Algeria - Social Safety Net Support Project

Document of The World Bank Report No. 15392-AL STAFF APPRAISAL REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SOCIAL SAFETY NET SUPPORT PROJECT MARCH 29, 1996 Human Resources Division Maghreb and Iran Department Midddle East & North Africa Regional Office  CURRENCY EQUIVALENTS Currency unit = Dinar Algerien (DA) I US dollar = 53.7 DA (as of January 31, 1996) FISCAL YEAR January Ist - December 31 WEIGHTS AND MEASURES Metric system ABBREVIATIONS AFS Contractual Solidarity Allocation (Allocation Forfaitaire de Solidarit6) DIPJ Program for Professional Insertion of Young People (Dispositif d'Insertion Professionnelle des Jeunes) DSPS Department of Health and Social Protection (Departement de Sante et de Protection Sociale) ECA Europe and Central Asia GDP Gross Domestic Product ICAF Completnentary Indenmity of Family Allocation (Indemnit6 Complementaire d'Allocation Familiale) ICB International Competitive Bidding ICSR Indeniity for the Incomeless (Indemnite en faveur des Categories Sans Revenu) IMF International Monetary Fund IPSU Indemnity to Low Income Households (Indemnite aux Personnes a Salaire Unique) LSMS Living Standards Measurement Survey MAP Ministry of Agriculture and Fisheries (Ministere de l'Agriculture et de la P&he) MEAT Ministry of Equipment and Land Use Planning (Minist&re de l'Equipement et de l'Amenagement du Territoire) MICLE Ministrv of Interior and Environment) (Ministere de l'Interieur, des Collectivites Locales, et de I'Environnement) MTPS Ministry of Labor, Social Protection and Vocational Training (Minist&re du Travail, de la Protection Sociale et de la Formation Professionnelle) NCB National Competitive Bidding NGO Non-Governmental Organizationi PAIG Program of Public Interest Activities (Programme d'Activites d'Interet General) PE Public Enterprise PCU Project Coordination Unit PHRD Policy and Human Resources Development SA Special Account SAL Structural Adjustment Loan SSN Social Safety Net STF Special Treasury Account TUP Public Works Program (Travaux d'Utilite Publique) UNDP United Nations Development Program  DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SOCIAL SAFETY NET SUPPORT PROJECT STAFF APPRAISAL REPORT LOAN AND PROJECT SUMMARY Borrower: Democratic and Popular Republic of Algeria Executing Agencies: Ministry of Labor. Social Protection, and Vocational Training Ministry of Agriculture and Fisheries Ministry of Equipment and Land Use Planning Ministry of Interior and Environment Project Objectives: The project seeks to create temporary jobs for the unemployed, to improve the social safety net system in Algeria, and to pilot social development programs based on increased community participation. Project Description: A labor intensive public works scheme, located in disadvantaged areas and executed mainly by small private enterprises, would provide about 20,000 person years of temporary employment in road, agriculture, and water and sewerage maintenance. The Government's current social safety net programs would be strengthened through studies, equipment provision, and training. A pilot program to improve local social infrastructure would be established and feasibility work undertaken to develop a Social Fund. Poverty Category: Program of targeted interventions. Public works programs are designed to effectively target the unemployed and poor with temporary job creation. The reforms of the existing social safety net programs aim to improve targeting of the poor and to enhance service quality. Reforms in eligibility criteria for some social programs will target poor female heads of household. Amount: US$50.0 million Terms: Repayable in 17 years including a five-year grace period, at the Bank standard variable interest rate.  - ii - Proposed Financing Plan: Funding Source Total Percentage of Total Project Costs (US$ Million) IBRD 50.0 71 Government 20.4 29 Total 70.4 100 Economic Rate of Return: Not applicable Environmental Rating: "B" Staff Appraisal Report: Report No. 15392-AL Map: IBRD 27831 Project ID Number: 4978  TABLE OF CONTENTS L. BACKGROUND .................................................. 1 Economic and Political Context ..................................... 1 Features of the Labor Market ...................................... 1 Poverty and Social Assistance Programs ................................ 3 Government Strategy ........................................... 4 Bank Assistance Strategy ......................................... 5 II. PROJECT OBJECTIVES AND DESCRIPTION ............................. 6 Project Objectives .............................................. 6 Project Description ............................................ 6 Labor Intensive Public Works ...................................... 6 Strengthening the Social Safety Net .................................... 8 Testing and Preparation of a Social Fund ................................ 9 Economic Analysis ............................................. 10 III. PROJECT COSTS, FINANCING, PROCUREMENT AND DISBURSEMENT ... ..... 11 Summary of Project Costs ....................................... 11 Financing ................................................. 12 Procurem ent ................................................ 13 Disbursement ................................................ 15 IV. PROJECT MANAGEMENT AND IMPLEMENTATION ...................... 16 Project Management ............................................ 16 Im plem entation ............................................... 16 Supervision, Monitoring, and Evaluation ......... ...................... 17 This report is based on the findings of an appraisal mission which took place in Algeria and Washington, D.C. in February, 1996. The mission included the following staff members and consultants: Mmes.lMessrs. Laurence Wolff (Mission leader and Principal Operations Officer, MNIHR), Fritz Rodriguez (Principal Sanitary Engineer, MNIPI), Claude Archambault (Engineer), Laurie Effron (Senior Economist, MNlPI), Kutlu Somel (Senior Economist, MNINE), Meskerem Mulatu (Human Resources Specialist, MN1HR), Nancy Gillespie (Human Resources Economist, MN1HR), Dung-Kim Pham (Operations Analyst, MN1HR), Pedro Kanof (Information Technology, Policy and Strategy Specialist, EMTDR), Setareh Razrmara (Economist, MNlCO), Nabil Salem (Consultant). Peer reviewers were Jean-Jacques de St. Antoine (LA1HR), Alexandre Marc (EC4MS), Kalanidhi Subbarao (PSP), and Verdon Staines (EMTHR). Ms. Roslyn Hees is the MN1HR Division Chief and Mr. Daniel Ritchie is the MN1 Department Director.  - 11 - TABLE OF CONTENTS (CONT.) V. BENEFITS AND RISKS ................... 18 Project Benefits ........................................ ...... 18 Project Risks ................................................. 18 Environmental Rating ............. 19 Program Objective Category ....................................... 19 VI. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS .... ............ 19 ANNEXES 1. Description of the Social Protection System 2. Road Maintenance Component 3. Water and Sewerage Component 4. Agricultural Sector Component 5. Social Safety Net Improvement Component 6. Pilot Social Fund 7. Community Social Service Units Component 8. Comparison of Current and Planned Interventions in the Algeria Social Safety Net 9. Project Monitoring and Implementation Indicators 10. Project Costs 11. List of Terms of Reference and Documents in the Project File  DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA SOCIAL SAFETY NET SUPPORT PROJECT STAFF APPRAISAL REPORT I. BACKGROUND Economic and Political Context 1.1 Algeria is undergoing an economic and social transformation. A collapse in the price of oil in 1986, with hydrocarbon exports accounting for 95% of total merchandise exports, caused a 50% drop in Algeria's terms of trade and exposed the inefficiency of Algeria's centralized economy. Output stagnated, and unemployment and inflation increased. The existing inefficiencies of the economy, and to some degree the impact of the reforms as they began to take hold, resulted in a drop in incomes and the attendant increase in the number of vulnerable people. 1.2 The impact of the 1986 oil shocks was exacerbated by the fact that oil revenues account for 60% of the Algerian budget. Since 1986 there has been a cumulative decline of consumption per capita by 28%. Reported unemployment rose from 17% in 1986 to 25% in 1994. Algeria borrowed heavily to cover its deficits, and its external debt increased by US$6 billion over the period 1985-87, and reached 68% of GDP by the end of 1994. Both political uncertainty and economic imbalances negatively affected foreign official and commercial investment in Algeria. By 1994, the widening macro-economic imbalances, the reduced access to external funds, and the deteriorating social and political environment became unsustainable. With the assistance of the IMF and the World Bank, the Government introduced swift and far-reaching stabilization and adjustment measures in May 1994 (IMF), and January and May 1995 (IBRD). 1.3 Under the IMF stabilization program, the budget deficit fell to 4.4% in 1994 (from 8.7% in 1993) and the overvalued dinar was devalued by close to 100%. The debt service ratio fell from 75% in 1993 to 37% in 1994. Under the IBRD and IMF supported adjustment programs, the Government succeeded, inter alia, in drastically reducing subsidies, limiting them to three food products (bread, semolina, and milk). The program is showing some results, and growth was estimated at 3.5% for 1995. However recent and expected growth will not, in the short and medium term, reduce to acceptable levels unemployment rates, housing shortages, and low household incomes. 1.4 Since the elections of 1991, the situation in Algeria has limited the Government's ability to respond to the economic needs of the population, or to provide adequate incentives for domestic and international investments to fuel at least some of the much-needed recovery. The political tension has also severely limited external development assistance which, under different circumstances, might have supported interventions to mitigate the negative effects of the economic crisis on the poor. Features of the Labor Market 1.5 Up to the mid-1980s, employment policy was to a large extent a mechanism for the redistribution of oil revenues. The State's strategy was to ensure close to full employment. During the 1970s, the  strong demand for labor originated in the expanding public enterprise (PE) sector, but after 1986, labor demand by PEs fell sharply. The proportion of new formal sector jobs in public administration increased from one third in the early 1980s to 50% of all new jobs. The shares of the construction and industry sectors declined, while the service sector remained largely unchanged over that period. 1.6 The employment distribution of the labor force in 1991 is given in Figure 1. In addition, data Algeria: Labor force distribution, 1991 from the 1991 labor force survey, the latest available information, show a clear trend in employment since 30 the mid-1980s: the absolute number of salaried workers remained virtually unchanged, but the share 25 - of temporary workers increased. Agriculture and 20 construction are two sectors in which a significant - expansion of temporary contracts has occurred. 15 - 1.7 Although 55% of women are illiterate, there 10 - are 83 girls per 100 boys in primary school, and 81 * girls per 100 boys in secondary school. While only - 10% of the labor force is female, female employment 0 growth averaged 10% p.a. between 1977-87. The CD E~~~~~~ real level of female economic activity is probably , .2 understated by the official statistics due to the formal . O categories of employment used in the surveys of XS employment. 1.8 Despite a relatively low labor force participation rate of 46%, open reported unemployment was 25% in 1994. A shrinking economy in the face of an expanding labor force has led to slow growth of employment in the formal sector and rising unemployment, especially among youth and new entrants to the labor force. The expected retrenchments of redundant workers in the public sector and rising female participation rates will also add to the ranks of the unemployed without faster employment growth. 1 .9 Those listed as unemployed include, in addition to the hard-core unemployed, people engaged in informal activities, the underemployed, and those who have refused employment offers due to expectations of getting a job according to their qualifications. Youth under the age of 25 represent two- thirds of the unemployed. Only one-third of the stock of unemployed have had prior work experience. About one-fifth of the unemployed have no formal education, 28% have not attained education beyond the primary level, and another 34% have no more than a lower secondary school education. Between 1989 and 1991, the share of the unemployed with higher levels of education rose. Unemployment for first job seekers as well as among older workers will remain a priority issue for some time during (and after) the transition period of economic reform. 1.10 During the years of central planning and controlled prices, the informal sector's primary role was that of making rents on shortages. As the economy has become increasingly liberalized, however, the Government has recognized the importance of the informal sector and its potential role. Indeed, micro- enterprises can play a critical role as an engine of growth and a source of stable employment and revenues; and fostering micro-enterprises can provide an important tool in poverty alleviation. Little systematic information is available, however, on the size, range of activities, or evolution of the informal sector in Algeria, so any program to support the micro-enterprise sector would have to begin with gathering and analyzing information.  - 3- Poverty and Social Assistance Programs 1.11 There are no official estimates on the number of poor in Algeria. However, the existing social protection programs reach about 1 million households. The number of poor people depends on the choice of the poverty line (the higher the poverty line, the more people will be defined as "poor"); at poverty lines of US$40, 50 or 60 a month, which are roughly the averages of the various poverty lines used in MENA countries, the number of poor in 1990 could be about 3%, 7%, or 12%, respectively, of the population. This indicates that very careful empirical work will need to be done before a poverty line is chosen. Given that normally poverty increases with declining incomes, a decrease in real consumption per capita of about 28% during 1986-94 suggests that the incidence of poverty should have increased significantly over that period. The ongoing Living Standards Measurement Survey (LSMS) will provide valuable information to calculate country specific poverty lines and on the status of needy groups. 1.12 The Algerian social protection system comprises both contributive and non-contributive components. The contributive component encompasses social insurance (Securite Sociale) and provides cash benefits for contingencies such as retirement, disability and survivors' pensions, health care, and unemployment insurance scheme. The non-contributive component comprises the implicit and explicit consumer price subsidies, family benefits, and the social assistance programs. An overview of the social protection system in Algeria is provided in Annex 1. 1.13 Despite structural problems and economic inefficiencies, in the 1970s and early 1980s, the system was fairly successful in alleviating poverty. Because of oil rents, fiscal costs were not a major constraint. The wide coverage of the former system,while inefficient because of the considerable leakage to the better-off in the society, enabled the Government to reach the poor. The main challenge of the current system is to protect the vulnerable during the transition period within a constrained budget. The system must balance considerations of equity with the need to focus on efficiency and financial sustainability. 1.14 In an effort to compensate vulnerable groups for the reductions in subsidies for food staples, the authorities introduced a broadly targeted system of cash transfers in 1992, covering almost 60% of the population in 1993. This program was designed to ensure wide popular support for the consumer subsidy reform. Its cost was about 2% of GDP. However, the new system was inefficient and poorly targeted due to inadequate means-testing. In October 1994, after agreement with the IMF, the Government put in place a further reform of the cash transfer system designed to improve targeting. One of the benefits was transformed into a cash transfer system (Allocation Forfaitaire de Solidarite, AFS) directed towards poor heads of households who are unable to work (i.e. the elderly and the disabled). A second transfer scheme (Programme d'Activites d'Interet General--PAIG) was established for the able-bodied and unemployed poor, who would "work" for municipalities for a full day at half the minimum wage. The Government considers these activities as acts of "social solidarity" rather than "work". 1.15 The new safety net system, covering about 15% of the population in 1995, and costing about 0.75% of GDP, is functioning better than the previous broadly targeted system. However, a recent review of the program identified a number of areas for improvement in targeting. Key issues are: (a) inadequate definition of poverty, including a lack of a unified poverty record system; (b) inadequate management and supervision; (c) inadequate implementation of selection criteria, which in practice are applied subjectively; and (d) cumbersome administrative procedures which lead to slow delivery of transfers and payments. In particular, due to lack of oversight and to institutional weaknesses, many participants in the PAIG are working for less than a full day and in activities with limited economic value added.  -4 - Government Strategy 1.16 In order to maintain long-term economic growth and social stability, the Government is seeking to intensify the transformation of the economy from one which is centrally planned and public dominated to one where the private sector is the engine of growth. Economic diversification from the present dependence on oil/gas is key to achieving this objective. The Government is also seeking to move from highly centralized socialist planning to decentralized and grass roots decision making. 1.17 To reduce unemployment, the Government's highest priority is the promotion of broad-based, sustainable economic growth through the above changes in the economic structure. At the same time the Government is promoting a variety of labor intensive programs, designed to generate large numbers of jobs. This includes, under the proposed project a multi-sectoral program of public works programs mainly in roadside maintenance, forestry, and water supply and sanitation. In addition, the Government is discussing similar free standing programs in agriculture and housing. The Government is coupling these programs with efforts to develop the private sector and encourage bottom-up decision-making for public works programs. 1.18 To promote micro-enterprises, the Government through the Ministry of Labor, Social Protection and Vocational Training (MTPS), undertook a program in 1990 targeted at the young (Dispositif d'insertion professionnelle des jeunes, DIPJ). After four years, more than 25,000 cooperatives had been established, employing about 64,000 people. In 1994, however, based on an evaluation of the program, the Government realized it needed a new approach to support micro-enterprises. The evaluation pointed out a number of serious problems, including: (a) the problematic nature of cooperatives and the high rate of dissolution; (b) the relatively costly subsidies, subsidized interest rates, and establishment of a guarantee fund, provided by Government for investments in the micro-enterprises; (c) the refusal of banks to continue to provide credit to the cooperatives through the program; and (d) the relatively high rate of arrears and default on the loans. Following this experience, the Government is prepared to seek a different approach, involving non-Governmental organizations, to ensure that a sustainable program is put in place that would provide support to a wide range of micro-enterprises. For the start up phase of the program, and in order to concentrate initial efforts, the focus would be on urban and peri-urban micro-enterprises. 1.19 With regard to its social safety net programs, the Government seeks to: provide temporary employment opportunities, particularly targeted to the poor, within the restructured macro-economic environment; and improve social assistance programs in both their management and their ability to better target the poor without further increasing budgetary commitments. Under the SAL, the Government has agreed to a specific program of improved management, better targeting, and further analytical work. Based on the expected analytical work to be undertaken over the next year, the Government, in consultation with the Bank, will undertake further reforms of the social safety net system as part of the second tranche of the SAL about a year from now. Better understanding of the economic and social characteristics of the needy, currently being sought through a Bank-financed LSMS, will help improve the targeting and implementation of social protection programs. 1.20 The Government is also seeking to strengthen local and grass roots decision-making. For example, individual communes are responsible for the management of the PAIG. In addition, on a pilot basis the Government has initiated a program (cellules de proximite), which identifies problems of slum dwellers, provides services, and links slum dwellers with other service agencies. The Government is moving forward with the preliminary work leading to the establishment of an autonomous agency which  would manage a social fund based on grass roots identification of problems and implemented, inter alia by private enterprises. The draft decree defining the statutes of the agency has been reviewed by the Bank and establishment of the agency is expected over the next six to eight months. Bank Assistance Strategy 1.21 The Bank aims to work closely with the Government of Algeria to support the reform program in all of its various elements, while recognizing the ongoing political uncertainties. The main objectives are to deepen and ensure the irreversibility of the reforms at both macro- and sectoral levels, while at the same time supporting targeted labor intensive projects as well as improvements in the social safety net, which complement adjustment efforts. The signature of an agreement with the IMF for a stand-by loan, and the recent follow-up discussions, signal the intention of the Algerian Government to pursue sound macroeconomic policies. The Government has complied with the terms and conditions of its agreed program with the IMF and is completing its commitments under the Bank's Economic Rehabilitation Loan approved in January 1995. The SAL focusses on the development of the private sector; the reform of public enterprises, public expenditures, and the financial sector; and the strengthening of the social protection system. Successful implementation of the SAL operation would move the Government further in the direction of reform. 1.22 As a complement to its structural adjustment program, the Government is requesting assistance from the World Bank to (a) provide short-term employment opportunities for the unemployed, in parallel with the adjustment effort; and (b) to strengthen its social safety net programs through better targeting, improved management, and, eventually, a more participatory approach. Parallel to the Social Safety Net project, the Bank is preparing similar projects in housing and in agriculture, designed to target the poor and to increase employment, in parallel with broader sector- and economy-wide adjustment programs. The Bank is also initiating discussions on programs which will create a better environment for the development of micro, small, and medium private enterprises. 1.23 Within the context of the current situation, the Bank has undertaken untraditional and innovative means to maintain the dialogue with the Government: reverse preparation, appraisal and supervision missions (with the representatives of Government coming to Washington or to third countries); and use of consultants from Algeria or elsewhere in the Maghreb to conduct preparatory studies, implementation evaluations, and selective field visits. 1.24 Lessons from Previous Projects. The experience of the Bank in financing road programs has been successful because of the strong institutional capacity of the Ministry of Public Works. At the same time all Bank-financed projects in Algeria have faced problems of slow procurement and disbursement, and some projects, for example in health and agriculture, have been closed due to a lack of Government commitment. The main lesson to be learned is that Government must be fully committed to project goals, design should be simple, and institutional and procurement arrangements fully worked out in advance. In the case of the proposed project, the Government appears strongly committed to the project and has proposed a system for rapid decision-making and financing flows which would bypass most normal bureaucratic processes.  - 6 - II. PROJECT OBJECTIVES AND DESCRIPTION Project Objectives 2.1 The proposed project mainly pilots new ideas and institutional set-ups which, if successful, could eventually be broadened and generalized. The most important project objective is to create employment and improve infrastructure and services in disadvantaged areas, and demonstrate the Government's commitment to mitigate the impact of economic reforms on the poor. The second objective is to enhance the effectiveness of Algeria's social safety net system. The third objective is to prepare, on a pilot basis, social development programs aimed at developing social infrastructure and alleviating poverty. 2.2 The project complements the SAL operation which focusses on the development of the private sector and the reform of public enterprises, public expenditures, and the financial sector. In particular the project would demonstrate the Bank's and Government's commitment to alleviate the social costs of adjustment and support SAL objectives to improve the social safety net system. Project Description 2.3 The project would consist of three main components: (a) labor intensive public works; (b) strengthening the social safety net; and (c) piloting of a program to improve social infrastructure as well as feasibility studies on developing a Social Fund. Below is a summary of the components, which are described in greater detail in the annexes to this report. Labor Intensive Public Works Programs (base cost US$55.6 million) 2.4 The project would support labor intensive public works programs (trava1r d'utilite publique or TUP) in rural roadside maintenance, agriculture, water supply and sanitation, to be undertaken in under- served urban and rural areas. These programs, comprising over 80% of project costs, would differ significantly from the PAIG in that there would be increased emphasis on social and economic value added, with closer supervision of works, and greater private sector participation. The programs are expected to provide short-term employment, encourage the growth of small enterprises, maintain basic infrastructure and services, and improve the environment in selected poor communities. In most cases local authorities would identify the specific works, which would be undertaken on a contract basis by small firms. Annex 8 summarizes the differences between the PAIG, the TUP, and a future Social Fund. 2.5 Roadside maintenance (US$24.2 million). The project would support the maintenance of about 13,000 km of rural wilaya and communal roadsides in about 32 wilayas with high unemployment. In particular, the project would finance relatively simple works executed by small task teams (or tacherons) under contract, the total for each of which is not expected to exceed the regulatory ceiling of DA 3 million (about US$60,000), tax included. The program would create about 4,400 person-years of temporary employment at a cost of US$5,500 approximately per job-year. The program would help (a) develop the small scale private sector, particularly those using labor-intensive methods, rather than relying on work done by Government force account, as has been the case in the past, and (b) maintain the infrastructure in poor communities. The program is also expected to contribute to the reduction of rural- urban migration and lead to a more flexible flow of decision-making authority and funds. Consultants would be hired to supervise the ongoing work. All project works selected require a minimum of specialized training or experience and a survey determined that local private contractors are indeed in place.  2.6 Within this program 6,700 km of wilaya roads in 15 wilayas, and 4,500 km of communal roads in 14 other wilayas have already been identified for maintenance on the basis of high unemployment, little or no budget for maintenance, and adequate security. A complementary 2,000 km for roadside maintenance will also be carried out. 2.7 Agriculture (US$18.7 million). The agriculture programs would include five sub-programs. The first would be designed to reduce the negative impact of caterpillar infestations in 50,000 ha. of pine forests. The second program would be designed to reduce soil erosion in vulnerable areas (53,000 ha.) in two provinces through regeneration and rejuvenation of the alfa plant. This plant, which thrives in the saline soils of high plateau steppes of Algeria, serves as an important element of a fragile ecological system, but also has economic value in the production of high quality paper. The third program, in the province of Boumerdes, would focus on maintenance of watershed infrastructures as well as drainage works. The fourth program, to be undertaken in the wilaya of Setif, would aim at flood damage prevention, afforestation, and fruit tree planting. The fifth program is a small scale activity for the cleaning and maintenance of irrigation drains in the lower Soummam and eastern coastal plain of Bejaia, which will improve utilization of the agricultural lands that are drained. 2.8 The agricultural programs would all be undertaken in poor rural areas. Overall about 10,000 person-years of employment would be created at a cost of $1,800 per job-year. The labor portion of these activities would range between 56% and 80% of total cost. 2.9 Water Supply and Sewerage (US$12.7 million). The proposed water and sewerage component would be implemented in 17 wilayas with the highest rate of estimated unemployment. A major concern in the water and sewerage sector has always been poor maintenance of the works. While the Government has made large investments in the sector, the public utilities have not had the necessary resources to properly maintain the Government-financed installations. The proposed project would seek to assist the utilities in improving and rehabilitating their water supply and sewerage assets. 2.10 The water supply and sewerage component would include three sub-components: The water supply sub-component would include the detection and repair of leaks from water supply pipelines installed in selected wilayas. At present, about 50% of potable water produced in these wilayas is lost through leaks in the pipes. Under the project, unskilled laborers would be employed to survey these leaks, and to uncover the pipeline areas where they are leaking. Leak repairs would be carried out by specialized labor of the utilities. After the pipelines have been repaired, the unskilled laborers would fill in the trenches. In addition, water would be collected from underground springs in three sites located in the wilaya of Mila. Also, a number of water reservoirs in the wilaya of Setif would be dredged and repaired. Steel reservoirs in the wilaya of Tizi-Ouzou would be sand-blasted and repainted. It is expected that these rehabilitation works would allow to extend substantially the useful life of these infrastructures. No water rights issues are raised by these activities. 2.11 The second sub-component would include the cleaning and repair of sewers in 15 wilayas. Under the project, unskilled laborers would manually remove settled materials from these sewers. The same laborers would also clean the outlets of the main sewage interceptors in the concerned wilayas. Manual dredging would also be carried out at the junctions of the interceptors with the receiving water bodies. 2.12 The third sub-component would cover the provision of public utilities, essentially water supply and sewerage, in 12 sites located in the wilayas of Batna and Djelfa. Basically, the work would consist of laying pipes for water supply and sewerage services. This would be performed manually by unskilled laborers.  - 8 - 2.13 Labor would account for about 63 % of the total cost. The water supply and sewerage component would create about 9,134 jobs over a period of six months, for a total of 4,600 person-years. The cost per job-year would be about $3,000. 2.14 Overall, the following tasks are to be performed under TUP programs: Roads: ditch cleaning and re-calibrating; weeding and restoration of shoulders; spreading of discarded materials; cleaning of culverts and sealing of small cracks in the concrete; and repairs to concrete walls and rock linings. Agriculture: maintenance of retaining walls; manual cleaning of drainage structures; construction of windbreaks; flood damage prevention; alfa replanting; preparation of soil, planting, and reforestation; road maintenance. Water and Sanitation: sewer cleaning and maintenance; water supply maintenance, including leak detection and repair; cleaning and repairing water reservoirs; spring water collection. Strengthening the Social Safety Net (base cost US$3.0 million) 2.15 Two sub-programs would help strengthen the Government's social safety net. The first would focus on improving management, targeting, and monitoring of the Government's social assistance programs. A second sub-program would strengthen the Government's pilot community social service program (cellules de proximite), which identifies problems of slum dwellers, provides guidance and health services, and links slum dwellers with other public service agencies. 2.16 Imnproving Social Assistance Programs (US$2. 1 million). Overall, while the AFS and PAIG are significant improvements over the previous system, they require improved management at both the local and national levels as well as better monitoring and improvements in targeting. As part of the SAL, the Government of Algeria will put into place new policies and actions to improve its social safety net. To improve targeting of the AFS, the Government is expected to make cash payments monthly rather than quarterly, extend cash payments to women who are heads of families and without other sources of revenue, and ensure that AFS programs do not duplicate other ongoing programs. Over the medium term the Government would utilize the results of the ongoing LSMS to better understand the characteristics of poverty. On this basis, and within its budget, the Government would adjust the amount of transfers provided to individual families. To improve the PAIG the Government is expected to enforce regulations requiring eight hours of work for PAIG participants, experiment with weekly payments, and improve the selection and location of activities to ensure better targeting. 2.17 In support of these recommendations, the project would help build institutional capacity through the provision of technical assistance, training, studies, equipment, and documentation. Specifically a study, the terms-of-reference of which have been agreed upon, would determine how to improve monitoring of social assistance programs through the setting-up of an MIS and related improved computerization, communication, and training programs. The study would build on the monitoring indicators agreed upon with the Bank and would be completed by December 31, 1996. As part of the study, a proposal, acceptable to the Bank, would be prepared for purchase of computers, software, fax machines, photocopying machines, etc, and related training, at an estimated cost of US$1.1 million. In addition, vehicles would be provided to about 20 provinces and funds would be provided for documentation, including books and periodicals, at the central and wilaya levels.  - 9 - 2.18 A large-scale training program to reach 2,000 staff responsible for oversight of social safety net programs, at national and local levels, would be undertaken. The main objective of this training program would be to strengthen the capacity for management, monitoring, and oversight of PAIG/AFS programs, including improving guidelines and support to local communities in developing PAIG programs. In addition study tours abroad as well as limited consultancies on technical matters would be made available to central MTPS staff. 2.19 In order to ensure that the Government has an adequate analytical basis to initiate further reforms of the social safety net system, the project would support a survey designed to identify the characteristics of PAIG/AFS beneficiaries. 2.20 In order to strengthen the management of social programs, the Government has initiated a program of redeployment of its staff. In particular the Government has established a small central office responsible for overseeing AFS/PAIG programs. It is planning to progressively increase the number of staff from the current four to ten. The Government is also seeking to redeploy two to four persons in each wilaya to monitor and coordinate the evaluation of these programs, and to designate, at the commune level, a person responsible for these programs. While the Governrment does not expect to contract additional staff the total operating costs for the staff who would oversee these programs is estimated at about US$4 million per year. This is a reasonable cost considering that the program, as a whole, distributes over US$300 million equivalent per year. 2.21 Commnunity Social Service Units ("Cellules de Proximite") (US$0.9 million). The Government has mobile social service units in place in 20 locations. Each unit comprises a health professional, an educator, a social worker/psychologist, and a representative of the Ministries of Sports and Culture. These units identify local community problems, link poor communities with existing social services, and provide certain key social services, at a relatively low cost. Several partial evaluations of this program which have been undertaken indicate that the programs are having some success in helping to ensure more direct and focussed Government interventions at the community level. However, further analytical work is needed before significant expansion should be undertaken. 2.22 Based on these evaluations, the project would support the strengthening of the existing 20 social service units as well as wilaya and central management. At the local level, this assistance would consist of about $5,000 per unit. Each unit, with community participation, would prepare a proposal for the necessary assistance. The first two proposals would be transmitted to the Bank for review. The project would also provide computers and related software, equipment, and vehicles to each of the seven wilaya coordinating units. At the central level, the project would provide for a vehicle, national seminars, and a national training program (including for the coordination unit). Testing and Preparation of a Social Fund (base cost US$4.1 million) 2.23 The third component would support small-scale testing of a commnunity development program and preparation of a Social Fund. 2.24 Pilot Proiect for Community Development (US$3.4 million). The project would support a pilot program for community development. The criteria for selection of these communities have been agreed upon. It is expected that the communities would include one with an active "cellule de proximite", one with an active NGO, and one with no significant active intermediary agency. An evaluation would identify the needs of these three communities and the capability of Government to meet these needs. On  - 10 - the basis of the study, a pilot program of social and infrastructure interventions would be identified including modalities for implementation, for financing under the project. The interventions, which have not been pre-identified, could include construction of community infrastructure such as pre-schools, wells, community development centers, school expansion and repair, road improvement, sites and services, etc, as well as social services such as training and institutional support. A condition of disbursement for this component would be completion of the assessment of community needs, preparation of a program, and definition of implementation needs, all acceptable to the Bank. 2.25 Preparation of a Social Fund (US$0.7 million).' As noted above, the Government is planning to establish an autonomous Agency for Social Development which would manage a Social Fund. An annex to this report provides a schematic discussion of the differences between the TUP, the PAIG and a future Social Fund. A draft decree establishing the Agency has already been prepared. The Agency would be established and its operations defined by no later than March 31, 1997. In order to define the nature of the Agency and the activities of the Social Fund, the project would finance a number of preparatory studies and actions. In particular a study would be undertaken to identify, on the basis of a national sample, community needs for social infrastructure, as well as the means for undertaking a demand-based program of local infrastructure development. Pre-engineering work would be undertaken to prepare estimates of the unit costs for expected interventions. Study tours would be undertaken to review experiences of social funds in the world. Economic Analysis 2.26 AFS/PAIG. The expected project benefits include, for the PAIG: (a) productivity gains in the activities undertaken through supervision to ensure workers actually work on the job, ensure compliance with technical standards for the job, and enforce an 8 hour work day for the equivalent of half the minimum wage instead of the frequently observed 4 hour standard; (b) improved returns on resources invested through training for project administrators in the identification and selection of more economically and socially valuable PAIG sub-project activities; and (c) social welfare gains through the strict application of the principle of self-targeting of beneficiaries by enforcing the work requirement. For the AFS, social welfare gains are expected through better targeting and service to AFS beneficiaries. Depending on the quality of implementation, economic benefits may be very high. Even a very conservative estimate of a 5% allocative efficiency gain represents $15.4 million per year, or 385% of (broadly defined) incremental recurrent costs of the component. 2.27 TUP. The public works program (TUP) would provide 20,000 person-years of short-term employment. Activities undertaken under the TUP component of the proposed project would have two types of economic benefits: first, the direct economic value of the sub-projects themselves; and second, the value of the TUP as an alternative job creation program model, which may guide future reforms of the PAIG and/or provide the basis for a future social fund. The objectives of this model include promoting the development of small private enterprises, starting a process of participation by decentralized, local-level decision-making units, and providing economically and socially valuable services in under-served areas. While the number of jobs created will be modest in regard to the number of 1/. In parallel, a Japanese grant will finance (a) the preparation of an implementation manual with guidelines for the selection, financing, execution, supervision, monitoring/evaluation, and reporting/auditing of sub-projects, as well as defining the environmental criteria for sub-project selection and (b) a feasibility study on the development of a micro-enterprise promotion program.  - 11 - unemployed, the program would serve to illustrate the Government's concern for poverty alleviation, through providing a positive Government presence at the local level, and would set the stage for a more efficient and effective social safety net, which would support a deepened economic adjustment effort. 2.28 Nearly all TUP sub-projects have been preselected and appraised. Selection criteria emphasize the project's overall objectives, and activities which have been shown, in other countries, to be correlated with acceptable economic rates of return.2 An ex-post economic evaluation of TUP activities is expected. 2.29 The expected average monthly cost per job created under the TUP is US$228. Although this is a higher cost per job created than under the PAIG, it is not unreasonable, given the greater economic value of TUP sub-projects. At 178% of GDP per capita, the cost per job created under the TUP fits within the range found in similar projects around the world (see Annex 8). III. PROJECT COSTS, FINANCING, PROCUREMENT, AND DISBURSEMENT Summary of Project Costs 3.1 Total costs of the project are estimated at US$70.4 million equivalent, including US$7.8 million for taxes (11% of project costs) and US$7.0 million for contingencies (10%). The foreign exchange component is equivalent to US$17.5 million (28% of project costs net of taxes). Base costs are estimated at US$63.5 million. 3.2 Contingency Allowances. Physical contingencies are estimated at 10% for civil works and 5% for other project items, for a total of US$5.4 million. Price contingencies have been estimated at US$1.6 million. Total contingencies represent 11 % of the base cost. The project has been costed in US$ equivalent to 53.7 DA. The annual world-wide rate of price increases of 2.4% has been applied to foreign and local costs for the duration of the project. It is expected that differentials between foreign and local inflation during project implementation would be reflected in an adjustment to the exchange rate. 3.3 Project costs by component are outlined in Table 1. Base costs of the Public Works component would be US$55.6 million, representing 88% of total base costs; costs of the Social Safety Net, US$3.0 million (5%); and costs of the Social Fund, US$4.1 million (6%). Detailed project cost tables are provided in Annex. 3.4 Incremental recurrent costs. Incremental recurrent costs under the project would be minimal. No new permanent staff would be recruited; therefore the costs incurred would be associated with a limited number of equipment, consisting of vehicles, computers and office equipment, under the improvement of the SSN program. Counterpart funds are allocated for the first year of operations in the 1996 finance plan. 2/. An economic analysis of similar roadside maintenance activities undertaken in Tunisia showed returns in excess of 30%. Financial rates of return for the water and sanitation activities are not expected to exceed 10%, but the incremental social benefits in terms of improved health conditions are expected to generate an acceptably high economic rate of return.  - 12 - Table 1: Project cost summary by component DA Million US$ Thousand Local Foreign Total Local Foreign Total 1. Public Works IA. Road Maintenance 862.6 434.1 1,296.7 16,078.0 8,091.0 24,169.0 IB. Agric./Forestry 953.1 50.5 1,003.5 17,764.0 941.0 18,705.0 IC. Sewage/Water 587.3 95.0 682.3 10,947.0 1,771.0 12,718.0 Subtotal 2,403.0 579.6 2,982.6 44,789.0 10,803.0 55,591.0 11. Social Safety Net IIA. Mgt. SSN 41.2 71.3 112.6 769.0 1,330.0 2.098.0 IIB. Cellules Proximite 13.5 33.5 46.9 251.0 624.0 875.0 Subtotal 54.7 104.8 159.5 1,020.0 1,954.0 2,974.0 III. Social Fund IIIA. Community Dev. 53.1 128.8 181.9 990.0 2,400.0 3,390.0 IIIB. Preparation 4.5 34.3 38.8 84.0 639.0 723.0 Subtotal 57.6 163.0 220.7 1,074.0 3,039.0 4,113.0 IV. Coordination Unit 21.8 21.7 43.5 407.0 404.0 811.0 Subtotal 21.8 21.7 43.5 407.0 404.0 811.0 TOTAL BASELINE COSTS 2,532.2 869.1 3,406.3 47,289.0 16,200.0 63,489.0 Physical Contingencies 237.2 50.9 288.1 4,421.0 948.0 5,370.0 Price Contingencies 65.6 18.4 84.1 1,223.0 343.0 1,567.0 TOTAL PROJECT COSTS 2,840.0 938.4 3,778.5 52,934.0 17,491.0 70,425.0 *Totals may not add up due to rounding. Financing 3.5 The project would be financed by a Bank loan of US$50.0 million equivalent (71% of total project costs) and Government contribution of US$20.4 million, which includes US$7.8 million of taxes. The Bank loan would cover 100% of foreign expenditures and 72% of local costs excluding taxes. The high proportion of Bank financing, including local costs, is due to the social importance of the project as a complement to the SAL as well as the Government's current financial constraints. The Government would finance the balance of local costs and taxes. A PHRD grant from the Japanese government would finance a portion of the preparatory work for the envisaged social fund.  - 13 - 3.6 The proposed financing plan is summarized in Table 2. Table 2: Project Financing Plan (in US$ million) Component IBRD Government Total Public Works 43.5 18.6 62.1 Social Safety Net 2.8 0.3 3.1 Social Fund 3.0 1.3 4.3 Coordination Unit 0.7 0.2 0.9 Total 50.0 20.4 70.4 Procurement 3.7 Procurement under the project will be in accordance with World Bank Procurement Guidelines (January 1995), using standardized local bidding procedures and contract forms agreed with the Bank. Procurement methods are summarized in Table 3 below. Procurement for works, nearly all of which will be under the public works component, will be done through National Competitive Bidding (NCB) procedures which are acceptable to the Bank. Algerian government regulations permit simplified procurement procedures for contracts below US$60,000. These procedures have been reviewed and found acceptable to the Bank. For contracts which are US$60,000 equivalent or below, advertisement within the wilayas would be used to ensure the utilization of local manpower. Strong efforts would be made to identify and encourage local contractors, including advertisements and publicity, coordination with other Government agencies, encouraging small enterprises, and organization by the MEAT of seminars to explain project objectives and procedures. Contracts which are above US$60,000 equivalent would be awarded through NCB where bidding would be advertised nationally. It is expected that no prequalification or grouping of bids will take place. 3.8 It is expected that over 800 small contracts would be signed with small contractors (tacherons), consisting mainly of road maintenance, small agriculture, and water supply projects, and based on simplified bidding documents. The agriculture programs for caterpillar removal and "alfa" regeneration would be implemented on the basis of larger scale contracts above US$60,000 under NCB. All public works bidding documents will be designed so as to encourage enterprises to utilize labor intensive methods and pay unskilled labor no more than the minimum wage. 3.9 With regard to procurement of equipment, contracts above US$300,000 would be awarded through ICB. Contracts estimated to cost below US$300,000 would be purchased through international shopping on the basis of three price quotations from suppliers. 3.10 Consultants needed for studies and technical assistance would be selected in accordance with the Bank's Guidelines on the Use of Consultants. For local consultants, simplified consultant contracts will be used.  - 14 - Table 3: Procurement arrangements (in US$ million) Goods and Services Amount by Procurement Method * ICB NCB International Other N.B.F. Total shopping Works - 64.2 - - - 64.2 (44.9) (44.9) Gosds 2.0 1.5 - - 3.5 (1.5) (1. 1) (2.6) Consuluicies - - - 2.6 2.6 (2.5) (2.5) Miscellaneous - - - 0.1 0.1 Total cost 2.0 64.2 1.5 2.6 0.1 70.4 IBRD financing (1.5) (44.9) (1.1) (2.5) (-) (50.0) * Totals include taxes and contingencies. Amounts in parentheses show allocations from Loan proceeds. NCB = National competitive bidding. NBF = Not Bank Financed. Consulting services shall be procured in accordance with Bank guidelines. 3.11 The following Bank prior review thresholds will apply: (a) Works: For public works, all contracts greater than US$300,000, and the first two contracts for each sector, i.e. road maintenance, agriculture/forestry, and sewage/water, independent of the value, will be subject to the Bank's prior review. For road maintenance and sewage/water works, as the value of contracts is expected to be less than US$60,000 equivalent, and no subsequent prior review is expected. For agriculture/forestry works, these contracts are expected to be larger. One in five contracts would be subject to a post review. Because of the small size of most contracts, about 25 % of the total value of sub-contracts would be subject to prior review. b) Equipment: Contracts to be awarded through ICB, estimated to cost the equivalent of US$300,000 or more, shall be subject to prior review. It is estimated that US$1.8 million of equipment would be procured through ICB, and US$0.8 million through international shopping. About 70% of the value of equipment contracts are expected to be subject to prior review. (c) Consultant services: Prior review will be required for contracts of US$100,000 or more for firms and US$50,000 for individuals. For contracts estimated to cost less than these amounts and except for the employment of single source selected firms or of contracts judged to be critical to the project, the Bank's prior review would be limited to terms of reference only. Procurement  - 15 - documentation for all contracts for the employment of individuals or single source selection of firms for studies and overall project monitoring would be subject to prior review by the Bank. Disbursement 3.12 While most of the public works programs are expected to be completed in one year, the social safety net components will develop more slowly over a two and a half year period. Taking into account that in Algeria there is as much as a year's lag in disbursement, the project would be completed by June 30, 1999 and the closing date would be December 31, 1999. The proposed loan would be disbursed according to the categories and schedule shown in Tables 4 and 5. Table 4: Disbursement by Category Category Amount (USS Million) Percentage of expenditures to be financed 1: Works 45.0 70% 2: Goods 2.6 100% of foreign expenditures, 100% of local expenditures (ex-factory cost) and 85% of local expenditures for other items procured locally 3: Consultants' 1.9 100% services, training and studies Unallocated 0.5 Total 50.0 Table 5: Estimated Disbursement Schedule (in US$ million) Fiscal Year 1996 1997 1998 1999 2000 (July-June) l Annual 0.0 5.0 15.0 20.0 10.0 Cumulative - 5.0 20.0 40.0 50.0 3.13 All withdrawals from the loan account will be fully documented except for expenditures relating to contract for goods and works costing less than $300,000, which will be eligible for reimbursement on the basis of Statement of Expenditures (SOE). SOE would also be used for consultant services contracts costing less than $100,000 for consulting firms and $50,000 equivalent for individual consultants. Documentation for SOE will be retained at the local levels and will be made available for review by auditors and Bank's supervision mission.  - 16 - 3.14 To facilitate disbursements, the Government would establish, maintain and operate on terms and conditions satisfactory to the Bank, a US dollar Special Account (SA) at the Central Bank of Algeria for up to US$5 million. This amount is estimated to represent about four months of average project needs. When the Loan becomes effective, the Borrower may request an initial deposit to the Special Account not exceeding US$2.5 million. Additional deposit(s) may be requested when the amounts committed and/or disbursed under the Loan will reach US$10 million. The SA will be replenished by submitting withdrawal applications to the Bank on a monthly basis, or whenever the account is diminished by one- third, whichever is sooner. Replenishment applications submitted against the SA will include monthly bank statements showing account activity since the last application, a reconciliation statement and supporting documents as required by the Bank. 3.15 The Government has provided sustained efforts to ensure the speedy preparation of this project. Retroactive financing up to 10% of the loan amount will therefore be provided for expenses incurred after February 15, 1996, to enable quick start-up of TUP activities and efficient functioning of the project. IV. PROJECT MANAGEMENT AND IMPLEMENTATION Project Management 4.1 A Project Coordination Unit (PCU) ("Cellule de Gestion du Projet"), established by Ministerial decision, is located at the level of the cabinet of the MTPS. The location of the PCU at the level of the cabinet of the minister of the MTPS will ensure a high political profile and access to high Government officials. An inter-ministerial committee composed of representatives of the Ministries of Labor, Agriculture, Public Works, Interior and of the Prime Ministry will meet regularly to coordinate and liaise with the head of the PCU. The purpose of the PCU would be to coordinate and ensure implementation at the wilaya, local and sectoral levels, link with the financing agencies, coordinate policies and regulations among different ministries and agencies, identify and resolve implementation problems, prepare the establishment of a Social Fund, and ensure that the project is able to bypass, to the extent possible, any bureaucratic procedures which might impede rapid implementation. 4.2 The PCU would include three full-time high level staff--a chief, an implementation specialist, and a finance and procurement specialist. The specific activities and terms of reference of each of these specialists have been agreed upon. Their experience, training, and qualifications would be acceptable to the Bank. The list of names of the main staff along with their qualification and experience will be transmitted to the Bank at the latest end of May 1996. Until the PCU becomes operational, MTPS staff and consultants will continue to manage the project. Implementation 4.3 The individual wilayas would be responsible for implementing the TUP programs. Under the 1996 finance law, a Special Treasury Fund (STF) has been established to be managed by the MTPS. This special fund permits advance payments from three to six months of all TUP activities, which are sent to the responsible official in the individual wilayas. Payments to the wilayas will be authorized on the basis of expected activities over the next three to six months. Over the past five years the MTPS has managed a similar procedure in its program for youth employment. This program has permitted payment within two weeks of completion of small contracts and one week after completion of force account works.  - 17 - 4.4 The wilaya representatives of the MTPS would have overall responsibility for all programs. At the technical level, agriculture programs would be managed by the representative of the Ministry of Agriculture and Fisheries (MAP), and road and water programs by the representative of the Ministries of Equipment and Land Use Planning (MEAT) and Interior and Environment (MICLE). A condition of effectiveness would be the signing of agreements between the MTPS, MEAT, MAP and MICLE for implementing the project. These arrangements should continue and be acceptable to the Bank for the duration of the project. 4.5 The PCU would be assisted in its work by a private consulting firm (or firms). This firm would be responsible for monitoring implementation of the TUP components of the project, eventually using a computerized monitoring system to ensure rapid transmission of data. On the basis of the results of its monitoring activities, and on a regular basis, the firm would recommend to the PCU means of improving project implementation. This assistance to the PCU will be in place at the latest September 30, 1996. A short list of firms has been sent to the Bank. It is expected that the local representatives of MEAT, MAP and MICLE would provide on site supervision for TUP programs. 4.6 To facilitate implementation, the Government has established a Special Treasury Fund (STF). This fund, managed by MTPS, bypasses normal budgeting procedures and permits advance payments of threc to six months to Wilayas. In addition, the provision of documentation of completed works would be simiplified. For payments, the "secondary" agents would complete a form stating that work has been completed at a certain value. This form would be sent to the Wilaya representative of the MTPS and then to the PCU and would serve as justification for replenishing the revolving fund at the local level and equally a, the national level. Contract documents would remain at the local level but would be subject to audit. 4.7 The PCU would implement the social safety net components of the project, in coordination with the appropriate agencies within the MTPS. It is expected that the PCU would engage consultants to undertake preparation of the proposed Social Fund. Supervision, Monitoring, and Evaluation 4.8 Status of project preparation. Nearly all public works programs have been identified and all procurement and disbursement procedures confirmed. The MEAT has already initiated its requests for bids. A number of studies are already underway. Training plans and terms-of-reference for nearly all studies have been agreed upon. 4.9 Project Monitoring Indicators. A list of program and project indicators by which both the process and impact of the proposed operations can be monitored has been agreed upon. Process indicators include: socio-economic status of program beneficiaries, number of employed recruited, management capacity of sub-contractors, use of labor intensive methods, implementation progress, productivity, timing and processes for implementation, procurement, and payment. As noted above, a private firm will be engaged to gather these indicators in a timely manner. Adequate support to the PCU for supervision and monitoring, acceptable to the Bank, would continue for the duration of the project. 4.10 Project Implementation Reviews. Because of the importance of timely execution of the project, the PCU will prepare, on a semester basis, reports on progress in achieving project goals. In particular the report will (i) describe progress in accordance with the agreed upon monitoring indicators, including  - 18 - procurement and disbursement; (ii) indicate specific problems in terms of management and recommended improvements; (iii) will define activities for the following quarter. The Bank and the Government will review progress, including the functioning of the PCU, every six months. A mid-term review of project implementation will be undertaken, at the latest by December 31, 1997. A Project Completion Report will be completed at the end of the project on the achievement of overall project objectives, including costs, disbursement, and an evaluation of the roles of the Bank and the Government. A plan for the future operation of the project will also be prepared. 4.11 Audits. Audited accounts and reports by independent auditors would be submitted to IBRD no later than nine months after the end of each fiscal year. The auditor's report on project expenditures would include an examination of the documentation substantiating expenditures and a verification that (a) project accounts permit identification of all receipts and payments; (b) goods had been received or work performed; (c) payments had been made; (d) all expenditures had been legitimate; and (e) the Special Account has been used appropriately, along with an opinion on the reliability of the SOE procedures and on whether the goods and services acquired under the project were being utilized in accordance with its objectives. The auditors would also prepare the audit report including the management letter revealing possible shortcomings in the staffing, accounting system and efficiency of the internal control procedures. Assurances on the foregoing will be obtained during negotiations. V. BENEFITS AND RISKS Project Benefits 5.1 The primary benefit of this project is improved income transfer mechanisms to support Algeria's vulnerable population groups during a period of economic reform. The project will help improve targeting and management of existing transfer programs as well as create a pilot public works program and a pilot social fund using innovative design and implementation mechanisms to support future program reform. As such, the proposed project will have a substantial impact on the efficiency of resource use in public transfer programs, with minimal incremental recurrent cost implications. Additional project benefits include promoting the development of small private enterprises, initiating a practice of decentralized, local-level participation in both decision making and implementation (both within government and within communities), and providing economically and socially valuable services in under- served areas. This project, although modest in scope, will set the stage for the development of a more efficient and effective social safety net, which would support a deepened economic adjustment effort. Project Risks 5.2 In spite of modest objectives, project risks are significant. Any diminished ability of the Algerian state to project its authority at local levels will jeopardize implementation of a locally based public works program. In the past, the Government has had difficulty in maintaining macro economic reforms, and there is no certainty that this would not recur, which could undermine the sustainability of program recurrent finance commitments. The inability of Bank staff and most foreign consultants to visit the country (beyond short highly controlled visits to Algiers) because of the security situation means that we may be unaware of key elements or issues which could compromise effective implementation. This problem will be partially overcome through the recruitment of Algerian and regional consultants to manage supervision. The multi-sectoral (and hence, multi-ministerial) nature of the project increases its complexity. The location of the implementation unit high enough within MTPS to handle the  - 19 - coordination issues smoothly. the interministerial agreement, and simplified procurement and disbursement, should reduce these complications to a minimum. Coordination within the Bank will be equally important. To that end, staff from the sectoral divisions have been closely involved in the technical discussions and would be expected to supervise project components. Environmental Rating 5.3 The small scale public works activities to be financed by the project will have no negative environmental impact. The agricultural activities are designed to have a positive environmental impact. The other activities are environmentally neutral. The project raises no international water rights issues nor does it involve resettlement of local population. Activities to prepare a future social fund project will include the development of environmental guidelines and checklists for each type of sub-project contemplated for future social fund finance. While the project is coded as "B," no study in advance of negotiations was required. Program Objective Category 5.4 The project would support a program of targeted interventions through reforms of the country's poverty reduction strategy. The TUP program and the pilot social fund components are pilot programs designed to effectively target the unemployed and poor with temporary job creation. The reforms of the existing social safety net programs (AFS, PAIG and Community Social Service Units) aim to improve targeting of the poor under these programs and to enhance service quality for the poor. The studies included in this project are designed to prepare a future social fund project that would be a demand-driven and participatory vehicle to deliver temporary employment opportunities and possibly infrastructure services to the poor. The reforms to AFS eligibility criteria target poor female heads of household and the strengthening of the Community Social Service Units, will be of greatest benefit to women and children. VI. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS 6.1 A condition of loan effectiveness will be signature of a framework agreement between MTPS and MEAT, MAP and MICLE. This agreement must be maintained during the life of the project (para. 4.4). 6.2 The following are conditions and assurances related to various project components: (a) to strengthen social assistance programs, a study to establish an MIS and an investment program to computerize the management of AFS/PAIG, including a plan for acquisition of equipment and training, would be realized at the latest, December 31, 1996, and would be acceptable to the Bank (para. 2.17); (b) for the community social service units, the first two proposals for strengthening local units would be reviewed by the Bank (para. 2.22); (c) for the pilot social fund, a condition of disbursement would be completion of an assessment of needs of local communities, preparation of an investment plan and an  - 20 - implementation plan, all acceptable to the Bank (para. 2.24); and (d) for the TUP, the first two contracts for roads, agriculture, and water would be reviewed by the Bank (para. 3.11 [a]). 6.3 Other conditions and assurances include the following: (a) an autonomous agency for social development would be established and its internal rules of operations defined by March 31, 1997 (para. 2.25); (b) the PCU would be maintained within MTPS with professional staffing in adequate number, whose qualifications and experience shall be acceptable to the Bank (para. 4.2), and arrangements acceptable to the Bank for assisting it in supervision and monitoring of TUP components will be in place by September 30, 1996 (para 4.5). (c) a mid-term review will be undertaken by December 31, 1997 (para. 4. 10); 6.4 On the basis of above, the project provides a suitable basis for a loan of US$50 million to the Government of Algeria.  Annex 1 Page 1 of 3 Description of the Social Protection System 1. The Algerian social protection system is comprised of both contributive and non-contributive components. The contributive component encompasses the social insurance (SecuriteSociale) and provides cash benefits to its affiliates for contingencies such as retirement, disability and survivors' pensions, and health care. Moreover, in July 1994, a new unemployment insurance scheme was introduced. This scheme is financed through an entry fee and payroll contributions. The non-contributive component comprises the implicit and explicit consumer price subsidies, family benefits, and the social assistance programs. 2. Social Insurance System:' The social security system is the contributive component of the social protection system and is managed by four public funds that are the source of all social insurance benefits (CNAS, CNR, CASNOS, and CNAC)2. According to existing legislation, all employers and workers are obligated to subscribe to the social insurance system. Total affiliation is about 5 million people. However, the number of affiliated workers represents only about 60% of the active labor force. Moreover, over 85% of agricultural employees and about 80% of independent workers (notably concentrated in agriculture) are not affiliated in practice. 3. The principal issue facing the social insurance system is its precarious financial status. The problems are mainly the result of: (i) the lack of a transparent actuarial link between benefits and contributions, which creates disincentives to join; and (ii) the use of the system's resources to pursue social objectives partly or totally unrelated to social insurance. The financing of health care coverage for non-affiliates is a clear example of this problem. Moreover, the reserves have been used to finance social development projects and placed in Treasury bonds at negative real rates of return. The weak link between contributions and benefits provides a strong incentive for employers in the formal sector and their employees to underpay contributions, and for informal activities to remain outside the system. This lowers contributions to the social security system, and hampers the expansion of its contributor base which is already constrained by widespread unemployment. As a result, contribution rates are relatively high, which reinforces the incentives to underpay and evade. Consequently the imbalances pose a risk to the system's financial viability. 4. Workers and employers have to contribute the equivalent of 31.5% of the wage bill to the social security funds. Although existing contribution rates are comparable to the average rates in the Westem European countries (i.e.. 25-30%), this does not necessarily mean that such rates are sustainable under present conditions in Algeria. The progressive aging of the work force will likely increase payroll taxes 1/ See: "The Democratic and Popular Republic of Algeria - CEM: The Transition to a Market Economy"; World Bank, report#12048-AL, May 1994. 2/ The Caisse Nationale des Assurances Sociales (CNAS) insures salaried workers in the agricultural and non- agricultural private and public sectors, as well as students and civil servants. CNAS provides health coverage, medical leave benefits, and disability benefits for work-related injuries. The Caisse Nationale des Retraites (CNR) is responsible for paying pension benefits to those covered bv CNAS. CNR does not collect contributions but receives a share (fixed by decree) of CNAS contributions. The CASNOS is the analogue of the CNAS and CNR combined for non-salaried workers (i.e., independent). The Caisse Nationale d'Assurance Ch6mage (CNAC) was introduced in 1994 and provides the unemployment insurance benefit to the affiliates.  Annex 1 Page 2 of 3 in the future. Moreover high labor costs may discourage job creation at a time when unemployment is chronically high (roughly 25% of the labor force). Therefore correcting the structural sources of the financial imbalances of the social insurance system is a more sustainable alternative than increasing contribution rates. 5. Consumer price subsidies: Faced with an increasing budgetary constraint, the Government decided to gradually eliminate general price subsidies on consumer products, and introduced in 1992 a system of cash transfers (see below) to compensate for the increase in consumer prices. By June 1992 subsidies had been completely eliminated on all foodstuffs except for flour for bread, semolina, and milk. As a result, food subsidies dropped from almost 5% of GDP in 1991 to 2.3% in 1992. However, subsequent increases in the import cost of these commodities. partly due to exchange rate depreciation, raised subsidies to 2.5 % of GDP in 1993. Subsidies on energy products and basic public services arose mainly from the fact that consumer prices are established below production costs. Since 1990 there has been a gradual price adjustment for gasoline, diesel fuel, electricity and nacural gas. In March 1994, prices for the remaining subsidized food products were adjusted by 41%, and prices for petroleum derivates by 50%. 6. Social Assistance Programs: The social assistance programs attempt to alleviate poverty through two types of schemes. One is a svstem of direct transfers, in kind and in cash, to the traditionally defined hard core poor unable to support themselves. Targeted on the basis of indicators, these programs include (i) financial aid to the 100% handicapped and the elderly poor (DA 2.100 per month); (ii) pension benefits, separate from the insurance schemes, to war veterans (moudjahidines) and members of their families; (iii) scholarships for children of less wealthy families; and (iv) cantines scolaires that channel food aid to children in schools located in geographically disadvantaged areas, predominantly in the south. The level of budgetary expenditures to finance these programs amounted to about 2 % of GDP in 1994. 7. The other is a safetv net, new cash transfer program introduced in 1992. to compensate vulnerable groups for food subsidies reduction and to protect the most vulnerable groups of the population from the short-term costs of adjustment. There were four cash benefits with an overall budgetary outlay of DA 24 billion (about 2.2% of GDP) in 1993, benefiting around 15 million individuals (more than 60% of the population). These programs included: (i) Indemnite complementaire d'allocarion farniliale (ICAF), a complementary monthly family allowance (per child) for all salaried workers affiliated with the social insurance system; (ii) IndemniW pour salaire unique (IPSU), for salaried workers earning less than 7,000 dinars per month and whose spouse is not working; (iii) Indemnite cornplnmenraire de pension et de retraite (ICPR), paid to every retiree who is a household head disabled in a work-related accident, or a war veteran on a pension less than 7,000 dinars per month. In addition, in order to qualify, the spouse must have no source of income: and finally (iv) 1ndemnites ailr categories sociales sans revenus (ICSR). In order to qualify for this benefit the household head had to certify that neither he/she. or his/her spouse, had any source of income. 8. However, the new system was inefficient and poorly targeted due to inadequate means-testing, and about 25% of the population were considered "without income" and benefitted from cash transfers. In 1994/95, the authorities, recognizing that the targeting of the cash payment scheme, introduced in 1992. needed to be improved, modified once again che safety net prograrms. The first three cash benefits (i.e. the ICAF, the IPSU and the ICPR) were integrated into the salarv structure or into existing social benefits under the social security system. Moreover, to substitute for the generalized subsidies, which were gradually being eliminated, the untargeted cash allowance paid to persons without income (ICSR) was replaced by two new schemes. The first, is the cash transfers providing financial support to those unable to work (Allocarion ForJaitaire de SolidariWe - AFS). The second, is the public work program  Annex 1 Page 3 of 3 providing compensation to those able to work (Indetnnite d'Acrivites d'Interet General - IAIG or PAIG). These two schemes, covering about 15% of the population (or 4.3 million) in 1995, and costing about 0.8% of GDP, are apparently more efficient and better targeted than the allowance paid to persons without income. The combination of direct transfers (AFS) to the unemployable and employment scheme (IAIG) provides the potential for a comprehensible safety net for the poor. 9. AFS gives allowances to those unable to work and intends to target those who are missed by other social assistance programs: (i) the elderly without pensions or sources of income; and (ii) the handicapped who are not 100% incapacitated (the 100% handicapped already receive direct cash transfers as mentioned above) but who are unable to work and have no income. Targeted beneficiaries - pensioners (elderly) and the disabled - receive DA 600 per month per capita, plus DA 120 per dependent up to a maximum of three. In 1995, about 453 thousand heads of households participated in the program, of which 38% were female, and the number of dependents totals 384 thousand. Out of the total participants about 84% are elderly and the remaining 16% are handicapped. Based on a preliminary study of the program the main drawbacks are the following. First, the payment frequency is inadequate for those who are really without any sources of income. Although the amount of the cash transfers is calculated monthly, in practice the payments are allocated on a quarterly basis. Second, the narrow scope of the eligibility criteria, by definition, excludes female household heads unable to work and without sources of income, but who are below 60 years of age. Finally, the cash transfers seem to be less than subsistence due to the budgetary constraints. 10. IAIG is an income-generation program that requires some obligation from the recipient, such as the requirement to work. It intends to provide short term employment, in various community based activities, to those able to work and willing to be paid at half the minimum wage. Overall about 26.305 work sites had been opened with 492 thousand participants, of which 27% are female. The participant is hired at DA 2,100 per month (DA 97 per day), which is half the minimum wage. Based on a preliminary study, the program has important flaws. It has been inefficient in targeting the poor because of a lack of adequate self-targeting mechanisms. The apparent low level of remuneration was designed to ensure self-targeting of those who have a lower opportunity cost. But in practice. because of lenient time requirements (4 hour working day), the level of compensation is in effect equivalent to the minimum wage; therefore the system fails to exclude those who are not poor and have other activities in the informal sector. As a result, instead of providing income support to the able-bodied poor without alternative employment, this program risks to provide permanent jobs for the unemployed youth. Currently about 54% of the participants are between 18 and 30 years of age. The selection of the work site is also not based on geographical targeting and the kind of activities created are not necessarily labor intensive, requiring hard work. Finally the payments are monthly instead of being by task or daily. 11. While preliminary evidence indicates that the new safety net system is functioning reasonably better than the previous broadly targeted system, it suffers from difficulties that typically arise in targeting assistancc to the poor using means tests and specific eligibility criteria. Thus there are several important issues to be addressed during the transition in order to improve the targeting of the new system. The main issues are: (i) deficiencies in the definition of poverty, lack of unified poverty record system, and inadequate administrative coordination between ministries (e.g., Labor, Education. Health) for allocating the transfers to Lhe poor which may have led to overlaps between programs and may have failed to reach all the needy groups; (ii) inadequate implementation of selection criteria which in practice are applied subjectively; and (iii) cumbersome administrative procedures which may have led to uneven delivery of transfers across wilayates and delays in payments. The SAL project, will emphasize on different means to improve the efficiencies of these schemes.  Annex 2 Page 1 of 6 Road Maintenance Component Project Description 1. Regional roads (Chemins de Wilaya, CW) in 15 Wilayas' and rural roads (Chemins communaux, CC) in 14 other Wilayas2 have been designated by the Directorate of Road Operations and Maintenance (DEER) at the Ministry of Public Works and Regional Planning (MEAT) as part of a pilot project to determine a maintenance strategy and define a three-year maintenance program3. This project is not funded under the Sixth Highway Project, which is concerned exclusively with national roads (Routes Nationales, RN). The Wilayas and the municipalities that would participate in the pilot project were chosen according to the following criteria: - Wilayas with highest unemployment levels in the last survey of 1987: unemployment is now generalized throughout the country, but there is no recent survey; - Wilayas where road maintenance was particularly neglected during the past five years, in the Hauts Plateaux particularly; - Wilayas with the lowest levels of security problems. and where it would be relatively easy to mobilize road maintenance crews: these are generally rural Wilayas, far from the major cities; - 101 communes had already been identified in preparing the Sixth Highway Project, and 54 other conmnunes were identified by local staff of regional directorate (DTP) of MEAT. 2. The pilot project will consist in performing current and routine maintenance activities over 6,700 km of paved regional roads (CW), and 4,500 km of paved rural roads (CC) which will create the equivalent of 62,000 men-months of work over a period of 6 months. A complementary program of about 2000 km is also included. All the works are relatively simple, and they do not require any specific training nor previous experience: minor repairs to concrete appurtenances and rock linings would require the presence of one specialized worker, usually a stoneworker, within an 8-men crew. The following is a list of tasks to be performed on both categories of roads, as determined by DEER: ditch cleaning and recalibrating to a depth at least equal to the height of the pavement structure; 1/ Ain Defla, Bordj Bou Arreridj, Djelfa, El-Bayadh, El Oued, Guelma, Khenchla, Laghouat, Naama, Oum- El-Bouaghi, Saida. Sidi Bel Abbes, Tebessa, Tiaret and Tissemsilt. 2/ Batna, Bejaia, Bouira, Cilef. Mascara, Medea, Mila, Mostaganem, M'Sila, Setif, Skikda, Souk Ahras, Tizi Ouzou and Tlemcen. 3/ Algeria's Sixth Highway Project, Staff Appraisal Report, Annex 10, January 1995  Annex 2 Page 2 of 6 iefection of shoulders, with construction of small lateral channels to evacuate the surface water from the pavement; spreading of discarded materials; cleaning of culverts and sealing of small cracks in the concrete; repairs to concrete walls; and rock linings. Proiect Costs 3. Project costs have been estimated based on the following assumptions: - average quantities per kilometer for various tasks have been estimated by DEER, as well as the time it would take an 8-men crew to perform the works; - total lengths have been determined based on available data for CW and CC in each Wilaya; - productivity rates of a road crew have been estimated by DEER based on current practice for similar works; - an 8-men crew would consist of 7 unqualified workers who will be paid the minimum wages (currently DA 4,000/month) and one specialized worker who will be paid 1.5 times the minimum wages; and - all works are to be done through local competitive bidding. In addition to salaries, costs include the location of a truck, including a driver, for every two 8-men crews, and buying small equipment (wheelbarrows, shovels, picks, etc.) and material (cement and quarry rocks for lining of ditches). The salary component is estimated at 54% of total direct costs for the CW, and at 56% for the CC. The following table illustrates the total direct costs of the pilot project:  Annex 2 Page 3 of 6 Table 1: Total Direct Costs of the Pilot Project 4 Maintenance of Regional (CW) and Rural (CC) Roads (based on 16-men crews) Average Total Costs T Length, Cost, Men- krn DA/krn mDillin mUilon months _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ D A U SS _ _ _ Regional Roads (Chemins de Wilava) . Cleaning: roads 6,705 29,991 201.1 4.0 20,968 Cleaning: culverts, etc. 6.705 29.125 195.3 3.9 13,166 Sub Total 6.705 59,116 396.4 7.9 34,135 Rural Roads (Chemins Communaux) Cleaning: roads 4.460 38.845 173.2 3.5 18,164 Cleaning: culverts, etc. 4.460 31.145 138.9 2.8 9,731 Sub Total 4,460 69,990 312.2 6.2 27,895 TOTAL, excluding overhead, profit 11,165 63,460 708.5 14.2 62,030 and taxes I _ __ I_ I__ _ _ I__ _ _ I___ __ 4. The following table illustrates total project costs, including the contractor's overhead and profit, design and supervision of the works, and taxes: Table 2: Total Cost Estimates Regional Roads Rural Roads Total Pilot Project (CW) (CC) DA US$ DA USS DA USS million million million million million million Cost of Works 396.4 7.9 312.2 6.2 744.4 14.9 Overhead and Profit 79.3 1.6 62.4 1.2 148.8 2.8 Supervision 28.5 0.6 22.5 0.4 52.1 1.0 Total before taxes 529.2 10.6 417.1 8.2 945.3 18.9 Taxes 68.8 1.4 54.2 1.1 122.9 2.5 TOTAL 598.0 12.0 471.3 9.3 1,068.2 21.4 4/ An additional program of approximately S5.0 million in about 3 wilayas will be defined jointly by both parties during project implementation.  Annex 2 Page 4 of 6 Environmental Impacts 5. The planned maintenance project will have a minor impact on the environrment, since it does not modify in any substantial way the conditions prevalent before the beginning of the works. Nevertheless, precautions will have to be taken in the following areas: - Soils Erosion: Manual weeding and cleaning of ditches, especially in mountainous areas, may create premature erosion of the ditches by increasing the speed of the pavement runoff water. In those conditions, small weirs or a lining of medium size quarry rocks may reduce the speed within an acceptable range. - Air and Water Pollution, Noise, and other Nuisances: The lack of new construction and the limited scope of the works explain why the impact on air or water quality is close to null, and that no noise or other nuisances will be generated by the works. - Disposal of Discarded Material: Ditches and shoulder cleaning will require the disposal of rejected materials: it will be necessary to spread these materials outside of the ditches, close to the road. As a rule, they would have a high vegetal content, with no adverse effect on the environment. * Traffic Safetv: Works will be carried out on low traffic volume roads. Nevertheless, the contractors will be asked to follow the rules described in the MEAT's road maintenance handbook regarding signalization of works areas. In addition, a half-day training session will be organized on each new project, to acquaint contractors and workers alike with environmental problems. Small Contractors (Tacherons) 6. There are very few small contractors in Algeria, particularly in the public works sector where all maintenance is presently done by force account. However there is a tradition of small contractors in the housing industry, and in agriculture. Tacherons as they are called in Algeria are usually specialized workers who will hire nonspecialized daily laborers on a temporary basis, according to the needs of the project. A recent survey done by DEER at the instigation of the Bank has shown that there are indeed tacherons in each Wilaya that was selected for the pilot program, and that local competitive bidding could be organized for all TUP projects. 7. In the Fifth Highway Project (1988-1994), two pilot projects have demonstrated the effectiveness of contracting out maintenance works for national roads (RN): in the last year of the project, maintenance by contracts was extended to all the Wilayas, in view of the success of the previous stages. However, one should note that most of the low bidders who got contracts were publicly owned enterprises. In most cases, there were only 2- or 3 bidders from the region where the works were to be performed, although the bidding documents were made available to any public works enterprise across the country, whether it was publicly or privately owned.  Annex 2 Page 5 of 6 8. The development of small contractors in the public works sector will require the following conditions: - large diffusion in the municipalities of information on upcoming contracts: DEER is to prepare the documents to that effect; - invitation to small contractors to register with the municipality or the Wilaya, since some contracts will be signed with the municipalities (public works projects), and others with the Wilaya (roads projects); - cocrdination with the Ministry of Labor and Social Protection (MTPS), which already has a program to promote small contractors, and with local associations such as the Young Unemployed Association; - organization of seminars to explain to small contractors the contents of the projects and the objectives of MEAT. 9. There will be more competition if projects are limited in scope, because of the limited financial capabilities of most small contractors. One invitation to tender could include six or seven lots, with the possibility that a contractor bids for any one or any combination of the lots. Assuming 16-men crews, contracts limited to six months, and the productivity rates and quantities described above, there would be approximately 340 contracts with a 20 km average length and worth around DA 1.6 million each for regional roads (CW), and 300 contracts with a 15 km average length and worth around DA 1.4 million each for rural roads (CC). In addition, any public project whose cost is less than DA 3.0 million is not subject to cumbersome local procurement procedures, hence the advantage of limiting the project scope so that it fits within this limit. 10. Experience shows that payment delays - a common occurrence in developing countries - entice small contractors to prefer high material content rather than high intensity labor content in public works, which is contrary to the objectives of the safety net protection project. Small contractors do not have ready access to local bank credit, and they may not want to press the Government for interest charges on overdue accounts for fear of being blacklisted. In addition, small contractors can delay payments to their suppliers, but cannot do the same with temporary workers, without running the risk of having to suspend the works. The following schedule should help in defining a faster payment cycle:  Annex 2 Page 6 of 6 a. Confirmation of works done during the period by the foremen or 0 the section chiefs, for each contract. b. Approval of the report by the area manager. 1 week c. Approval by the Director of Public Works at the Wilaya level. 3 days d. Confirmation by the Treasurer of the Wilaya that the 10 days expenditures can be made. e. Payment to the contractor. 1 week Total 4 weeks Contractual Documents 1l. The contract specifications have been prepared. The project preparation cycle is the following (for projects whose costs are less than DA 3.0 million): a. Preparation of bidding documents by the DTP for maintenance 1 month of CW and CC in their subdivision. b. Open local bidding, with advance public notice in the newspapers 1 month and in town halls. c. Bidding period, including possibly an information meeting for all 3 weeks bidders. d. Public opening of the bids at the time and place where they are 0 due. e. Evaluation of the bids and selection of a contractor by DTP, 4 weeks confirmation by MTPS, and signature by the Administration delegate. f. Notification of contract to contractor. 1 day Total 16 weeks For larger projects, whose costs exceed DA 3.0 million, the total delay has to be increased by a minimum of 12 weeks. 12. The small contractors will sign a contract with the Wilaya DTP, and the area manager will supervise the works and control their execution, with the possibility that a consultant be appointed by the DTP to help with the supervision and control.  Annex 3 Page I of I The Water Supply and Sewerage Component Proiect Description 1. With the aim of creating jobs through the implementation of useful and beneficiary works, the proposed water and sewerage component would be implemented in 17 wilayate with the current highest rate of unemployment. A major concern in the water and sewerage sector has always been poor maintenance of the works. While the Government has made large investments in the sector, the utilities have not had the necessary resources to properly maintain the Government-financed installations. The proposed project would seek to assist the utilities in improving and rehabilitating their water supply and sewerage assets. 2. The water supply and sewerage component would include three sub-components: The first one would cover the detection and repair of leaks from water supply pipelines installed in the selected wilayate. At present, about 50 % of potable water produced in these wilayate is lost through leaks in the pipes. Under the SSN project, unskilled laborers would be employed to survey these leaks. and to uncover the pipeline areas where they are leaking. Leak repairs would be carried out by specialized labor of the utilities. After the pipelines have been repaired., the unskilled laborers would fill in the trenches. 3. Other items of the water supply sub-component would consist of collecting water from underground springs. These works would be executed in three counties located in the wilaya of Mila. Also, under this component, a number of water reservoirs in the wilaya of Setif would be dredged and repaired. Steel reservoirs in the wilaya of Tizi-Ouzou would be sand-blasted and repainted. It is expected that these rehabilitation works would allow to extend substantially the useful life of these infrastructures. 4. The second sub-component would include the cleaning and repair of sewers in 15 wilayas. Under the proposed SSN project, unskilled laborers would manually remove settled materials from these sewers. The same laborers would also clean the outlets of the main sewage interceptors in the concerned wilayas. Manual dredging would also be carried out at the junctions of the interceptors with the receiving water bodies. 5. The third sub-component would cover the provision of public utilities, essentially water supply and sewerage, in 12 sites located in the wilayate of Batna and Djelfa. Basically, the work would consist of laying pipes for water supply and sewerage services. This would be performed manually by unskilled laborers. Proiect Cost 6. The cost of the water supply and sewerage component, including construction supervision and taxes, is estimated at DA 892.6 millions. Labor would account for DA 564.9 million, or about 63% of the total cost. Equipment and material supply would account for onlv 11 % of the total cost, illustrating the labor-intensive aspects of the proposed works. Taxes would amount to 13% of the total investments. Construction supervision is estimated to account for 8% of the total project cost. Job Creation 7. It is estimated that the proposed water supply and sewerage component would create about 9.134 jobs over a period of six months. for a total of 54,804 man-months. The cost per job creation would be about DA 97,730.  Annex 4 Page I of 5 Agricultural Sector Component 1. Bank Strategy on Rural Employment. Reforms that have been initiated essentially aim at reducing the role of the public sector in economic activity. In 1990, public employment in Algeria, covering both the Government (public service) and the public enterprises made up 57% of total employment; 50% of male employment; and 85% of female employment. Austerity measures are already having an effect in reducing public service employment and similar results would be expected as a consequence of privatization and restructuring of public enterprises. These consequences of economic reform and adjustment in increasing unemployment in the short to medium term are compounded by the political conditions. Indications are that there is a noticeable exodus from urban areas with high unemployment and security problems, towards rural areas. These developments exacerbate the employment question in rural areas. 2. The Bank aims to address these evolving issues in a two phase approach. In the short term, in response to the urgency of the problem, agricultural sector activities are proposed to comprise a significant par' in the public works component of the proposed Social Safety Net Project. This will be followed by a proposed Rural Employment Project with a more concerted assessment of unemployment incidence and rectifying measures. The proposed activities will focus on the repair and maintenance of the existing agricultural infrastructure, especially the irrigation infrastructure, and environmental infrastructure. The issues in these two areas are briefly reviewed below. In the implementation of these activities the private sector will be given prioritv in order to create externalities for private sector development and sustainable employment creation. 3. Maintenance and Repairs of the Irrigation Infrastructure. Irrigated areas make up only about 10% of cultivated and 3-4% of arable land and there are plans to expand these areas substantially by the year 2010. The Government gives high priority to and allocates a large share of agricultural investments to irrigation. However, there are important problems in the management of the water resources and the irrigated areas. Overall system efficiency is estimated at 36%. This low system efficiency is compounded by low on-farm water use efficiency (WUE), which would imply that as low as onlv 20% of the water harnessed for irrigation is actually converted into plant production. In some cases, the exigencies of self sufficiency policies had resulted in the use of valuable irrigated land for crops with low economic value. These problems are compounded by the lack of effective water charges to cover at least operation and maintenance (O&M) costs. As a consequence, system maintenance is not done in an effective manner. Soil erosion in the watershed areas has caused irrigated areas to decline bv reducing water storage capacity in dams as a result of siltation. Hence, the following should be given high prioritv in irrigated areas: (a) rehabilitation and effective O&M of irrigation systems; (b) effective dissemination of production techniques. and (c) water pricing that promotes higher on-farm WUE. 4. Agroecological Issues: Soil Erosion and Desert Encroachment. The natural resource base is threatened by several natural or man-made factors. The consequences are not only jeopardizing the productivity of farm land but also the substantive investments in irrigation. Soil erosion and desertification through the encroachment of sand dunes are the two main agroecological problems: a. Soil Erosion. The main factor causing soil loss is water erosion. due to heavy runoff in the fragile areas, which are primarily the overgrazed pastures. denuded forest areas, the untilled fallow and the ravines and gullies in the watershed areas. In some areas,  Annex 4 Page 2 of 5 expansion of production into marginal areas in response to Government price incentives and the use of inappropriate tillage techniques have recently become more critical. As a consequence, almost 10 million ha of land in the North is considered susceptible to loss of productivity as a result of soil erosion. Currently, (a) soil erosion in the watershed areas reaches 2,000 MT/km2/year; (b) 120 million MT of sedimentation is lost to the sea annually; (c) on average, dams have lost about half their capacity due to siltation; and (d) the annual reduction of water storing capacity in dams is around 20 million m3. These problems require a concerted research and extension effort (both for erosion control and for promoting appropriate production technologies) along with public works and involvement of local populations in managing the natural resource base and the environment. b. Desert Encroachment. The encroachment of sand dunes results in irreversible loss of agricultural land. Intensive efforts are under way to stabilize dunes with "barrages verts", reduce sand dune movement with windbreaks (brise vent) and control of grazing in marginal areas (despite the countervailing pressures from contradictory subsidies to promote livestock production). An example of effective controls is observed in Bousaada, where the fortunate presence of underground water has allowed land with highly sandy soils to be allocated to producers. Commercial production on these farms is the best guarantee for dune stabilization. Similar approaches should be used where the potential of the private sector can be exploited to counter ecological problems. Agricultural Sector Components of the Social Safety Net Project 5. The agreed guidelines for these activities are: a. Control of infestation in pine forests (caterpillar control), b. Regeneration et developpement des nappes alfatieres (alfa bush regeneration); c. Wilaya de Boumerdes (rural development), maintenance of watershed infrastructures and drainage works; d. Wilava de Bejaia (drainage maintenance); and e. Wilava de Setif (repair and maintenance of flood control structures). 6. During appraisal. it was agreed that: a. the private sector would be given priority in implementation, b. the minimum wage would be paid to workers (DA 211.77/day. including social costs); c. labor and material costs would be based on established norms which would be explicitly stated; d. priority would be on repair and maintenance of the existing agricultural infrastructure and environmental activities; e. all activities would be executed within 12 months; f. a person-year would be calculated on the basis of 3 12 eight hour days per year; and g. a profit and overhead margin of 25 % over total costs would be applied in estimating indicative budgets.  Annex 4 Page 3 of 5 7. Lutte contre la chenille processionaire du pin. This component entails the mechanical (i.e., manual) control of a devastating pest attacking pine trees, especially young plants. Coverage would be in 12 provinces over an area of 50,000 ha. 8. These caterpillars currently constitute one of the important pests that cause major damage to around 1.5 million ha of pine forests in Algeria. Field inspections have indicated infestation in 400,000 ha, with half of this area being highly infested. These pests attack especially young trees. Evergreens such as the Aleppo pine, which is adapted to semi-arid conditions, are used in barrage verts to arrest the encroachment of sand dunes on to productive land. These young plantations are attacked by the carterpillars which prefer to defoliate the young shoots. Thus. major investments in these environmental protection activities will fail if this pest is not controlled and eradicated. Furthermore, the effects of the pest on pine forests elsewhere in the country are causing economic losses by reducing the volume of the lumber harvest. 9. Chemical control over large forest areas and plantations would have adverse environmental effects as selective controls are not available. Hence, the Government has used mechanical methods to attack the pest. These involve manually removing the pest populations from the trees during the three phases of its biological cycle by cutting the branches infested with larval tents, cocoons and pupae (chrysalis). This selective method also allows local populations to find seasonal employment. 10. Implementation requires prior training, planning and adequate supervision. Assurances would be needed from the Government on a detailed implementation plan. Work has to be organized into gangs, headed by forepersons, at a ratio of around 20:1 or 25: 1. 11. This component would cost US$ 7.8 million and create 4808 person-years of employment at a cost of US$ 1629 per person year of employment created, with a high labor cost component of 75 %. 12. Regeneration et developpement des nappes alfatieres. Alfa is a bush that thrives in the saline soils of the high plateaux steppes of Algeria, on what used to be ancient salt marshes. The plant is used for complementary forage but also for high quality paper production. Part of the production is processed in Algeria for paper and the rest is exported. The bush is an important element of a fragile ecological system that is susceptible to wind erosion. Overgrazing has taken its toll and the environment requires an important protection and regeneration effort. 13. The proposed component aims to rejuvenate and regenerate alfa plantations on 48,000 ha in the province of Djelfa and 5000 ha in El Bayadh. Activities entail removal of dead plant residues to reduce crowding. delineation of production areas, collection and preparation of plant material, preparation of the soil and planting. While the lands are under public ownership. exploitation and harvest of the production parcels is subcontracted to local residents. The cost of the component is US$6.5 million. It creates 4152 person-years of emplovment at a low US$1,562 per person-year and at a high labor cost component of 78 %. 14. Wilaya de Boumerdes - mise en valeur. This component targets the irrigation perimeter of lower Sebaou on the Sebaou River in the dairas of Baghlia and Dellys in the province of Boumerdes. It aims to focus on maintenance of the watershed infrastructures as well as the drainage works. Apart from protecting valuable irrigated agricultural land, the activities will also protect grazing areas from erosion.  Annex 4 Page 4 of 5 Reduction of soil erosion from the watershed areas will also reduce siltation in the reservoirs. The maintenance of the drainage works will reduce potential salinity arising from the rise of the water table in irrigated areas.Other activities entail windbreaks on around 10,000 ha of which 7000 ha are irrigated. 15. Specific activities include the maintenance of gabions with a volume of 4000 m3, windbreaks of 1000 km, and manual cleaning of drainage structures with a volume of 550,000 ml on 5500 ha of irrigated land. The cost of the component is US$0.9 million, creating 4 13 person-years of employment at US$2.203 per person-year and with a labor cost element of 56 %. 16. Wilaya de Bejaia - curage manuel de drains. This is a small scale activitv for the cleaning and maintenance of irrigation drains in the lower Soummam and eastern coastal plain of Bejaia. It will facilitate improved utilization of the agricultural lands that are drained by the systems to be maintained and cleaned. The activities have a high labor content of 72 % and create 18 person-years of employment at a cost US $30,000, equivalent to US$1,714 per person-year. 17. Wilaya de Setif - retenues collinaires. This component aims to repair and maintain flood control structures upstream of irrigation ponds established on the ravines and gullies of the watershed areas in the province of Setif. Of the 13 existing structures in Setif, eight in the dairas of Amn Amat. Maoklane. Ain El Kebira and Bir El Arch are targeted. These ponds have a total capacity of 4.4 million m3 and potential irrigation area of 690 ha. Complementary activities include afforestation, plant cover in ranges and fruit tree plantations. 18. Specific activities include maintenance work on flood control structures of 10.000 m;, afforestation on 330 ha, plant cover on 700 ha of rangeland and fruit tree planting on 120 ha. The total cost of the component is US$1.25, creating a total of 535 person-years of employment at USS 2347 per person-year as a labor cost element of 52 %. 19. This component contains desirable elements for employment and maintenance of agricultural infrastructures with the following caveat: assurances would be needed for sustainability, i.e., O&M resources. 20. Costs. The costs of the agricultural components of the Social Safety Net Project total DA 885 million or US$16.5 million, excluding VAT. These projects have a high labor cost component of 73% on average and create the equivalent of 9926 person-years of employment. at an average cost of DA 89,237 per person-year or US$1,663.  Annex 4 Page 5 of 5 Projects Costs Projects Costs Cost US$ % Labor Created Cost Cost millions millions employment person- person- DA person- employmen employ- years t DA ment US$ Boumerdes - Mise en 48,9 0,91 56 413 118.182 2.203 valeur Nappes Alfatieres 348,0 6,49 78 4.152 83.810 1.562 Setif - Retenues 67,3 1,25 52 535 125.916 2.347 collinaires Bejaia - Curage de 1,6 0,03 72 18 91.956 1.714 drains Chenilles 420,0 7,83 75 4.808 87.402 1.629 processionnaires TOTAL 885,8 16,51 73 9.926 89.237 1.663 Note: The costs do not include VAT. The exchange rate used is US$1.00 = Da 53.6522  Annex 5 Page 1 of 3 Social Safety Net Improvement Component (AFS - PAIG) 1. Under the SAL, measures have been agreed upon to improve targeting by AFS and self-targeting by PAIG (cf. SAL aide-memoire of February 1996). The proposed program includes components on automation of the system's management, at the national and wilaya levels, training of supervisors, documents and equipment for management of the system at the national and wilaya levels, and studies. Management Information System (MIS) 2. Terms of reference for a study of a master scheme to establish an MIS have been completed. The main objective of this MIS is to ensure the monitoring of social safety net programs (AFS - PAIG). This study focusses on preparing an MIS for personnel, finances and monitoring of AFS and AIG programs, designing the system, equipment, software and ancillary services, and training users on service software. On the basis of the study's conclusions and the contents of the master scheme, equipment will be purchased and installed. In addition to hardware and software, photocopy and fax machines, as well as vehicles, will be purchased, at a total estimated cost of US$ 1. I million. Training and technical Assistance 3. Training and technical assistance will aim at strengthening the social safety net system through raising the level of qualification of supervisory personnel at all management and monitoring levels of the system. The training program will comprise all modem methods scheduled in training plans (experience, further training, refresher courses, seminars, exchanges of know-how) for: Personnel at the Ministry's central level and personnel of community and wilaya services. As for the contents of training, the programs will target project selection, management, monitoring as well as automated management systems. Supervisory training US$ - Total number of staff 2,000 - Daily amount 20 - Duration: 10 days/person/2 years Total amount for training 400,000 Seminars, study tour 25,000 Technical Assistance 20,000 4. An agreement will be sought by the Ministry of Public Works and Vocational Training with an institution responsible for implementing the training program, with possible collaboration with an overseas training institution. Total cost is estimated at US$445,000. Documents 5. In order to improve management of the system, aside from aspects indicated above, it is necessary to provide management structures at all levels with general documentation, whether technical or specialized (technical management review, manuals, case studies, methods of analysis of statistical data, design of file management. etc.). The documentation will be supported by audio-visual equipment. Total cost is estimated at US$70,000.  Annex 5 Page 2 of 3 Strengthening of Management of the social safety net system 6. Control Level. In 1995, a "social safety net cell" was created, directly managed by the Ministry's cabinet, through an Advisor. It is presently composed of a high-level official, deputy director of central administration, two administrators and an accountant. Its purpose is to ensure administrative monitoring of each wilaya in terms of commissioning and use of credits allocated to communities for AFS and PAIG, evaluate beneficiaries (from AFS and PAIG) and PAIG building sites. The information will be sent quarterly by the Department of Health and Social Protection of each wilaya who receives it from the communities. 7. The means available to central services remain insufficient and should be strengthened in order to ensure a closer monitoring, mainly for maintaining statistical data. The extent of the program, in terms of staffing and amounts of budget allocated to communities justifies the need to strengthen, primarily through staff redeployment, the service in charge of the project at the central level. The strengthening could affect resources of staff competencies and management and monitoring tools appropriate to the programs. 8. Compared with present staffing, the strengthening would take place through transfer or redeployment: of one staff responsible for statistics, in charge of records maintenance (AFS and PAIG); of one staff responsible for planning and monitoring of economic and social situation of wilayas, building site programming (PAIG) per wilaya, population and needs, as well as evaluation of AIG programs. 9. The Central unit will need adequate automation, and communication tools with the wilayas. These tools, which are presently non-existent would allow the central unit to receive and process information more quickly and efficiently and to regularly prepare the sunmmary of wilaya reports, monitor the use of allocated credits, prepare quarterly budget projections for the wilayas, and prepare recommendations for the orientation of AFS and AIG programs. 10. Wilava Level. The management of the social safety net system at the wilaya level is presently ensured by a specialized unit at the level of the health and social protection direction of the wilaya. The unit in charge of social assistance to the under-privileged was given, since October 1994, responsibility for the management of the social safety net (AFS and PAIG). Its capacity and means remain limited compared to its goals. This situation makes it imperative to consider the creation of a wilaya unit solely responsible for the social safety net, equipped with manpower and equipment necessary to its operation. 11. The structure planned at the central level could, for consistency in the system's management, be copied at the wilaya level while adapting capacity to the volume of actual work required by the programs. 12. Staff from this unit should include, aside from the social safety net unit manager, a coordinator of activities at the wilaya level, a staff responsible for records (AFS and PAIG), administrative and financial management of allocations and compensation as well as monitoring of planning and evaluation of economic and social situation of the wilaya (economist-sociologist): a staff responsible for management, supervision and evaluation of AIG building sites organized by communities (Technician). Staff transfers will mostly take place through redeployment in order to make a better use of competencies and existing capacities before recruiting new staff.  Annex 5 Page 3 of 3 13. Local Level. The conmnunity plays an important role in the implementation of the system. It constitutes the basis of the local social administration. Its services must be strengthened for the achievement of its goals and the improvement of implementation of the social safety net system. Strengthening of staff and means will take place through redeployment and maximum use of available means before recruiting new staff of purchasing new equipment. Studies 14. The cost of study for a master scheme on the automation of the system is estimated at US$40,000. The cost of the survey on impact of social safety net system (AFS - PAIG) on beneficiaries is estimated at US$70,000. Summarv of Costs Social Safety Net (AFS - AIG) 1. Equipment - Automation, communication 1,100,000 - Vehicles 400,000 - Training 400,000 - Documents 70,000 - Seminars, study tours 25,000 2. Studies - Survey on social safety net impact on beneficiaries 70,000 - Automation master scheme 40,000 - Miscellaneous 20,000 Total estimated cost 2,125,000 Grants will be sought for the financing of the studies.  Annex 6 Page 1 of 3 Pilot Social Fund Project Justir.cation 1. In 1993, the Algerian Governrment established community social service units to serve under- privileged people in popular districts. These units are composed of teamns of multi-disciplinary specialists settled at the district level. Social aspects in the units' interventions, especially remedial education and health prevention advice received special emphasis. The measures taken by the units aimed at improving the life of underprivileged groups 2. It has become necessary to go beyond social service units, to the development of under-privileged areas eventually to be supported by a social development fund managed by an autonomous agency and benefiting from a substantial financing from international donors and lenders. However, it is necessary to test this approach on a small scale before expanding. Purpose 3. On a pilot basis the program will aim at contributing to the improvement of a commnunity's living conditions by promoting access to basic social services and by encouraging revenue-generating activities. The specific activities will be determined on the basis of an in-depth study of community needs. Activities 4. In order to ensure commitment from the population to the project and its implication, a study would identify essential needs of selected under-privileged conmmunities and involve the population in it. The community would define its own priorities with the help of other concerned parties. The needs thus defined will be translated into objectives and measures to be taken in the short-term, in addition to those already initiated by the State. The following steps will be taken. 5. A limited number of communities, probably three. will be identified for the Pilot Social Fund. The project coordination unit will identify the consultant(s) who will undertake a field study. The unit will valuate consultant proposals which are submitted and advise the coordination committee of its choice for examination and approval. 6. The first step in the field study will be the identification of three under-privileged areas in each wilaya. To make this identification reference will be made to the census of under-privileged areas and the census of their population initiated by the MTPS and surveys on consumption and level of households. The MTPS will confirm the selection of these sites. A sample of under-privileged areas is required to measure the success of the pilot program. In principle there would be three types of communities selected those (a) where under-privileged populations already benefit from the assistance of a community social service unit (cellules deproximite), (b) where populations benefit from the assistance of associations or district committees, and (c) where populations have no assistance at all. Other criteria to be defined (nutrition, hygiene, literacy, revenues, etc.) will also be taken into account. 7. The second step is to identify social partners who would intervene in the selected communities (community social service units, associations, district conmmittees, etc.) and their level of competence.  Annex 6 Page 2 of 3 8. The third step is to undertake a detailed analysis of essential needs of the target populations and their expectations. The information produced in this analysis will permit identification of key indicators for the selection of projects as defined by the population through associations, social service units, district committees and other community groups, as well as to also identify social action projects which can not be met by these groups either because of lack of means, or because they are not present in the community. 9. The next step is to define the role of the program management unit, the role of social partners (community social service units), associations, district or other committees) in the identification of social support activities and their implementation, and the role of communities in the formulation of needs and their participation in implementation; particular attention will be given to relations with local authorities. This will include determination of functional and operational links among the various participants as well as financing procedures. 10. The next step will be to prepare detailed proposals on objectives, activities to implement to realize these objectives. and expected results. Factors ensuring sustainability of measures taken will be emphasized. These proposals would be the result of an interactive identification process, evaluation and approval of activities. The participation of communities in this process would be decisive. 11. Taking into account the pilot nature of the project. it is suggested that, within each community, that only two or three objectives be identified (e.g. small hydraulics works, rural works, improvement of health coverage). These objectives will be met through multiple activities. The expected results will be measurable. 1-. The next step would be to identify how to strengthen the intermediary agencies which would implement the program, including technical assistance, training and small equipment. etc, as well as the nature of the required technical assistance to implement each activity. 13. Finally the specific interventions and investments would be costed and a system proposed for procurement and implementation, with an emphasis on labor intensive works and community participation. 14. Subsequently the Project Coordination Unit would assist in procurement and implementation. 15. The Project Coordination Unit will, in this process of definition of needs and activities to implement, assist the various partners for each phase of the project and also will evaluate and review the organization being implemented. The process would be dynamic and interactive. Evaluation 16. Consultants would be responsible for defining indicators permitting at the end of the pilot phase, to evaluate the organization responsible project implementation and the capacity of the partners to undertake this type of project. This should permit the drawing of conclusions before launching a nat.onwide program. In particular it would identify any difficulties faced by the project during its implementation and propose solutions with the prospect of pursuing the experiment on a larger scale. In part through this experience, the Project Coordination Unit will prepare a manual on organization and  Annex 6 Page 3 of 3 procedures to implement for the realization of the second phase (reference will be made to the conclusions of the evaluation, see above). Budget 17. The nature and size of investment and social action programs cannot be precisely evaluated at this stage. A total of US$3 million is allocated for the studies as well as implementation. While the MTPS has estimated that each intervention would cost US$100,000, the consultants will be asked to identify smaller investments and actions. Review 18. The Bank and the Government of Algeria will agree on the initial selection of communities, and the investment plan. The program will be approved early summer 1996, and it is expected that works, training programs and purchase of equipment will begin by November 1, 1996.  Annex 7 Page I of 4 Component: Community Social Service Units 1. The Government of Algeria has developed 20 conmnunity mobile service units (cellules de proximite or CDP) in an effort to integrate marginalized populations and improve their access to social services. Under this program, four major areas of intervention have been identified: health and hygiene, psycho-social affairs, education, and cultural and sport activities. To date, several partial evaluations of the CDP experience have been concluded, with sufficient infornation to show the important role these CDPs have played in serving an important liaison function between the communities and the formal social sector ministries. Therefore, the project will strengthen the 20 existing CDPs in 7 wilayas, namely: * Alger. Mouradia et Madania * Atnnaba: Cite de Draa Erich et Centre de transit de Annaba * Boumerdes: Cite El Marsa et Cite El Sahel * Constantine: El Khroub, Constantine chef lieu, Zirout Youcef, Hamma Bouziane, Ibn Ziad, Dicouche Mourad * Blida: Blida and Boufarik * Setif: 2 CDPs in Setif ville * Oran: 4 cellules 2. Prior to expanding the CDP model to other wilayas, an in-depth evaluation of the program will be done in the course of this pilot project. To that end, the project will support two weeks of international technical assistance, and 2 months of local expertise as well as the expenses of such an evaluation. One of the most important elements of this evaluation will be the cost-effectiveness and - efficiency of the model, and a deterrmination needs to be made of how it fits within the traditional activities of the affected sectors (health, education, water and sanitation, etc.) Proiect description 3. Within the component, the project would support the commnune, wilaya, and central levels of the CDP program as follows: At the commune level, the project would finance equipment and furniture, as well as training for staff and conmmunity representatives. and seed funds for specific community action. A simple format for data collection and reporting would also be developed. Within the budget envelope and the constraints given below, each CDP would be given sufficient flexibility to propose a plan and a budget that is tailored to its own needs. 4. In order to receive the support, each CDP must prepare two documents: (i) a plan for one year, based on the needs of the target population, within a project-financed budget of S5,000 for the year. Expenditures are expected to be partitioned as follows: (a) equipment and furniture, not to exceed 60 percent;  Annex 7 Page 2 of 4 (b) community outreach activities, not to exceed 20 percent; and (c) funds for innovative activities with prior approval by the central coordinator, not to exceed 20 percent. Within these limits and with the approval of the central coordinator, each CDP team may decide what equipment, furniture and materials (not including consumables, which would be financed separately by the Govermnent) best meet its needs. (ii) a set of impact indicators, a format for which would be provided by the central coordinator. The baseline values for these indicators would be submitted by the CDP team, on the basis of which the impact of this project would be assessed. The central coordinator will send the first two requests from CDPs for Bank approval of the planning and budgeting. Equipment budgets (SOOOs) for 20 CDPs 100 On the basis of $5,000 per CDP B. At the wilava level, to ensure that the needs of the 7 wilayas are adequately covered (in equipment and, where needed, transport). the project would finance (costs given are estimates): (SOOO) Vehicles 240 For mobile clinics (clino-mobile) or cars, based on needs of the wilaya. Computer 30 For a desktop or laptop computer, based on needs. Equipment 330 May include fax, copier, media equipment, calculator, fax, based on needs 5. All efforts would be made to involve the non-governmental organizations and community associations in the discussions at the level of the wilaya. C. At the central level, the project would finance a vehicle, technical assistance for the preparation of 1 national and 12 wilaya-level workshops (technical assistance will consist of I month of international and 3 months of local expertise) for the design and implementation of a training program, including materials and modules. The central coordinator will administer the training program, in consultation with the Chief of the Project Management Unit.  Annex 7 Page 3 of 4 ($000) 1 vehicle 26 Equipment 6 fax, computer 1 national workshop 6 bringing together all CDP staff, central and wilaya authorities, community organizations, resource persons as needed. Duration of atelier to be determined by central coordinator 12 wilaya workshops 4 2 workshops per wilaya over the next 12 months; each workshop for 1 day with 30 participants @ $20/day for all expenses + 400 per workshop for materials, resource persons, etc. Training TA Foreign 12 1 month @ $12,000 TA Local 15 3 month @ $ 5,000 per month CDP teams 48 5 persons X 20 CDPs X 4 weeks of training and 2 additional weeks for meetings Community representatives 16 5 persons chosen by the community X 20 CDPs X 2 weeks Wilaya coordinators 6 5 persons (including sector ministries) X 20 CDPs X 2 weeks Central level 1 5 persons (central coordinator and sector ministry representatives X 2 weeks training Recurrent expenditures 6. All recurrent expenditures, especially staff salaries), operating costs, public awareness campaigns, and all consumables at the commune, wilaya and central levels will be borne by the Government. Training 7. The training of CDP staff members, wilaya-level coordination committees, and central-level authorities, as well as that of NGO representatives would be financed by the project, as mentioned above. Procurement 8. All procurement would be done according to Bank procedures, and would be the responsibility of the Director of Finances within the Project Management Unit.  Annex 7 Page 4 of 4 Costs of Evaluation 9. An in-depth evaluation of the program of Cellules de Proximite will be conducted during the implementation of this project. To that end, the project would finance a study at a cost of $20.000. 10. The terns of reference for this study have been prepared. These TORs will be further refined by the Chief of the Project Management Unit to ensure that all relevant informnation is collected. It is expected that this evaluation, in which community representatives would be involved, would be used to measure the impact of this project.  Annex 8 Page 1 of 5 Comparison of Current and Planned Interventions in the Algeria Social Safety Net Context: Four features of the current Algerian situation provide the context for the proposed Social Safety Net project: 1. The program of macroeconomic reform is expected to lead, among other things, to labor shedding during the phases of stabilization and restructuring; 2. High existing unemployment -- or at least the perception of such -- creates a high general potential for social unrest, as well as for resistance to reforms that are likely to bring further labor shedding; 3. Rapid labor force growth rates will continue to exert pressure on the labor market well into the medium and long term. This feature will combine with the prior two to increase political pressures on the government to create employment opportunities; 4. Several years of economic decline are expected to have caused increasing poverry and vulnerability among the population. Social Safety Net Needs: To respond to this context, Algeria's social safety net should include two features: first, temporary job creation until a recovery of economic growth can begin to absorb labor; and second, targeted poverty programs for the most vulnerable. Bank Responses: To address these needs, the Bank's strategy for Algeria includes both lending and non-lending activities. The SAL will include conditionality to support the rationalization of the social safety net and increase coherence and coordination of programs. It will require that the GOA undertake poverty analysis to improve its poverty reduction strategy and targetting capabilities, and that the GOA create an independent social fund as a core element of its social safety net. The measures called for in the SAL will be supported by the poverty assessment, which will give the GOA the tools to improve both its overall poverty strategy and its specific poverty targetting efforts. The SSN project will strengthen safety net program design, and will implement a pilot temporary employment creation program (TUP) as a transitional step toward developing a social fund. The poverty assessment and the labor markets study will help refine our understanding of the characteristics of the vulnerable groups, and the scope and duration of the need for employment creation projects. They will serve as an important input to the preparation of a possible social fund project.  Annex 8 Page 2 of 5 GOA Programs: The main elements of Algeria's social safety net include the AFS, a program of targetted income transfers, and the PAIG, a self targetting employment program. Under the Bank supported SSN project, the GOA will launch the TUP, a transitional public works employment program, and will prepare the Social Fund, for possible Bank support under a subsequent project. The key operating features of these programs, and the objectives they serve, are presented in the tables below. How they work Operating Mechanisms AFS PAIG TUP Social Fund target group poor, and elderly able bodied poor unemployed unemployed or unable to work what is cash transfer, up to 'solidarity minimum wage market wage transferred 25% min wage transfer," 50% min. wage conditions of none work work work transfer duration of ongoing temporary temporary temporary transfer implementing municipality municipality MTPS = > line autonomous agency agents ministries = > => private sector .__ ___ ___ ___ ___ ___private sector product none public works low public works i social ifrastructure econ. value maint. some econ. high econ. value value transfer share of 100% N.A.' 50% <30% (LAC total non-admin. average) costs (approx.) subproject supply driven supply driven supply driven demand driven selection no. people reached 430,000 house-hold 420,000 18,000 person T.B.D. heads participants years of work 1. The guidelines establishing the PAIG provide for limited overhead costs, but make no clear provision for the financing of non-labor subproject costs. Official estimates of the labor share of total costs are 85-90%, though this cannot be confirmed, since the PAIG does not provide data on actual costs. Given the nature of the subprojects financed, it is likely that the labor share of total costs exceeds 50'7o.  Annex 8 Page 3 of 5 Obiectives they serve ' Objectives Served AFS PAIG TUP Social Fund income transfer high high moderate moderate targetted to poor building social none low low-moderate high infrastructure private sector none none moderate high development temporary none high high high employment creation appearance of high high high high governmental concern community none low low high participation SSN Program Differences and ComDlementarities The above tables indicate some of the differences and complementarities between the GOA's most important safety net programs. It is to be emphasized that the TUP is conceived of as a temporary, transitional program, fulfilling some, but not all, of the objectives of a social fund. Key program differences include: (i) Product. While the AFS does not aim to generate any product apart from a straight income transfer, the other three programs do, to an increasing degree. For the PAIG, the product is not an important consideration in the selection of subprojects, although since the beneficiary must work for the transfer, some product is generated. No prior analysis of the value of the product created is conducted, however, as the driving criterion for this program is employment creation. The TUP limits subprojects to activities that are likely to be both labor intensive and generate a product with positive net value, such as maintenance of infrastructure. Further economic analysis of those subprojects to be executed under the TUP is in progress. The social fund would differ from the TUP in the sense that the subproject selection is demand driven, within a prescribed menu, rather than preselected. Social fund subproject eligibility criteria typically emphasize the construction of social infrastructure, or other products that will be of ongoing value to the community. (While these criteria are not strictly economic rate of return calculations, the ex post evaluation results of other social funds is that these criteria tend to lead to projects with very high economic rates of return. (Nicaragua, Honduras). ii) Share of Costs Transferred/Cost per Job The increasing complexity of the subprojects envisaged across programs from the AFS to the PAIG to the TUP to the Social Fund is reflected in a declining labor (or transfer) share of total costs, and a rising total cost per job created. New construction efforts are likely to have a higher cost per job, due to the relatively larger costs of complementary inputs (materials, 2. This table reflects program design features. In practice, some programs do not operate strictly according to design. For example, due to inadequate enforcement of self-targeting criteria, the PAIG has been less successful at reaching the poor than intended. See SAR Annex 1.  Annex 8 Page 4 of 5 equipment, supervision) required. Routine maintenance projects tend to have a lower cost per job. Average wage levels will also affect total job costs. !n Latin American Social Funds, which typically focus on the construction and rehabilitation of social infrastructure, the average cost per man-month of jobs created ranged from US$270 to US$320 in Bolivia, Honduras and Nicaragua.3 In employment generation projects in other countries, costs per job per day ranged from $1.10 (Indonesia), $1.80 (Haiti), $3.20 (Kenya) and $23.90 (Eastern Caribbean).4 These projects emphasized maintenance activities, with a lower materials complement to labor costs. These figures on costs per job created range from a high of approximately 590% of GDP per capita for the Latin America social fund average to a low of 46% in Indonesia.5 At 178% GDP per capita, the cost per job in the proposed TUP component is well within the range found in similar projects around the world. iii) Subproject Implementation/Private Sector Development. The range from PAIG to TUP to social fund contemplates an increasing role for the private sector in subproject implementation.. While the PAIG contracts subprojects by force account, the TUP will use simplified bidding procedures with private sector contractors as implementing agents, which will promote capacity building in the private sector in anticipation of a social fund. The social fund would be implemented by an executing agency with autonomy from the government, and would contract subproject implementation to the private sector. iv) Subproiect Selection/Participation. The AFS, PAIG and TUP all contemplate a preselection of subprojects to be financed (or beneficiaries to receive AFS transfers). These are identified and selected by the public sector (municipalities or line ministries) and financed accordingly. The social fund would represent a departure from this pattern, by leaving project identification to the conmmunities and selection/approval to an autonomous agency. This demand driven mechanisms for subproject selection makes the social fund a more participatory temporary employment creation program. v) Targeting. In providing difficult manual labor jobs in underserved areas, the TUP may effectively self target the poor, even while paying the minimum wage (which may be above or below the market wage). Its principal objective, however, is to generate temporary employment for the unemployed during the economic reform and transition. Assuming PAIG criteria are effectively enforced, this is the vehicle that self targets the poor, through its stipend, set at half the minimum wage. The future social fund would combine these features by permitting private sector contractors to pay a market wage (which targets the unemployed) and by weighting the project menu and resource allocations toward very low skill activities in poor areas (which targets the poor).6 3. See Glaessner, et. al., Poverty Alleviation and Social Investment Funds, The Latin American Experience, World Bank Discussion Paper No. 261, 1994. 4. Cited in Haiti Employment Generation Project SAR, Report No. 14510-HA, June 1995, page 23. 5. These are approximations based on 1993 GDP per capita in dollars as cited in WDR 1995, converted at 12 months. per year or 312 days per year. The LAC average is the average of the costs per job cited, relative to the Honduras GDP per capita, which falls between those of Nicaragua and Bolivia. 6. Or, the social fund may emphasize jobs that target other salient correlates of poverty. These refinements of the targetting mechanism will be possible once a poverty profile is constructed from the forthcoming LSMS data.  Annex 8 Page 5 of 5 Agency for Social Development A. As noted above, it is expected that a second project would support the establishment of an autonomous Agency for Social Development which would implement a Social Fund. The key differences between the proposed Social Fund and the TUP are the following: (a) bottom-up versus top-down priority setting. Although local authorities were consulted in the setting of priorities under Phase I, they were not the major decision-makers, and they in turn did not directly consult with community representatives (comites de quartiers, NGOs, or others); (b) indevendent azencv versus Government implementation unit. Not only would the establishment of an independent agency outside normal government regulations signal independence from the individual agendas of relevant line ministries, but it would also enable the Social Fund to hire the best qualified personnel and pay them market salaries; (c) continuous monitoring of community needs. Continuous monitoring and evaluation efforts would highlight the communities' own priorities, within the criteria established with their input, and within the available resource envelope; and communities' satisfaction (or lack thereof) with the services being provided; and (d) increased focus on development of commnunitv infrastructure and on environmental improvement.  Annex 9 Page 1 of 5 Project Monitoring and Implementation Indicators Monitoring indicators have been prepared for each of the project components. They aim to measure not only the implementation progress of the project, but also consider the attainment of the project's broader development objectives. Project monitoring would be carried out by an independent consulting firm that will present regular reports to the GOA and to the World Bank. Terms of reference for that activity are included at the end of this annex. TUP Water and Sanitation Subcomponent Performance Indicator Target Competition Total number of contracts 140 Average number of bids per call for bids 3 Progress Average time for processing contracts (in calendar days 30 following the bids) Actual kms of water/sewer maintained 1,200 Percentage of payments to contractors within 15 days of 90 invoice receipt Manpower Actual number of man-months 54,800 Actual number of unemployed people who received 4,200 minimum wages Percentage wages paid/Amount of contract (excluding 50 taxes)  Annex 9 Page 2 of 5 TUP Roads Subcomponent Target Performance Indicator SW cc Competition Total number of maintenance contracts 300 240 Average number of bids per call for bids 3 3 (supervision or construction) Total number of supervision contracts 5 2 Work progress Average time for processing contracts (in 30 30 calendar days following the bids) Actual kms of roads maintained 6.000 4.000 Percentage of payments to contractors 90 90 (supervision or maintenance works) within 4 weeks Percentage of payments to contractors 50 50 (supervision or maintenance works) within 2 weeks Manpower Actual number of man-months (supervision 28.800 24.000 or maintenance works) Actual number of unemployed people who 4.200 3.500 received minimum wages Percentage wages paid/Amount of contract 50 50 for maintenance (excluding taxes)  Anniex 9 Page 3 of 5 PROJET FILET SOCIAL - COMPOSANTES AGRICOLES PRINCIPAUX INDICATEURS DE PERFORMANCE Pirlorimianice lidicatcLir RUg6ncr,ion alIhicre liejaiia - C'urage maniiel lloiiiiicrdcs - Nlise cii (hellilles Setif - RIcILInCs colliiiires de drains vaklur processionnaires Avancemnent de Duree mnoyenne de passalioni d'uii 30 30 30 30 30 travaux conirat, cii jotirs, de la date du ddpot des soumissions a la date de l'ordre de servicc Objeciifs physiques rdafisds 53 000( ha dc 55 260 Ml, 3 000 m' de 50.000 ha 330 ha de rcboisciiiciit dcliniination, correctioniis torrcicl Ics 700 ian de fi\atiomi dcs bergcs netloiciln:it ti paillage (gabions) 1 .000 in' de correclions iorrenticlIi s I 000 ha de production 1.000 kiii de brises (gahions) de rhizomes benis 120 ha de plantation Imitikre 550.000 Ml. de curage rniaiiIel de draiiis l'ourci:itage des pai ieiets all 90 90 90 90 90 contractamit eii itoinis de 4 sci:iaiiiis 1Iourclireag: ties paiclicnis aiSl 5) 5tl 5( 50 50 Cilltraclailt ell Il lills (IC 2 seIIlmilcs Maiii d'oeuvre Nomiibre de personnes-annkcs rdalis&es 4.152 18 413 4 808 535 (26 jours de travail par niois - 312 jours de travail par aln) Nombre de chduneurs qui oit rccu Ie 5.000 15 500 5000 600 salaire minimum PIiurcemiiagu des salariis payis par 78 72 56 75 52 rapport aLl inhintani dii cniltrat  Annex 9 Page 4 of 5 Strengthening the Social Safety Net Proposals for monitoring indicators of AFS & PAIG transfer programs For each social safety net program, it is essential to monitor the evolution of the following indicators under the social safety net project. After two months, this information should be available for six Wilayas, after six months this information should be available for all Wilayas. AFS Monitoring Indicators I1. Distribution of beneficiaries by category (seniors, handicapped persons), by gender, social status (single heads of households); and total number of dependents (by age and gender). Distribution of dependents: by age, gender and category. 3. Distribution of beneficiaries, similar to (1) and (2), per wilaya and rural and urban areas. 4. Total distribution of allocations (or services actually paid) by category (seniors, handicapped), by gender, social status (single heads of household): allocation of total increased of DA 120 gained on dependents (by age and gender); and allocation of services rendered by Social Security by category, gender, social and professional status. 5. Distribution of benefits, increases and social security services, and as in (4), per wilaya and rural and urban areas. 6. Timing of AFS allocations (monthly, quarterly), per wilaya and rural and urban areas. 7. Total cost of AFS programs management, by category and wilaya, and rural and urban area. PAIG Monitoring Indicators 1. Number of participants, according to accurate list of building sites and existing activities, defining the type of activities per wilaya. The number of participants per type of building site that may be classified under 7 general categories, will have to indicate specific category activities at the level of each wilaya, such as list of specific AIG in wilaya, details on public buildings maintenance, details on social and hygiene measures, etc. 2. Necessary qualifications depending on type of detailed activities and per wilaya. 3. Average number of hours per day for each AIG (by detailed type of activity) for each wilaya. 4. Timing and type of PAIG payments (monthly, per task or work day) per wilaya and for each type of detailed activity.  Annex 9 Page 5 of 5 5. Type of supervisory framework and qualification of monitoring by type of PAIG activity, per wilaya. 6. Cost of supervision and monitoring mechanisms by PAIG detailed type of activities, per wilaya. 7. Total cost of management (including supervisory and tool costs) of PAIG programs , as well as services from social security, for each PAIG detailed activity and per wilaya and rural and urban areas. 8. Distribution of total budget expenses for PAIG (specifying expenses for beneficiaries and social security), and per wilaya and rural and urban areas.  ALGERIA SOCIAI. SAFETY NET PROJECT Expeniditure Accounits by Components - Base Costs ((JSs '000) IlI.Social Fund I-Public Works lI.Soc.Safely Net (Phase2) IV.impl.Unit IA 18 IC IIA IIB IIIA 10IB Road Agric./ Sewage/ Mgt. Celliles Com. Prep. Maint. Forestr. Water SSN Proxiiim. Dev. Total hlivestmerit Costs Civil works 24,154 18,705 12,718 - 55,576 Subprojects - - - - - 3,390 - 3,390 Equipment Vehicles - - - 393 346 - - - 739 Data processing - - - 1,081 47 - - 10 1,138 Office equip. - - 69 234 - - 10 313 Kits - - - - 111 - - - 111 Subtotal - - 1,543 738 - 20 2,301 Technical Assistance lntei national - - - - 18 - - - 18 Local - - - - 28 - - 430 458 Subtotal - - - - 46 - - 430 476 Studies 15 - - 130 4 - 633 20 o02 Tiainiing - - - 425 U7 - 90 - 602 Total Investment Costs 24,169 18,705 12,718 2,098 875 3,390 723 470 63,148 Recurrent Costs Operalt,mainlen - - - - - - 121 121 Salaries - - - - - - - 220 220 Total Recurrent Costs - - - - - - 341 341 Total BASELINE COSTS 24,169 18,705 12.718 2,098 875 3,390 723 811 63,489 Physical Contingencies 2,021 1,870 1.272 105 42 - 36 23 5,370 Price Contingencies 537 497 338 44 12 98 20 20 1,567 Total PROJECT COSTS 26,727 21,072 14,327 2,248 930 3,488 779 855 70.125 Taxes 3,073 2,424 1.648 190 94 401 4 12 7,846 Foreign Exchange 8,760 1,060 1,995 1,422 662 2,470 688 435 17,491 0 0 i,  Annex 11 Page 1 of 1 List of Documents in the Project File Documents Related to the Project 1. Agreed Upon Detailed Perfornance Indicators, Terms of Reference for Studies and Training Programs, Draft Agreements, and Draft Proposals for Creation of an Autonomous Social Development Agency, as follows: a. Study of Community Needs and Capacity b. Economic Rate of Return for Road Maintenance c. Study on Planning an MIS for Social Assistance Programs d. Baseline Study on Micro-enterprise e. Terms of Reference for TUP Supervision f. Draft Agreements between Participating Ministries g. Draft Decree for Establishing an Agency in Social Development h. Training Plan for the Management of the AFS/PAIG i. Training Plan for the Community Social Service Units (Cellule de Gestion) 2. "Fiches Techniques" for Public Works Programs in Roads, Agriculture, and Water and Sewerage. 3. Detailed Government Proposal of August, 1995. Documents Related to the Sector 5. "Rapport d'Evaluation a mi-parcours de l'execution du Filet Social en Algerie", Farouk Tebbal and Saad Belghazi. Octobre 24, 1995, Alger. 6. Dispositif Relatif au Soutien de l'Etat aux Categories Sociales Defavorisees", Ministere du Travail, de la Protection Sociale et de la Formation Professionnelle, Alger, 1995. 7. Study on the Legal Environment for Micro-enterprise.   MAP SECTION   IBRD 27831 ALGERIA Al e cL e n a n S e a SOCIAL SAFETY NET SUPPORT PROJECT 4' Elj- . PROJET D'APPUI AU FILET SOCIAL Md. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 1 \ 41 3 4 t 0 < _ n <) i DA- _ \> t { 4~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Q 29 B .e S/ 1 I N , ' , M . o'E I T3 V d TI n 3 . 1 E I -K SOIL g rn u - _ r / I~~~~~~~~~~~~~~~~~~~ XrO~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I El @hg0 WILAYA NAMES PAVED NATIONAL ROADS 0 TOWNS AND VILLAGES NOMS DES WILAYATE ROUTES NATIONALES VILLES ET VILLAGES . ,ALGIERS ADRAR 2 EL BAYADH OUARGLA PAVED WILAYA ROADS WILAYA HEADQUARTERS \, / :, AIN DE LA J' E L OILED AOUM EL EO UAGHI ROUTES SECONDAIRES 5IEGES DES WILAYATE , Are- VfNPOA E AIN TEMOUCHENT EL TARF RELIZANE RAIROAD NATIONAL CAPITAL ALGIERS I' GHARDAIA - SAIDA VOLES FNROREES CAPITALE r..., 2 ANNABA ' SELMA SETIF 33 - 7 _ S BATNE HA LL.Jl 2E SIDI BEL ABBES AIRPORTS - - WILAYA BOUNDARIES | j BECHAR - IEL SKIKDA AEROPORT'S LIMITES DES WLLAYATE j C 5 B aEJAIA KII KHENCHELA i SOUK AHRAS r,r- - _ BISKRA ' LAGHOUAT TAMANGHASSET INTERNATIONAL BOUNDARIES R'N- | __ I B3IDA - MASCARA TEBESSA LIMITES INTERNAFIONALES ., t , > B.3ORLJ BOU ARRERiDI M MEDEA I TIARET - N-..r I) BO3UIRA . MILA - TINDOUF \ I l 3- BOUMERDES : MOSTAGANEM _ TIPAZA \, 1 2 CHLEF - M SILA TISSEM S I \ I,, '5 CONSTANTINE I NAAMA TIZI OUZOU