Cambodia - Demobilization and Reintegration Project

Document of The World Bank Report No: 22601 KH PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 14.7 MILLION (US$18.4 MILLION EQUIVALENT) TO THE THE KINGDOM OF CAMBODIA FOR A DEMOBILIZATION AND REINTEGRATION PROJECT August 2, 2001 Southeast Asia & Mongolia Country Unit East Asia and Pacific Region  CURRENCY EQUIVALENTS (Exchange Rate Effective August 1, 2001) Currency Unit = Cambodian Riel I Cambodia Riel = US$0.00026 US$1 = 3,835 Cambodian Riel FISCAL YEAR January 1 to -- December 31 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank ANKI National Armies of Cambodian Independence (FUNCINPEC) ASEAN Association of South East Asian Nations AWPB Annual Work Plans and Budgets CARERE Cambodia Area Rehabilitation and Reintegration Project CAS Country Assistance Strategy CCC Cooperation Committee for Cambodia CDAF Council for the Demobilisation of Armned Forces CDRCAF Commission for Demobilisation of the Royal Cambodian Armed Forces CIDA Canadian International Development Agency CG Consultative Group CoM Council of Ministers COS Country Operation Strategy (ADB) CPAF Cambodian People's Armed Forces CVAP Cambodia Veteran Assistance Programme DC Demobilisation Commission (MND) ES Executive Secretariat of the Provincial Veterans Committee EMP Environmental Management Program FUNCINPEC National United Front for an Independent, Neutral, Peaceful, and Cooperative Cambodia GS General Secretariat of the Council for the Demobilisation of Arrmed GTZ Deutsche Gesellschaft fir technische Zusammenarbeit (German Bilateral Technical Assistance) IAPSO Inter-Agency Procurement Service Office IDA International Development Association IDP Internally Displaced Person ILO International Labor Office Vice President: Jemal-ud-din Kassum (EAPVP) Country Manager/Director: Ian Porter (EACSM) Sector Manager/Director: Task Team Leader/Task Manager: Bonaventure Mbida-Essama (EACSF)  IMF International Monetary Fund IOM International Organization for Migration KPLNF Khmer People's National Liberation Front KR Khmer Rouge MAFF Ministry of Agriculture, Forestry and Fisheries MEF Ministry of Economy and Finance MIS Management Information System MLMUC Ministry of Land Management, Urbanization and Construction MND Ministry of National Defence MoH Ministry of Health Mol Ministry of Interior MRD Ministry of Rural Development MSALVY Ministry for Social Affairs, Labor, Vocational Training and Youth Rehabilitation MWVA Ministry of Women and Veterans' Affairs NADK National Army of Democratic Kampuchea (Khmer Rouge) NGO Non Governmental Organization PIM Project Implementation Manual PDP Pilot Demobilization Programme PMR Project Management Reports PRDC Provincial Rural Development Council PRGF Poverty Reduction Growth Facility (IMF) PVC Provincial Veterans Committee RCAF Royal Cambodian Armed Forces RGC Royal Government of Cambodia SAC Structural Adjustment Credit SEILA Government program to strength local governance in the context of decentralization and deconcentration SIDA Swedish International Development Cooperation Agency SOC State of Cambodia SWAP Sector Wide Approach SVF Specially Vulnerable Families TA Technical Assistance TSN Transitional Safety Net WFP World Food Program WGWR Working Group on Weapons Reduction   CAMBODIA DEMOBILIZATION AND REINTEGRATION PROJECT CONTENTS A. Project Development Objective Page 1. Project development objective 2 2. Key performance indicators 2 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 2 2. Main sector issues and Government strategy 4 3. Sector issues to be addressed by the project and strategic choices 6 C. Project Description Summary 1. Project components 9 2. Key policy and institutional reforms supported by the project 11 3. Benefits and target population 11 4. Institutional and implementation arrangements 12 D. Project Rationale 1. Project alternatives considered and reasons for rejection 13 2. Major related projects financed by the Bank and other development agencies 15 3. Lessons learned and reflected in the project design 15 4. Indications of borrower commitment and ownership 16 5. Value added of Bank support in this project 16 E. Summary Project Analysis 1. Economic 17 2. Financial 17 3. Technical 18 4. Institutional 18 5. Environmental 20 6. Social 22 7. Safeguard Policies 24  F. Sustainability and Risks 1. Sustainability 25 2. Critical risks 26 3. Possible controversial aspects 27 G. Main Credit Conditions 1. Effectiveness Condition 27 2. Other Appraisal and Negotiations Conditions 28 H. Readiness for Implementation 28 I. Compliance with Bank Policies 28 Annexes Annex 1: Project Design Summary 29 Annex 2: Detailed Project Description 31 Annex 3: Estimated Project Costs 33 Annex 4: Environmental Assessment 34 Annex 5: Financial Summary 44 Annex 6: Procurement and Disbursement Arrangements 45 Annex 7: Project Processing Schedule 57 Annex 8: Documents in the Project File 58 Annex 9: Statement of Loans and Credits 59 Annex 10: Country at a Glance 60 Annex 11: Letter of Demobilization Program Development 62 Annex 12: Preliminary Evaluation of the Pilot Demobilization Project 69 Annex 13: Monitoring and Evaluation Framework 76 Annex 14: Supervision Plan 83 Annex 15: Procurement & Financial Management Consultants 86  CAMBODIA Demobilization and Reintegration Project Project Appraisal Document East Asia and Pacific Region EACSF Date: August 2, 2001 Team Leader: Bonaventure Mbida-Essama Country Manager/Director: Ian C. Porter Sector Manager/Director: Ian C. Porter Project ID: P071445 Sector(s): BY - Other Public Sector Management Lending Instrument: Specific Investment Loan (SIL) Theme(s): Public Sector Poverty Targeted Intervention: Y Program Financing Data f I Loan [X1 Credit [ Grant []Guarantee [ Other: For Loans/CreditslOthers: Amount (US$m): $18.40 Proposed Terms (IDA): Standard Credit Grace period (years): 10 Years to maturity: 40 Commitment fee: .5% Financing Plan (US$m): Source Local Foreign Total BORROWER 7.20 0.00 7.20 IDA 0.90 17.50 18.40 NETHERLANDS, GOV. OF THE (EXCEPT FOR 0.50 1.50 2.00 MOFA/MIN.OF DEV.COOP.) JAPAN, GOV. OF (EXCLUDING MIN. OF FINANCE - PHRD 5.60 4.40 10.00 GRANTS) SWEDEN: SWEDISH INTL. DEV. COOPEATION AGENCY 0.00 2.40 2.40 (SIDA) WORLD FOOD PROGRAM 2.00 0.00 2.00 Total: 16.20 25.80 42.00 Borrower: GOVERNMENT OF KINGDOM OF CAMBODIA Responsible agency: DEMOBILIZATION SECRETARIAT Council of Ministers (CoM), Council on Demobilization of the Armed Forces (CDAF), General Secretariat (GS) Contact Person: H.E. Sok An, Senior Minister, Minister in charge of the Council of Ministers, CDAF Chair, H.E. Svay Sitha, Under-Secretary of State, CoM, Secretary General, CDAF Tel: 855-23 880 625 Fax: 855-23 880 625 Email: gscvap@bigpond.com.kh Estimated disbursements ( Bank FY/US$m): FY 2002 2003 2004 2005 Annual 4.90 6.60 5.50 1.40 Cumulative 4.90 11.50 17.00 18.40 Project implementation period: 09/01/2001 - 06/30/2004 Expected effectiveness date: 11/01/2001 Expected closing date: 12/31/2004 OCS PAD Fam: RW, ,. X  A. Project Development Objective 1. Project development objective: (see Annex 1) The Demobilization and Reintegration Project (the Project) is a major component of the public sector reform program of the Government. It is an important element of the structural reformns supported by the IMF's Poverty Reduction and Growth Facility (PRGF) and IDA's Structural Adjustment Credit (SAC) consistent with Cambodia's transition from a post-conflict society, in particular the need to reorient public spending priorities from security issues to provision of social services and development of economic opportunities for the poor. The project would build upon the experience of a pilot project financed by a consortium of donors and through trust funds administered by IDA to reduce the size of the military and assist the reintegration of veterans. The overall objectives of the project are: * Assist the Government in its effort to demobilize 30,000 soldiers and to promote their successful adaptation to civilian life. * Contribute to a reallocation of budgetary resources to the social sectors in order to build human, social and economic assets. Savings achieved from demobilization will help achieve this. 2. Key performance indicators: (see Annex 1) Progress towards achievement of the project objectives would be monitored using the following indicators: 1. Number of soldiers removed from military records and payroll database. 2. Proportion of demobilized veterans and their families able to maintain or improve their standard of living in terms of health, housing and economic activities following demobilization; 3. Increase in expenditures for key social and economic sectors of education, health, agriculture and rural development as a result of savings from demobilization. B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: 20077-KH Date of latest CAS discussion: 2/29/00 The main objective of the Country Assistance Strategy (CAS) is to assist Cambodia build the foundations for sustainable development and poverty reduction for the medium to long term. Building these foundations entails: (i) supporting Good Governance such as legal and judicial reform and public sector reform including civil service restructuring and military demobilization; (ii) building physical infrastructure; (iii) rebuilding human capital including access to health care services and education; and (iv) facilitating private sector development. In addition to the CAS foundations outlined above, a key aspect is the need to focus all interventions as much as possible in rural areas where the majority of the poor and indeed the majority of the population live. The CAS was designed and is being implemented in a collaborative manner with IDA's development partners. IDA is to support Sector Wide Approach (SWAP) on a pilot basis in the governance, infrastructure and health/education areas and stronger partnerships overall. The focus of IDA lending is to be rural infrastructure and rural development. The Project is consistent with the CAS approach and is a major part of the public sector reform program of the Government. It is an important element of both the IMF's PRGF and IDA's SAC programs. Failure to - 2 -  carry it out could have negative consequences for these two programs. Both the PRGF and the SAC support measures that will enhance governance through, among other things, military demobilization and an increase in budget allocations to the priority sectors (health, education, agriculture and rural development). The savings obtained from demobilization would represent a major contribution, in whole or in part, to the resources to be reallocated to the priority sectors. Consistent again with the CAS, a special emphasis has been put on partnership and coordination in processing the demobilization project. It has been designed by the Government in full partnership with the donors and civil society including NGOs. The process also has some of the main features of the SWAP. After extensive discussions with various stakeholders a pilot demobilization project was proposed to: (i) demobilize 1,500 soldiers in four provinces; (ii) test the key assumptions made; (iii) deepen the understanding of the issues raised; (iv) draw pertinent lessons and (v) prepare the full demobilization project. The Government, the donors and the NGO community asked IDA to be the lead coordinator. Subsequently, the Government prepared a pilot project which was reviewed by all its partners, amended and finally adopted by the Government and the donors. IDA led the effort to secure funds for the $2.25 million pilot project. Financing was obtained from six donors for activities consistent with its development priorities. Overall coordination of implementation supervision has been conducted by IDA, which administered trust funds for financing provided from the Swedish International Development Agency (SIDA), the Netherlands and the Canadian International Development Agency (CIDA). All phases of the pilot project, with the exception of the delivery of the reintegration assistance packages (expected to be completed by October 2001) have been completed. While delays incurred during implementation of the pilot program, mainly associated with issues of administration of multi-donor funding and design and procurement planning of reintegration assistance, have been cause for concern on the part of demobilized veterans and their former military commanders, these limitations have been addressed and the lessons leamed incorporated in the design of the full-scale program. A workshop attended by all stakeholders (Government, donors, NGOs, veterans under the pilot project) was organized on March 1-2, 2001 to evaluate implementation of the demobilization and reinsertion phases of the pilot project and draw lessons regarding needs assessment, logistics, procurement and multi-donor disbursement arrangements. Conclusions and recommendations of the workshop as well as the lessons learned from the subsequent process of finalizing design and procurement of reintegration assistance packages have been incorporated in the design of the current project as appropriate. They are reviewed in Annex 12. The Project is therefore an integral part of broad-based efforts supported by many donors and civil society. It will consolidate IDA's assistance to the Government's sector reforms as embodied in the SAC. Additionally, the project will promote the CAS' proposed Bank Group Assistance Program in the following areas: * By helping with the reintegration of about 30,000 demobilized soldiers, it will support efforts towards building good governance and contribute to the implementation of the expenditure reforms supported by the SAC, most specifically the reorientation of expenditures to the social sectors. * It will support rural development by helping coordinate and provide needed support to the veterans and their families in the rural areas where most of them live or are likely to resettle, thereby improving their living conditions and the growth of the local economies. - 3 -  * It will support private sector development by promoting the involvement of private and community based suppliers, entrepreneurs and NGOs in the provision of goods and services and infrastructure development, thereby also contributing to temporary job creations. * It will support human capital development by its screening of the health conditions of veterans and by facilitating their access to provincial health facilities. It will also assist in the financing of the health needs of the most vulnerable veterans after discharge. It will also provide training and skills development for the veterans and their families through targeted programs. * It will support CAS recommendations regarding coordination with other aid agencies and civil society, most notably the NGOs. More specifically, it will deepen and consolidate the successful partnership and coordination with other stakeholders established during the design, funding and implementation of the pilot demobilization project. 2. Main sector issues and Government strategy: Priority Objective - Sustained Growth and Poverty Alleviation. The foremost priority for the Government's development program is to take and implement concrete measures to promote growth and reduce poverty, most specifically in the rural areas. The Royal Government's Platform for 1998-2003 aims to reduce poverty by: (i) safeguarding social stability and security; (ii) building human capacity; (iii) strengthening infrastructure and fostering an environment for private investment; (iv) fully protecting and preserving the natural environment; (v) enhancing national revenues in the context of a fully accountable and transparent fiscal policy; and (vi) encouraging the private sector as an engine of growth, investment, and employment creation. At the same time, it has been recognized that this ambitious reform program must be accompanied by an adequate public sector reform program to enhance the efficiency and effectiveness of public service delivery. Demobilization is an important part of public sector reform. It is also a key element of the PRGF and the SAC as regards fiscal reform, most notably the reallocation of expenditures from the security to the social sectors. Background. The Paris Peace Accord of 1991 entrusted the United Nations Transitional Authority in Cambodia (UNTAC) with supervising the unification of the four fighting factions (the State of Cambodia, -FUNCINPEC, the Khmer People's National Liberation Front, and the National Arny of Democratic Kampuchea, (NADK)) and the subsequent demobilization of the warring factions with armies consisting of approximately 140,000 soldiers. When the program was completed in May 1993, about 36,000 soldiers had officially been demobilized and only from the cooperating factions. However, each faction started recruiting soldiers again, a situation which led to an increase in the number of soldiers overall. The last program of demobilization updated for the Tokyo Consultative Group (CG) in 1999 was never implemented because of lack of financing and lack of consensus on a number of important issues such as the wider context of the reform of the armed forces within which demobilization should be placed, the need to update the needs and profiles of the soldiers, land ownership issues, program design and the management of its different components. In the end, the donors reached an agreement with the Government to test the various assumptions made in the proposed demobilization program. This has been done through the preparation and implementation of a pilot demobilization project, the results of which have helped in the formulation of the overall demobilization project Sector issues. Demobilization covers many key issues related to the public sector reform and govemance in general. In an environment of weak institutions, inadequate human resources and poor health conditions, more resources need to be allocated to the social sectors to build human resources. Economic and social - 4 -  services sectors are currently crowded out in the utilization of budgetary resources. Demobilization would make a contribution to efforts to increase spending in the social sectors through reallocation of savings to these sectors. The following specific issues have been raised and recognized as critical to any effective demobilization undertaking: * Reform/Reprofessionalization of the Security Forces. With the return of peace and stability since the formation of a new government on November 1998, Camnbodia is now emerging from three decades of armed conflict that led to the significant depletion of its human and social capital and the destruction of vital physical and productive infrastructure. With the priority now given to social development and poverty reduction, the demobilization project should be considered within the wider context of the reform of the armed forces in an effort to recast their role in a peaceful and democratic society. * Number of military personnel. The number of military personnel has been a subject of constant debate. The situation has been made more difficult by the integration of soldiers belonging to different political factions into the army. There have been recurrent reports on the existence of "ghost soldiers" who contribute to an artificially high military bill. In addition, the Government has prepared and signed a "Letter of Demobilization Program Development" incorporating important principles that will guide the demobilization project (see Annex 1 1). e Destruction of smaU arms and weapons. A key aspect of the demobilization program is the need to disarm soldiers before or at the time of discharge so that the weapons can be destroyed and the soldiers adopt a civilian life style. Ex-soldiers should not become a source of danger and security problems. Ensuring that the discharged soldiers have been disarmed and the surplus arms are appropriately disposed of is therefore a priority. * Socio-economic profiling and a needs assessment of soldiers and their families. It is necessary to create the conditions for the veterans' successful full reintegration into society so that they can become economically productive. This requires helping thern obtain sustainable means of livelihoods. A first step in this area is to update their socio-econornic profiles and to obtain fuller information on the specific needs of the veterans and their famnilies. 3 Reintegration needs. A systematic assessment of the needs of the soldiers to be demobilized and their families is needed to determine what incremental investments is needed to help facilitate full reintegration of veterans into civilian life. * Access to land. Security of tenure over sufficient arable land is a major concern for rural dwellers and especially for those veterans who are already farmers or who choose farming as their means of livelihood. Ensuring secured access to land is therefore a key consideration under the project. * SpeciaRy Vulnerable Families. A more systematic approach is required to identify the Specially Vulnerable Families (SVF). An adequate mechanism is needed to ensure a more accurate and systematic identification of the most vulnerable families and targeting of assistance to them. * Criteria for the selection of soldiers to be demobilized. In order to avoid discriminatory practices against specific groups within the army, criteria for the selection of soldiers to be demobilized need to be objective and transparent. -5 -  3. Sector issues to be addressed by the project and strategic choices: Some of the sector issues have already been addressed during the design, preparation and implementation phase of the pilot demobilization project. Where necessary, they will be addressed directly through various components of the proposed project. * Reform of the Armed Forces. The Ministry of Defense prepared a Defense White Paper with assistance from the Australian Government. It was approved by the Government and published in February 2001. The White Paper defines clear objectives for the military and recasts its role in the context of a peaceful and stable Cambodia. It clearly states that the "Government's political guidelines direct the armed forces to demobilize to an acceptable size". It says that the "RCAF reform plan requires the demobilization of 55,000 soldiers in order to reduce the burden of defense on the national budget". It also identifies specific areas that will require priority spending for the reformed armed forces. * Number of military personnel. With assistance from the World Bank, the Government has conducted a complete registration of all soldiers in the armed forces and computerized the results. These results are broadly consistent and can be reconciled with those obtained from other sources such as the 1998 census data after adjustments are made for the irregularities uncovered. The registration exercise was started in January 1999 and completed in December 1999. All the 15,551 irregular soldiers identified have been removed from the forces. Further, approximately 9,000 widows have been identified for removal from the records of the armed forces and transferred to other appropriate line ministries. This leaves about 131,227 soldiers in the armed forces. It is estimated that 11.04% (14,487) of these are in Category 2 (disabled (5.93%), chronically ill (3.08%) and over 55 years old (2.03%)) and would be a priority target for demobilization. A total of 30,000 soldiers would be demobilized under the project. In addition, the Government has prepared and signed a "Letter of Demobilization Program Development" incorporating important principles that will guide the demobilization project (see Annex 11). * Destruction of small arms/weapons. Under the pilot project, soldiers were required to surrender their weapons before they are discharged. This policy will be maintained under the project. However, there still exist many small arms available in the country at large. The European Union has been working with the Government on the collection and destruction of small weapons. A European Union mission has already visited Cambodia and issued its report. Further, a small arms destruction project is now funded by the European Union. The Working Group on Weapons Reduction in Cambodia (WGWR), a coalition of local and international NGOs, organizations and individuals working to address the issues of small arms proliferation in Cambodia, was invited by the Government to participate in the pilot demobilization project by monitoring its implementation. As part of its activities WGWR conducted interviews with some 300 soldiers on weapons-related issues and delivered presentations to 1,041 demobilized soldiers on weapons use, possession and basic peacekeeping skills. WGWR will continue to be involved with the project. * Socio-economic proMfle of soldiers and their families and needs assessments. As part of the design and implementation of the pilot demobilization program, an update of the profiles of the soldiers has been carried out in the four pilot project provinces where the soldiers were demobilized. Studies carried out so far include: a labor market study, a baseline survey on the needs of specific groups of vulnerable soldiers, a study of the needs of vulnerable groups among veterans, a study on the situation of soldiers -6-  who had entered the various factions as children, a health status of demobilized soldiers, and a gender analysis of the pilot project. In addition, the armed forces 1999 registration data, various World Food Program village surveys, the 1998 census and the 1997 socio-economic survey report, and specific field surveys conducted by the General Secretariat provide more recent information on the profile of the soldiers. The list of documents in project files appears in Annex 8. The results of all these surveys, studies and reports are basically consistent in key areas. First, the registration and other survey results indicate that about 6% of the soldiers are disabled. It also shows that overall, 11.04% (14,487) of the army is made of Category 2 soldiers (the disabled, the chronically ill and the over 55 years old). Second, there are clear indications that between 65-75% of the soldiers or their spouses are already engaged in farming activities and have access to land for cultivation. However, many of them, have no secure rights to that land and /or would need additional land if they want to adequately support their family. It should also be underlined that farming has been undertaken as a way to supplement the inadequate salary from the army. It is done with insufficient means and cannot by itself support soldiers' families when the salary is stopped after demobilization. Third, the average soldier is usually better educated than the pcpulation at large. Fourth, a majority of soldiers would like to continue farming after they leave the army. Fifth, only a minority of soldiers, including those in Category 2, live in the barracks. Sixth, most soldiers want to stay where they are now and apparently do not want to move to a different region, even if this means their place of origin. Seventh, most soldiers already own a house, including those still living in the barracks, but in most cases, the physical condition of these houses need improvements. Eighth, the average size of a family is about 5 members. And finally, the majority of soldiers indicated that their priority is for money, cattle and land. In the health area, 1,498 soldiers or 99.9% of the total number demobilized under the pilot project underwent health screening. This group consisted of 108 women and 1390 men. Of these, 471 or 31% were able-bodied and 1027 or 69% were Category 2. The latter group was comprised of disabled (2 1%), chronically ill (35%) and elderly (12%). It was determined that 1,107 soldiers (74%) suffered from medical conditions requiring further examination or follow-up treatment. They were referred to provincial health facilities. The project provided treatment to 32.2% of the soldiers who went through the health screening. The most common medical conditions encountered were: eye problem (27% of the total), gastritis, (22%), amputation (19%), respiratory problems (15%), urinary tract infection (14%), post-traumatic blast/bullet injury (11%), and hypertension (6%). In addition, of 409 soldiers tested for malaria and 9 of them found positive. Tests also found that 50 soldiers (3%) had sexually transmitted diseases (STD). Finally, a mental health assessment was conducted for 433 veterans randomly selected found that 68 (37%/6) reported subjective emotional distress (depression symptoms, anxiety symptoms, mix of anxiety and depression, post traumatic stress disorder symptoms). The socio-economic profile updating described above has helped provide a more up-to-date assessment of the needs and health status of the soldiers and their families. Information already obtained has made it possible to categorize soldiers with various characteristics and needs into sub-groups: those who already have land and practice farming, those who already own a home, those with a trade in stock, female soldiers, child soldiers, the handicapped and the sick etc. This work has been done in a collaborative effort involving government agencies, the donors and NGOs. The efforts aimed at establishing a strong data base on soldiers to be demobilized will be continued with the emphasis given to rapid processing and analysis of the registration data collected in 1999; incorporation/ integration of data available from line agencies and donor partners, especially WFP, GTZ and SEILA; and new data collection to update the registration data and provide a more in depth needs assessment of -7 -  veterans, their families and specially vulnerable families such as those female veterans who are single heads of households, the disabled and elderly without family support. A qualified NGO, consultant or team with appropriate skills in the social sciences will assist the General Secretariat (GS) in conducting the social needs assessments. Besides providing a report containing an updated socio-economic profile of soldiers to be demobilized and their families, the GS/NGO/consultant team will work with the project's participating donor organizations to develop a vulnerability index and map to ensure the better targeting of assistance to the most vulnerable families. This activity will be carried out with the assistance and participation of other member ministries of Council for the Demobilization of Armed Forces (CDAF), primarily through their representatives on the Provincial Veteran's Committees (PVCs). * Access to Land. According to the socio-economic data many soldiers currently engaged in farming activities do not have secured rights to the land they use. In other cases as yet not known with sufficient detail, many soldiers although possessing some land would require more land to be able to fully support their families. Soldiers who decide to move to a new area may also need land to build a house. The updated registration data will provide information on the number and probable final location of settlement of those veterans deciding to move. The number of demobilized soldiers requiring assistance with land to ensure their successful reintegration will vary according to where the demobilized soldiers are likely to settle down, the choice of farming for their future livelihood and the availability of land in the commune. To ensure a proactive approach to the land issue it is necessary to complete processing and analysis of registration and socio-economic data focusing on land and shelter needs. The needs assessment of up to 10% of the soldiers will analyze the land needs of demobilized soldiers. Based on the findings of the report and data from the re-registration and needs assessment, the GS will undertake discussions with authorities at the central and provincial levels to agree on a framework to deal with the land issues. Provincial plans for dealing with the land issue will be prepared and integrated with the work plans of the Demobilization Project and participating agencies. Access to housing is likely to be a issue, especially for demobilized soldiers staying in barracks and for vulnerable groups such as the disabled and those without families to support them. To enable a better assessment of this need, GS will undertake a review of the suitability of the housing component of reintegration support as well as utilize findings from earlier evaluations and the planned review of land needs of demobilized soldiers. The GS will work with the Ministry of Land Management, Urbanization and Construction (MLMUC) and other participating agencies on the PVCs to ensure that the package of housing assistance is timely, well targeted and useful. This will include the provision that soldiers to be demobilized would not receive assistance for the construction of new housing unless they have secure right to land for such housing. In addition any land assistance provided to beneficiaries under the project is required to be free from any litigation or controversy. * Specially Vulnerable Families (SVEF). It is recognized that more work is needed to identify and develop a program of assistance for the SVF and to ensure the ongoing monitoring of their situation once the project ends. The Ministry of Women's and Veterans Affairs (MWVA), the Ministry of Social Affairs, Labor, Vocational Training and Youth Rehabilitation (MSALVY), the Ministry of Health (MOH) and other member ministries of CDAF will be invited to participate in the design and implementation of this part of the program based on their institutional mandate and responsibility for - 8 -  the veterans after the program is completed. The construction of a vulnerability index is necessary to identify the SVF and assist in the formation and implementation of a program of assistance targeted at them. * Criteria for demobilization. It has been determined that priority discharge will be given under the project to Category 2 soldiers who are generally regarded as less useful to the needs of the armed forces. Besides this criteria, discharges under the pilot project were made on the basis of health, rank and professional abilities and promotability. The same criteria will be used for the full project as reflected in the letter of program development in Annex 11. * Reintegration needs and community development. In two of the pilot provinces, a systematic assessment of the needs of the families of veterans and the communities where the veterans have settled or are likely to resettle was done to determine what incremental investments will be needed to meet the identified needs, including health care and skills training. For the project, the survey of reintegration needs of soldiers and the situation of recipient communities will be carried out in more systematically and in coordination with existing or planned development activities in the pertinent areas. Several ongoing or planned rural development projects, including by other donors such as the Asian Development Bank (ADB), have been proposed which target communities with a concentration of veterans. C. Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): The Government's program to downsize the anned forces has two distinct but closely related phases: demobilization and long term reintegration of soldiers into civilian life. The Project concems the first phase and has four main components: personnel data management and information system, demobilization, reintegration, and project implementation and technical assistance. _ Personnel data management and information system. The objective of the registration exercise undertaken by the Government in 1999 with assistance from IDA was to establish a reliable military personnel database and to develop a computerized payroll system. It included the following activities: identification and verification of identity, data collection, taking of photographs, issuance of discharge certificate, data processing, and development and maintenance of a personnel data base. Many of these activities have already been implemented before this project. The project will use the results obtained, help evaluate them and make improvements as needed. Soldiers that are not registered would not be able to participate in the program. * Demobilization. Demobilization is meant to support the Government efforts to downsize the army. It marks the formal and controlled discharge of soldiers from the army. Demobilization entails four basic sub-components: assembly and disarmament of soldiers before they leave the arny and before discharge operations; discharge; the provision of a transitional safety net (TSN); and transportation of veterans to communities. The soldiers are first assembled in the barracks, relinquish their arms, are given preliminary instructions and taken to the discharge centers. Discharge at the centers includes pre-discharge orientation, withdrawal of the military identity card and provision of a civilian one, health screening of soldiers, 9  initial counseling, provision of a TSN package of cash, foodstuff and household kits and transportation to the communities where the veterans live. * Reintegration. The objective of reintegration support is to assist the assimilation process of veterans into the mainstream of productive civilian life. Reintegration follows directly from the demobilization phase. Reintegration assistance is intended to facilitate the full reintegration and adaptation of the veterans in the initial phases of their return to full civilian life in local communities. It includes a more detailed assessment of the socio-economic needs of the veterans' families, and the provision of the identified key individual social and economic assets that will help them build long term sustainable livelihoods. The assessment will be conducted prior to the first discharge with a random sample of up to 1O percent of the soldiers to be discharged. The interviews will be conducted at the home of the soldiers to be discharged, with the participation of their family. The composition of the reintegration package will be based on the lessons learned under the pilot project, complemented by the results of the field survey, monitoring and evaluation during irnplemnentation, and the analysis of available socio-economic surveys and census data. Reintegration assistance is expected to include (a) health screening, although this is conducted at the discharge center for logistical reasons; (b) provision of information, counseling and referral after arrival of veterans in the communities of settlement, and sensitization of host communities; (c) the provision of the package of assistance reflecting the needs assessed which could include housing, economic assets, mainly agricultural and other assets; and (d) the design and implementation of skills/vocational training programs and job counselling. Every effort will be made to deliver the packages of assistance no later than six months after discharge, subject to the applicable procurement procedures. - Project Implementation and Technical Assistance Studies. The project will provide support to the implementing agencies at the central and provincial levels. Technical assistance will also be provided for: (a) the strengthening of the planning and inplementation capacities of the GS of CDAF, the PVCs and their Executive Secretariats (ES); (b) the improvement of financial and data management including monitoring and evaluation; and (c) the coordination of the provision of long term means of sustainable livelihoods to the veterans, including facilitating linkages to on-going community development programs in communities where veterans have settled. Costs The project costs are summarized in the table below excluding taxes: Indicativ Bank~- % Component Sector I Costst l %of financing) !;Ban- X _____________________________ ______________ ( ;E 4 USS$M )i Total (US$M ) financing (1) Data Management and MIS 0.20 0.5 0.20 1.1 (2) Demobilization 13.80 32.9 0.00 0.0 (3) Reintegration 24.00 57.1 14.90 81.0 (4) Project Implementation, TA & 4.00 9.5 3.30 17.9 Studies Total Project Costs 42.00 100.0 18.40 100.0 Front-end fee 0.00 0.0 0.00 0.0 Total Financing Required 42.00 100.0 18.40 100.0 - 10-  Financing Financing for the project is as follows: Government (US$7.2 million excluding taxes of $5.4 million), IDA ($18.4 million), Government of Japan (US$10.0 million), Government of Sweden ($2.4 million), WFP ($2.0 million), Government of Netherlands ($2.0 million). In addition, GTZ is providing assistance to be managed in parallel with the above funds, including provision of technical assistance to the GS. Funding from the Government of Japan will be provided through its counterpart funds mechanism, and will include financing for basic human needs as they did under the pilot demobilization project. Financing from Sweden is through a budget support facility for Calendar 2001 from which US$2.4 million will be used for demobilization. Funding from the Netherlands is through an annual contribution from its Embassy of US$1 million in Calendar 2001, and US$1 million in Calendar 2002. Government of Sweden (for the second year) and the Government of the Netherlands (for the third year) have indicated the possibility of providing additional grant funding for the project in subsequent years, subject to implementation progress in the first year. IDA's financing would be for technical assistance for implementation, institution building of implementing agencies, and goods and services for reintegration. None of the itemns to be financed by IDA is of a humanitarian relief nature or for emergency recovery assistance. Food and water at the discharge centers, the leasing of the discharge centers themselves to temporarily house the soldiers, the foodstuff and house kits included in the non cash TSN are financed by bilateral donors. 2. Key policy and institutional reforms supported by the project: The project will support efforts by the Government to: * Implement a broad-based security reform agenda; and * allocate a bigger share of resources to the social sectors as a percentage of GDP. 3. Benefits and target population: The main benefits expected from the project are: * Fiscal savings to be realized from the downsizing of military personnel to be allocated to the social sectors; * improved livelihoods for the veterans and their famnilies; and * promotion of small scale, rural private sector development through the participation of local small business in the provision of goods and services. The target population of the project is the 30,000 demobilized veterans and their families, and eventually communities in which they will reside. This group includes some of the most vulnerable segments of society, in particularly the SVF which will be identified through the application of a vulnerability index. Benefits accruing to these families include health screening and referral to provincial health structures, special assistance to the disabled, agricultural inputs and tools, skills development and job creation. - 11 -  Beneficiary organizations will be (a) the staff of the GS and the line ministries which comprise CDAF and which will be responsible for coordination and implementation of the program at the national and provincial levels; (b) MWVA in its capacity as the ministry responsible for maintaining case files of veterans once they have been transferred from MND; and (c) rural enterprises, which will be involved in the provision of goods and services under the project. 4. Institutional and implementation arrangements: The project will be implemented in conformity with the project implementation manual (PIM). The PIM was prepared based on similar documents prepared for the pilot project and updated to reflect the lessons learned and the additional technical requirements associated with IDA financing. At the national level, CDAF is responsible for the design and overall coordination of the demobilization project. CDAF is a civilian body that brings together representatives from all concerned line ministries MEF, MoH, Ministry of Interior (Mol), Ministry of Rural Development (MRD), MSALVY, MWVA, Ministry of Agriculture, Forestry and Fisheries (MAFF), MILMUC, MND, the Prime Minister's Military Advisor and the Council of Ministers (CoM). It is chaired by the Senior Minister in Charge of the CoM. The executing agency for the project is the GS of the CDAF. The GS, as the Project Implementation Unit, will be responsible, as it was under the pilot program, for overall planning, implementation, coordination and monitoring. The GS is represented at the Provincial level by the PVC. The PVC is headed by the Provincial Governor and includes provincial staff of the ministries represented in CDAF. The head of the Provincial Rural Department is Vice-Chair of the PVC and Chief of its ES. The ES is responsible for the detailed planning and coordination of project activities at the provincial level. A key feature of the project is to use existing structures as much as possible and to avoid creating new ones. Various ministries will contribute to specific implementation aspects of the project through their membership in CDAF. NGOs and other interested partners working in the provinces will also contribute to project implementation as required. Many tasks will be outsourced in order to allow the GS to concentrate on the core functions of planning, progranmming, budgeting and monitoring. Some of the jobs to be outsourced include procurement, financial management and needs assessment for the veterans at the community level. Outsourcing will be carried out in accordance with Bank procurement guidelines. Planning: The project will be implemented on the basis of Annual Work Plans and Budgets (AWPB) to be prepared by the GS and submitted to the donors for review and commnent prior to finalization. Disbursements in any given year will be based on the corresponding AWPB, and monitored through quarterly Project Management Reports (PMRs). Financial Management and Procurement: Financial management and procurement will be outsourced to a professional firm with experience and qualifications acceptable to IDA. As part of the contract, this firm will review and update the procedures set out in the Project Implementation Manual and install an adequate project accounting system. Reporting: PMRs will be submitted to IDA on a quarterly basis. The professional firm hired will be responsible for the production of the PMRs. These will be forwarded to IDA within 45 days of the end of each quarter following review and approval by GS. The first PMR will be submitted to IDA at project effectiveness with the withdrawal request for the initial disbursement to the Special Account. The project - 12 -  accounts will be subject to annual audits by independent auditors acceptable to IDA under terms of reference acceptable to IDA. Audit reports will be submitted not later than six months after the end of the calendar year. Monitoring and evaluation: (see Annex 13) Overall project monitoring and evaluation will be based on indicators agreed by IDA and the RGC as listed in the Development Credit Agreement and as indicated in the provisional logframe (refer Annex 1). It will be carried out in four components: i) final design of the monitoring and evaluation framework with detailed indicators, means of verification and targets, by an external consultant engaged on terms of reference and qualifications acceptable to IDA; ii) ongoing data collection and reporting by the GS, assisted by a monitoring and evaluation consultant, using IDA's Project Monitoring and Reporting (PMR) system, iii) external monitoring and evaluation reporting at six month intervals by the External Consultant; and iv) an end of project monitoring and evaluation report by the External Consultant. Monitoring of input and output indicators will be done on a continuous basis by the GS and PVCs based on field visits and review of case files. Information management will be assisted by the procurement and financial management firm and the Monitoring and Evaluation Advisor, who will ensure that data is entered into the project MIS so that monitoring reports and PMRs can be generated as needed. Evaluation reports by the External Monitoring Consultant will be provided directly to the GS and IDA as chair of the Donor Working Group on Demobilization, for joint review and discussion. Evaluations will include participatory methodologies as well as review of project reports and documents, field visits and direct observations. Draft Terms of Reference for the evaluation are provided in Annex 13. Supervision: (see Annex 14) Field supervision will be performed by the Bank in conjunction with other donor stakeholders as appropriate. A supervision plan, including the number of missions and skills requirements is provided in Annex 14. In addition, bilateral donors have indicated that they will provide technical assistance to the GS and may also do so for the Donor Working Group on Demobilization to strengthen implementation supervision and reporting. D. Project Rationale 1. Project alternatives considered and reasons for rejection: Demobilization is a key component of the public sector reform program of the Government of Cambodia. It is a conditionality of the IMF's PRGF and its processing progress is a condition of the floating tranche release under IDA's SAC. Activities financed by IDA are important to provide the necessary link between the demobilization and reinsertion activities financed by other donors and the reintegration activities consistent with broader rural and comrnunity development concerns. No existing project by IDA or the other donors can be used to meet these needs in the targeted areas and activities under preparation may have an important lag between the time demobilization is completed and their effectiveness. Failure to carry out the proposed project would jeopardize the whole reforn program. If the soldiers are demobilized without the support proposed under the project, a high proportion of them (special target group) will become even more vulnerable while those veterans who are able-bodied could become a security risk by resorting to illegal means to support themselves and their families. The following alternatives were considered for the project: * The first option considered was to discharge the soldiers from the army without any further assistance in any form being provided to them and just let them fend for themselves. - 13-  * The second option was to provide them with the equivalent of 5 years of their normal salary as a departure allowance after they have been discharged. The objective was to provide the veterans with a basic safety net that the veterans would use at their discretion to meet basic needs such as food (45% of the amount), shelter (2 1%), clothing (4%), health (11%), education (2%), household effects (12%), and transportation (5%). The amount, the Transitional Safety Net (TSN), would have been paid in three cash installments of $400 at intervals of four months. Under this scenario, the emphasis and the bulk of the funding would have been front-loaded in favor of this TSN. * The third option discussed was a combination of the second option above and a Demobilization Program developed by the Royal Cambodian Armed Forces (RCAF). The DP seeks to help with the reintegration of the demobilized soldiers into civilian life through a resettlement scheme using large tracts of land under RCAF's control. Development Centers would be set up in those areas under RCAF administration and management. The main activities would be the building of new local infrastructure (roads, schools, health facilities, wells, etc), the construction of factories to process cash or industrial crops by private companies, and the skills development and training of veterans and job creation. * The fourth option is the proposed project. The first option was rejected because it was felt that it entailed total neglect of the soldiers after they leave the anny despite the services they had provided to the country. Soldiers left by themselves could become a serious security risk in the urban and rural areas. In addition, the case of the special vulnerable groups cannot be ignored. The second option was dropped because of lack of interest from lenders in financing it and because of a number of issues raised by important stakeholders within the Goverunent and by donors. First it was felt that the socio-economic profiles of the soldiers had changed over the years and the needs were not the same for every soldier. The assistance package was to be based on the assessed needs of the soldiers. Second, it was felt that the emphasis should be more on providing the ex-soldiers with the long term means of sustainable livelihoods as opposed to meeting their short term needs. Third, it was feared that based on the experience of the repatriation program for refugees in 1991/1992, the cash provided to the soldiers would not be put to good use. If so, there was a danger that ex-soldiers would become more vulnerable after the money had been spent over a short period of time. This situation contained special social security risks. Fourth, it was realized that many soldiers do not live in the barracks and are involved in outside activities such as farming or various trades. This occupational and income diversification needs to be developed through training and skills development. Fifth, it was agreed to concentrate more on the vulnerable groups. Sixth, the proposed project was designed and prepared without adequate participation of other partners and stakeholders including the NGOs and as such did not represent a consensus or reflect important considerations particular to the Cambodian context. Seventh, there was a wide spread perception that most of the cash payments to be made may not reach the intended beneficiaries because of possible leakages and abuse. Finally, this option was considered too expensive. The third option was not adopted because (a) it involves a considerable resettlement scheme with substantial additional costs; (b) the socio-economic profiles of the soldiers suggest that most of them are already settled into communities and engaged in some kind of economic activities to supplement their meager salaries. This implies that it would be more cost effective and require less resources to help them and the communities where there are settled; (c) the risks and complexities involved with ensuring that the private sector would be able to quickly construct factories (market research, project financing, etc); (d) the risks associated with setting up large concentrations of veterans in a given area; and (e) issues related to the administration and management structure to implement this option. - 14 -  2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). Latest Supervision Sector Issue Project (PSR) Ratings (Bank-financed projects only) Implementation Development Bank-financed Progress (IP) Objective (DO) Support major reforms such as civil Economic Rehabilitation Credit S S service reform and demobilization (ERC) Support for civil service reform Technical Assistance Project S S (Cr. 2664-KH) Social and economic infrastructure Social Fund I&II Projects (Cr. S S fund 2379-KH and 3179-KH) Community/Rural Development North East Village S S Development Project (CR 3216-KH) Other development agencies Demobilization, Reintegration and SIDA, Government of Japan, Community Development Pilot WFP, Government of the United States, GTZ IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 3. Lessons learned and reflected in the project design: Key lessons which have been learned from other IDA credits and other activities come from four major sources: (a) the Country Assistance Evaluation executed by IDA's Operation and Evaluation Department in June 1999; (b) repatriation and reintegration of refugees starting in 1993; (c) the Country Portfolio Perfornance Review (CPPR) of May 21, 2000; and (d) the pilot demobilization project. The main lessons drawn include the need to: (a) ensure adequate consultations and coordination with other donors and NGOs so that they can be committed to the project and help with its design, preparation, implementation and evaluation; (b) establish Government leadership early on during the design and preparation of the project; (c) take into account the implementation and management capacity of the Government in the project design. This would help determine the level of complexity and the number of project components; (d) carefully design the technical assistance component to ensure not just an adequate support for effective implementation but also to have adequate training of local staff and know-how transfer; (e) conduct a pilot project and carry out appropriate research and studies to test new ideas fully; (f) focus on poverty alleviation and encourage rural enterprises; (g) broaden the target group to include not only the project beneficiaries but also the communities where they live; (h) initiate the process of full demobilization project only after all the financing has been secured and the funds are ready and available to be disbursed; - 15 -  (i) outsource or contract as many activities as possible to outside experienced organizations; (j) ensure that reintegration activities are implemented as soon as possible after discharge; (k) assess the needs of the veterans and their families in their homes by qualified teams possessing appropriate skills mix; and (1) adopt measures to substantially improve project implementation capacity (particularly procurement, financial management and monitoring and evaluation). The project also includes other measures to internalize various lessons by: (a) strong coordination and consultations with other donors and NGOs in the design, preparation, implementation and evaluation of the pilot project; (b) strong leadership and involvement of the Government which prepared the pilot project and played a key role in its successful implementation; (c) the provision of specific specialized training and technical assistance; (d) specific and selective measures to support the overall institutional framework of the sector; and (e) the preparation of adequate procedures and a set of monitoring indicators. A more detailed presentation of the pilot project and the lessons learned to-date are provided in Annex 12. 4. Indications of borrower commitment and ownership: The Government perceives the project as a key component of its structural reform agenda as discussed with and endorsed by all the donors. It is an integral part of its PRGF program with the IMF and the SAC with IDA. It is also a major trigger discussed with and agreed by the Government under the CAS (February 29 2000). The actions which have been taken during the prior to or during its preparation include: * The preparation, approval and publication of the White Paper on Military Reform with assistance from the Australian Government. The White Paper firmly commnits the Government to proceed with demobilization. 3 The decision to revise the amount and modalities for the cash payment. The Government has funded the revised aunount under the pilot project and will adhere to this in the full project. * The preparation and successful implementation of the pilot demobilization project in close coordination and partnership with the donors and other stakeholders, including the NGOs. 5. Value added of Bank support in this project: IDA has provided and will continue to provide the following support and assistance: * Maintaining a leading position in coordinating donors' actions in the demobilization exercise and in pursuing the partnership approach proposed by the CAS, thereby supplementing (and strengthening) the Governnent's limited institutional capacity. * Support the overall structural reforrn agenda in close partnership not only with the IMF but with other partners as well. * Coordinating technical assistance and the work of all stakeholders, including NGOs. * Provide support for overall resource mobilization for the project and the administration of the various grants from donors. * Assuring that resources are well utilized and that least cost solutions are adopted through supervision and the use of tested procedures and guidelines as requested by other partners. * Help leverage project financing by attracting other donors as well as continue to ensure the support of those that who have indicated that their continued financial support is contingent on the Bank's presence as a lending partner. - 16 -  E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (see Annex 4): O Cost benefit NPV=US$ million; ERR = % (see Annex 4) O Cost effectiveness * Other (specify) Traditionally, RGC has allocated to, and spent a high proportion of its budget on defense. This has ranged from 3.54% of GDP in 1996 to 3.35% in 1997, 2.96 in 1998, 2.93 in 1999 and an estimated 2.4 in 2000. Corresponding figures for the combined sectors of health and education have been 1.5% in 1996, 1.42% in 1997, 1.39% in 1998, 1.97% in 1999 and an estimated 2.44 in 2000. The demobilization of 30,000 soldiers would provide savings at least in personnel costs and help reduce the fiscal burden of defense expenditures and would facilitate increased allocations and expenditures for poverty reduction programs focused on improving social services and economic opportunity. On a different scale, the distribution of limited agricultural implements should lead to improved productivity and yield tangible economic benefits. The health financing component will improve the health status of the veterans and lead to fewer days of work lost through ill health of the veterans and his/her family members. Finally, by taking into account the role of women and their contribution to family life and income, the project will improve the overall status of the families concerned. At the same time it should be underlined that the actual savings obtained will depend on a number of factors including: (i) the perfonmance of the economy as a whole; (ii) effective government budget management; (iii) political trade-offs that can be obtained between the military and the civilians; (iv) the results of the military reform in terms of the needs for new investments required to turn the army into a professional one. The impact of the likely savings on the economy will depend on (i) the actual level of savings transferred to the social sectors as opposed to non-productive areas and (b) the efficiency with which the reallocated savings are used in the social sectors. The sector policy framework has to be adequate, priorities well determined and the institutions with the needed capacity for effective implementation. 2. Filnancial (see Annex 4 and Annex 5): NPV=US$ million; FRR = % (see Annex 4) N/A Fiscal Impact: The savings to be obtained annually are about US$7.2 million from soldiers' salaries and about US$3.1 million for the rice distributed every month to soldiers, yielding a total of US$10.3 million a year. These estimates are conservative and do not include the cost of providing housing, clothing, arms and ammunition and other recurrent expenditures associated with maintenance of soldiers. The investment under the project can therefore be recouped within five or six years following full demobilization, with net fiscal savings thereafter. The net savings are substantially in excess of the debt servicing requirements, allowing for a substantial surplus which could be allocated to social expenditures. In theory too, additional fiscal benefits would result from additional tax revenue resulting from the enhanced agricultural production and other economic activities supported under the project. - 17 -  3. Technical: Project activities reflect technical assistance provided by IDA's Post Conflict Unit, GTZ and other donors in the context of the pilot project, and reflects the key elements and organizational requirements of a demobilization program. The design has also benefited from a fully participatory approach involving major stakeholders, including many NGOs with substantial experience working with veterans and other vulnerable groups in Cambodia. These, and other inputs obtained through workshops, studies and surveys and by using the results of the pilot project has led to (a) a specific focus on the specially vulnerable families, (b) the design of a package to be based on socio-economic assessment of the veterans, (c) gender mainstreamning activities, and (d) judicious outsourcing of a number of services in order not to overburden the implementation unit. It has also resulted in a broad consensus to help meet the basic human needs of the veterans in terns of health and housing, to help them with long term sustainable means of livelihood. 4. Institutional: The pilot project provided the opportunity to evaluate the performnance of the GS and PVCs over the demobilization phase of the program. 4.1 Executing agencies: Primary responsibility for project execution will lie with the GS. The GS has gained significant experience under the pilot and its performance in organizing demobilization activities was generally good, but given the complexity and timeliness of project activities, the GS will be supported by international consultants as well as the contracted procurement and financial management firm under the proposed project. Vehicles will also be provided to facilitate GS backstopping and supervision in the provinces. The PVCs have the potential to effectively conduct their coordination activities but would require significant training and support from the GS. The pilot also demonstrated the need to provide basic equipment (fax, computers, copiers) as well as transportation (motorcycles and cars) to the PVCs to carry out their responsibilities. The MWVA, the MoH and the MSALVY are expected to be chiefly responsible for the provision of services to veterans after demobilization. Selective assistance will be provided to each of the ministries to strengthen its capacity to provide these services consistent with their institutional mandate. Proceeds of the credit will not be used to pay salaries or salary supplements. - 18 -  4.2 Project management: The GS was created specifically to manage the implementation of the demobilization program. The GS includes a number of Cambodian and expatriate staff with some experience with internationally funded projects. During the pilot phase, the GS also developed some familiarity with Bank procedures. They have proved generally good in the organization and coordination activities associated with demobilization both at the national and field levels. However, the GS has limited capacity to support procurement and financial management for the full scale program. Given the risks to implementation progress, reputation and donor relations, the GS has undertaken to hire an international firm to provide procurement and financial management services, as well as facilitate information management and technical reporting. 4.3 Procurement issues: The appraisal mission carried out a procurement capacity assessment of GS. It was found that the said agency has limited procurement experience in implementing projects financed by IDA. In order to ensure that procurement under the proposed project will be accomplished in a transparent and timely manner and to build capacity of the GS, it was agreed to hire a procurement consulting firm to assist the executing agency. Prior review thresholds and the supervision plan reflect the risk assessment and the findings of the draft Country Procurement Assessment Report (1997) and the CPPR (1999) (see annex 6). As part of the contract the firm will be expected to review and update the procurement management procedures in the PIM, prepare annual overall procurement plans specifying allocation of tasks and responsibilities at each stage of procurement, prepare bidding documents and install a procurement monitoring and record-keeping system acceptable to IDA. The firm will also appoint qualified and experienced procurement staff in adequate numbers to manage the procurement functions at GS and at discharge centers to be established in the provinces. Appointment of the consulting firm will be a conditions of effectiveness, and installation of the procurement monitoring and record keeping system is expected to be in place by December 1, 2001. The pilot program highlighted the importance of careful procurement planning and capacity to implement procurement processes rapidly. Given the need to accelerate project implementation of demobilization of the soldiers, the GS has decided to proceed with the initial steps of procurement before credit effectiveness. In particular, selection of procurement and financial management consultants, management and implementation consultants, bidding for renovation of discharge centers, and purchase of vehicles will need to be carried out immediately. All procurement activities, including procurement of goods and consulting services (civil works under the project are not financed by IDA) will be in accordance with the Bank's procurement guidelines and follow the procurement procedures, including the prior review requirements in the Credit agreement. 4.4 Financial management issues: The project will be financed by multiple donors and the Government and involves payments in cash to soldiers discharged from armed forces and provision of goods and services to assist in the integration of these soldiers to civilian life. A financial management assessment of the Finance Department of GS was carried out by IDA. The GS Finance Department had only gained limited experience in managing the finances of the pilot demobilization program, therefore building up capacity in time to manage the main project was not considered feasible. In addition, given the political sensitivity of the project and the Government's commitment to ensure transparency and integrity in project financial management, - 19 -  Government and the donors have agreed to contract out the procurement and financial management functions to an intemationally recognized professional consulting firm. The GS will be responsible for reviewing the Project Management Reports, PMRs, for signing Withdrawal Applications in conjunction with Ministry of Economy and Finance, and for authorizing withdrawals from the Special Accounts and Second Generation Special Accounts. As part of the contract the firm will be expected to review and update the financial management procedures in the PIM and install a project accounting system acceptable to IDA. The firm will also appoint qualified and experienced finance and accounting staff in adequate numbers to manage the finance functions at GS and at discharge centers to be established in the provinces. The financial management system will be fully documented in the financial management procedures in the PIM. Appointment of the consulting firm and the installation of an acceptable financial management system will be conditions of effectiveness. The consulting frm will establish a Central Finance Office in Phnom Penh and Finance Units at each of the discharge centers. All accounting and record keeping for the project will be centralized at the Central Finance Office. Where accounting transactions take place in the provinces, adequate procedures should be established to ensure that all data is sent to the Central Finance Office. 5. Environmental: Environmental Category: B (Partial Assessment) 5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis. The project is considered to be a Category B as the assistance package to soldiers includes help with housing which could include assistance with access to land. The implications of this component on land and environmental issues is not clear yet because of lack of information on where the soldiers are located, the number who may choose to move to a new area, their status on the land, and the need for new land and housing. However, this number has been assessed by earlier studies to be relatively small. The Government has provided an undertaking in the Letter of Program Development that it will ensure that land provided to veterans will be free from litigation or controversy, and that resettlement and land acquisition, if required, will be subject to IDA's policies and guidelines. Additionally, the Govemrnent has agreed to the establishment of a policy framework to deal with possible impacts on Indigenous Peoples (IP). 5.2 What are the main features of the EMP and are they adequate? While no EMP has been necessitated, the Project Implementation Manual is to include policy frameworks for resettlement and indigenous peoples to guide the GS and PVCs in complying with the Government's and Bank's social and environmental requirements. The inclusion of the Ministry of Environment in CDAF will also help in ensuring that all project activities are in conformrity with existing national regulations. - 20 -  5.3 For Category A and B projects, timeline and status of EA: Date of receipt of final draft: Policy frameworks for resettlement and indigenous peoples were prepared by GS and included in the Project Implementation Manual (see Annex 4). 5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EA report on the enviromnental impacts and proposed environment management plan? Describe mechanisms of consultation that were used and which groups were consulted? Disclosure of environmental and social guidelines has already been undertaken by GS in several project areas. Groups consulted include project beneficiaries, representatives of line ministries and NGOs in areas to be covered by the project. This process will be continued in other participating provinces in a timely fashion before project launch. To ensure meaningful consultations and transparency, information on project objectives, description and potential impacts have also been provided in project areas. In addition, in provinces where communities of IP are present and may be affected by project activity, representatives of these communities will be brought into the consultations to provide feedback. 5.5 What mechanisms have been established to monitor and evaluate the impact of the project on the environment? Do the indicators reflect the objectives and results of the EMP? Regular supervision of compliance with environmental and social safeguards will be undertaken to ensure that Bank guidelines and procedures are being met. - 21 -  6. Social: 6.1 Summarize key social issues relevant to the project objectives, and specify the project's social development outcomes. The role of women in demobilization, and the likely impacts of the project on them has generally not been adequately evaluated. As part of the preparation and preappraisal of the project a gender study was undertaken to help identify gender related issues, assist in a gender analysis of the project and to provide recommendations for the project. The findings of the study can be summarized as follows: First, the importance of spouses of veterans as providers for the family is much more important than previously thought. In some cases, because of the loss of military income and rice allowance, the wife has become the sole provider of the family, a fact that challenges the traditional belief of the male being the primary provider in the family. This situation is likely to become more pronounced with the high number of families where the husband is seriously disabled. Second, the needs assessment conducted under the pilot project seems to have had a narrow focus because no systematic effort was made to go beyond the veteran to the family as a whole. It is also not clear whether in many cases, the reintegration assistance options did not properly reflect the needs assessment itself as there was no systematic attempt to identify the most vulnerable families, this has made the targeting of assistance problematic. Third, despite the important role they play in the family as provider, spouses of soldiers had in general not been invited to participate in discussions about the needs of the family. Fourth, there is a serious risk that demobilization could make the most vulnerable families even more vulnerable if they cannot replace their already low military pay and rice allowance with alternative resources. Fifth, MWVA, which is ultimately responsible for veteran case files and pensions had little participation in the pilot. Finally, there is an estimated 3% of the armed forces that are women. The special needs of women soldiers which have hitherto been neglected will be better reflected in this project. 6.2 Participatory Approach: How are key stakeholders participating in the project? Some veterans participated in the process by meeting with Government, donors and NGOs and being in focus groups held in the pilot provinces. This gave veterans the opportunity to provide inputs into how the full project could better meet the needs of future soldiers to be demobilized. Socio-economic surveys conducted as part of project preparation have provided useful information and made it possible to have a better understanding of the plight of the vulnerable groups: war widows, under-age soldiers, the handicapped and the chronically ill. All this points to a positive impact of the project in terms of creating more awareness, fostering more consultations and partnerships. The carryover effect will help define better reintegration programs and strong commitment from local populations to the development of their communities. Health screening makes it possible to have a better knowledge of health profile of the veterans.Local communities, enterprises and NGOs will participate throughout project implementation in a demand-driven provision of goods and services. 6.3 How does the project involve consultations or collaboration with NGOs or other civil society organizations? The following measures, used during the design, preparation and implementation of the pilot program and for the proposed project have secured the participation of key NGOs concerned or affected by the project: - 22 -  * The studies and surveys made by the GS, consultants and NGOs had extensive discussions with the expected or actual beneficiaries to elicit their views and comments on the design and implementation of the project * Representatives of the local administrations and NGOs in areas to be covered by the project have also been consulted and have participate in the design and preparation of project activities. For the pilot project, regular meetings were held with the Provincial Veterans' Committees and local NGOs and families of beneficiaries. * A workshop evaluate the results of the implementation of the pilot project took place on March 1 & 2. Participants included the veterans, local administrations, the donors and NGOs. * Project preparation has been coordinated closely with NGOs and other donors engaged - or to be engaged -- in complementary projects. 6.4 What institutional arrangements have been provided to ensure the project achieves its social development outcomes? The implications of these findings are being included in project design by: (a) providing some assistance to MWVA to ensure the ongoing management of case files continues after the project is completed; (b) helping to promote gender mainstreaming in the project not as a separate component but by ensuring that gender issues are actually addressed in all aspects of the project, from planning, programming and iinplementation. For instance, the needs assessment will be done in a more holistic way by outsourcing it to a team with the right mix of skills. It will also be done at the veterans' home in the community with the active participation of other family members; (c) providing gender training to implementing agencies at all levels; (d) including gender mainstreaming provisions in the PIM; (e) including gender in monitoring and evaluation process; and (f) ensuring that data collection is broken down by gender. 6.5 How will the project monitor performance in tenrs of social development outcomes? The project will directly monitor (through external evaluations carried out each six months) the following indicators related to beneficiary participation, including families, in the design and selection of reintegration packages, gender mainstreaming and attention to the needs of SVF: * Packages designed based on results of socio-economic evaluation and funding supply constraints. * Percentage of PVC and ES staff who receive gender training; * Families of veterans (particularly spouses) involved in selection of reintegration packages; * Percentage of special needs cases identified during discharge health screening which receive follow-up physical/mental health services. - 23 -  7. Safeguard Policies: 7.1 Do any of the following safeguard policies apply to the project? polic Apcblty Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) 0 Yes 0 No Natural habitats (OP 4.04, BP 4.04, GP 4.04) 0 Yes * No Forestry (OP 4.36, GP 4.36) 0 Yes 0 No Pest Management (OP 4.09) 0 Yes 0 No Cultural Property (OPN 11.03) 0 Yes * No Indigenous Peoples (OD 4.20) * Yes 0 No Involuntary Resettlement (OD 4.30) * Yes 0 No Safety of Dams (OP 4.37, BP 4.37) 0 Yes 0 No Projects in International Waters (OP 7.50, BP 7.50, GP 7.50) 0 Yes 0 No Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60) 0 Yes * No 7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies. On land issues, socio-economic surveys and the military registration show that less than 5% of the soldiers live in the barracks and that most of them already own a farm and a house. Further, surveys indicate that the vast majority of soldiers prefer to stay where they already leave. Finally, the Government has decided that veterans are free to choose where they would like to live. A proactive approach including studies to establish the extent of land needs and collaborative efforts between the PVCs and local authorities will be pursued to ensure that the land access issue is well managed in the reintegration efforts. On assistance with farming, the project does not propose activities that would have serious implications for natural habitats, forestry or pest management. The farmers-soldiers are not known to use any pesticides. Use of even fertilizers is very limited in subsistence farming because of the high costs of these inputs, low cost-benefit ratios, poor state of roads and other infrastructure that severely limits access to inputs and the absence of a marketable surplus in many areas. The project does not involve, and is not anticipated to have impact on, indigenous people. However, in the event that land and housing provided to soldiers to be mobilized is located in areas where there are communities of indigenous peoples, the policy framework agreed to by the Government would apply. Resettlement and land acquisition issues are also anticipated to be minor and manageable. Involuntary resettlement is considered improbable for the following reasons: (a) the great majority of soldiers already live in communities where they own a house and are engaged in farming; (b) the great majority of soldiers have indicated that they prefer to stay where they already have their roots i.e. in existing areas; (c) the only land available for possible resettlement is state-owned land under the control of the military. This land will require extensive investments to build road, social and economic infrastructure and to make it a viable option for new settlement. The project has no funds to build this infrastructure which is a pre-requisite for any new settlement. No financing has been proposed from any source for new settlement; (d) it is government policy not to encourage a sizable congregation of ex-soldiers in any given areas of the country; and (e) the veterans will be going through a traumatic transition period when they lose the secured income and food rations. Uprooting their families by moving to a new locality would represent a second major trauma they would be reluctant to face at this point. - 24 -  In the event where a limited number of soldiers decide be transferred to areas where they have not lived, they will go to a place of their own choice. In the Letter of Program Development, the Government has committed itself to the policy that any land provided to a veteran would not be or have been the subject of litigation. Furthermore, the letter provides that any land provided would be subject to IDA's policies on resettlement, forestry and indigenous peoples, should these be applicable. F. Sustainability and Risks 1. Sustainability: By providing a safety net to the ex-soldiers, assisting the most vulnerable groups, and providing a reintegration package, the project helps veterans acquire sustainable means of livelihoods and will improve living conditions in the rural areas. In addition, the promotion of the use of small private sector enterprises in the rural areas will help create jobs. - 25 -  2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1): Risk Risk Rating Risk Mitigation Measure From Outputs to Objective Each demobilization exercise handles less M Pilot experience than 400 soldiers. Transfer of veteran case files to PVCs H Institutional strengthening support to PVCs and does not result in effective follow up MWVA assistance. Reinsertion packages do not address M Pilot experience immediate, basic needs. Reintegration assistance is not utilized by S Options provided to families (including spouse) beneficiaries to improve living standards. and design of packages based on results of needs assessment Veteran families do not participate and M Special targeting mechanisms and participation benefit directly from community based arrangements agreed with implementing development infrastructure and skills agencies training subprojects. Savings from demobilization are not H Stated objective of RGC's Defence White Paper transferred to social sectors Ghost soldiers are not effectively purged S Rigorous cross checking of list provided by from registration database. demobilization commission with data base produced during registration financed by IDA. From Components to Outputs Lack of continued government support S Legal covenants for counterpart funding and (e.g. through adequate counterpart mandated joint reviews of annual work plans funding and active collaboration with and external evaluations donors) Donors funding not available in timely S Cross conditionality for effectiveness and manner careful financial planning Project administration inadequate S Contracting of project management firm Inadequate coordination among S Pilot experience agencies/units involved in implementation at field level Overall Risk Rating H Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk) The project's risk rating of "High Risk" reflects the reputational risk factors associated with its high visibility as well as the other factors outlined below. Reputational Risk for IDA. The project can be considered a high risk for the reputation of IDA for the following reasons: (a) it is very complex and different from almost any other project handled by the Government and its partners; (b) it is politically sensitive and involves delicate matters of national security; (c) it places an unusual burden on IDA which is requested to manage other donors' funds and be deeply involved as a negotiator and broker between the Government and other donors, sometimes even between Government agencies; (d) the Bank, as well as the Govemrnment, will be held responsible for the - 26 -  transparency and accountability with which funds from SIDA and the Netherlands are used as they will be administered through IDA-managed trust funds; and (e) the project is a key part of the IMF's PRGF, IDA's SAC and an important consideration in the determination of the lending levels under the Country Assistance Strategy for Cambodia. The project design and the implementation provisions include measures to help reduce this risk including: * IDA administration of other donor funding is expected to be limited to US$2.4 million (funds from Govemment of Sweden), or just over 5% of total project financing. In the event that funds from the Govermment of Netherlands is also administered by the Bank, the total would only reach US$4.4 million, or just over 10% of total project financing. * Hiring of a professional management company to be in charge of financial management and procurement. * Provision by other donors of technical personnel to support implementation supervision by the Donor Working Group on Demobilization. * Participation of other donors in formal project supervision missions. * External evaluation of project performance by contracted consultants every six months with results reviewed by GS with all donors in the context of monitoring and evaluation. 3. Possible Controversial Aspects: In addition to the reputational risk factors outlined above, the following controversial aspects have emerged from the pilot program and during project preparation: e As has been explained above, although resettlement and environrnent are potentially controversial aspects of any project, especially in Cambodia, the proposed project does not provide any financing for and is not expected to lead to involuntary resettlement Government has stated in their Letter of Program Development (Annex 11) that resettlement, indigenous peoples and environmental issues will be handled consistent with the provisions of the relevant IDA policy guidelines. * Concerns have been raised that veterans already appear as a privileged group and could therefore be resented in their communities. Survey data clearly show that veterans are among the most vulnerable, especially those in Category 2 (55 years and more, disabled, chronically ill). In addition, their loss of income and monthly food rations represent a blow to them and puts them in a precarious situation. The on-going reintegration grant for returnees by IDA Bank in the northwestern provinces has not resulted in any negative feelings towards the returnees in the communities where they live. G. Main Credit Conditions 1. Effectiveness Condition * Procurement and financial management firm contracted and financial management system established acceptable to IDA. * PVCs have been established in each of the provinces or municipalities where veterans will settle. * PIM and AWPB for first year of Project acceptable to IDA formally adopted. * Project bank account opened and initial deposit entered. -27 -  * Provision of registration data (including where soldiers will be diharged antd expecut loation and land tenure situation at rentegration) for the first I 5,0)0 soldiers to be demobilizvd in first year and confirmed as genuine soldiers based on reoniliatioI of list provided by the demobilization commission with the data base produced during tie registration fmanced by the Bank. * Grant agmcents with all cofinancir siped ani all conditions of withdrawal of funds met. 2. Other [classify according to covewaint types used in the Legal Agreemnts.] 1. Conditions of Prentation to Board of Directors * Letta of lDenobifiation Proamn Leveopiment has been signed anc submitted to IDA; * Environmental and Social Guidelines have been approved by relevant auithorities of ROC, H. Readiness for Implementation 1 l. a3 The engineering design doc-umets for the first year's activities are complete and ready for the stat of project impleneittion. :L l. b) Not applicable, 2. The prcurement documnts for the first years activities are complete and ready for the start of prject inpiemetation. ' 3. The Projxct lmpletnentation Plan has becn appraised and found to be realistic and of satisfactory qulaity. 7 4. The following items are lacking and are discussed under loan conditions lSeclion G): The selection of Procurement and Financial Magement Firm. 1. Compliance with Bank Policies I 1 This project cnplies with all applicable B3ank poficte%. .2. Te folIing exceptions to Bank policies are rcommended for apoval. The project Complies with all other applicable Bank policies. It is proposed that retroactive financing be provided up to USS3.O millixn, Ot 20 percelt of the amount of the prposcd toan. 1 6~~MidaEsana _ an C.i Pore 17'> 9TeatI i.ed*a Country ManagerlDirector -28-  Annex 1: Project Design Summary CAMBODIA: Demobilization and Reintegration Project Key Performance Hierarchy of Objectives Indicators Monitoring & Evaluation Critical Assumptions Sector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission) CAS Objective: CAS monitoring indicators Sector/ country reports CAS Objective will support Bank Build foundations for Mission if. sustainable development and * Political stability persists poverty reduction * Government policies * Supporting Good aligned with CAS Govemance objectives ... Building physil * Government committed to * Building physical good governance infrastructure * Govenmment supports * Rebuilding human capital overall public sector * Facilitating private reform sector development * Government comnitted to * Focusing on rural areas. military reform * Donors' commitment sustained Project Development Outcome I Impact Project reports: (from Objective to Goal) Objective: Indicators: Assist the Government in its 30,000 soldiers removed from Extemal evaluations, Sufficient economic opportunities effort to demobilize 30,000 military records and payroll socio-economic assessments and available in communities where soldiers and to promote their database. annual expenditure reviews demobilized soldiers and their successful adaptation to civilian carried out by IMF and World families reside. life. Bank. Contribute to a reallocation of 30,000 veterans and their Military refom is properly done budgetary resources to the social families able to maintain or so as to eliminate waste and sectors in order to build human, improve their standard of living unnecessary expenditures on a social and economic assets. in terms of health, housing and sustainable basis. Savings achieved from economic activities demobilization will help achieve commensurate with their this. communities. Budget allocated and expended Absence of severe macoeconomic in health, education, agriculture shocks. and rural development expanded to reflect significant proportion of savings from demobilization. -29 -  * ~~~Ke Peorae HierarItofObjectiv es dicaor Monitoing & valuati iia Assumptins i Output from each Output Indicators: Project reports: (from Outputs to Objective) Component: Registration data for soldiers to Data of military personnel is PMRs, independent evaluation Ghost soldiers effectively purged be demobilized, verified and completed, updated and reflects reports, Bank supervision from registration database. updated. current records of all active missions. service personnel including removal of demobilized soldiers. Demobilization exercises carried Number of civilian identification Transfer of veteran case files to out. cards provided to fomner soldiers PVCs results in effective follow relativeto number of soldiers up assistance. demobilized under project. Reinsertion packages provided to Actual transfer and receipt of Each derobilization exercise all demobilized soldiers. veterans files to PVCs and handles at least 300 soldiers. relevant line ministries for follow-up. Reintegration packages based on Number of demobilization events Reinsertion packages address needs assessment with families which provide adequate food, immediate, basic needs. delivered in timely ranner. lodging, health screening and orientation services. Percentage of demobilized Reintegration assistance utilized soldiers who receive complete by beneficiaries to improve living reinsertion package. standards. Percentage of demobilized Savings from demobilization soldiers and their families who utilized for social sector receive reintegration assistance expenditures. (economic assets, housing improvements, skills training and health referral services) within six months of demobilization. Project Components I Inputs: (budget for each Project reports: (from Components to Sub-components: component) Outputs) Registration & MIS 0.2 million PMRs, Annual Audits Continued govermnent support (e.g. through adequate counterpart funding and active collaboration with donors) Demobilization 13.8 million Donors funding available in timely manner Reintegration 24.0 million Project administration adequate Project Implementation, 4.0 million Adequate coordination of Technical Assistance, Studies activities at the field level. -30-  Annex 2: Detailed Project Description CAMBODIA: Demobilization and Reintegration Project The objectives of the Project are to: (i) provide support to the Government's efforts to demobilize 30,000 soldiers and to promote their successful adaptation to civilian life; and (ii) contribute to a reallocation of budgetary resources to the social sectors in order to build human, social and economic assets. Savings achieved from demobilization will help achieve this. The project consists of the following components or parts, which can be modified after consultations and agreements between the Government and its partners as appropriate to achieve the defined objectives: By Component: Project Component I - US$0.20 million Preparation of Personnel Data Base and Management Information System The objective of the registration exercise undertaken by the Government in 1999 was to establish a reliable military personnel data base and to develop a computerized payroll system. This component is designed to complete that registration exercise and includes a systematic and thorough evaluation of the results achieved so far, i.e.: the finalization of the identification and the verification of identity, data collection, taking of photographs, issuance of laminated ID cards, data processing, and development and maintenance of personnel data base, establishment of a link between the personnel management data base and the futures RCAF data base, identification or confirmation of equipment needs and specification of equipment most suitable to meet those needs, identification of staff training needs and provision of that training as needed, advise on logistical and administrative arrangements regarding data storage and transport, and design of simple and transparent information flow for central and local levels. It also includes recommendations on further actions needed. The project will support the provision of expert advisory services, training and electronic equipment needed to carry out the proposed activities. All these related costs would be financed by IDA. Project Component 2 - US$13.80 million Demobilization Following the decision to remove of soldiers from the army by the Ministry of National Defense, the purpose of this component is to help implement the formal and controlled discharge or transfer of the soldiers form the army to civilian life. It consists of: the assembly and disarmament of soldiers in the barracks before they leave the army; the establishment of discharge centers where the soldiers are assembled after they have been handed over by the army; the discharge operations themselves including the provision of pre-discharge orientation to the soldiers, the withdrawal of military identity cards and the provision of civilian identity cards, health screening, discharge procedures including the provision of the transitional safety net (TSN) consisting of a cash payment, foodstuff and a household kit for each veteran and transportation to the communities where the veterans settle. The financing provided for this component covers the following costs: minor renovation of building facilities at the centers and rent, electricity and water, supplies and materials to be used at the discharge centers, food during the stay of veterans at the center, rice and other foodstuffs such as canned fish, salt and cooking oils, household kits, transportation services for the veterans to take with them, subsistence and other staff costs. None of these items are to be - 31 -  financed by IDA. They are financed by the Government (transport from the barracks to the discharge centers and cash payment) and bilateral donors. Project Component 3 - US$ 24.00 million Reintegration The reintegration component is conceived to assist the assimilation process of veterans and their families into mainstream productive civilian life. It is intended to facilitate full reintegration into civilian life. It includes the following activities: counseling, a more detailed assessment of the socioeconomic needs of the veterans and their families, and the provision of key long term human, social and economic assets to help build long term sustainable livelihoods. Key activities or items to be fnanced are: (a) consultants or experts' services for counseling, sensitization of local communities, skills development, needs assessments; (b) assistance package including housing, agricultural implements/tools, economic assets in the form of equipment and draft animals; and (c) referrals to provincial and NGO health care providers. Except for health referral services and housing rehabilitation, IDA funds will finance all the other items in total or in part. Project Component 4 - US$4.00 million This component aims to strengthen the capacity of the Government agencies responsible for the planning, implementation and control of project activities. This is to be done through the provision of: