Tajikistan - Pilot Poverty Alleviation Project

Document of The World Bank Report No. 16082 TJ STAFF APPRAISAL REPORT REPUBLIC OF TAJIKISTAN PILOT POVERTY ALLEVIATION PROJECT April 10, 1997 Human Resources Division Country Department III Europe and Central Asia Region  CURRENCY EQUIVALENTS (as of November 25, 1996) Currency Unit = Tajik Rubles TR 1 = US$0.0032 IJS$1 = TR 312 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS AKF - Aga Khan Foundation ARSP - Agricultural Recovery and Social Protection Project CAS - Country Assistance Strategy EBRD - European Bank for Reconstruction and Development EU - European Union FHH - Female Headed Household FSU - Former Soviet Union GBAO - Gorno-Badakhshan Autonomous Oblast GGLS - Group Guaranteed Loans and Savings GNP - Gross National Product IBTA - Institution Building and Technical Assistance Project IMF - International Monetary Fund MIS - Management Information System PHRD - Population and Human Resources Development (grant) PPAP - Pilot Poverty Alleviation Project PRDP - Pamir Relief and Development Program SCF-UK - Save The Children Fund (UK) SCF-US - Save The Children Federation (US) TASIF - Tajikistan Social Investment Fund UNDP - United Nations Development Program UNHCR - United Nations High Commission for Refugees UNICEF - UJnited Nations Children's Fund USAID - United States Agency for International Development TAJIKISTAN - FISCAL YEAR January 1 - December 31 Vice President Mr. Johannes Linn Director . Mr. Yukon Huang Division Chief/Manager Mr. Robert Liebenthal Staff Member _ Mr. Michael Mills  STAFF APPRAISAL REPORT REPUBLIC OF TAJIKISTAN PILOT POVERTY ALLEVIATION PROJECT CONTENTS CREDIT AND PROJECT SUMMARY .............. ............... i PART I. INTRODUCTION. 1 PART II. PROJECT OBJECTIVES ............................... I ...... 6 PART III. PROJECT DESCRIPTION. 9 PART IV. PROJECT IMPLEMENTATION .........12 PART V. PROJECT COSTS, FINANCING, PROCUREMENT AND DISBURSEMENT ... 27 PART VI. BENEFITS AND RISKS .37 PART VII. AGREEMENTS AND RECOMMENDATIONS ......39 ANNEXES A. Basic Social and Economic Data on Tajikistan B. Shelter and House Rehabilitation Program (Save The Children-US) C. Micro-Credit Program (Save The Children-US) D. Program of Support to Female-Headed Households (Save The Children-UK) E. Agricultural Reform Program (Aga Khan Foundation) F. Summary of Social Assessment G. Social Protection Measures Supported through the Agricultural Reform and Social Protection Project H. Draft Government Resolution Establishing the TASIF I. Outline of Operational Manual for the TASIF J. Institutional Organization of the TASIF and TORs K. Review of Non-Government Organizations in Tajikistan L. Key Indicators for Monitoring and Integrated Evaluation M. Detailed Project Cost Estimates N. Procurement Plan and Schedule 0. Project Implementation Plan P. Estimated Disbursement Schedule Q. Supervision Plan R. Selected Documents Available in Project Files  MAP IBRD No. 28399R TABLES Table 5.1 - Summary of Project Costs by Component Table 5.2 - Financing Plan Table 5.3 - Summary of Proposed Procurement Arrangements Table 5.4- Estimated Disbursement of Credit Table 5.5- Estimated Loan Disbursement Schedule Table 6.1- Project Beneficiaries FIGURES Figure 4.1 - Organizational Structure of the Tajikistan Social Investment Fund This report is based on the findings of an appraisal mission which visited Tajikistan in November/December, 1996. The mission comprised Michael Mills (Task Manager), Alexey Proskuryakov (Operations Analyst), Evelyn Villatoro (Procurement Specialist), Maniza Naqvi (Social Policy Specialist), and Pamela Hunte (Anthropologist). The peer reviewers for the project are Alexandre Marc and Margaret Grosh. The Division Chief is Robert Liebenthal, the Director is Yukon Huang, and the Vice President is Johannes Linn.  REPUBLIC OF TAJIKISTAN PILOT POVERTY ALLEVIATION PROJECT Credit and Project Summary Borrower: Government of Tajikistan Implementing Agency: Tajikistan Social Investment Fund Beneficiaries: Unemployed and low-income groups, including female-headed households, mainly in rural areas; non-government and community organizations. Poverty: Program of Targeted Intervention Amount: SDR 8.7 million (US$12 million equivalent) Terms: Payable in 40 years with 10 years grace at standard IDA terms. Financing Plan: See Section V Economic Analysis: Microprojects financed by the TASIF will be selected according to criteria described in the operational manual, integrating economic analysis. Map: IBRD 25721 Project ID Number: TJ-PE 44202 Project Objective: The development objective of the Project is to increase on a sustainable basis the incomes of the poor and improve their access to essential economic and social services. The Project objectives are to: (a) improve incomes of about 250,000 poor people by 1999; and (b) develop local capacity to implement participatory approaches to poverty alleviation. Project Description: The Project has two linked components: (i) The scaling-up of selected existing poverty alleviation programs carried out by international non-government organizations. This component has five sub-components: (a) the shelter and house rehabilitation program (Save The Children-US); (b) the micro- credit program (Save The Children-US); (c) the program of support to female-headed households (Save The Children-UK); (d) the agricultural reform program (Aga Khan Foundation); and (e) future sponsored activities to be supported after the first year of the Project. (ii) Development of the Tajikistan Social Investment Fund. This component has two sub-components: (a) institutional  - 11 - development of the Tajikistan Social Investment Fund as a demand-driven funding mechanism to finance community-based initiatives for small investments; and (b) financing of about 70 microprojects that support the rehabilitation or restoration of small-scale social and economic infrastructure and services in poor communities. Project Benefits: There are three types of benefits expected to be derived from the Project. First, about five percent of the population will benefit directly either from the scaled-up programs run by the selected non-government organizations, or from the microprojects funded through the Tajikistan Social Investment Fund. The benefits will vary across targeted groups, including improved quality, availability or regularity of services, increased family incomes through labor wages, reconstructed shelter, improved supplies of agricultural inputs and services, and access to financial services. Second, the Project will strengthen in-country capacity to target, appraise and monitor efforts to alleviate and reduce poverty. The strengthened capacity will be manifested in the Tajikistan Social Investment Fund which by Project end will be a demand-driven and cost-effective mechanism to channel small amounts of money and provide technical support to communities to plan and undertake small investments. This mechanism will be used by the Government to attract increased external funding for poverty alleviation, and infrastructure restoration and development. Local governments, non-government organizations and community-based organizations will gain valuable experience in planning and undertaking small investments and poverty alleviation activities, conducting competitive procurement, involving community members, and reporting. Third, lessons emerging from the Project will feed into the Government's larger program of poverty alleviation in the future, and will assist the Government in trying to mobilize increased external funding. Project Risks: There are three main risks associated with the Project. First, the security situation in much of the country is fragile, and there is still some fighting in the East. To reduce this risk, the first component of the Project has been designed to support the extension of poverty alleviation activities in areas where programs are already successfully underway. Expansion or replication of these or other programs and the microprojects financed by the Tajikistan Social Investment Fund will be undertaken only where the situation is sufficiently stable. Second, political factors could compromise the autonomy, credibility and effectiveness of the programs supported by the international non- government organizations and the Tajikistan Social Investment Fund. The risk to the former will be minirirzed through regular and close  - iii - cooperation between the non-government organizations and the Taj ikistan Social Investment Fund staff. This cooperation will be facilitated by technical assistance support. This risk will also be reduced by detailing the specific roles and responsibilities of the Government and the international NGOs in the service contracts, and by close monitoring of the fulfillment of obligations through project management and regular Bank supervision. To reduce the risk of interference in its daily operations, the Tajikistan Social Investment Fund is being established as a semi-autonomous body, with a Board of non-governmental and governmental members and chaired by the Prime Minister. This arrangement should create a high profile and broad ownership, and thus help protect the integrity of the institution. There will also be comprehensive institutional checks and balances, and efficient operating procedures detailed in the operational manual, which will be checked closely during project supervision. Third, there are risks associated with the limited managerial, technical and institutional capacity of local organizations responsible for proposing and implementing microprojects, and for financing the operation and maintenance of the microprojects after completion. To reduce these risks, the appraisal procedures for the microprojects will include careful analysis of institutional capacity, and technical assistance will be provided to fill institutional, technical and management gaps. Furthermore, increased community participation in the identification and implementation of the microprojects will increase the likelihood that microprojects respond to an urgent community need, thus increasing the likelihood for sustaining investments.   REPUBLIC OF TAJIKISTAN PILOT POVERTY ALLEVIATION PROJECT STAFF APPRAISAL REPORT I. INTRODUCTION AND COUNTRY SETTING A. Country Setting and Recent Developments 1.1 Tajikistan is a small country of 5.8 million people, with about seventy percent of the population living in the rural areas. The economy is predominantly agricultural, even though only seven percent of the land area is classified as suitable for agriculture. The agricultural sector, which under the Soviet system was dominanted by cotton production, now accounts for 25 percent of Gross Domestic Product (GDP) and 50 percent of employment. The industrial sector, which is dominated by aluminum production, accounts for 35 percent of GDP and 12 percent of employment. 1.2 At independence in 1991, Tajikistan was the poorest republic of the Former Soviet Union (FSU) and remains so today: its estimated per capita income in 1995 was $370. Poverty inherited from the FSU was due largely to geographical factors. Prior to independence, most of the poor were located in the remote eastern areas of the country, although there were pockets of severe poverty in other parts of the country. Since independence, the nature and extent of poverty has changed--becoming more widespread and intense--in large measure because of three major shocks, which also account for the decline in GDP. First, the break-up of the FSU precipitated the collapse of inter-republic trade arrangements and brought an end to the generous budget transfers that had long enabled Tajikistan to consume far more than it produced. Second, the political and ethnic turmoil and conflict of the early 1990s resulted in the loss of about 50,000 lives and disrupted economic activity. While turmoil continues in some parts of the country especially in the South and East, recent progress in peace talks between government and the major opposition groups indicate that the conflict may be near an end. Third, a series of natural disasters, including floods in 1992, 1993 and 1996, damaged infrastructure and productive assets. 1.3 As a result of these factors production fell by about 60 percent between 1991 and 1995, affecting agriculture and industry. Most industrial firms are currently operating below one-third of their capacity, while agricultural production is only about 30 percent of its 1991 level. The real value of monthly wages in 1995, when actually paid, was only about 5 percent of the 1990 level. Nearly one million workers are either openly unemployed or under/partially unemployed. 1.4 The Government's reform program began in late 1995 and has been supported by an IMF stand-by arrangement (May 1996), and IDA Credit in the form of a policy-based Agricultural Recovery and Social Protection (ARSP) operation in an amount of SDR34.8 million, and the Institution Building Technical Assistance (IBTA) Project for SDR3.4 million. Implementation of these programs was satisfactory until late 1996 when renewed violence caused the Government to increase significantly its defense expenditures. These were financed by a combination of budget arrears (including significant amounts owed to the social safety net) and monetary expansion. The Fund's SBA expired at the end of 1996 and negotiations on a second SBA have not begun because of the Government's lack of response to the Fund's advice regarding stabilization of monetary and fiscal indicators. Although the prior actions for the ARSP Credit were front loaded, there has been some backsliding in recent months. Specifically, although the Government agreed to liberalize cotton marketing by eliminating the state order system and marketing monopoly, it has reneged on this understanding by imposing some export controls on cotton.  -2 - 1.5 On the political front, efforts are being made by the Government and the opposition to resolve outstanding differences and bring the peace process to a satisfactory closure. Two weeks of difficult talks between the Government and the United Tajik Opposition ended in Tehran in January 1997 with the signing of a joint statement on procedural issues necessary to launch the transitional process towards national reconciliation. In February 1997 meeting in Meshad, the Tajik Government agreed to a power-sharing accord with the opposition group giving 13 seats of a new 26-member National Commission for Reconciliation to each side. The two sides agreed that the Commission should be in place and working by July 1997. Further agreements were also reached on a mutual amnesty law and a central election commission and incorporation of opposition members in the Government. In March 1997, the two sides agreed on the reintegration of opposition troops into the regular Tajik armed forces. The move towards peace has created hopes but also fears, as armed groups, who were left out of the peace process, intensified the violence in the country. The taking of UN hostages in December 1996 and, again, February 1997 is a clear manifestation of a fragile security situation in Tajikistan. B. Living Conditions and the Social Situation 1.6 Living conditions vary around the country". Most industries are located in the northern oblast of Khojand, which is widely believed to be better-off. Kulyab in the South has historically been quite poor. The adjacent area of Kurgan-Tube has suffered some of the worst fighting in the conflict. The eastern areas are remote and sparsely populated. 1.7 The fall in Government revenues and expenditures has led to a collapse of the inherited social safety net. The combined share of GDP allocated to education and health was about 17 percent in 1992 but only 7 percent of a much smaller GDP in 1995. There has been a similar decline in resources available for social payments, although the Government is now exploring ways of improving targeting to those most in need. Recently the bread compensation payment and child allowance have been combined into a single welfare payment. In addition to improved targeting, there is need for the country's infrastructure to be strengthened to benefit the poorest groups and for new institutional arrangements to be put in place to alleviate poverty. 1.8 A social assessment was undertaken in May-June 1996 in order to understand better the nature and causes of poverty, its dynamics, and the context in which effective solutions could be developed. It concluded that there are three main characteristics rendering certain areas liable to poverty: rural location, impact of the war and isolation. Even though formal unemployment is severe in urban areas, and the poverty of some urban households is no less deep than that of many rural ones, poverty is somewhat less widespread in urban areas. Poverty is most acute in war affected villages, and in areas with a high proportion of female-headed households, poor access to land, low levels of savings to act as a buffer against hunger, a lack of means to cultivate cash crops, eroded assets (such as cattle and personal goods), and shelter in a poor condition or lacking altogether because of destruction related to the war. Poverty is also due to discrimination and lack of security inhibiting economic growth. Isolated villages have been hit particularly hard. The main priorities arising from the social assessment are the following: peace, 1/ Administratively, in addition to the capital city of Dushanbe (population about 600,000), there are four oblasts (or regions). These are: (i) Khojand (population about 1.6 million) in the north; (ii) Khatlon, comprising Kurgan-Tube (population about 1.1 million) and Kulyab (population about 700,000), in the south- west;(iii) Gorno-Badakhshan Autonomous Oblast (population 200,000) in the remote east of the country; and (iv) the Regions of Republican Subordination (population about 1.2 million) in the center of the country which are ruled directly and have no oblast level structures.  security and the rule of law; an improved ability to meet basic needs of food, shelter, shoes, health and education; diversification of income sources; and enhanced access to productive assets to increase self- sufficiency and to produce tradeable goods. The social assessment (which is summarized in Annex F) also provides strong support for using a participatory approach that will ensure effective targeting at the local level, and identifies a wide range of local opportunities for microprojects. It indicates that effective poverty alleviation will require careful attention to be paid to local aspects of ethnicity, gender relations, physical security and power relations. C. National and Local Institutions 1.9 The structure of the government of the Republic of Tajikistan consists of the executive branch, the representative branch (the Majles Oli), and the judicial branch. The heads of the executive and representative branches are appointed by the President of the Republic. They preside over the sessions of the Majilises, prepare and submit local economic and social development programs for approval by the Majilises, implement and account for these programs, and regulate land reforms. Since independence, the government ministries have been reorganized on a number of occasions, which has added to uncertainty and instability in public management and duplication of duties. 1.10 In December 1994, the "Law on Village Governance" was adopted, the starting point of reform for local government. It replaced the former Village Soviets with Jamiats, which are groups of street, block and village leaders. They propose program activities, control cash expenditures, consider issues on territorial borders, and allot land for ownership or leasing. The Chairman of the Jamiat is responsible for order, general improvement of the living conditions of the area, and land and property allocation. Regional, town and farm representatives are appointed from above, and often are new arrivals from a different region and/or sector. Other formal national institutions include the Women's Councils and Youth League, but these are also highly centralized, hierarchical and top-down. Local level institutions are mostly traditional, male dominated, and based on family relations or locality, and often have a religious element. The extended family network is centered on the male head of household, his household and that of his sons. The clan, which is based both on family and locality, includes the immediate relatives of the male head of household. 1.11 Indigenous non-government organizations (NGOs) do exist, but with very limited capacity and coverage (see Annex K). Only one local organization, the Pamir Relief and Development Organization, supported by the Aga Khan Foundation, has much capacity. Most international NGOs entered Tajikistan over the last three or four years, primarily in relief work and often in association with a multilateral agency such as UNICEF or UNHCR. However, several of these have made the transition from relief to rehabilitation or development work. D. Government and IDA Strategy and Rationale for Bank Involvement 1.12 The Government's reform program is designed to stabilize the economy and stimulate labor- intensive economic growth. However, growth alone will not be sufficient to reduce poverty especially in the near-term, given the precipitous fall of incomes combined with the collapse of inherited social programs and the potentially high transitional social cost of the reform measures. The Government recognizes that Tajikistan cannot afford to maintain the level of social investment and protection that it enjoyed under the Soviet system, and is trying to achieve a balance between the need for social assistance in the form of a safety net and the need to operate within a severely constrained budget. To do this, it is making efforts to improve the efficiency and targeting of social programs, and to find innovative ways  -4 - to reach and support the poor. 1.13 The Bank Group's Country Assistance Strategy (CAS) for Tajikistan was discussed by the Board on May 16, 1996. Recognizing the risks associated with the political and economic instability in Tajikistan, the CAS calls for a flexible approach to the Bank Group's assistance program until the end of FY97. It aims at arresting the intensification of poverty through measures designed to foster a supply response, based on employment intensive growth combined with direct steps to protect the most vulnerable groups. The broad elements of the strategy are to: (a) strengthen institutional capacity to plan and implement a medium-term program of structural reform; (b) support the Government's efforts to stabilize the economy; and (c) moderate the impact of the economic collapse on vulnerable groups. Under this approach the Bank will continue supporting the implementation of the IBTA and the ARSP Credits, provided the security situation remains satisfactory. In addition to the proposed Pilot Poverty Alleviation Project (PPAP), the Bank Group will also begin preparation of an adjustment credit, provided an IMF program remains in place. The Bank has been coordinating closely with other donors in Tajikistan, particularly the EBRD, EU, UNDP, UNHCR, UNICEF, Aga Khan Foundation, and USAID. Until now, donors have mainly provided technical support and/or humanitarian assistance, while little support has gone to development projects. 1.14 Within this overall country approach, the strategy for the proposed PPAP is based on: (a) the urgent need to address the poverty problem directly, to revive economic activity at the local level and to get some productive incomes into poor households; (b) the lack of services and the considerable backlog of maintenance which needs to be carried out on the country's basic infrastructure; (c) the existence of some implementation capacity and development program experience among the international NGO community active in the country; (d) recognition of the weak institutional capacity of the Government at present, and the highly constrained Government budget envelope which prevents more than a marginal impact on the poor even with improved targeting; (e) the importance of building upon the coping and survival strategies which are now being adopted by the people themselves; (f) the need to create indigenous capacity for carrying out poverty-focussed development programs; and (g) the relatively limited operational experience so far of both the Bank Group and other donors in Tajikistan. 1.15 This calls for a strategy with a dual approach: (a) support for the scaling-up and replication (over a three-year period) of a few selected programs currently operated by international NGOs which already have significant poverty alleviation impact; and (b) the building up of national capacity for designing, carrying out, and evaluating community-based projects through the establishment of a social investment fund and associated institutional development activities. In this way, it is hoped that there will be an immediate and positive impact on the living standards of some poor people in the country. The creation of a new mechanism and successful financing of projects will also increase the likelihood of additional funding in the future. With procedures developed for the identification and implementation of microprojects, and with the staff in place, the scope and infrastructure for a larger program will exist. A follow-up project has already been provisionally included in the Bank's lending program for Tajikistan, and support from other donor organizations could be sought at forthcoming consultative group meetings. Experience gained by the social investment fund in alleviating poverty through interventions in various different sectors could also be extended through programs of assistance to individual sectors such as agricultural development, health, education, roads and microcredit. F. Lessons of Experience 1.16 It is important to consider the lessons of experience from three angles: (a) the experience of the Bank so far in Tajikistan and other countries of Central Asia; (b) the experience of the Bank in working with NGOs; and (c) the experience of the Bank in social investment fund projects in other countries. (a) The Bank's experience in working in Tajikistan is limited, so it is prudent to draw on  -5- experiences in Central Asia generally. Some of the main lessons include the following: (i) high-level support and political commitment for key policy reforms and project design are essential; (ii) the institutional reform of inherited social safety nets takes time to achieve and tends to be undermined by the severity of the fiscal collapse; and (iii) staff development and training, including on Bank-related procedures, are needed for efficient project implementation. (b) In working with NGOs, the Bank has learned that: (i) partners need to be chosen carefully, using a transparent and fair selection process; (ii) Government/NG0 relations need to be addressed and specific agreement on any new operating modalities reached; (iii) the managerial and technical absorptive capacity of NGOs needs to be realistically assessed; and (iv) close attention should be given to the design of suitable procurement arrangements. (c) General lessons emerging from social investment funds around the world include: (i) objectives should be clear and based on community involvement; (ii) institutional arrangements for project implementation should be designed to avoid bureaucratic procedures, but coordination with line ministries is also important; (iii) well-qualified, professional staff with performance incentives are necessary; (iv) there should be an incremental approach, building upon and scaling-up existing activities; and (v) great attention is needed to operational maintenance. G. Project Preparation 1.17 Project design work commenced in April 1996. Project preparation was enhanced by several factors and events: (a) a Working Group was established by the Prime Minister (and chaired by an official in his Office) to guide the process; (b) two study tours were undertaken by members of the Working Group to review the experience of social investment fund projects in other transition countries; (c) a seminar was held under the auspices of the Economic Development Institute for participants to learn more about the worldwide experiences of social investment funds; (d) a Japanese PHRD grant was approved to cover some of the costs of the technical assistance and training activities for project preparation; (e) particular use was made of national consultants, especially for conducting the social assessment and poverty ranking exercises, and for examining legal issues; (f) there were extensive discussions with key stakeholders (including the NGOs in the country) about the objectives and strategies of the project; and (g) efforts were made to strengthen the working relationships between the NGOs and the Government. In addition, there was close coordination with other external agencies. This included participation by the UNHCR on the identification mission, and a USAID-funded consultant on the pre-appraisal mission. There was also close coordination with the UNDP, especially regarding the development of its new rehabilitation program, and with the European Union's TACIS Program.  - 6 - II. PROJECT OBJECTIVES A. Project Concept and Objectives 2.1 The development objective of the Project is to increase on a sustainable basis the incomes of the poor, and improve their access to essential economic and social services. The Project objectives are to: (a) have a modest though quick impact (within three years from Project start-up) on the incomes of some of the poor; and (b) develop capacity at the national and local level to implement participatory approaches to poverty alleviation. The rationale for the Project lies in the severity of poverty and the emergency situation in the country. Some insight into poverty was gained through World Bank economic reports and the recent social assessment. Further information and quantification will be obtained through a forthcoming poverty assessment. 2.2 The strategy of the Project is to: (a) collaborate closely with selected international NGOs that are implementing programs in Tajikistan which could be expanded with additional funding quickly (an approach which has the commitment of the Government); (b) maintain the momentum from the relief phase and ensure continuity from humanitarian assistance to sustainable development; (c) use the Project as a short-to medium-term program to reverse the deterioration in infrastructure and living standards, and to stimulate some employment; (d) capitalize on the availability of some highly motivated and well educated nationals wanting to improve social conditions; and (e) demonstrate successful poverty alleviation programs for further replication and build institutional capacity for poverty alleviation activities in the long-term. In relation to the civil strife and emergency situation in the country, the strategy is to (a) complement the emerging peace process with investments to reduce suffering and economic hardships; (b) target poor communities, but also maintain an appropriate ethnic and regional balance; (c) select Project staff and other collaborators on merit, but additionally, ensure that they are as representative as possible of the whole national scene; and (d) promote cooperation between different organizations and social groups, including the Government, local and international NGO's, academic institutions and researchers. 2.3 The strategy will be implemented through two components: the scaling-up of selected existing poverty alleviation programs carried out by international NGOs, and the creation of the Tajikistan Social Investment Fund (TASIF). The strategy of the Project is reflected in the criteria used for selecting the NGO programs under the first component: (a) targeting of the poor; (b) the developmental (rather than relief) nature of the programs; (c) sustainability; (d) community participation; (e) the existence of ongoing (rather than planned) activities; (f) management capacity to scale up the programs; (g) technical soundness of the activities; (h) cost-effectiveness; and (i) environmental impact. Although the choice of NGO programs for scaling up was constrained by the existence and location of the initial programs, and although the programs maintain a bias towards those areas of the country which suffered most in the civil war, nevertheless, a significant number of different districts will benefit - including in the most remote, eastern part of the country. Risks remain that some of the investments made could be undermined or destroyed by a resumption of violence, but on balance, it is believed that the investments are likely to contribute to improvement of tensions rather than the reverse. For example, different ethnic groups will combine together in the house rehabilitation program, and efforts will be made in each of the programs to train officials and other interested parties in design techniques which could then be replicated elsewhere. In the second component of the Project, there will also be careful attention given to ensure that social cohesion is supported through the microprojects 2.4 There are also critical links between the two components. The scaled-up NGO programs will improve the situation of some of the poor, build some local capacity, and demonstrate poverty alleviation activities that could be replicated or expanded through the TASIF. Community based organizations  - 7 - involved in the NGO programs will also be encouraged to put forward proposals to the TASIF. Similarly, activities of the TASIF will involve the active participation of communities and collaboration with "requesting agencies," many of which will be international and local NGOs. The TASIF will benefit from lessons emanating from the NGOs' approaches to targeting poor groups, working with different types of community organizations, and ensuring commitment to operation and maintenance. The linkages between the two components will be formalized through TASIF's monitoring, supervising and reporting on the NGO programs, as well as on the microprojects. 2.5 The Government has demonstrated its commitment to the proposed Project in a number of ways. It quickly established the Working Group (composed of non-governmental and governmental officials) which proved to be an efficient and valuable counterpart for Project preparation. The Prime Minister agreed to be the Chairman of the TASIF "Board for Project Realization", and the Government agreed to pass on borrowed IDA funds to the selected international NGOs on grant terms, in recognition of their existing capacity to implement programs effectively. B. Income Generation 2.6 The Project's first objective will be achieved mainly through the first component of the Project: the scaling-up of selected existing poverty alleviation programs carried out by international NGOs. This component has five sub-components: (a) The Shelter and House Rehabilitation Program (to be carried out by Save The Children Federation (US): SCF-US) will assist 2,000 poor and previously displaced families in five districts through self-help reconstruction of their homes devastated by the civil war. (b) The Micro-Credit (Group Guarantee Loans and Savings) Program (to be carried out by Save The Children Federation (US) SCF-US) will provide access to credit and mobilize savings for 3,750 poor women in the Bokhtar, Vakhsh, Vose, Kurgan-Tube and Kolkhozabad districts of Khatlon Oblast. (c) The Program of Support to Female-Headed Households (to be carried out by Save The Children Fund (UK): SCF-UK) will support a total of 3,700 female-headed households and their communities: 2,100 of them in Vakhsh, and 1,600 in four other districts. It will also strengthen their capacity to maintain and prevent the collapse of locally available social services. (d) The Agricultural Reform Program (to be carried out by the Aga Khan Foundation: AKF) will expand the area under food crop production in the Gorno-Badakhshan Autonomous Oblast (GBAO); increase food crop production and productivity in GBAO; establish and support private farm management; and develop human and institutional capacity in the agricultural sector in the oblast. (e) The future sponsored activities will be directed at further NGO and other programs that meet the set criteria and will be implemented during the second year of the project. 2.7 The 70 microprojects to be funded under the second component of the Project, through the TASIF, will also contribute to poverty alleviation, as they will be selected largely on factors relating to their expected positive impact on vulnerable and poor groups. Their immediate impact will be modest due to the relatively small number of microprojects to be implemented and the limited capacity initially of the TASIF to target. However, by Project completion, the TASIF will be capable of channeling new funds  -8 - to many more poor communities. 2.8 For the first objective of the Project, there will be two sets of indicators to monitor progress and evaluate outcomes. First, there will be a common set of five indicators which will be used across all of the sponsored international NGO programs and also the microprojects. In view of the difficulties of measuring income levels of the poor directly, three of these indicators will relate to proxy measures (food security and nutrition levels; clothing and shoes; and availability of shelter and fuel). The other two comnu-on indicators will relate to the cost-effectiveness of the programs and the extent of community participation. Then, in addition, each of the individual NGO programs and also the microprojects will have three further indicators relating to the specific programs. More details of these and the evaluation procedures are given in Annex L. C. Development of Local Capacity for Poverty Alleviation 2.9 The Project will strengthen in-country capacity to target, appraise, implement and monitor poverty alleviation programs. This will be done in two ways. First, the Project will establish the TASIF as a semi-autonomous, transparent, accountable and efficiently-run organization, able to fund an increasing number of microprojects. The TASIF will also provide technical support to national and local governments, community-based organizations and local contractors and entrepreneurs to conduct and participate in competitive procurement. Second, the Project will encourage collaboration and capacity building between international NGOs (especially those involved in the first component) and local governments and communities to initiate and supervise poverty alleviation activities. For example, the AKF will collaborate with the Pamir Relief and Development Program (PRDP), a national NGO, carrying out the agricultural reform program. SCF-US will also seek to transfer the micro-credit program to a formal, independent, local NGO or financial services institution, capable of carrying on or expanding credit activities after the Project ends. 2.10 The proposed Project is a pilot, even though the first component finances the scaling-up of already existing programs. It will demonstrate successful programs that can be further expanded and replicated in other parts of the country through the TASIF or via other means. The Project will enable experimentation to take place in terms of approaches to targeting, working with different types of community organizations, in a variety of settings, and mobilizing community contributions for investments and preventive maintenance. This experimentation will demonstrate the benefits and limitations of various approaches, which will be adapted by the TASIF, government bodies, NGOs and other actors. 2.11 The indicators to be used to measure and evaluate the success in building capacity will comprise: (i) the development of national and local capacity to implement participatory poverty alleviation programs; (ii) specifically, the number of TASIF staff trained in project identification, proposal preparation and community participation; and also (iii) the number of national and local goverrnent officials trained in these skills. Further details are given in Annex L.  - 9 - III. PROJECT DESCRIPTION 3.1 The Project has two components: (a) scaling-up of on-going NGO poverty alleviation programs; and (b) the development of the Tajikistan Social Investment Fund. A. Scaling up of Poverty Alleviation Programs (US$ 7.5 million) 3.2 This component has five sub-components: (a) the shelter and house rehabilitation program (SCF- US); (b) the micro-credit program (SCF-US)); (c) the program of support to female-headed households (SC-UK); (d) the agricultural reform program (AKF); and (e) future sponsored activities to be supported after the first year. 3.3 Shelter and House Rehabilitation Program (US$3.2 million). This program will assist 2,000 returned families in the self-help reconstruction of their homes in five districts most devastated by the recent civil war in Bokhtar, Vakhsh, Kolkhozabad, Kabodien and Shaartuz districts in the Khatlon Oblast. The social assessment in this area identified the provision of shelter as a critical priority need for poverty alleviation, economic recovery and the health and productivity of the population, and recommended that the existing program ought to be scaled up to increase its impact. The Project will support essential structural repairs (walls and roofs) through provision of essential roofing materials (timber, nails, tiles), and through the distribution of food for work to local work brigades, including home owners. Local project organizers will target the neediest families with local participation, and local communities will assist in the construction, monitoring and distribution of food and materials. Documentation, training and extension will enable replication in other parts of the country. 3.4 Micro-Credit (Group Guarantee Loans and Savings) Program (US$1.0 million). This program involves the expansion of the existing pilot micro-credit program in Kurgan-Tube town, Bokhtar, Vakhsh and Kolkhozabad districts of Kurgan Tube. The social assessment identified this region in terms of opportunities and resources through access to markets, widely available irrigation and remittances, all ideal conditions for micro finance development. Most of the 528 current women clients are urban or semi urban and borrow for trading activities. The Project, in addition to supporting expansion of its activities in the existing locations, will extend the program to the Vose District. Savings will be introduced as an important component of this expanded program. The program will provide access to credit and mobilize savings for 3,750 poor women. The management of the existing groups will be restructured into an independent local NGO or financial services institution that could operate a micro finance program independently to sustain poor women's access to credit. Tajik staff of the program will be trained in the theory and practice of group guaranteed loans and savings programs. The Project will support the expansion of the GGLS program through strengthening of GGLS at the institutional, financial and client levels. At the financial level, the project will support a loan fund of US$ 300,000; the training of staff in financial management; and a management information system (MIS). At the institutional level, the project will support the formation and training of 250 groups of women clients (18- 20 women in each group) for borrowing and savings; recruitment of additional staff and their training in financial management, group formation and institution building; collection of baseline data on clients; and the setting up of an MIS system for efficient financial record keeping and monitoring and evaluation. 3.5 The Program of Su=port to Female-Headed Households (US$ 1.0 million). This program involves the provision of agricultural assets and strengthening of capacity of social services to provide female-headed households (FHHs) with access to and ownership of agricultural assets such as livestock, seed and tools as well as technical advice. SCF-UK's experience is that this approach can work provided there is adequate consultation with beneficiaries about the scale of assistance and the nature of assets to be provided. The program also includes informing clients of their legal rights, existing social services  - 10 - and assistance programs. Baseline data collected by SCF-UK for analysis of the cost effectiveness and benefits of the project activities will enable not only the measurement of the overall economic benefits provided but an analysis of household income overtime. The Project will provide inputs to 2,100 FHHs in Vakhsh District, such as livestock, seed, tools, technical advice; start-up grants to day care centers and schools; and the recruitment and training of additional field staff for group formation. It also includes local capacity building activities and the replication of the SCF-UK model to 16 additional communities of 1,600 households in Aini, Panjkent, Dushanbe and Shaartuz. Altogether, 3,700 FHHs will be reached. 3.6 Agricultural Reform Program (US$0.6 million): This program will be implemented by the Pamir Relief and Development Program in conjunction with AKF in GBAO, the mountainous region of eastern Tajikistan. Since its inception in 1993, the program's long-term goal has been the establishment of self- sufficiency in staple food crops (wheat, potatoes, etc.) by the local populace. The Project will continue to expand the area under food crop production, increase food crop production and productivity, establish and support private farm management, and develop human and institutional capacity in agriculture. It is planned that some 1,600 farmers will participate in the construction of irrigation channels and the development of new land in six of GBAO's seven districts. The construction of 32 irrigation schemes (108 kilometers of channels) will enable an increase in the amount of privately managed land by some 3,900 hectares. The specific PRDP-related agricultural reform processes in the area of farm restructuring which are occurring in GBAO are consistent with the Government's land reform and farm restructuring program that is currently being implemented on a pilot basis in other parts of the country and is supported by the ARSP. Under the program, farmers obtain plots of land for private management from kolkhoz (collective) farms or gain permission to bring new land under cultivation through negotiations with the local government in GBAO. This is accomplished either individually or in groups, with PRDP assistance if necessary. Formal written contracts, which define and guarantee land access rights, must be obtained from the Government before the farmers may participate in PRDP activities. These contracts stipulate that the land access rights are long-term and can be inherited. They cannot be traded, although this may be the case at a later stage. 3.7 Future sponsored activities ($1.6 million). Additional funding will be allocated to these programs if they continue to be successful or to other programs that meet the same criteria (para 2.3) at the end of the first year of the project. Some of this additional funding could also be allocated to microprojects under the TASIF, if appropriate. B. Tajikistan Social Investment Fund (4.2 million) 3.8 This component has two sub-components (a) the development of the TASIF; and (b) microprojects. 3.9 Development of the Taiikistan Social Investment Fund (US$ 1.5 million). The sub-component will support the development of the TASIF through provision of equipment, vehicles, salaries, operating costs, training, technical assistance, and financing for monitoring and evaluation. An international consultant will provide technical support to the TASIF. International and local consultants will also provide support through short missions to assist the TASIF in setting up an accounting system and an MIS, and to further develop its targeting strategy and methodology. A beneficiary assessment will be undertaken during the second year of the project to ascertain the impact of the microprojects on benefiting communities and community organizations. Training will be provided to the TASIF staff on a range of topics such as participatory community development, contracting and bidding procedures, project supervision and evaluation, English, and computer training. A limited number of study tours will also be organized to complement the training modules. The Project will also enable TASIF to make available some technical assistance and training to local governments, small contractors, NGO staff and other active community members to help them plan, manage, and implement microprojects and to participate in competitive bidding. Whenever possible, delivery of technical support will be contracted to qualified local firms or  - 11 - individuals. 3.10 Microprojects (US$2.5 million). During the first year of the project, 10-15 pilot microprojects will be implemented in order to train staff and test and modify the targeting, promotion, appraisal, approval, supervision, monitoring and evaluation procedures that will be elaborated in the operational manual. Examples of possible microprojects are: (a) social infrastructure, such as waste water canal cleaning, irrigation repair, pump replacement, small water and sanitation stations, public baths and latrines, and reconstruction of kindergartens, schools and health points (especially in war-affected or remote villages); (b) environmental projects, such as reforestation, terracing, flood and mud-slide prevention; and (c) entrepreneurial activities, such as small loans to micro-enterprises, and processing of fruits and vegetables. During the next two years of the project, an additional-50-60 microprojects will be implemented. The maximum size of a microproject will be US$150,000, though few will exceed US$50,000. The average microproject size is estimated at US$30,000 in the first year and US$35,000 over the life of the project.  - 12 - IV. PROJECT IMPLEMENTATION A. Overall Management of the Project 4.1 The TASIF will be the executing agency for the Project. The TASIF has been established by Presidential Resolution with financial and administrative autonomy, and with its own charter that will stipulates its structure and authority. It is able to enter into contracts, recruit staff from outside the civil service and establish its own operating procedures, including those for procurement and disbursement. Autonomy is necessary so that the TASIF can work with NGOs, local governments, private contractors and community organizations in an efficient and effective manner. 4.2 The TASIF structure (Figure 4.1) comprises the Board for Project Realization (the "TASIF Board') and the TASIF Executive Committee. The TASIF Board is chaired by the Prime Minister and comprises eight representatives, four from government ministries and four from non-governmental sectors. The TASIF Board approves the operational manual, and quarterly and annual reports; designates external auditors; considers microproject proposals over US$50,000; and provides guidance to the Executive Committee on the execution of the PPAP. 4.3 The Executive Committee is headed by the TASIF Executive Director, who was recruited competitively. The Executive Director is responsible for the coordination of all TASIF activities. He prepares the TASIF's work programs, authorizes all disbursements together with the Finance and Administration Manager, prepares reports on the progress of the TASIF and the programs carried out by the selected international NGOs under the first component of the project, and identifes training needs of TASIF staff. 4.4 The Executive Committee comprises the Finance and Administration Department, Microprojects Department covering two areas (divided into Northern and Southern areas), the Planning, Monitoring and Evaluation Department, and six advisory and support units (legal, institutional support, procurement, management information system, environment, and promotion). The Finance and Administration Department oversees all financial and accounting matters, prepare financial and administrative reports on the use of Project funds; prepares disbursement applications to IDA; and makes requests for replenishment of the special account. The Microprojects Department consists of two area managers and field engineers to oversee the preparation, appraisal and supervision of microprojects. The Management Information System Unit will develop and maintain the MIS. The Planning, Monitoring and Evaluation Department monitors the progress of the NGO programs supported under the first component and also the microprojects; develops and monitors a targeting strategy, and coordinates reporting and evaluation activities. The Institutional Support Unit coordinates the delivery of training and technical assistance to contractors and communities involved with TASIF-financed microprojects, as well as to TASIF staff. The Legal Unit is responsible for legal matters. A procurement specialist will be hired to monitor compliance on procurement with the operational manual. A promotion specialist will organize promotional activities for microprojects. An environmental consultant will be hired during the second year of the project to advise on and monitor environmental aspects of microprojects. The TASIF will be staffed by about 30 professionals. The TASIF will subcontract supervision tasks and professional services to consultants and NGOs whenever appropriate.  W --~~~~~~~~~~i >~~~~~~~~~~~~~ > 0 ET~~~~~~~~~~~~~~~~~~~~~~~~~T 1~~~~~~ I I I-C  - 14 - B. Implementation of Poverty Alleviation Programs of NGOs Institutional Assessment of Selected Non-Government Organizations 4.5 The scaled-up poverty alleviation programs will be carried out by three major international NGO's (SCF-US, SCF-UK and AKF) and possibly also by other NGOs to be identified at the end of the first year of the project. The TASIF will enter into a service contract for the implementation of each program. These selected NGOs have worldwide experience in carrying out such programs, and they each have considerable experience specifically of working in Tajikistan. 4.6 The SCF-US is a well-established not-for-profit relief and development organization working in over forty countries in Asia, Central Asia, Africa, South America and Eastern Europe. Its headquarters are in Westport, Connecticut, USA. It has worked in Tajikistan since May 1994, almost exclusively in the south-western part of the country with internally displaced persons and returned refugees, and with support from a range of sources including USDA, USAID, Soros Foundation, UNHCR, UNDP, UNICEF and the Government of the Netherlands, as well as from its own wide network of individual and institutional donors. Its Tajikistan program, operated under a formal agreement with the Government of Tajikistan, is staffed by about 160 mainly local staff, although its senior officers are expatriates. Its current country budget is about $3.5 million. It has effective management, procurement, monitoring and accounting procedures, and is subject to external audit. From an initial emphasis on relief, it has focussed increasingly on creating the preconditions for local economic development in Tajikistan. It has also undertaken several surveys on a variety of issues such as the informal economy. 4.7 The SCF-UK is an international charitable organization with headquarters in London, UK, and field offices in countries in Asia, Africa and Eastern Europe. It began work in Tajikistan in October 1994 to assist with relief supplies in the southwestern part of the country (Bokhtar district, Khatlon Oblast), an area severely damaged by civil war. Following a participatory needs assessment, it decided to assist vulnerable children through the provision of productive assets to female-headed households (seeds, sewing machines, livestock), and assisted about 1,000 households in this way. SCF-UK's strategy has been to establish a cost-effective, sustainable program with a high level of group support, community participation and empowerment, before seeking to expand its geographical coverage. A recent evaluation indicates that the point has now been reached. The UK home office supervises and provides logistical and administrative support to its field offices, including international recruitment of all field staff management positions and consultants, supervision and designing of all financial management and procurement procedures, and designing of training modules and the MIS. The field offices manage and implement all SCF-UK in-country programs in sectors such as health, education, infrastructure rehabilitation, microenterprise development and agriculture. The program in Tajikistan is managed by the Program Director in the office in Dushanbe who reports to the Regional Director for Central Asia in Tashkent. 4.8 The AKF is an international philanthropic institution headquartered in Geneva, Switzerland, with field offices in the USA, Europe, Asia, and Africa. It supports innovative and sustainable solutions to problems in health, education, and the general quality of life in poor rural populations in developing countries. In Tajikistan, where AKF has been active since 1992, the organization has its general field office in Dushanbe. It initially undertook relief work/ration distribution in the relatively isolated GBAO following the collapse of the Soviet Union. By charter, however, AKF is a development institution and not a relief organization. Thus AKF subsequently established a local NGO, the PRDP in GBAO with its headquarters in the capital, Khorog, sub-offices in all of GBAO's seven districts, and additional offices in Osh (Kyrgyz Republic) and Moscow. Since late 1993 PRDP has been active in agricultural reform along with continuing its humanitarian assistance to GBAO. AKF is responsible for raising funds and reporting to donors, which presently include Germany, the European Community, Japan, Canada, USA,  - 15 - and others. It appoints PRDP's General Manager, recruits expatriate staff and consultants for evaluations, negotiates budgets with PRDP and presents them to donors, provides funds to the PRDP, and controls/audits its accounts. As AKF's principal partner, PRDP operates under specific instructions from AKF on matters such as procurement, monitoring, and liaison with the authorities in GBAO. Recently a new AKF Program Director has been assigned to Khorog which will further support PRDP's management. Under the supervision of the AKF, PRDP itself is responsible for the implementation of the Agricultural Reform Program, recruitment of local personnel, negotiations with the local government, and report preparation. Project Management, Responsibilities and Operational Plans 4.9 The Shelter and House Rehabilitation Program will be implemented by SCF-US which will be responsible for informing the population and securing their participation through village meetings (see Annex B). SCF-US will also be responsible, in close consultation with the community and local leaders, for selecting and verifying beneficiaries and ensuring targeting, including a representative proportion of women beneficiaries. Village work brigades will be formed to undertake construction based on a work plan prepared showing project support to be provided and local participation (e.g. for organizing transportation of materials, and construction work). Materials and food will be procured and utilized with monitoring by local representatives and SCF-US. Village brigades (usually 15-20 persons) will be formed from the community members. Each brigade will elect a leader, and a detailed contract will be formalized between SC/US and the brigades (including terms and conditions, details of each house owner and work to be done, and names of the brigade members). Usually the brigade leader will enter into a contract with the village executive committee for the provision of transport. Food will be released and distributed according to specified procedures against work done. Local carpenters will be trained in roof construction. Entrepreneurs will be assisted to establish micro-enterprises. Three demonstration houses have been tiled in order to show the technology and determine training needs. Local project organizers, in small teams of one man and one woman, will target the neediest beneficiaries directly, identifying them through existing lists of homeless families, supplemented by community-based participatory social mapping, and consultation with other NGOs working in the area and key community resource people. The organizers will assess the extent of reconstruction work to be done, assist in the formation of work groups and the preparation of a work plan, and assist in the distribution of materials and verify work completed. It will take between three weeks to one month to construct a house, and brigades will work on several houses at a time. There will be a survey to verify that the construction had been satisfactorily completed, and this will be the basis for approval of distribution of commodities. SCF-US will report quarterly to TASIF on achievements against targets in relation to beneficiary selection, work group formation, construction work plans, and post survey, as well as on the progress of the tiles and training component. Site visits and training will be arranged for a small number of selected community representatives and government officials from other parts of the country where there is an identified housing need (rural Panjkent, Aini, Mascho), with a view to building capacity in other local organizations for similar programs. This will enable the methodology to be adopted and adapted to the needs of other areas where SCF/US does not work, and where similar housing needs of the very poor exist for reasons other than destruction in civil war. 4.10 The Micro-Credit (Group Guarantee Loans and Savings) Program will also be implemented by SCF-US (see Annex C). Staff based in the Field Office in Kurgan-Tube and in Vose will be directly responsible for the day to day management of the program including group formations (they will form 250 women's groups and provide loans to 3,750 women micro-entrepreneurs over a 2-year period), savings mobilization and loan disbursements and collection. The Field Office in Dushanbe will provide overall supervision and management support and will be involved in monitoring, evaluating and reporting in accordance with the indicators chosen. GGLS staff in SCF-US field offices in Kurgan-Tube and in Vose, through the group promoters, will be respoisible for group formation, training of groups, collection of baseline data on clients, assisting clients in filling out loan application forms and passbooks,  - 16 - disbursement of loans, collection of repayments and savings. GGLS offices in the field will be responsible for supervising loan disbursement and repayment, and for maintaining financial records which will be reported to and supervised by the office in Dushanbe. The GGLS staff or group promoters supervised and managed by the project manager and project supervisors will be responsible for identifying potential clients in groups, the training of groups in a basic understanding of borrowing and repayments, loan disbursal and repayments. The GGLS group promoters work in pairs and handle an average of 12 groups each in the first year of the project and 15 in the second year. Each group will have an average of 15 members. Group promoters will therefore handle an average of 220 clients each. 4.11 The Program of Support to Female-Headed Households will be implemented by SCF-UK (see Annex D). Overall management of the project will be the responsibility of the program manager in Dushanbe. Day to day operations will be managed by a project manager based in Khatlon with support from the program administrator for procurement and logistics, as well as financial monitoring. The training coordinator will also be involved. SCF-UK will arrange site visits and training for a small number selected community representatives and government officials from other parts of the country, with a view to building capacity in other local organizations for similar programs. This will enable the methodology to be adopted and adapted to the needs of other areas where SCF-UK does not work. 4.12 The Agricultural Reform Program will be implemented by PRDP in conjunction with AKF (see Annex E). The local PRDP Deputy General Manager in Khorog, the capital of GBAO, will supervise the implementation of the program with technical input from the Irrigation Engineer and the Agricultural Supervisor and general guidance from AKF's Program Director. Villagers interested in PRDP assistance in channel construction and new land development will first form a group and appoint a leader (sardar). They will then negotiate with the Government for permission to utilize new land once channel construction is completed. PRDP will next sign a formal agreement with the farmers' group stating that it will help with channel construction and land development (i.e. technical assistance and materials; provision of seed, fertilizer, and fuel on credit; etc.). Villagers will agree to provide manual labor for the program's activities, with Food-For-Work inputs funded by GTZ. 4.13 The details of the implementation arrangements for each of the above programs have been included in the contracts to be signed between the three international NGOs and the TASIF. The contracts also specify the performance indicators, together with financial reporting mechanisms, that will trigger subsequent release of funds after the first mobilization payment. The TASIF and the three international non-governmental organizations have reached agreement on the draft service contracts for the four sponsored programs. These draft agreements have received the no objection of IDA. 4.14 In addition to the pre-identified international NGO programs, funds will be made available for other sponsored programs to be identified during the Project. The implementation program for these activities will be as follows: the criteria for the selection of the programs will be similar to those already used for the selection of international NGO programs and will be publicized by the TASIF; applications will be received and then reviewed by a selection committee, after which recommendations will be made to IDA by the TASIF and the Government. After approval, these programs will be carried out during the second year of the project. By December 31, 1997, the TASIF will have submitted to IDA, a proposal for the use of the future sponsored program funds.  - 17 - C. Tajikistan Social Investment Fund Implementation of the Institutional Development of the TASIF 4.15 Technical assistance was provided during Project preparation to the TASIF to start to develop its institutional capabilities and ensure that it has the capacity to fulfill its functions at Project launch. Based on this foundation, the Project will finance equipment, vehicles, salaries, staff training, technical assistance, studies and operating costs of the TASIF during the Project period. Staff development will mainly be on the ground, learning-by-doing through practical application of an operational manual. A draft of the operational manual has been prepared by TASIF including sample bidding documents for the microprojects. Structured training in World Bank procurement and disbursement procedures, computers, and English will be provided. Technical assistance will focus on supporting the TASIF to develop an accounting and management information system, financial control and reporting, and community participation. Training will be conducted on the job, through local resources and foreign technical assistance, by exchange visits to similar projects (building on the study tours already conducted to Armenia and Albania), and by other means as necessary. The Institutional Support Unit of the TASIF will coordinate the training activities. 4.16 Technical assistance in the form of an international technical advisor, focusing on construction and preparation of standards and norms, will be provided, building upon the support already in place through PHRD grant funding. An international management advisor will focus on all aspects of management in the TASIF, including setting work plans, time and task management, team building, communication, and development of personnel review procedures. Short-term international and local technical assistance will also be provided to develop and test the accounting system and MIS and targeting strategy. During the second year of the project, the TASIF will contract out a beneficiary impact study to examine the impact of the microprojects on benefiting communities. Technical support will also be provided to meet the managerial and technical needs of contractors, implementing organizations and communities to participate in competitive procurement. The TASIF will enter into a contract with one or more qualified institutions or individuals to provide training and technical assistance. Microprojects 4.17 The major participants involved with microprojects will be (i) the community or group that is supposed to benefit directly from the microproject in terms of increased job opportunities and income and improved access to services; (ii) the requesting agency, that is, the community group, NGO or local government that presents a microproject proposal to TASIF for financing; and (iii) the implementing agency (may be the same as the requesting agency) which will sign the framework agreement with the TASIF and take responsibility for implementing the microproject and fulfilling tasks as stipulated in the agreement. The implementing agency may be an NGO or other community group. Other major participants will include staff of the Microprojects Department who will be ultimately responsible for appraisal, supervision and quality control of microprojects; the independent supervisor who will sign a separate agreement with the implementing agency to provide daily supervision functions; and the small private contractors hired by implementing agencies or directly by the TASIF to undertake works. The TASIF will conduct financing activities in accordance with a microproject cycle common to all social funds. This cycle will be elaborated in the operational manual and refined as the TASIF accrues experience and the NGO programs and microprojects are implemented. The stages of the microproject cycle to be detailed in the operational manual will include the following steps. 4.18 Targeting. The TASIF will have limited funds and aims to assist the poor, and thus, not everyone will be helped. To increase the likelihood that benefits reach the poor, one of the priorities during the first six months of the Project will be to develop a means for improving the identification of vulnerable  - 18 - groups from among the larger population and for channeling funds selectively to them. The TASIF strategy for targeting will be based upon the experience gained by (i) the NGO programs supported under the first component; (ii) experimental poverty ranking already carried out at the rayon (district) level; and (iii) existing data and major findings from the social assessment. The first seven microprojects, that have been identified prior to development of the full targeting strategy, will be identified on the basis of existing information about poverty and will be implemented in areas that are visibly poor, and in areas not reached by the NGO programs supported by the first component. In addition to poverty levels, the targeting methodology will reflect some geographic and ethnic balance, and infrastructure needs. By December 31, 1997, the TASIF will have developed a targeting strategy satisfactory to IDA to guide distribution of resources for the rest of the Project duration. 4.19 Promotion. Efforts will be taken to increase awareness among community members, potential requesting and implementing agencies, and the private sector of availability of funds, the types of microprojects supported by the TASIF, the centrality of community participation, the selection criteria, and the procedures to be followed to obtain funds. In the first year, the TASIF will avoid large-scale promotion activities to avoid raising expectations that cannot be met. Promotion activities will begin at the end of the first year in targeted regions so as to generate proposals to be financed during the second year. Whenever feasible, the TASIF will contract out promotion activities and coordinate with NGOs, especially those involved under the first component, and with local government networks. 4.20 Identification. Microprojects will be proposed by local organizations, including local governments, NGOs, parents and women's committees, farmers' cooperatives, health committees, and newly-created community-based organizations. Selection criteria will be stipulated in the operational manual, which will be acceptable to IDA at all times. The criteria for selection of the first seven microprojects include: labor content of at least 20 percent; community contribution of at least 10 percent (in kind or cash); cost less than US$20,000; positive impact on the lives of poor groups; implementation possible during the winter; interest of a community organization in collaborating with the TASIF; rehabilitation and not reconstruction; and no adverse affect on the environment. The selection criteria and menu of microprojects will be defined and modified as necessary based on experience accrued during the first batch of microprojects, and in consideration of the capacity of TASIF staff or qualified firms to appraise and supervise different types of microprojects. The TASIF will start with financing a small menu of microprojects, mostly small infrastructure works. As intermediaries and TASIF management gain capacity, it could expand into more complex microprojects. Bank supervision and technical reviews will monitor the capacity in the TASIF or other service providers. 4.21 Preparation. To support the TASIF's participatory objectives, the TASIF will develop microproject proposal documents that are simple and standardized to enable communities to translate Project ideas into feasible proposals. These will be adjusted accordingly during the first year of the Project and integrated into the operational manual. When technical studies for microprojects are required, they will be contracted by the TASIF. Preparation costs will be calculated according to instructions to be provided in the operational manual. 4.22 Appraisal. The first seven microprojects will challenge the TASIF to standardize appraisal criteria and procedures for different types of microprojects. Technical, institutional, social, and economic analysis will be carried out for each microproject, and the tools and methods for doing this analysis will be transferred to the operational manual. The TASIF will integrate criteria for community contribution (in kind or cash), labor content, operation and maintenance into appraisal. 4.23 Approval. The Executive Committee will be responsible for considering the approval of microprojects costing US$50,000 or less. The Executive Committee will be headed by the Executive Director and will comprise the Finance and Administration Manager; the Planning, Monitoring and Evaluation Manager; two Microprojects Area Managers; and the Legal Advisor. The first batch of  - 19 - microprojects and any microproject over US$50,000 will be subject to approval by the Board for Project Realization and subject to no-objection from IDA. 4.24 Implementation. When a proposed microproject is approved by the TASIF, the local organizations proposing the activity will become the "implementing agency" and enter into a framework agreement with the TASIF. Whenever feasible, works will be carried out by small private contractors using labor- intensive construction techniques in order to generate jobs. The maximum size of a microproject will be US$150,000 though few will exceed US$50,000. 4.25 Supervision. The TASIF will decide the mode of implementation in consultation with communities. A standard multi-party framework agreement will be signed by the implementing agency and the TASIF, stipulating the responsibilities of each party. The framework agreement will be based upon those used successfully in other social funds and be experimented with during project preparation. The implementing agency will select and contract contractors under the supervision of the TASIF. The regulations for competitive bidding will be tested and integrated into the operational manual. Implementing agencies will enter into a separate agreement with an independent supervisor for daily, on- site supervision of civil works contracts. 4.26 Handover. During the first year of the project, the TASIF will develop a protocol for handing over completed microprojects to communities which will be integrated into the operational manual. This may be done through a completion and handover meeting attended by all those involved with the microproject. 4.27 During the first year of the project, 10-15 pilot microprojects (i.e. the initial batch of 7, plus a second batch of about as many) will be implemented in order to test and modify as needed the targeting, promotion, appraisal, approval, supervision, monitoring and evaluation procedures and the accounting, MIS and administrative systems. The operational manual will be reviewed again by the TASIF Board and IDA by the end of the first year of the project and will be used to guide the selection and implementation of the next batch of microprojects, which will consist of 50-60 microprojects. Altogether, an estimated 70 microprojects averaging US$35,000 will be implemented during the Project. D. Economic analysis and cost recovery International NGO programs 4.28 The international NGO programs to be supported through the Project are all in operation and have each been evaluated already. One of the criteria for their selection was their cost-effectiveness, and so each program has already had a positive economic judgement. 4.29 Shelter and House Rehabilitation Program. In considering the economic analysis of this program, the social assessment found poor housing to be a major factor in poverty and a very high priority for the poor. Also the existing program has shown that the provision of food and materials and the creation of work brigades generates considerable community participation, helps to create social cohesion and often leads to other tasks and economic activities. The house owners and the communities contribute substantially to the shelter and the house rehabilitation program. Besides their contribution of labor, they are involved in the selection of beneficiaries, program monitoring, and negotiations with village authorities. Home owners are also required to pay for the cost of ceilings, windows and doors, which could amount to $50 per house. The unit cost for the rehabilitation of the houses is reasonable: the direct unit cost of a re-roofed house is about $1,700, of which timber accounts for nearly fifty percent. Overhead costs are estimated at 13 percent. An analysis has also been made of the economic advantage  - 20 - of using tiles rather then asbestos sheets. Although the latter are slightly cheaper, tiles last twice as long and are considerably cheaper to repair. Health risks of asbestos are also avoided. 4.30 The Micro Credit Program. The program has a direct impact on the economic well-being of families negatively affected by the war by stimulating economic activities at the local level. This is particularly important in view of the lack of any other formal source of credit. The results thus far of the SCF-US pilot GGLS program have proven that micro-enterprises in Tajikistan can succeed. A total of $62,000 has been disbursed to date to 524 members, whose loans are protected by 28 groups. The loan repayment rate is 100 per cent, enabling SCF-US to collect $50,000 in repayments already and continue to make loans of increasing size to existing members. It has started a process of social cohesion and provides access to credit for women who have no other source. It has assisted these clients in their asset building process. In the future program, it is projected that cost recovery will remain high and there will also be a new savings element introduced into the program. Despite its effectiveness, however, the costs of delivering a loan are somewhat high. An evaluation of the program a year after its implementation found that administrative costs amounted to nearly sixty percent of the total. Micro finance experience shows that such high costs at the start up stage of a micro credit program are not unusual, and over half of the costs of the scaled-up program will still be to finance support and investment expenditures. The proportion of administrative costs is projected to decline rapidly by sixty percent by the end of the project. 4.31 The Program of Support to Female-Headed Households. The evaluation of this program in 1995 concluded that the program had already successfully helped to improve the physical welfare of children through increasing their access to food, clothing (and to some extent) educational materials. It also concluded that the project inputs were improving the economic well being of households through both increased consumption and market sales. The provision of agricultural assets such as livestock, seed and tools, as well as technical advice, will increase further income levels. The program will improve household food security and generate a small income for families through the sale of products and it will also contribute to social stability in an area which suffered greatly from war. SCF-UK's experience shows that a significant positive impact can be derived by explaining the land reform process and mechanisms for applying for land. This complements policy reform at the national level. Baseline data collected by SCF-UK's for analysis of the cost effectiveness and benefits of the project activities will enable not only the measurement of the overall economic benefits provided, but also an analysis of household income overtime. Cost recovery will be in cash or in-kind, and will amount to between 100-120 per cent of the value of the agricultural commodities provided to the households originally. 4.32 The Agricultural Reform Program has expanded much more rapidly than initially anticipated when it began in late 1993, and the potential for additional scale-up is great. A mid-term evaluation of PRDP's work clearly notes the success of the various program activities. In 1993 PRDP negotiated agreements between kolkhoz (collective) farm authorities and private farmers for only 83 hectares on a pilot basis. By 1996 this figure had strikingly increased to 1,954 hectares, which reflects a total of 2,118 agreements between government authorities and some 4,725 farmers, with many additional farmers waiting to participate. In addition, recent introduction of improved seeds from abroad and subsequent local propagation has produced dramatic increases in crop yields among farmers who privately manage their land as compared to those of the kolkhoz. Most participating farmers have obtained yields 3-4 times higher than before, with the winter wheat crop often yielding 6 metric tons of wheat per hectare. The planned expansion of the program will bring 3,662 hectares of new land under cultivation, and 1,600 farmers will avail of improved seed and technical guidance from PRDP. The program is highly desirable from an economic point of view. The cost of bringing one hectare of new land under cultivation will be only US$174. And, using very conservative figures for yields on new lands and the cost of a ton of flour in GBAO, the total project investment of US$650,000 will be recouped within only three years. Within eight years, the total value of the wheat produced on the new land will be approximately US$11 million.  - 21 - Cost recovery is already working well, with the farrners paying back in cash or kind materials (i.e. seeds, fertilizer, and fuel) provided to them on credit. This will be continued through the scaled-up program. TASIF Microprojects 4.33 For the TASIF microprojects, there are two main issues: (a) the relative costs and effectiveness of a demand-driven social fund, compared to other types of social protection and employment programs; and (b) at the micro level, the criteria for the choice of individual microprojects. 4.34 The Ministry of Labor currently operates a public works program (employing 2,762 workers in mid-1995), and a very limited food-for-work program (reaching 700 workers). In addition, the Government runs a cash benefit system that includes bread allowances, child allowances, student stipends, pension benefits, unemployment benefits and other subsidies. The rationale for supporting a social investment fund rather than expanding the existing government programs is premised on the following: (i) the limited capacity of the current ministries, especially the Ministries of Labor, Social Protection, Education and Health, and the difficulties experienced in other Central Asian countries in trying to increase the efficiency of their current programs (especially in a context of fiscal collapse); and (ii) the limitations of the transfer programs--even with IDA support through the ARSP project and improved targeting--due to the heavy fiscal drain and constrained capacity of the Government to increase levels of tax collection. 4.35 Regarding economic analysis at the microproject level, the demand-driven nature of the project means that it is difficult to predict the overall economic rate of return in advance. Evidence from public works programs worldwide suggests that cash wages paid by SIF-financed microprojects alone are not more cost effective than cash transfers. Thus, for public works to be justified, they must create useful assets. To ensure the cost effectiveness of individual microprojects, calculations will be made on the first batch of microprojects to assess various norms and standards, costs per labor day of employment, cost per beneficiary and possible rates of return for different types of microprojects (such as water supply), in order to uncover those types of investments that accrue higher returns. Those investments with higher returns will be reflected in the menu of microprojects. By the second year of the Project, the MIS and unit cost database will be fully operational which will help the TASIF to arrive at least cost solutions to infrastructure needs. The beneficiary impact assessment will ascertain the impact of pilot microprojects on communities, and will enable the TASIF to gain understanding about who in terms of gender, age, socioeconomic group and vulnerable status is actually benefiting. Demographic information on laborers hired under TASIF-financed microprojects could be gathered and some assessment made of the impact of wages on household incomes. All of this information will be valuable during the second year of the Project as the Government and donors consider the economic rationale of continuing the TASIF after project completeness. One of the expected outcomes of the proposed Project is that the Borrower will demonstrate that the TASIF is a cost-effective, transparent, and efficient organization for channeling small amounts of money to Tajik communities, and that donors will be interested in contributing funds to enable the TASIF to continue. E. Sustainability and Expected Impact International NGO Programs 4.36 In 1993-4 much of the external assistance to Tajikistan was to support relief efforts, in which sustainability was not a dominant issue. The current phase of external support is dominated by "rehabilitation" efforts that seek to restore physical and human capital destroyed during the civil conflict. In contrast, the proposed Project aims to go further than this in promoting development, based on investments combined with popular participation. The sustainability issues in the first component of the  - 22 - project address primarily questions of sustainability of impact, although increasingly emphasis will be placed on the sustainability of the new processes being put in place. 4.37 The Shelter and House Rehabilitation Program. Sustainability of impact has already been demonstrated in the earlier phases of this program, and the reconstruction of homes meets a priority need of poor families in areas affected by civil conflict. Many of the residents of these areas were internally displaced from the war, and their first need, in returning to their destroyed homes to resume their lives, is for a place to stay. The rebuilding or repair of habitable structures is also a first step in a process of re-establishing viable communities. The basic structure, created through the program, is followed by further voluntary home improvements entirely from local resources, and provides both a physical and a moral basis for further developments: by investment in family gardens, development of household level economic activities (small stock, silkworm cultivation, baking bread, petty commerce, group micro-credit) and in community infrastructure (water, roads, schools, kindergartens etc). In addition, the work brigades, formed largely of neighborhood residents who help each other in reconstruction work, contribute to social cohesion and further economic cooperation. They also help to reintegrate able-bodied, economically active men into local society, one of the most compelling needs for economic rehabilitation. 4.38 The Micro Credit (Group Guarantee Loans and Savings) Program. The aim is to develop the existing program into a sustainable local NGO or financial services institution that can operate independently within four years and can sustain the access to capital for poor women. Within two years from the start date of this upscaled program, a core group of borrowers and GGLS staff will begin participating in SCF-US sponsored training and will produce an agenda for the development of a local apex institution that can fully operate a microcredit program within four years. Various operating responsibilities related to the GGLS program will be handed over to the client groups after the last year of the Project period (which will be the fourth year of the GGLS program) as their capacity dictates. In the fourth year of the GGLS program, groups receiving credit and savings services will be managed and monitored by this apex NGO. The GGLS program will also be linked, through the monitoring and evaluation process, to the TASIF according to the operational manual guidelines. This should enable GGLS to network with client groups and organizations beyond its present area of operation and enable it to increase its client base. To address the issue of financial sustainability, savings will be an important component of the project. Savings serves as an indicator of profit and commitment as well as sustainability. The GGLS program will require clients to save on a weekly basis which will total three per cent percent of the loan in a cycle. Group savings perform many functions, including serving as a guarantee for defaults and being available for future capital expansion. Group members will be encouraged to open individual or group savings accounts once the banking facilities are available in the area. All 3,750 group members will get loans in three month cycles. At the close of the first year of the project 3,450 loans will be disbursed to 1,500 members. Disbursed loans will be protected by 100 groups, averaging 15 members per group. In the first and second quarter of the first year 20 groups each will enter the first loan cycle. Similarly in the second year 30 groups each will enter the first loan cycle. Similarly, in the second year, 30 groups each in first and second quarters, and 45 groups each in last two quarters, will join the first cycle of loan. Upon the successful completion of a loan cycle in the end of each quarter, groups will enter a new loan cycle and will remain constant once they reach the fourth cycle. Repayments of loan with interest from the first year will be revolved for continued funding in subsequent years. The proposed loan funding will allow all groups to reach the fourth loan cycle and continue receiving loans indefinitely provided additional funding is secured to pay a portion of the program costs. SCF-US estimates the program will be 6 percent operationally self sustainable at the end of the first year and 27 percent, 72 percent and 144 percent at the end of the second, third and fourth years respectively, with the standard interest charge of 10 percent (to which 3 per cent will be added to make the total service charge 13 per cent). However, the three percent will be deposited in group names and will remain as the savings for the group. Groups will have full authority in the utilization of the savings fund.  - 23 - 4.39 Support to Female-Headed Households Program. These households are among the most vulnerable in the areas affected by civil conflict. The small inputs provided to the most severely affected families from the civil conflict have enabled a modest but sustained improvement in family economy and health, as evidenced by the nutritional state of the children. The evaluation of August 1995 found abundant evidence that the project had generated productive family investment (livestock increase, family stocks of seed) and household economic activities. Although started as a relief exercise, payback in kind (seed potatoes, small stock) was introduced in order to increase sustainability and cost-effective coverage. Equally important, the advocacy and educational work with women has generated a tangible increase in their motivation and self-confidence, for example in dealing with local authorities over land rights or other entitlements. The continuation of this project over two years in Bokhtar and its extension to Vakhsh will extend this impact, with attention to improving the payback system. The inclusion of an element of documentation, training and extension is intended to ensure replication of this project in other parts of the country where SCF-UK does not operate, possibly with the support of TASIF. 4.40 The Agricultural Reform Program This program is still extremely relevant for GBAO. Since the collapse of the Soviet Union, the whole populace of GBAO has been dependent upon AKF-sponsored food rations for survival. Change is occurring, however, and in recent years initial steps have been taken by PRDP towards the development of a sustainable agricultural system. A mid-term evaluation of the NGO's work conducted in 1995 concluded that wheat self-sufficiency is possible in future years if land reform continues and the general economy of the region improves. This program has as its target the additional cultivation of 3,877 hectares of new land which, along with the previously privately managed land coordinated by PRDP, will produce some 14,000 metric tons of wheat in the next two years, which is approximately half of the region's total requirement. Private entrepreneurship will also be encouraged through the sale of food surplus. In this regard, PRDP is actively fostering the development of local markets, which are crucial to the establishment of a sustainable agricultural system for GBAO. TASIF microprojects 4.41 The fact that the TASIF will be demand-driven makes it difficult to estimate quantitatively and in advance the impact of the microprojects. Furthermore, the modest amount of funds for microprojects during the Project means that the overall impact on poverty alleviation in a country with vast numbers of poor will also be modest. However, the expected impacts are still significant and will include: (a) a transparent mechanism (the TASIF) that could provide financing, monitoring, and technical support in the future to an increased number of community requests for small investments, in the event that funds continue to be made available for future activities; (b) improved quality, regularity and availability of social and economic services used by the poor; (c) unskilled and semi-skilled jobs during the implementation phase; and (d) increased capacity of community organizations to plan, manage and implement small investments. While male laborers and their families are likely to be direct beneficiaries of most short-term job opportunities created by the microprojects, women and children in 70 communities, averaging 2,000 population each, will benefit as a result of the rehabilitation and restoration of small infrastructure and services. 4.42 Sustainability is a concern at both the institution (TASIF) and microproject level. First, although the Project is being conceived as a short-term program of three years, if it is successful the TASIF could and should be continued. The Project will build the institutional capacities of TASIF, as well as local agents (such as local government units and NGOs), so that they could carry out poverty alleviation programs in the future. Second, presentation of a plan for operating and maintaining the microproject will be one of the criteria for microproject approval. Priority will be given to repairs and reconstruction of facilities that are currently operating and for which salaries of service personnel are already budgeted. Finally, the emphasis on community participation in microproject design and implementation will improve  - 24 - the prospects for sustainability. The ability of communities to pay directly for the operating and maintenance costs of rehabilitated infrastructure may be limited, and so it is envisaged that local contributions (equivalent to 10 per cent of the total cost of each microproject) may often be in the form of donated time and labor, rather than money. F. Enviromnental Analysis International NGO Programs 4.43 In selecting NGO programs for support through the Project, one of the major criteria used was their environmental impact, thus favoring the selection of projects that will have either a positive environmental impact, or at least no negative impact. (a) The Shelter and House Rehabilitation Program will make a significant improvement to the built environment, both in terms of health and aesthetically, with no adverse impacts on the natural environment. In particular, the promotion of tiled roof technology over the previously used asbestos sheeting will remove a potential health hazard. The reconstruction of ruined houses also acts as an incentive to further environmental improvements, such as clearance of rubble and other evidence of war damage, improvement of environmental sanitation, and removal of other health hazards. SCF-US has also instituted extensive checks to ensure that food provided under the food for work scheme is fit for human consumption. (b) The Micro Credit Program and the Program Support to Female-Headed Households encourage small-scale income generation activities which are either environmentally neutral or beneficial, as in the case of encouragement of low external input farming systems and food production (crop rotation, natural fertilizers) in place of high agrochemical input cotton production. (c) The AKF/PRDP Agricultural Reform Program involves extension of gravity-flow irrigation systems, expansion of arable land on the edges of existing fields and in valleys, and careful use of fertilizers. In this context, AKF's long-standing commitment to socially and environmentally sustainable development is relevant; the organization has extensive experience in agricultural development in fragile mountain settings (e.g. in the Northern Areas of Pakistan), and promotes sound cultivation practices, including terracing and reforestation to retain and enhance soil fertility. Any use of fertilizers and other agrochemicals will be carefully controlled by monitoring and farmer education. (d) Similar environmental criteria will be applied to any other projects to be supported under the first component of the project. TASIF Microprojects. 4.44 Institutional support to TASIF is environmentally neutral. Microprojects to be supported under TASIF will be individually screened and monitored for environumental impacts according to criteria to be included in the operational manual. The project staffing structure ensures environmental analysis capability by including the post of environmental specialist.  - 25 - G. Monitoring and Evaluation Integrated Evaluation 4.45 An independent integrated evaluation at mid-term and project completion will be contracted by TASIF to be undertaken by a consultant leading a multi-disciplinary team of local and international experts. Implementing INGOs will each nominate a team member, but the team as a whole will evaluate all aspects of both components of the project including TASIF's institutional capacity. It will visit project sites, review reports and indicator measurements in the light of its own observations and investigations, and seek to establish lessons to be learned both at mid-term and for Project follow-up. It will report both to TASIF and to the Bank. Further details are in Annex L. 4.46 Key objective indicators will be measured and monitored by the Project in order to track, in a consistent and comparable fashion, the essentials of performance against objectives. The first Project objective of impact on the incomes of the poor will be measured across all sub-components by five key indicators, of which two will indicate the extent to which this objective has been met in a cost effective and participatory fashion. In addition, each sub-component will be evaluated according to three specific indicators relating to the particular program (e.g. shelter, micro-credit, agricultural production of female- headed households, agricultural reform) and particular aspects of impact, coverage and sustainability. The second Project objective of capability building will be measured by two general indicators across all components, with a third relating specifically to the training of TASIF staff. Thus each sub- component will be evaluated on ten indicators, of which seven are common to all sub-components of the Project, and three are specific to each sub-component. These indicators, and the specific measures and instruments to compile them, will be refined in a pilot baseline exercise . International NGO Programs 4.47 Monitoring and evaluation activities have already been a prominent feature of the existing NGO programs, and both Lhe findings and systems used will be built upon in the scaled-up programs. The Project will closely monitor the scaled-up programs. Specifically, the NGOs will be asked to report to the TASIF on a quarterly basis on the following: (i) summary of achievements: number of beneficiaries reached (direct and indirect) versus goal; cost per beneficiary (total NGO program cost divided by number of beneficiaries); labor content as a percentage of the NGO program budget; number of person- days of employment generated; and operating costs as a percentage of the NGO program budget; (ii) obstacles and issues to be overcome and resolved; (iii) targeting; (iv) community participation; (v) financial reporting; and, (vi) sustainability. In addition to this the NGOs will report to TASIF on achieved targets in order to trigger release of payments by TASIF to the NGOs (see Annexes B-E). 4.48 Each of the NGO programs will also have a monitoring schedule based on its specific characteristics (see Annexes B-E). Specifically: (i) the shelter and house rehabilitation program will be monitored through eight indicators these are: beneficiaries, female participation, reconstruction, distribution of materials and food and average inputs per house, construction quality and contribution to poverty alleviation; (ii) the micro-credit program will be monitored through the bi-weekly visits to the groups using indicators relating to group information such as business activities, attendance, repayments and savings (iii) the program of support to female-headed households will monitor the distribution and use of productive assets. These will be monitored on a monthly basis and at the end of each repayment period. Field workers will report on advocacy activities every two weeks; and, (iv) the work of the district field staff of the agricultural reform program will be monitored periodically through field visits by PRDP staff (Deputy General Manager, Irrigation Engineer, and Agricultural Supervisor) from the Khorog Head Office and by periodic visits by AKF staff from Geneva. Key indicators to be monitored are number of kilometers of channel construction which have been completed, the number of schemes completed and the number of hectares of land brought under cultivation.  - 26 - TASIF microprojects 4.49 An integrated monitoring and evaluation system will be developed during the first year of the project in order to monitor and evaluate the institutional development of the TASIF and the impact of TASIF-financed microprojects. Indicators for monitoring the progress and development of the TASIF are given in Annex P. The means for verifying these indicators will be quarterly reports, Bank supervision, technical assistance reports and audits. The objectives of the monitoring and evaluation activities will be to (a) determine if there is compliance between TASIF operating regulations and procedures for implementing contracts and microprojects; (b) provide information regularly on progress toward achieving desirable results and facilitating reporting to the TASIF Board, the Government and donors; (c) alert managers to actual or potential problems in implementation so that adjustments can be made; and (d) determine whether the Project is benefiting the intended people and how. This system will comprise microproject monitoring by TASIF staff and communities; the MIS; and a beneficiary assessment. When fully operational, the computerized MIS will track progression of microprojects through the microproject cycle, provide transparency and accountability of financial flows, monitor civil works progress based on field supervision reports, and flag microprojects experiencing unusual delays and cost overruns. By the second year of the project, MIS-generated information will be used in the daily decision making and operations of the TASIF; and will be an integral part of the reports submitted by the TASIF management to the TASIF Board; and of quarterly reports and comprehensive annual reports submitted to donors. While the MIS will generate information on the physical and financial progress of works, a beneficiary assessment will be utilized to evaluate the impact of microprojects on benefiting communities.  - 27 - V. PROJECT COSTS, FINANCING, PROCUREMENT AND DISBURSEMENT A. Project Costs Summary of Project Costs 5.1 The total project cost is estimated at US$12.7 million equivalent including duties and taxes of US$0.1 million. The estimated cost and foreign exchange by components are shown in Table 5.1 below. Annex M contains detailed project cost by types of expenditures. Table 5.1: Summary of Project Costs by Component (in US$ million) Foreign % of Exchange Total % Base Cost Local Foreign Total 1. Scaling-up of Existing Poverty Alleviation Programs of NGOs A. Shelter and house rehabilitation program 1.00 2.17 3.17 69 27 B. Micro-credit program 0.62 0.42 1.04 40 9 C. Program of support to female-headed households 0.63 0.41 1.03 39 9 D. Agricultural reform program 0.38 0.27 0.65 42 6 E. Future Sponsored Programs 0.44 1.19 1.64 73 14 Sub-total Scale-up Existing Poverty Alleviation Progs. of NGOs 3.71 4.46 7.53 59 64 11 Creation of the Tajikistan Social Investment Fund A.. Institutional Development of TASIF 0.85 0.65 1.51 43 13 B. TASlFMicroprojects 2.01 0.44 2.45 18 21 C. Integrated Evaluation of PPAP 0.02 0.08 0.10 78 I D. Audit of the PPAP 0.01 0.14 0.15 95 1 Sub-total Tajikistan Social Investment Fund 2.89 1.31 4.21 31 36 Total BASE COST 5.96 5.77 11.73 49 100 Physical Contingencies 0.27 0.43 0.70 62 6 Price Contingencies 0 0.25 0.25 100 2 Total PROJECT COSTS 6.23 6.45 12.68 51 108 Note: Figures may not total due to rounding. Price contingencies are based on base cost plus physical contingencies. Basis of Cost Estimates 5.2 Project costs have been estimated in US Dollars due to difficulties in forecasting inflation rates for local currency. Estimates for civil works and goods, including construction materials, equip- ment and vehicles required for the scaled-up programs to be implemented by international NGOs, as well as for the establishment and operation of TASIF are based on the itemized cost estimates in the NGO's submitted proposals as well as on unit prices for similar items recently procured in the coun- try by other aid agencies. Estimates for management and administration services of the selected NGOs required to implement their programs are based on rates provided, and on the basis of recent prices for comparable services. The estimated Project cost also include the institutional strengthening of the newly established TASIF. The average cost of microprojects, consisting mainly of small civil works, is estimated at US$35,000 equivalent, with the maximum being US$150,000 equivalent.  - 28 - These estimates have been reviewed by Bank staff and found acceptable. Base cost estimates reflect prices as projected at time of negotiations. Incremental Operating Costs 5.3 The operating costs for TASIF are estimated at US$0.99 million equivalent and consist of: a) maintenance for facilities and equipment procured and leased under the Project; b) salaries of TASIF staff, as well as per diem expenses for field work and trips related to the Project; c) consumable office supplies; (d) salaries of contract staff; and (e) office operating expenses such as utilities, repro- duction and communication charges related to the project. Items will be procured according to the procedures described in the operational manual in compliance with IDA Guidelines. The personnel for TASIF will be hired on fixed term contract through a competitive selection acceptable to IDA. Foreign Exchange Component 5.4 The foreign exchange component of US$6.45 million represents 51% of project cost, net of duties and taxes. The foreign exchange component was estimated as follows: a) small civil works for microprojects, 20%; b) goods: equipment (including computers and related office equipment) and vehicles, 90%; furniture, 60%; technical assistance and services: foreign experts, 95%, local experts, 10%; study tours and fellowships, 100%; and local training, 10%. Contingency Allowances 5.5 Physical contingencies (US$0.70 million) represent six (6) percent of the base cost. Price contingencies (US$0.25 million) represent about two (2) percent of base cost plus physical contin- gencies. Total contingencies represent about eight (8) percent of the base cost. Contingencies will not be applied to the microprojects component and any increase in the average micro-project cost will be reflected in a reduced number of microprojects financed. Taxes and Customs Duties 5.6 Project costs include an estimated US$0.10 million equivalent in taxes and duties on civil works and locally procured goods. Goods specifically imported for the Project will be exempt from custom duties and taxes. International personnel will be exempt from local income taxes. B. Project Financing Financial Plan 5.7 The proposed Credit of US$12.0 million equivalent will finance 100 percent of the foreign exchange component (US$6.5 million) and about 92 percent of local costs (US$ 5.7 million), exclud- ing duties and taxes. The Government and/or participating entities will provide about US$0.7 million equivalent or about five (5) percent of total Project costs.  - 29 - Table 5.2: Financing Plan Local Foreign Exchange Total Pro- Costs ject Costs USS M US$ M US$ M %Project IDA 5.5 6.5 12.0 94 GOT 0.7 0.0 0.7 6 TOTAL 6.2 6.5 12.7 100 Local Cost Sharing/Counter Part Funds 5.8 The Tajik local counter part funds will consist of: (a) the Government's local cost sharing contribution (the rent of the building and utilities for TASIF); and (b) the micro projects (10% of the civil works). In addition, the local community contribution to the micro projects representing about 10% of their costs will be mostly in-kind and is not included in the project cost. C. Procurement 5.9 The TASIF will have overall administrative responsibility for Project coordination and over- sight, including carrying out the procurement of the second (TASIF/Microproject) component of the Project as well as the monitoring and review of the procurement activities carried out on its behalf by the selected NGOs in the implementation of their sponsored programs. TASIF will be responsible for ensuring that all implementing agencies undertake procurement according to procedures stated in the operational manual approved by the Bank. Procurement arrangements will be designed to increase Project sustainability through involvement of communities, NGOs, and local governments in imple- mentation and maintenance of microprojects and NGO programs; increase capacity of small private contractors; respond to the need for flexible use of procurement methods, given the differences and disparities in the institutional capacity of communities, availability of services, markets and local contractors, and familiarity of local contractors with competitive bidding in different regions. Train- ing will be provided for TASIF staff, implementing agencies and contractors involved in procurement. 5.10 The Presidential Decree establishing the TASIF has exempted it from the public procurement and disbursement regulations, present or future, and has permitted the TASIF to test and develop pro- curement guidelines based on the Credit Agreement that will be detailed in the TASIF operational manual. 5.11 A contract will be signed between the TASIF and each of the international NGOs under the first component of the Project - Scaling-up of existing poverty alleviation programs. The contractual agreement will be based on the World Bank standard form of contract for consultant services under a lump sum. The three International NGOs have been selected on a sole source basis. The NGOs will act as procurement consultants to the TASIF and will follow agreed World Bank's procurement proce- dures as described below and as set forth in the Credit Agreement utilizing the Bank's standard bid- ding documents, adapted as appropriate, and as agreed with the World Bank for the procurement of all items required to carry out their agreed programs. A similar approach will be used for the future sponsored programs.  - 30 - Summary of Procurement Procedures 5.12 Procurement of Works, Goods and Services will be in accordance with the Bank's "Guidelines for Procurement under IBRD Loans and IDA Credits" dated January 1995 (revised January and August 1996) and "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" dated August 1981. Table 5.3 below summarizes proposed pro- curement arrangements. Annex N contains the Project Procurement Plan. Procurement of Civil Works 5.13 Civil Works (US $1.96 million) will be procured as follows: (a) National Competitive Bidding (NCB). For civil works for Component II of the project under the Microprojects, TASIF will follow the agreed procedures described in the operational manu- al. All civil works contract above US$30,000 equivalent will be procured through NCB procedures up to an maximum aggregate amount of US$1.18 million. The maximum size of the microprojects will be US$ 150,000 equivalent. (b) Small Civil Works (SCW). Civil works contracts below US$30,000 equivalent up to and aggregate of US$ 0.68 million equivalent will be procured under lump-sum, fixed price contracts awarded on the basis of three quotations obtained from three qualified domestic contractors in re- sponse to a written invitation. The invitation shall include a description of the works, including basic specifications, the expected completion date, a form of contract acceptable to the Bank and relevant drawings if applicable. Since the contracts are small and widely scattered geographically, it is unlike- ly that foreign firms will be interested, therefore ICB is not considered feasible. (c) Comunity Related Procurement: In exceptional circumstances works in remote areas where contractors are not available, estimated to cost $10,000 equivalent or less per contract and $100,000 equivalent or less in aggregate shall be procured in accordance with procedures acceptable to IDA. Procurement of Goods 5.14 Goods (US$ 4.39 million). Consisting of construction materials, equipment including com- puters and office equipment, vehicles and supplies will be grouped to the extent possible and consid- ering project objectives, in package sizes that will encourage competitive bidding. The following methods of procurement will be followed: (a) International Competitive Bidding (ICB) procedures will be utilized for goods for contracts above US$250,000 equivalent for a total of about US$2.72 million (62% of total goods). These goods will consist of construction materials consisting of roof- ing tiles and timber, inter alia. (b) International Shopping (IS) procedures will be used for readily available off-the- shelf goods (including equipment) of standard specifications that are small in value estimated to cost less than US$250,000 (but more than $50,000) up to an aggregate of US$1.24 million (27% of total goods). Due to the urgency to rehabilitate the first 200 houses by the end of 1997, IS procurement procedures will be used to procure timber for roof trusses estimated at US$0.17 million necessary for their rehabilitation (under the SCF-US Housing Program-2000 houses total). ICB procedures will be used for the timber required to rehabilitate the remaining 1,800 houses. IS procedures will require quotations from at least three (3) supplier from two different eligible coun- tries.  - 31 - (c) National Shopping (NS) procedures will be used for goods estimated to cost less than US$50,000 up to an aggregate amount of US$0.39 million (5% of total goods) consisting of goods ordinarily available in the country. Quotations from three suppli- ers will be required. (d) Direct Contracting (DC) procedures will be used to procure roofing tiles from an established and experienced local NGO. The climatic conditions in Tajikistan allow for a short construction window between June and October. It is expected that at least 200 houses can be built within this period in 1997 after the project becomes effective if materials can be procured quickly. Therefore to achieve the objectives, tiles for the first 200 houses will be procured through direct contracting from an established and experience local NGO. This will allow delivery of tile required for the rehabili- tation of the first 200 houses by the end of 1997 under the SCF-US housing program. The estimated amount for this contract US$ 0.09 million. The remaining amount for tiles and incidental services required to rehabilitate the rest of the houses will be pro- cured utilizing ICB procedures. Direct contracting may also be used in special circum- stances for microprojects subject to prior review and approval by the World Bank and as stated in the Operational Manual. Preference for Domestically Manufactured Goods. 5.15 For contracts for goods to be awarded on the basis of ICB, the Borrower may, as set forth in the Credit Agreement, grant a margin of preference in the evaluation of bids up to 15% or the amount of applicable custom duties, which ever is lower, to qualified domestic manufacturers of goods. Selection Procedures for Consulting Services 5.16 Contracts for consulting services (technical assistance) as well as training required for the Project will be awarded following the World Bank Guidelines for the "Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" (August 1981). Consulting services and training in the amount of US$4.59 million and US$0.20 million respectively, will be obtained mostly through international NGO organizations for their administrative and management services regarding the sponsored programs. The three international NGOs have been selected through a sole source basis. There are several local consultants with the required skills and backgrounds; their par- ticipation in project assignments is expected to be high. Technical assistance required under the the three International NGO sponsored programs is itemized in the individual proposals in Annexes B-E. Technical assistance for TASIF will include, but not be limited to, long-term technical advisor and short term consultants, to assist the Finance and Administration Department and the Information and Monitoring Unit of TASIF. Service contracts will consist of local supervisors hired by the imple- menting agencies, for a specified term, to supervise microproject implementation. Engineering ser- vices will also be contracted to provide the technical expertise required in finalizing proposals for TASIF consideration. An independent, annual, ex-post technical and procurement review, will also be financed under the project to ensure compliance with agreed procedures.  - 32 - Table 5.3: Summary of Proposed Procurement Arrangements (US$ '000) 1/ Procurement Methods ICB NCB Other NBF Total 1. Civil Works Microprojects/rehab 1.18 0.78 1.96 (1.00) (0.67) (1.67) Goods Agriculture Items3l 0.11 0.11 .__________________ _________ (0.11) (0.11) Construction Mate- 2.72 0.60 3.32 rials 4/ (2.72) (0.60) (3.32) Office EquipmeAt_' 0.47 0.47 ________________ _______ ________ (0.47) (0.47) Other Equipment 6 0.12 0.12 ______________ ______ _______(0.12) __ _ _ _ _ _ _ _ _ _(0.12) Vehicles_/ 0.35 0.35 (0.35) (0.35) Furniture- 0.016 0.016 l _______________ _______ (0.016) (0.016) 3. Services TA/Prog.Mgt.&Admi 4.59 4.59 n. 2/ (4.59) (4.59) Training 91 0.20 0.20 l _______________ .______ (0.20) (0.20) Loan Grant Fund. L