Colombia - Community Works and Employment Project (Manos a la Obra : Proyectos Comunitarios)

Document of The World Bank Report No: 201 59-CO PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$100 million TO THE REPUBLIC OF COLOMBIA FOR COMMUNITY WORKS AND EMPLOYMENT PROJECT (MANOS A LA OBRA: PROYECTOS COMUNITARIOS) April 18, 2000 Human and Social Development Group Country Management Unit for Colombia, Ecuador, and Venezuela Latin America and the Caribbean Regional Office  CURRElNCY EQUJIVAL.FNTS (Exchalalge Rate LIfective Marclh 28, 2000) Currency Unit Colombiani Peso (COP) I Colombian Peso (COP)= US$ 0.0005099 US$ I = 1,961.00 Colombian Pesos FISCAL YEAR January I - December 31 ABBREVIATIONS AND ACRONYMS CAF Andean Development Bank (Coorporaci In Andina de Foniento) CAS Country Assistance Strategy CBO Community-Based Organization CPAR Country Procurement Review DAPRE Departamento Administralivo de la Presidencia de la Repmhlica DNP Department of National Planning EAT Empresas Asocialivas de Trabajo EG Environmental Guidebook FEC Fondo dce Compensaci6n FINDETER Financiera dce Desarrollo Territorial FIP Fondo de Inversi6n para la Paz FOS Fondo de Solidaridad GOC Government of Colombia IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding ICBF Inslilulo Colombiano de Bieneslar Familiar TCV Indice de Calicdad dle Vida IDB Inter-American Developnment Bank M&E Monitoring and Evaluation MIA Management Information Agency MIS Management Information System NCB National Competitive Bidding NCU National Coordinating Unit NGO Non-Governmental Organization NPV Net Present Value PAC Plan Anual de Caja PCD Project Concept Document RAS Red de Apoyo Social RCU Regional Coordinating Uniit RPA Regional Procurement Advisor SBD Standard Bidding Documents SENA Servicio Nacional de Aprendizqje SIE Subproject Implementinig Entity SIIF Sistema Integrado de Informaci(5n Financiera SISBEN Sistema de Seleccikn de Beneficiarios de Programas Sociales SOE Statement of Expenditures Vice President: David de Ferranti Country Manager/Director: Andres Solimano Director: Xavier E. Coll Task Team Leader/Task Manager: Vicente B. Paqueo  COLOMBIA COMMUNITY WORKS AND EMPLOYMENT PROJECT (MANOS A LA OBRA: PROYECTOS COMUNITARIOS) CONTENTS A. Project Development Objective Page 1. Project development objective 2 2. Key performance indicators 2 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 3 2. Main sector issues and Government strategy 4 3. Sector issues to be addressed by the project and strategic choices 6 C. Project Description Summary 1. Project components 7 2. Key policy and institutional reforms supported by the project 8 3. Benefits and target population 8 4. Institutional and implementation arrangements 9 D. Project Rationale 1. Project alternatives considered and reasons for rejection 12 2. Major related projects financed by the Bank and other development agencies 14 3. Lessons learned and reflected in proposed project design 15 4. Indications of borrower commitment and ownership 16 5. Value added of Bank support in this project 16 E. Summary Project Analysis 1. Economic 16 2. Financial 17 3. Technical 18 4. Institutionial 18 5. Environment 19 6. Social 20 7. Safeguard Policies 22 F. Sustainability and Risks 1. Sustainability 23 2. Critical risks 24 3. Possible controversial aspects 26  G. Main 24 Conditions E. Effectiveness Conditioni 26 2. Other 27 H. Readiness for Implementation 27 1. Compliance with Bank Policies 27 Annexes Annex 1: Project Design Summary 28 Annex 2: Project Description 32 Annex 3: Estimated Project Costs 36 Annex 4: Cost Benefit Analysis Summary, or Cost-Effectiveness Analysis Summary 37 Annex 5: Financial Summary for Revenue-Earninlg Project Entities, or Financial Summary 39 Annex 6: Procurement and Disbursement Arrangements 41 Annex 7: Project Processing Schedule 48 Annex 8: Documents in the Project File 49 Annex 9: Statement of Loanis and Credits 50 Annex 10: Country at a Glance 52 Annex 11: Summary of Key Environmental Issues and Project Environmental Management 54 Guidebook Annlex 12: Social Assessmenit and Participation 60 Anniex 13: Institutionial Organization and Flow of Funds 64 MAP(S)  COLOMBIA COMMUNITY WORKS AND EMPLOYMENT PROJECT (Manos a la Obra: Proyectos Comunitarios) Project Appraisal Document Latin America and Caribbean Region LCSHD Date: April 18, 2000 Team Leader: Vicente B. Paqueo Country Manager/Director: Andres Solimano Sector Manager/Director: Xavier E. Coll Project ID: P068762 Sector(s): SA - Social Funds & Social Assistance, SE - Labor Markets & Employment Lending Instrument: Specific Investment Loan (SIL) Theme(s): Social Protection Poverty Targeted Intervention: Y Project Financing Data i21 Loan D Credit C Grant L Guarantee LI Other (Specify) For Loans/CreditslOthers: Amount (US$m): $100.00 Proposed Terms: Fixed-Spread Loan (FSL) Grace period (years): 5 Years to maturity: 17 Commitment fee: 0.85% pa for first four years; 0.75% pa thereafter Front end fee on Bank loan: 1.00% Financing Plan: Source Local F_Loign Total Government 2.98 0.00 2.98 IBRD 99.70 0.30 100.00 IDA LOCAL CONTRIBUTION 90.00 0.00 90.00 Total: 192.68 0.30 192.98 Borrower: GOVERNMENT OF COLOMBIA Responsible agency: DAPRE (ADMINISTRATIVE DEPARTMENT OF THE PRESIDENCY) Contact Person: Manuel Salazar Tel: (57-7) 334-9763; 334-4405; 334-0031 Fax: 57-1-334-0221 Email: m I salazar@dnp.gov.co Bogota, Colombia Estimated disbursements ( Bank FY/US$M): FY 2 0 2001 2002 2003 - Annualf 3.0 17.0 35.0 45.0 I Cumulative1 3.0 20.0 55.0 100.0 Project implementation period: 3 years; 2000-2003 iExpected effectiveness date: 06/01/2000 Expected closing date: 11/30/2003  A. Project Development Objective 1. Project development objective: (see Annex 1) In order to alleviate the impact of the current economic crisis on the poor and vulierable population, the Project would finance small, labor-intensive public works to provide temporary employment to poor workers, increase the net labor income of their families, and prevent deterioration of living standards in poor communities. The project would contribute to the last goal not only through increased income from temporary work but also through improved basic services in poor communities. It is expected that about 70-100 percent of the workers hired ulider subprojects financed by the Project would come from households in the first (bottom) quintile of the household income distribution. In addition, ubprojects would be located in communities in the first and second quintiles of theQuality of Life Index orIndice de Calidadde Vida (ICV). This employment-generation project is a key part of the Government of Colombia's (GOC) evolving Red de Apoyo Social (RAS) program designed to expand and strengthen Colombia's social safety net system, enabling it to respond faster and better during times of crisis. 2. Key performance indicators: (see Annex 1) Outcome/impact indicators include: (1) percent increase in an average individual beneficiary's net annual eamings; (2) poor (bottom quintile) workers as percent of Manos a la Obra. Proyectos Comunitarios laborers; (3) poor families' utilization of infrastructure built, expanded, or rehabilitated underManos a la Obra. Proyectos Comunitarios. The target for the first impact indicator (increase in net annual earnings of an average Project beneficiary) is 58 percent. For the second indicator, the aim is to reach 100 percent poor workers as a percentage of total subproject laborers, although the actual rate would probably fall in the range of 70-1 00 percent. These impact indicators would be measured using data to be collected by surveys of households and facilities at the beginning, middle and end of the Project. Output indicators include: (I) Number of low-income workers employed in the Project, total and by gender; (2) Rate of subproject completion (hand over to the Project operator); (3) Percent of completed public works of acceptable quality; (4) Percent of subprojects located in poor areas (quintiles I and 2 of ICV (Indice de Calidad de Vida)); (5) Percent users of public works funded by the Project who are poor; (6) Leverage: ratio of total cost of subprojects relative to their public fundinig; (7) Efficiency of employment program (value of salaries received by workers/total government - 2 -  cost of project); (8) Labor intenisity of the subprojects. The most important output indicators that the Project would use to assess its bottom-line performance are: (1) the number of low-income workers employed and (2) the rate of project completion. The targets for these performance measures are the employment of 150,000 workers and 100 percent completion rate of subprojects, respectively. These indicators would be measured at least aniually. Informationi regarding the performance and impact of the Project would be drawn from its monitoring system, external audits, and external impact evaluation based primarily on surveys of households and facilities. For more details, seeAnnex 1: Project Design Summary and corresponding attachment on monitoring and evaluation. B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: 17107-CO Date of latest CAS discussion: 11/18/99 The CAS Progress Report dated November 1, 1999 states that "in order to alleviate the impact of the current economic crisis on the poor, the Government has identified the segments of the population that have been hit the hardest by the crisis, including the unemployed poor, young entrants into the labor market, female heads of households, children, the elderly, and those displaced by the ongoing internal conflict; these people are mostly in the poorest two deciles of the population. In response to the problems of these vulnerable groups, the Government is now designing, together with the Bank and the IDB, programs to provide basic social services targeted to this population." The above CAS report further states that the Bank is "undertaking operational and analytical work to support the Government's effort to ameliorate the social impact of the currenit economic crisis on the poor... [It] is preparing two lending operations to support immediate strengtheniing and expansion of the social safety net framework (e.g. protection of the vulnerable by creating jobs and training, low-income housing, and providing safe water and sanitation)." 2. Main sector issues and Government strategy: Colombia is currently experiencing one of the most difficult periods of its recent history, and its most severe economic crisis in over sixty years. Economic activity is expected to have declined by 4.5 percent in 1999 and the fiscal deficit to have surpassed 6 percent of GDP in 1999. While the recession has negatively affected almost all productive sectors, the impact has been particularly severe in construction and manufacturing, whicil contracted by 24 percent and 1 7 percent respectively between the second quarters of 1998 and 1999. The economic crisis has affected the living standards of Colombians, especially the poor, and raises important issues for the social sectors. -3 -  Main sector issues High unemployment rate. The economic crisis has led to an unemployment rate of 20 percent in urban areas in September 1999. This rate is the highest in Colombia's recorded history and far above its historical rate of 1 I percent. Unemployment has affected workers across the board, but some groups are more severely affected that others. For example, unemployment is higher among women than men (23.2 percent vs. 16.4 percent). It is highest for those in the 15-19 year age-group (36.7 percent) and descends steeply and continuously with age, reaching 8.7 percent for those 60-69 years of age. In terms of educational attainment, workers who have not completed secondary school suffer the highest rates (19.1 percent) of unemployment, while those without any education whatsoever and those with completed college experience the lowest rates (1 2.4 percent and 0.9 percent, respectively). Unemployment is most severe in urban areas. In terms of geographic distribution, more than 80 percent of the unemployed are located in 78 municipalities, each with a population of 100,000 or more. Increased poverty and worsening income distribution. While the economic crisis affects people in all socioeconomic strata, it has had a particularly devastating impact on those living below or close to the poverty line. This group is in a particularly precarious situation due to its limited human capital and inability to compete in the labor market during times of recession. In addition, since people in this group possess few physical assets and financial savings, the loss of a job may lead to the disappearance of their sole source of income. Finally, the lack of unemployment insurance makes the poor particularly vulierable to the economic crisis. The reduction in income of the economically vulnerable families has led to a dramatic increase il poverty rate and worsening of income distribution. In this regard, data indicate that the recession has wiped out all of the gains of the first part of the present decade in terms of poverty reduction. During the second half of this decade, extreme poverty-defined in terms of minimum food intake-in the urban areas has increased by more than 4 percentage poinlts, reaching 1 8.2 percent in the first quarter of 1999. During the same period, poverty (measured by domestic standards) increased by seven points, reaching a level of 60.4 percent. With the high unemployment rate, income inequality rose dramatically from 1997 to 1999. The relative earnings of the richest quintile with respect to the poorest went from 13.6 times in 1995 to 21.8 times in 1998; the Gini coefficient rose correspondingly from 0.50 to 0.55. While the income of the fifth quintile grew by more than 50 percent between 1990 and 1998, the poorest quintile suffered a net loss of 20 percent during the same period. Overall, as a result of the current economic recession, the welfare level of the poorest quintile is substantially below that enjoyed by the same group two decades ago. Decline in living standards and human/social capital investments In the short-term, the income reduction experienced by Colombia's poor has directly affected their nutrition, access to healtlh services and education. Recent surveys in urban areas found that Colombians are reducing their food intake at all income levels, especially among the poorest quintile. More than half (52 percent) of the households in this quintile have reduced expenditure on food items. In addition, -4 -  preliminary results of a World Bank study in Cali show that 61 percent of the households of the bottom quintile have suffered from hunger during the past year. Furthermore, the rise in unemployment has led to a huge reduction in the number of workers affiliated with the contributive health insuranice system. The decline appears to be more than 25 percent in the last year alone. In the medium and longer term, income reduction may negatively affect human capital, perpetuating the vicious cycle of poverty. Students who withdraw from school to contribute to family income, for example, are unlikely to return to school. Their educational attainment is thus reduced and their human capital seriously endangered. In the case of the unemployed, long periods outside the labor market reduce future employability and also contribute to the deterioration of human capital. Finally, the high unemployment rate, the increase in poverty and the worsening of incoile distribution combined can seriously damage the country's social capital. As highlighted in the recent Bank report, Managing the Social Dimension of Crises. Good Practices in Social Policy, econiomic crises could provoke "breakdowns in family and social structures that can lead to permanenet declines in social cohesion and rises in family and communal violence". In Colombia, where violence and social cohesion are already serious issues, this effect is of great concern. Budgetary reduction and adequacy of social spending. While the need for alleviating poverty and protecting human and social capital is expanding and has become more urgent, the budget in contrast has become tighter due to the fiscal deficit problem. In this regard, in its effort to implement the needed fiscal adjustment measures, GOC has committed itself to a 7 percent real reduction in its budget for 2000 as compared with its 1999 budget. Reduction in public spending could have serious social consequences and could hurt vulnerable groups, depending on how the budget is adjusted. In this regard, there is concern about the budget of the social sector programs in view of the fiscal adjustments. lImprovements in health, education and social assistance programs would be difficult to bring about without adequate funding. During the 1990's, public expenditure on the social sectors as a proportion of GDP has more than doubled, increasing from 3.8 percent of GDP in 1990 to a projected 7.7 percent for 1999. (As defined here, public social expenditures comprise expenditures on health, education, the Instituto Colombiano de Bienestar Familiar(ICBF), and the national training institute (SENA); they do not include expenditures on pensions.) Despite this dramatic increase, however, the level of public social expenditure in Colombia remains low by Latin American standards. Government strategy. To deal with the economic crisis and mitigate its social consequences, GOC has adopted a strategy that has two main parts. First, the Government will implement fiscal adjustments and economic reforms to achieve stability and sustainable growth. This objective is fundamental to poverty reduction and the long-term improvement of living standards of the poor. It is also critical to the GOC's ability to strengthen, expand and maintain an adequate social safety net in the long run. Second, acknowledging the urgency of alleviating the social consequences of the economic crisis and fiscal adjustments, GOC has established the aforementionedRed de -5 -  Apoyo Social (RAS) to cushion their impact on the welfare of the poor and vulnerable population. The RAS complements the objectives and social policies established in the National Development Plan 1999-2002, which seeks economic and social changes that would promote the establishment of peace in Colombia. The RAS would have three major elements: (i) a community works program called Manos a la Obra, which aims to provide temporary employment to poor, unemployed, unskilled workers; (ii) a conditional cash subsidy program for poor families that would give cash assistance to the poor provided that they keep their children in school and provide them with basic preventive health care; and (iii) a training/apprenticeship program for young adults based on competitive bidding among private firms. To implement the RAS, GOC is determined to spend an additional 0.3 percent of GDP per year (about US$250-$300 million aninually), over and above current public social expenditures, to be targeted to the provision of social safety net programs during the next three years (2000-2002). The Bank, IDB, and CAF have pledged to support the program through a series of lending operations and analytical studies. In addition to support for this employment-generation project, the Bank's strategy includes support for a future conditional income transfer project and analytical work to support protection of the most vulnerable groups during this crisis. Bank support is expected to be complemented by an IDB loan of US$250.0 million, prepared in close collaboration with the Bank, to support employment generation, welfare assistance initiatives, and a pilot training program for young adults. 3. Sector issues to be addressed by the project and strategic choices: Alleviation of unemployment and its effects on the poor. The proposed Project would conitribute to alleviation of the social and economic consequences of unemployment on poor families through the workfare program, Manos a la Obra: Proyectos Comunitarios. This iitiative, which is modeled after Argentina's successful Trabajar program would help families obtain additional income in a way that would encourage their work ethic and promote self-worth. GOC has clearly indicated that it values highly the impact of productive employment in restoriig the self-worth of the unemployed and in diminishing violence and other anti-social behavior caused by unemployment. Temporary employment generation is justified, considering that the factors underlying the current high unemployment rate are unlikely to be resolved in the short run. Colombian workers are caught between the largest post-depression recession in the country's history and a dramatically expandinig workforce of secondary wage earners and migrants being driven from rural areas by increasing violence. In addition, there are potential distortions in the labor market that appear difficult to eliminate. Minimum wages were binding in 1998 and, due to serious over-prediction of inflation, were raised by almost 9.2 percent in real terms in 1999. Though the unionized sector is small, the uncertain and violent climate of many Colombian cities gives the ulliolns ilfluence amounting to veto power over any downward revision in wages. A reform attempting a 9 percentage point reduction in non-wage benefits consisting of contributions to the inefficient programs of national training and social welfare was stymied in 1998 and seems unlikely in the near future. In either case, at an own-wage elasticity of 0.4, real labor costs would have to fall at - 6 -  least 30 percent to return the country's historic rate of unemployment, a scenario that seems unlikely in the present situation. In fact, a recent decision by the Constitutional Court obligated GOC to raise the minimum wage by at least as much as the previous year's inflation. This makes it virtually impossible to decrease the real minimum wage in the short term, regardless of events in the labor market. This has meant that with a GOC decree to increase the minimum wage by 10 percent, and with the 1999 inflationi of 9.2 percent, the real minimum wage has increased by 0.8 percent. It should be stressed, however, that the employment-generation project does not pretend to provide long-term solutions to the unemployment problem; rather, it would help the poor weather the crisis until the economy recovers. For a medium- and long-term solution to unemployment, the GOC needs to implement prudent macroeconomic policy and undertake financial and other reforms such as those outlined in the CAS, the Financial Sector Adjustment Loan, and the IMF Letter of Intent of 1999. GOC would also have to address minimum wage determination and other labor market issues. Other strategic choices considered (a) Financing a diverse set of existing programs: It was considered initially to finance a variety of old and new projects, which included public infrastructure projects to generate employment, initiatives for micro, small and medium scale enterprises, micro-credit, soup kitchens, expansioni of ICBF program for 0-2 year olds, education loans, and social programs for senior citizens. This proposal was rejected because it was unfocused and was deemed too complicated, risky and time consuming to prepare. (b) Sequencing: The option was considered to include both the workfare and conditional subsidy to poor famnilies in a single loan operation, in order to assist not only able-bodied poor workers, but also families that could not take advantage of public employment programs (e.g., those headed by mothers, the elderly). This option was rejected on the grounds that Project implementation would be too complicated, which would hilder the ability of GOC to respond quickly to the urgent needs of the unemployed poor. The choice was made instead to proceed first with the employment-generation project, which could be prepared quickly, while concurrently preparing a conditional subsidy project, which would require more time in preparation. (c) Urban focus: While it was recognized that many poor people reside in rural areas, it was decided that the Project should focus on urban areas, because the unemployed poor are concentrated there. C. Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): The project consists of three components, as shown in the table below. The first component, Manos a la Obra Subprojects, would finance the salaries of unskilled workers hired under small - 7 -  community works projects and, for some municipalities, a portion of the materials needed for constructioni. Of the amount allocated to this component, up to US$15 million could be used to finanice up to 40 percent of the materials requirements of subprojects eligible for material financing. Eligibility for material financing is limited to very poor municipalities that cannot afford to pay for the required materials. All subprojects would be approved in accordance with the procedures and criteria established in the Operations Manual. The Project Management componenit would finance the operational costs of the temporary National Coordinating Unit (NCU). Finally, the Monitoring and Evaluation component would finance the external review and evaluation of the performance and impact of the project. 1. Manos a la Obra: Proyectos 180.00 93.3 90.00 90.0 Comunitarios Subprojects* 2. Project Management 8.62 4.5 5.74 5.7 3. Monitoring and Evaluation 0.79 0.4 0.69 0.7 4. Unallocated 2.57 1.3 2.57 2.6 Total Project Costs 191.98 99.5 99.00 99.0 Front-end fee 1.00 0.5 1.00 1.0 Total Financing Required 192.98 100.0 100.00 100.0 * Manos a la Obra: Proyectos Comnunitarios Sub-Projects comprises of Materials (US$15 million) and Salaries subsidies (US$75 miilion). 2. Key policy and institutional reforms supported by the project: The proposed Project seeks to establish the knowledge and institutional capacity necessary to establish a safety net program with efficient institutional arrangements for mitigating the negative effects of widespread unemployment in the poorest sector of society. Toward this end, the Project would support the development of appropriate rules and guidelines governing public works employment-generationi programs. It would also establish a new methodology for geographic targeting that would be used to rank localities by their socioeconomic indicators and as an input for a new system of choosing, evaluating and monitoring public works projects for poor communities. The new methodology, the ICV (Indice de Calidad de Vida), is based on census data, which pennits its disaggregation to small geographical units, including municipalities and neighborhoods within municipalities. According to the calculations of DNPMisi6n Social, the ICV is a very good predictor of household consumption, with a correlation of 0.936. 3. Benefits and target population: The Project would generate several benefits. First, it would provide temporary employment for unskilled workers in the bottom income quintile-and income to their families. Second, by employing workers in socially productive activities, the Project could help restore the self-esteem of unemployed workers, reduce their frustration, and prevent violence. Finally, the public works financed by the Project would help improve basic services to poor communities and offer the opportunity to build their social capital. -8 -  Beneficiaries and targeting mechanism. The benefits of this Project would be directed towards the bottom quintile of the population. To implement this objective, subproject employment would be limited to workers in SISBEN categories I and 2 (i.e., the bottom income quintile). Furthermore, the public works to be financed by the Project would be located in communities in the first and second quintiles of the ICV (a new methodology for classifying neighborhoods within municipalities according to socio-economic characteristics). This methodology is more accurate thani the current approach based on Servicios Pzulicos Strata. In order to maximize the number of workers benefited and to discourage employment of better-off workers, the weekly subsidy per worker would be limited to 70 percent of normal job hours per week. Employment impact. The employment effect of the Project, both direct and indirect (multiplier) effects, have been calculated. The indirect employment effects consist of the additional demand for labor generated by the increase in the consumption expenditures of workers as a result of wages earned from subprojects. The number of full-year jobs with six hours of work per day is estimated at 90,000, assuming that the cost of materials is fully financed by subproject proponents. This implies a three percentage-point reduction in the unemployment rate of the bottom income quintile (from 18.1 percent to about 15.1 percent). Considering the estimated amount available for workers' salaries (US$90 million) and factoring in possible indirect Keynesian multiplier effects (assuming multipliers between 2.0-4.0) the workfare program could generate approximately 105,000-154,000 jobs. It is possible that municipalities might simply substituteManos a la Obra: Proyectos Comunitarios subprojects for others in their pipeline that would have been undertaken without the Project subsidy. While additionality cannot be guaranteed by the program, the strong political support for employment-generation projects at both municipal and national level suggests that the subprojects would be incremental to existing investment plans. This would be carefully monitored durinig implementation. 4. Institutional and implementation arrangements: Overall Project implementation responsibility. The Administrative Department under the Office of the President, through the Peace Investment Fund (DAPRE-FIP), would be responsible for implementation of Manos a la Obra: Proyectos Comunitarios and other Red de Apoyo Social (RAS) projects. Day-to-day operations would be handled by a National Coordinating Unit (NCU), to be set up under DAPRE-FIP with full-time staff, which would operate with relative autonomy. The NCU would be responsible for ensuring implementation of project activities according to agreed criteria and guidelines and for loan administration, including procurement, disbursement and accounting. DNP would be responsible for monitoring and technical review of the Project's progress. As DAPRE-FIP would be responsible for other programs with different objectives, agenda, and governing procedures, it has been agreed that the RAS would be maintained operationally and financially separate from the other DAPRE-FIP programs. To this end, the RAS would -9-  have its owii Bank accounts and accounting system. Moreover, a Steering Committee, which would comprise highi-level representatives of stakeholders such as the Departments of Planning, Education and Health, as well as ICBF and SENA, would be established to ensure that RAS operations are technically sound and well coordinated. The principal responsibilities of the Committee are to provide technical orientation, coordination of the various RAS projects, and supervision of their performance. Most aspects of the Project would be carried out through outsourcing arrangements with several national and sub-national entities. These include: (i)FINDETER, a public development bank that provides financing to subnational entities, for subproject evaluation and selection; (ii) NGOs and workers' cooperatives (Empresas Asociativas de Trabajo or EAT s) acting as subproject implementing entities for subprojects and selecting/paying their workers; and (iii) a Management Information System (MIS) company for keeping track of subprojects and workers. Municipal and departmental governments, NGOs, EATs and public service companies are eligible to propose subprojects. In the case of subprojects proposed by municipalities, the municipality would choose an NGO or EAT to act as a Subproject Implementing Entity (a measure intended to reduce the risk of political manipulation and corruption). Employment and payment of workers. An output-based contract would be signed for each subproject between the NCU and the Subproject Implementing Entity (SIE). Under the contract, the SIE would be responsible for satisfactory completion of subprojects and would receive fees for mnanagement services. The SIE would contract with local contractors, who would select and pay tle workers according to Colombian labor laws. Only workers with "cedula" (national identity number), required by law of persons 18 years old and over, could be hired. (The Governmenit will facilitate rapid acquisition of valid identification cards, when necessary). No employer-employee relationship between the Project and the workers will be established either explicitly or implicitly. Subproject Implementing Entities would receive disbursements for salaries of workers under approved subprojects and, where approved, a portion of the cost of materials. Guidelines and Manual of Operations. The functions and responsibilities of the above project participants would be governed by the Operations Manual (Project File), which includes the procedures, guidelines, criteria, staffing and assignment of responsibilities regarding subproject identification, preparation, selection, supervision, and reporting-as well as procurement and disbursement. The experience of the Bank in similar programs in other countries (e.g., Argentina) has been used to improve such tasks as program definition, scope, administrative systems, responsibilities, and monitoring. Submission of the final draft of the Operations Manual satisfactory to the Bank is a condition of effectiveness. Apart from various measures aimed at ensurinig active beneficiary participation in the choice of subprojects and workers, several evaluation and screening systems would be established to ensure that the works would be technically sound and that they would comply with all of the applicable environmental, operational and other criteria. Professionals will evaluate all subprojects according to the methodology specified in the Operations Manual. The - 10-  assessment would include economic, technical, financial, institutional, environmental and social aspects. Guidelines on information required to be submitted with proposals are detailed in the Operations Manual. A list of pre-qualified NGOs would be established by the NCU based on agreed criteria to be included in the Operations Manual. The list will be updated regularly. Subproject funding would require an agreement among DAPRE-FIP, the proponent and its selected SIE in accordance with the Operations Manual. All agreements would adhere to a model (odelo de Convenio) acceptable to the Bank, which will be incorporated in the Operations Manual. Financial management. The NCU will be responsible for maintaining project management arrangements acceptable to the Bank. The NCU will initially follow SOE procedures until it is ready to apply LACI procedures. The Operations Manual would concretely specify internal controls over project transactions, including control procedures for project flow of funds. In addition, the Manual would include specific administrative and accounting procedures to assure sufficient control and accurate information. The Government has also agreed to a time-bound action plan designed to prepare the NCU for full LACI compliance. The first part of the action plan, which establish the capacity to ensure that Project funds can be accounted for in a timely maner and that they will be used in accordance with the purposes of the loan, would be completed as a condition of effectiveness. Accounting, financial reporting and auditing arrangements. The NCU under DAPRE-FIP will be responsible for the management of project funds, including national counterpart funds, and for keeping track of local counterpart resources. In order to ensure provision of accurate and timely information about the use of project funds, the NCU would install an integrated financial system acceptable to the Bank. This system would include planning, internal controls, accounting, and financial reporting. The Project Chart of Accounts would be structured accordingly. During each year, the NCU shall prepare and submit to the Bank quarterly Project Management Reports (PMRs) linking project expenditures to key monitoring indicators of activities carried out during the quarter. The formats and basis to produce those reports would be in accordance with the Bank's Financial Management Manual and LACI procedures. In addition to PMRs, external audits of project financial statements will be required on an annual basis. An independenit private sector firm acceptable to the Bank will carry out the auditing of project accounts. A specific shortlist of audit firns and Terms of Reference for audits (TOR) would be prepared by the NCU and a no-objection letter would be issued by the Bank. The Terns of Reference (TOR) for audits have been prepared; they would be modified, however, to include evaluation of NGO/EAT performance based on specific audit procedures. The revised TOR will be included in the final version of the Operations Manual. - 11 -  D. Project Rationale l. Project alternatives considered and reasons for rejection: Targeting. A self-targeting mechanism (applying wage rates below market minimum wage) was considered. However, Colombia's minimum wage law does not permit this. Instead, the Project would use the SISBEN, a proxy means-testing methodology developed and in use in Colombia that is considered the best in Latin America, to identify the eligible population of very poor families. The marginal cost to the Projectof using SISBEN is expected to be relatively small, as the system is already in use nationally for the identification of beneficiaries of health insurance and other social assistance programs. (Some improvements and updating of SISBEN would need to be made; such improvements would also help improve targeting under existing programs and would be required for the conditional-transfer program under preparation.) Use of Public Services Classification for identification of poor communities This method, consisting of the socioeconomic classification of municipalities based on data used by public utilities companies in establishing their tariff structure stratification, was rejected as an inadequate method of identifying beneficiary communities. Instead, the Project will use a new classification system based on the Quality of Life Index (Indice de Calidad de Vida (ICV)), a more sensitive index that is based on more precise variables. Financing of construction of private houses under the project. This was considered but was rejected because such subprojects would reduce the Project's employment impact and benefits to the poor. Instead, financing of housing subprojects would be limited to pilot initiatives that would test innovative approaches to low-income housing. No more than 5% of total cost (including both loan and municipal allocations) is to be used for housing subprojects. Financing of subproject materials costs. It was proposed that loan proceeds be used exclusively for workers' salaries, in order to maximize the employment impact of the loan and simplify project design and implementation. This alternative was rejected, because of concernis that very poor municipalities may not be able to provide counterpart funding for the materials and might therefore be excluded from participation in the Project. As a compromise, it was decided that a maximum of 15% of the loan amount could be made available for the financing of materials for municipalities identified as having inadequate resources. Institutional arrangements. It was considered desirable to use existing organizations to manage the Project. Unfortunately, there were serious concerns about the two existing organizations that might logically undertake project implementation. The first, theRed de Solidaridad Social was rejected because it has shown inadequate strategic and programmatic focus, a lack of capacity to guarantee subproject quality and retain qualified personnel, and a high vulnerability to political pressure. The second institution,FINDETER, has a great deal of experience and contacts with municipal authorities and other sub-national entities as well as a decentralized structure giving it a presence in many target areas. At present, however, the Government's strategic goal is to develop FINDETER's role as a second-tier bank, and giving it responsibility as implementing agency of this project was considered to run counter to that goal. - 12-  In order to benefit from FINDETER's institutional capacity, however, it was agreed that it would assist in implementationi by carrying out the evaluation of subprojects according to agreed-upon technical criteria and providing technical assistance to teams assisting in the preparation of subprojects. Creation of a new autonomous unit as implementing agency. In the absence of existing institutions to undertake implementations, a second option was to create a new unit such as FOREC, the agency especially created to coordinate execution of the earthquake reconstruction project. In view of the urgency of initiating project implementation, this option was rejected because it would require legislation that would require excessive time to obtain. Establishment of a project coordination unit under existing agencies. Having decided onl the alternative to establish a temporary project coordinating unit (NCU), several options were considered regarding the location of the unit. The first option was to establish the NCU under DNP, which was considered relatively well-insulated from political manipulation. It was rejected, however, because of concern that the role of DNP as a national planning entity would be compromised by involvement in project implementation and that it would be drawn into an area beyond its expertise. The alternative chosen was to place the NCU under the Investment for Peace Fund (Fondo de la Inversi6n para la Paz (FIP)), recently established under the Administrative Department of the Office of the President (DAPRE). Under this arrangemenit, the Red de Apoyo Social, of which the Project is an important part, would be formally linked to the Government's comprehensive development strategy called Plan Colombia. With this linkage, the Governmenit wishes to emphasize Plan Colombids character as an integrated and balanced strategy aimed not only at suppressing drug traffic and reducing related violence, but also at alleviating the negative impact of the economic crisis on the poor and vulnerable population. Additionally, the Government hopes to attract financial and political support for Plan Colombia from donor countries. The above proposal has several advantages. First, it would ensure strong support at the highest level of Government. Second, it would allow easier and faster implemenitation of Manos a la Obra: Proyectos Comunitarios since the FIP is a system of accounts governed by special procurement regulations that could be used by the Project, provided their actual specific application is acceptable to the Bank. The decision to locate project management responsibility under DAPRE-FIP was taken after thorough discussion with the Government and Bank management of the risks involved (see Section F (Sustainability and Risks)). - 13-  2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). Latest Supervision Sector issue (Prjt fP8R} Ratings V_________ : ;gi :iE : E (Bank-financed projects onIyK Implementation Development Bank-financed Progress (IP) Objective (DO) - Integrated youth development Youth Development (Ln. S S 2920-CO) - Poverty reduction and peace Magdalena Medio (Ln. S S 4371-CO,) - Development in areas of conflict, Peasant Enterprises Zones S S particularly in rural areas Development (Ln. 4364-CO) - Decentralized education project Antioquia Education (Ln. S S 4243-CO) - Municipal managed education project Pasto Education (Ln. 4242-CO) S S - Rural development Rural Development Investment S S Program (Ln.3250-CO) - Reconstruction of social and Earthquake Recovery (Ln. economic infrastructure in rural areas 7009-CO, approved 03/21/2000) - Rural development, education Rural Education (Ln.7012-CO, approved 04/11/2000) - Transfer of resources to decentralized Decentralized Human Capital public entities for investment in human Development (P068762, under development preparation) Other development agencies Inter-American Development Bank - Poverty Social Solidarity Network (889/OC) - Poverty Pacific Coast Sustainable Development (926/SF) - Violence Peaceful Coexistence and Citizens' Security (1085-1088/OC) USAID - Rural poverty/ Drug interdiction A project focused on "displaced persons" is being considered. P/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) - 14-  3. Lessons learned and reflected in the project design: There is extensive experience with labor-intensive public works programs aimed at generating employment. The lessons from this experience are succinctly summarized in the aforementioned IBRD paper, "Managing the Social Dimensions of the Crises: Good Practices in Social Policy." These lessons, which are reflected in the design of the Project and the choice of workfare as an instrument for strengthening Colombia's social safety net, are: (i) Workfare provides incentives to work and maintains the positive features of workforce participation, thereby contributing to social cohesion. (ii) Workfare programs can be considered cost-effective only if the public works provide substantial benefits in themselves, in addition to serving as a self-targeting mechaniism for distributing cash in the form of wages (or food, in food-for-works programs). It is possible to target the works perforned so that the assets created benefit the poor in the long run. (iii) Although it is possible to achieve good rates of return with labor-intensive methods, the labor share is likely to be no more than 40-60 percent in a large portfolio of sound projects. (iv) The higher the share of unskilled labor in total costs, the greater will be the contribution to current benefits. (v) If the wage is set at a low level (at or below the effective market wage for heavy, unskilled labor), only the poor will choose to work on the jobs, and errors of inclusion will tend to be low. Additional lessons are further reflected in the decision to keep the objective of the Project limited in scope and to consider under a separate project complementary approaches, such as conditionial income transfers, to both broaden and strengthen Colombia's social safety net. These lessons are: (vi) Labor-intensive public works programs have rarely employed a very large fraction of the poor. For example, the Maharashtra Employment Guarantee scheme in the 1 980s, widely regarded as one of the most successful and relatively large public works scheme, did not cover more that 18 percent of households in the bottom income quintile. (vii) Workfare programs do not help all groups: they are not suitable instruments to reach the elderly or children, they usually do not reach the working poor, for whom the opportunity costs of participating are higher, and explicit design features need to be incorporated to achieve substantial rates of participation by women. The above lessons are consistent with the observations of the Colombian teamn that went to Argentinia to study thiat country's Trabajar program during project preparation. -15-  4. Indications of borrower commitment and ownership: The borrower's commitment has been demonstrated by the diligence and care shown by the Government in preparing the Project, and its commitment to ensure that it will have the necessary budgetary authority to make payments without delay. In addition, the President has made a personal commitment to ensure that the project has the support needed for implementation by placing project coordination under the Office of the President. 5. Value added of Bank support in this project: Bank support adds value in several areas. First, the Government applied many good design features into the Project, building on the Bank's international experience and lessons learned from workfare projects worldwide, including Trabajar. As mentioned, the Government sent a study tour, arranged by the Bank, to Argentina to learn from Trabajar. Second, the Bank provided technical expertise that was useful in the discussion of the various alternatives considered above. Finally, Bank's support for the project during implementation would assist the Government in ensuring that the technical criteria are applied appropriately and that any adjustments made to project design take into account the most recent experience in similar projects. E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (see Annex 4): *0 Cost benefit NPV=USS million; ERR = % (see Annex 4) O Cost effectiveness O Other (specify) A. Requirement of cost benefit and ERR: not applicable. B. The conclusions of the cost-effectiveness analysis (see Project File) can be summarized as follows: (i) It has been shown that a workfare project can be cost-effective if the benefit to the poor (in terms of current income) per unit cost of making the transfer falls within the range observed for cash transfers, food assistance and other social welfare programs in various countries (Ravallion, 1998). The degree of cost-effectiveness depends on the assumption one makes regarding future returns to assets created by the Project. In Argentina's Trabajar, for example, the increase in incomes of the poor relative to total project cost is about 0.40, assuming that the subprojects' benefits are sufficient to cover their cost and that there is no explicit attempt to target poor areas. Using this estimate, Trabajarlooks attractive compared to other programs. For cash transfer programs in Eastern Europe, for instance, the proportion of the public transfer going to the poor ranges from 19 to 58 percent. In a number of developing countries, the total transfer to the poor as a proportion of total cost under targeted food programs ranges from 19 to 93 percent. Trabajar's benefit/cost ratio, however, comes down to 0.20 when only current income benefits are included. In this regard, it can be argued that 0.20 is the more relevant - 16-  estimate since families in dire need of current income would tend to discount future returns heavily. In this case, workfare in general would appear to be only marginally cost-effective. (ii) Manos a la Obra. Proyectos Comunitarios could also be cost-effective in the above sense. Its level of cost-effectiveness could even be deemed largely comparable to the cash transfer and food programs, if one considers that in Colombia the cost of materials for municipal government subprojects would largely come from earmarked budgets that would be used for public works even without the Project. Its cost-effectiveness falls dramatically, however, if the Project pays for payroll "taxes" for workers' non-wage fringe benefits, which they are unlikely to enjoy (at least, not in the short-run). (iii) The validity of assessing a workfare program solely on the basis of the current income it provides poor families has been questioned for its narrow definition of benefits. For example, it does not include the future returns to the assets being created by the program. In addition, the methodology does not take into account the value that society puts on employmentper se and its positive effects on a person's self-worth and standing as a peaceful and productive citizen. Furthermore, there is a disconnect between the above methodology and the objective of supporting productive purposes. This implies that project evaluation should focus primarily on the benefits arising from productive activities and that transfers are justifiable only to the extent that they improve productivity through improvements in human, social, and physical capital. (iv) As a supplement to the above analysis, the mission examined international evidence regarding the cost of creating a temporary job under a workfare program -- normalized by GDP per person as a rough indicator of country productivity. The conclusion is that if the Project does not finance non-wage benefits, it would be within international experience in ten-ns of this cost indicator (see Annex 4 and Project File). In light of the above conclusions, the Project does not finance workers' fringe benefits. 2. Financial (see Annex 5): NPV=US$ million; FRR= % (see Annex 4) (1) NPV and FRR analyses: not applicable (2) Availability of Municipal Co-financing Funds. Investigation revealed that, in the aggregate, eligible proponents would be able to provide sufficient counterpart funds to finance material requirements of subprojects. This capacity is unevenly distributed, however, and small municipalities do not appear to have the resources to participate in the Project. Since the large and medium-sized municipalities have a concentration of poor unemployed, it is appropriate for thie majority of project resources to be channeled to subprojects located in them. In order to ensure that poor in less dense areas are not excluded, however, up to 15% of project funds could be targeted to the provision of materials in the smallest and poorest municipalities. It is essential to note that estimates of financial capacity refer only to municipal governments; they do not refer to local public utilities (empresaspziblicas descentralizadas), which may qualify as proponents, nor do they include in-kind contributions of materials by project proponents. - 17-  Anecdotal evidence suggests that actual cash disbursements by municipalities often constitute less than half of total investment contributions, suggesting that provision of materials for subprojects will not constitute a problem in nearly all cases. (3) Financial sustainability and selection of subprojects. The criteria for eligibility and the process of evaluation and selection of subproject proposals would include financial analysis for certain types of subprojects to ensure financial sustainability of operations and maintenance of subprojects (see Annex 2). Fiscal Impact: The fiscal impact of the project is manageable: (I) Counterpart funds for the Project would constitute less than 1.4% of the total projected capital expenditures of the local non-financial public sector (which includes the departmental and municipal governments, and local non-financial enterprises comprising water, telephone and electricity companies). (2) The annual amount needed for recurrent expenditures arising from the subprojects would be about 2.0 percent of subproject investment (Annex 5). Subproject appraisals would include verification that these recurrent costs will be manageable by the responsible entities. 3. Technical: All subprojects will be evaluated byFINDETER before being submitted to DAPRE-FIP for approval according to processes and guidelines acceptable to the Bank. These processes and guidelines are detailed in the project's Operations Manual and are summarized in Annex 2. Trained professionals on FINDETER staff (regional level) would evaluate each subproject by usinig a methodology that covers economic, technical, financial, institutional, environmental, and social aspects of the subproject and incorporates checks on costs, using a data base containing information on unit costs for similar types of subprojects. Appraisal formats and guides were developed based on the experience of the Argentina's Trabajar program, various social projects currently being implemented in Colombia (Red de Solidaridad Social, Banco de Proyectos, Sistema Nacional de Cofinanciaci6n) and the previous experience of FINDETER. Each trained FINDETER appraiser is expected to be able to evaluate between 20 and 40 subprojects per month. Details on the subproject evaluation methodology are contained in the Operations Manual. An inspector (interventor) would verify Government-owned subprojects and ensure compliance with Colombia's civil works regulations. In addition, the Project would contract firms to supervise all subprojects at least three times during their execution. 4. Institutional: 4.1 Executing agencies: The assessment of the various alternative institutional arrangements is summarized in Section D, Project Rationale. The general conclusion is that the institutional structure and associated - 18-  arrangements are adequate to implement the Project. Moreover, GOC ownership of the Project and continued Presidential support are assured under these arrangements. 4.2 Project management: see Section D and Annex 2 4.3 Procurement issues: There are no significant procurement issues. Nevertheless, a procurement plan has been agreed to ensure smooth operations and compliance with Bank procurement guidelines (see Annex 6). 4.4 Financial management issues: A financial management assessment was conducted by a Bank financial management specialist. Based on his assessment, the Operations Manual has been improved to ensure control, accountability and transparency in the use of Project funds. A time-bound action plan has been agreed with the Government to address remaining issues. Completion of several actions would be a conditioni of effectiveness; completion of the action plan would make ensure LACI eligibility. (see Section D) 5. Environmental: Environmental Category: B 5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis. During project preparation, Bank environmental specialists and consultants worked closely with the borrower to ensure that the Project's design is consistent with Bank environmental guidelines and policies. The borrower has completed an Environmental Guidebook (EG), which identifies key environimental issues and sets in place a process to ensure compliance with Colombian laws and mitigation of potential environmental impacts. The Borrower has also included detailed environimilental criteria in the two key subproject documents: theManual de Evaluaci6n Ex-Ante de Proyectos and the Manual de Preparaci6n y Presentaci6n de Proyectos Manos a la Obra: Proyectos Comunitarios. A summary of the EG can be found in Annex I 1. Overall, it is unlikely that the Project will have significantly negative environmental impact, considering that it will support only small community works widely dispersed throughout the country. On the contrary, the Project could have a positive environmental impact, as it includes among eligible projects works to improve community sanitation, parks, and the urban environment. Nevertheless, the project would undertake several measures to reduce certain (albeit, small) risks. These measures, which are discussed in Annex 11, include: (a) a list of subprojects that are ineligible for funding for environmental reasons; (b) establishment of an environmentally friendly evaluation, supervision, and monitoring of eligible subprojects; (c) training of evaluators and supervisors; (d) hiring of an environmental consultant at the NCU; and (e) allocation of Project funds to cover the cost of the above-mentioned training and consultant as well as of disseminating environmental guidelines to relevant Project participants. 5.2 What are the main features of the EMP and are they adequate? - 19-  The borrower has completed an Environmental Guidebook (EG), which identifies key enviro-nmenital issues and sets in place a process to ensure compliance with Colombian laws along with mitigatilg potential environmental impacts. The Project will provide the necessary resources to carry out the environimenital training of subproject evaluators and the implementationi of all environmental activities identified in the EG. These arrangements are adequate to comply with Bank guidelinies. 5.3 For Category A and B projects, timeline and status of EA: Date of receipt of final draft: A final draft of the EG was discussed with the Bank's Environmental Specialist during the Project Appraisal Mission. Filal adjustments were made in order to be consistenit with the Project's institutionial arrangements, along with specify'ig the resource requirements to implement enviro-nmenital activities identified in the EG. 5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EA report on the environmental impacts and proposed environment management plan? Describe mechanisms of consultationi that were used and which groups were consulted? The main institutions charged with implementing Colombia's environmental laws were all consulted during project preparation, including the Ministry of Environment (ME), the Urban Environimenital Agency (Bogota), and the Regional Corporations (CARs) in the 9 departments where the Project will be implemented. Their opinions and recommendations are included in the final version of the EG. In addition, the ME and the CARs have produced sectoral guidebooks for environmenit best practice, which will be disseminated to subproject proponenlts. Depending on the type of activities to be supported by subprojects and the degree of expected environmenital impact, these agencies may be involved in the environmental screening process. 5.5 What mechanisms have been established to monitor and evaluate the impact of the project on the environment? Do the indicators reflect the objectives and results of the EMP? The Environmental Specialist based in the NCU will be responsible for overseeing the environmental monitoring of subprojects. Based on the initial evaluation and environimenital categorization, subprojects will be selected for field monitoring visits. Results of those visits will be inputted into the overall project-monitoring plan. If specific subproject's environmental performance is inadequate, the Specialist can request that the Project's review committee be convenied to explore potential solutionis. However, it is expected that most performance issues can be dealt with most effectively directly with the proponent. 6. Social: 6.1 Summarize key social issues relevanit to the project objectives, and specify the project's social development outcomes. - 20 -  The Project is not expected to have a negative impact on any special population group. Nevertheless, the Project will take measures to ensure adequate participation of special groups, as explained Annex 12. These include women and indigenous peoples. Womnen. Concern has been expressed about low participation of women in workfare programs. There would be an assessment of the extent of women's participation and, if necessary, an appropriate strategy to improve it would be developed. Within the first year of project iimnplementation, the monitoring system will report the participation rate of women by region and type of activity, so that corrective actions can be put in place as needed. Indigenous Peoples. The participation of indigenous peoples in the Project is expected to be low, given its concentration on large urban areas, where the presence of indigenous peoples is extremely low. The appraisal mission looked at how their participation can be enhanced in large urban centers. The project would develop a communications strategy suitable to these special groups. It would explain clearly and widely how they can access project funds and what the rules are regarding subproject proposal, evaluation, selection and approval. Afro-Colombian Populations. Poor, Afro-Colombians unskilled workers living in urban areas would have access to project benefits on equal terms with other eligible beneficiaries. Their participation is expected to be high since they tend to represent a large percentage of the bottom quintile of the income groups of the population. Internally Displaced Groups. Adult men and women who are displaced as a consequence of the internal conflict would have equal access to the temporary work opportunities offered by the Project. However, there would be no special component in the Project for this sub-population, as the Government is planning a special program under the Red de Solidaridad Social, with other funding sources, to benefit them. Consultations were undertaken during appraisal with representatives of all of the above population groups, including ONIC, the national indigenous organization of Colombia, the National Council of Afro-Colombians Populations, the National Association of Displaced Groups, leaders of NGOs specialized in issues of gender, ethnicity and displaced populations, and other relevant stakeholders. One objective of these consultations was to find effective ways for these sub-populations to access Project benefits (Annex 12). 6.2 Participatory Approach: How are key stakeholders participating in the project? The key stakeholders of the Project are poor workers, municipalities, NGOs and other non-profit organizations. The use of a mix of implementing agencies, combining public and non-governmental organizations, together with the project's demand-based approach and the decentralization of project implementation provides a framework that is conducive to a high level of social participation. However, this mix must be complemented by the participation of the local people in the identification and selection of the proposed public works for several reasons. First, local participation in subproject proposals builds ownership and interest, which are critical - 21 -  variables for the sustainability of community infrastructure works. Second, by financing community infrastructure the program provides an opportunity for developing human and social capital. Some ideas on how to address this issue were explored during appraisal and are discussed in Annex 12. The mission recommended that the final version of the Operations Manual include a requirement for proponents to describe and provide evidence on the extent of local participation in the choice of proposed subprojects. A critical factor to the promotion of a participatory approach is the development of an effective information/communication strategy not only to generate public support, but also to promote social control of project activities. For this purpose, the Project is developing such strategy with the help of a professional consultant and is allocating funds for its completion and execution during project implementation. Key elements of the strategy are discussed in Annex 12. 6.3 How does the project involve consultations or collaboration with NGOs or other civil society organizations? N/A 6.4 What institutional arrangements have been provided to ensure the project achieves its social development outcomes? N/A 6.5 How will the project monitor performance in terms of social development outcomes? N/A 7. Safeguard Policies 7.1 Do any of the following safeguard policies apply to the project? Li Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) W Yes L No El Natural habitats (OP 4.04, BP 4.04, GP 4.04) L Yes O No El Forestry (OP 4.36, GP 4.36) Li Yes ZK No EL Pest Management (OP 4.09 El Yes 1 No L Cultural Property (OPN 11.03) El Yes 1 No El Indigenous Peoples (OD 4.20) C Yes Z No El Involuntary Resettlement (OD 4.30) El Yes Z No El Safety of Dams (OP 4.37, BP 4.37) LI Yes X No El Projects in International Waters (OP 7.50, BP 7.S0, OP 7.50) LI Yes 12 No El Priojects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60) El Yes O No 7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies. N/A - 22 -  F. Sustainability and Risks 1. Sustainability: This Project is a response to the sharp, temporary rise in unemployment due to the economic crisis. Unlike standard Bank projects, therefore, Manos a la Obra: Proyectos Comunitarios is expected to fade away, as employment levels retumn to normal. At the end of the three-year project period, it is expected that the unemployment rate would be significantly lower than it is today, because of the reforms that the Government is currently promoting to solve the economic crisis. These reforms, whose implementation is being facilitated by this project, are expected to stimulate economic growth and, therefore, increase employment. Still, it remains uncertain whether the unemployment rate will go down to historically low levels three years from now. If it does not, the Project if successful, would probably be continued by the Government (as has been Argentina's experience with Trabajar)-perhaps at a scaled down level. If the unemployment rate does decline significantly, however, a decision will need to be made on how to make use of the "software" and experience developed by the Project to enable the Government to more quickly respond to economic crises in the future. The bottom line is that a successful implementation of the Project would encourage the Government to iniclude workfare (as enriched by Colombia's experience with Manos a la Obra: Proyectos Comunitarios) among its instruments for providing emergency assistance to the poor. The subprojects would likely be sustained after project completion. The process of identification, evaluation, selection, implementation and supervision of Manos a la Obra: Proyectos Comunitarios subprojects is designed so that proposals that are not technically, economically, and financially viable are screened out. Equally important, the Project would seek to encourage local participation in the identification and preparation of proposals in order to build local ownership and interest in completing, operating and maintaining subprojects funded by the program. Finally, the cost of operations and maintenance of the subprojects is projected to be small on the whole (Annex 5). -23 -  2. Critical Risks (reflecting assumptions in the fourth column of Annex 1): Risk - Risk Rating Risk Minimization Measure From Outputs to Objective (1) Leakage of benefits from families in M (1.1) Strengthening of the procedures for the poorest income quintile to those above SISBEN classification and its application in the it, if some of the weaknesses in the Project. SISBEN classification system and its application worsen. (1.2) Timely evaluation of the adequacy of the SISBEN classification system and its application during project implementation. (2) Insufficient concentration of M (2.1) Careful targeting of very poor investments in subprojects on poor communities, using the Indice de Calidad de communities and failure to choose Vida, an indicator that is highly correlated with subproject outputs that are highly valued level of consumption. by the poor. (2.2) Including local participation in the proposal and design of subprojects to ensure they are highly valued by the poor (3) The cost per job generated is not kept H (3. 1) the share of administrative cost is limited within acceptable range. to less than 10 percent of loan. (3.2) the share of material cost is limited to no more than 15 percent of loan. (3.3) salary contribution per week has been set below the standard minimum salary per week. (3.4) the institutional arrangement has been designed so that the Project is not obligated to pay fringe benefits. tFrom Components to Outputs (I) Delay in the release of budget for M (I.] ) Special budgetary authorization for the payment of salaries Project to ensure that money is available when needed. - 24 -  (1.2) Payment for salary contribution to SIEs to be delivered directly from the Special Account through the SIIF (Sistema Integrado de Informaci6n Financiera). (1.3) Establishing a Special Account that conforms to Bank standards regarding release of funds. (2) insufficient demand (capacity and M (2.1) Strong promotion activities by NCU. willingness to pay) for the materials needed by subprojects to be financed by (2.2) Allocation of up to 15 percent of loan the Project. proceeds to finance a portion of the cost of materials of subprojects proposed by the poorest municipalities (2.3) Careful monitoring of project implementation indicators and supervision of progress on the ground to device timely corrective actions, if needed. (3) Danger of misuse of project resources H (3.1) Use of non-governmental organizations as due to political factors SlEs to manage salary and material subsidies given to approved subprojects. (3.2) Use of Operations Manual acceptable to the Bank that clearly sets forth the "rules of the game" regarding presentation, evaluation, selection, supervision and implementation of subprojects; as well as the flow of funds and financial management control. (3.3) Outsourcing information system and supervision firms; as well as agreement on regular audit and external performance evaluation (Annex I b). (3.4) Agreement with the Government to include in the Operations Manual mechanisms for strong social control of subprojects through suitable information campaigns, keeping local people well informed about the objectives and rules governing the Project; and encouraging them to voice out complaints about implementation failures and violation of project rules - 25 -  ((4) Implementation could be impeded by M (4.1) Keeping the operations of the Red de iviolence. Apoyo Social separate financially and administratively from the other programs (The decision to put RAS under FIP under managed by the FIP, including the establishment DAPRE could lead to a mistaken of a separate Steering Committee for the RAS perception that RAS is part of the Government's strategy to reduce (4.2) Government assurance to maintain a narco-traffic and related guerrilla politically neutral public image for the Project, activities. This perception could create ensuring that Manos a la Obra: Proyectos security risks for personnel implementing Comunitarios and RAS are not associated with the Project and Bank staff conducting narco-guerrilla issues, focusing the project's supervision visits.) communications strategy exclusively on its poverty alleviation objective, and maintaining a low profile for the Bank Overall Risk Rating 5 Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk) 3. Possible Controversial Aspects: G. Main Loan Conditions 1. Effectiveness Condition (a) Adoption by the Borrower, through DAPRE-FIP, of an Operational Manual, satisfactory to the Bank, containing, inter alia, the detailed procedures for the carrying out of the Project, including: (i) the procedures for the flow of funds to finanice subprojects, the requirements for submission of a subproject by a proponent; (ii) the criteria and procedures for selection of subproject Implementing Entities; (iii) the criteria for selection and financing of subprojects, including the requirements for assessment of the economic, technical, finanicial, institutional, environmental and social aspects of subprojects; (iv) the guidelines for mitigation of adverse environmental impacts of subprojects; (v) the rules and requirements for employment of temporary workers under the subprojects; (vi) the financial management procedures for the Project; (vii) the procedures for procurement of building materials under the subprojects; (viii) the eligibility criteria for Subproject Implementing Entities to receive financing for building materials under subprojects; and (ix) the model of the agreement between the DAPRE-FIP, the Subproject Implementing Entities, and the proponents; (b) Signed agreement between FINDETER and DAPRE-FIP; (c) Establishment of the NCU and the appointment of its general coordinator, chief of the administrative and finanicial division, accountant, procurement specialist, environment specialist and chief of internal control, all with terms of reference and - 26 -  qualifications and experience satisfactory to the Bank; (d) Installationi in the NCU of a transitory management information system (including the Project's financial management system), satisfactory to the Bank, for use not longer than six months after the Effective Date, and the submission of the design and an action plan, satisfactory to the Bank, for the installation of an enhanced management information system; and (e) Establishment of the Steering Committee and appointnent of its members. 2. Other [classify according to covenant types used in the Legal Agreements.] H. Readiness for Implementation X I. a) The engineering design documents for the first year's activities are complete and ready for the start of project implementation. I. b) Not applicable. O 2. The procurement documents for the first year's activities are complete and ready for the start of project implementation. 1 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. Q 4. The-following items are lacking and are discussed under loan conditions (Section G): 1. Final version of Manual of Operations satisfactory to the Bank; 2. Terms of reference for outsourcing of MIS design and operations satisfactory to the Bank as well as description of the transitory MIS for the initial stage of project implementation; 3. Signed agreement between FINDETER and DAPRE-FIP; 4. Establishment of Steering Committee; and 5. Terms of Reference of key staff and their appointment satisfactory to the Bank. 1. Compliance with Bank Policies Q 1. This project complies with all applicable Bank policies. El 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other applicable Bank policies. Vicente B. PagZeo Xavier E. Coll Andgogolimano Team Leader Sector Manager/Director 06-untry Manager/Director - 27 -  Annex 1: Project Design Summary COLOMBIA: COMMUNITY WORKS AND EMPLOYMENT PROJECT (Manos a la Obra: Proyectos Comunitarios) Key Perfdrmance HWierarchy of Objectives I0dicatos M i 0torin & Evluation CRitical fiAsumptins Sector-related CAS Goal: Sector Indicators: Sectorl country reports: (from Goal to Bank Mission) In pursuit of poverty reduction Development of a stronger and social development, the social safety net would CAS aims to strengthen alleviate poverly in the Colombia's social safety net to short-run at the same time that cushion the poor- and it facilitates human capital vulnerable fiom the worst accumulation and effects of the crisis. implementation of economic and institutional reforms needed to improve peace, economic gr-owth and reduction in income inequality in the medium and long-runi. Project Development Outcome I Impact Project reports: (from Objective to Goal) Objective: Indicators: Support a social safety (1) increase in net annual (1) external evaluation survey Increase in poveity and its iprogram which through earnings of average human capital and social ,financing for small public individual beneficiary consequences are strongly Nworks projects provides (target=58% increase) related to the rise of tlemporary employment to poor unemployment. workers, increases the net (2) poor (bottom quintile) (2) external evaluation survey labor income of their families, workers as % of Manos a and prevents deterioration of la Obra laborers living standards in poor (target=100%) communities. (3) poor families' utilization of (3) monitoring through a infrastructure built, facilities survey expanded, or rehabilitated under Manos a la Obra (target= 100%) - 28 -  Key Performance Hierarchy of Objectives indicators Monitoring & Evaluation Critical Assumptions Output from each Output Indicators: Project reports: (from Outputs to Objective) component: Small infrastructure projects (I) number of low income (I) program records and The design of the program and temporary jobs for poor workers employed in the external evaluation household results in the accurate workeis project, total and by gender survey targeting of benefits to poor (total target=250,000; women workers, subprojects are target=50,000; includes IDB concentrated on pooIr component) communities and are highly valued by them, and the cost (2) % of completed public (2) monitoring through a per job generated is kept works of acceptable quality facilities survey reasonably low. (target= 1 00%) (3) rate of project completion (3) program records (handover to the project operator) (target= 100%) (4) % percent of projects (4) facilities survey located in poor areas (quintile I and 2 of ICV) (target= 100%) (5) facilities survey (5) % users of public works funded by project who are poor (target= 100%) (6) external audit; financial (6) leverage: ratio of total cost monitoring of subprojects relative to their public funding (target=95%) (7) program records and (7) efficiency of employment external audit program (value of salaries received by workers/total government cost of project) (target=75%) (8) program records (days (8) labor intensity of proJects worked by individual workers); financial monitoring (target=40%) The project will pay less than minimum market wage per day and will not finance non-wage payments for programs that are unlikely to benefit poor workers -29 -  Project Components I Inputs: (budget for each Project reports: (from Components to Sub-components: component) Outputs) (I) Salaries of unskilled $180 million Monitoring system Timely release of budget for workers/materials the Manos a la Obra and timely payment of salaries and availability of materials (2) Monitoring and Evaluation $0.79 million External review Sufficient demand (capacity and willingness to pay) for the materials needed by subprojects to be financed by Manos a la Obra (3) Project Management $11.19 million External audit/review Use of ProJect resources according to agreed technical criteria rather than political factors Project implementation not impeded by violence Attachment: Monitoring and Evaluation A Monitoring and Evaluation (M&E) system will be implemented to collect the indicators specified in the logical framework in order to assess the project's success in achieving the desred outcomes and impacts. The M&E system will be based primarily on an external impact evaluation and will draw on data produced from the project's management information system (MIS), government statistics, project audits and consultations with policymakers. The M&E strategy will produce results at three stages of the Project: (i) at the beginnling of the Project to inform the design of the workfare program; (ii) at the mid-point for the Project in order to inform any needed adjustments to project design and implementation; and - 30 -  (iii) at the conclusion of the Project in order to assess project impact. This three-phase process will provide information at points when critical policy decisions will be made. Three elements will form the basis of the M&E system: 1. Household Level Impact Evaluation. The extemal evaluation will collect baseline and follow-up data from individuals employed inManos a la Obra projects and a comparison group in order to assess the project's impact on earnings and household welfare. The evaluation will rely on an agreement reached with the GOC that will encourage infrastructure project administrators to randomly select workers from a pool of qualified applicants in cases of excess demand for the jobs being offered. The random selection process will not only provide a transparent and equitable basis for the selection of beneficiaries; it will also permit the evaluation to apply an experimental design based on the use of applicants not selected for employment as a control group to assess prograimn impact. The evaluation will also harmonize its data collection efforts with the existing system of household surveys to provide a basis for evaluating targeting and for constructing an alternative control group using non-beneficaries drawn from national survey data. 2. Project Evaluation. A facilities survey will be applied to sample projects to assess the technical quality, sustainability, targeting and cost-effectiveness of the infrastructure investments financed by the workfare project. 3. Process Evaluation. To complement and test the validity of the quantitative data, provide needed inputs for refining the implementation of Manos a la Obra at the beginning and conclusion of the Project, and foster a participatory evaluation process, a process evaluation using qualitative data will be collected from communities receiving program investments and policymakers. Appropriate strategies, such as focus groups, community questionnaires, and key informanit interviews will be used. There will be an emphasis on developing indicators for which chianges can be measured over time by usinig techniques such as ranking and listing and by ensuring that a common methodology and sets of questions are applied across projects in the evaluation. To support the quality of the M&E system and to ensure its relevance to policy decisions in Colombia, a Technical Committee will be established at the National Planning Department. The committee will work directly with the staff contracted to conduct the external evaluation and with the Project Implementation Unit to ensure the timely production of the relevant monitorinig data. In addition, a Steering Committee consisting of evaluation specialists, academics and policymakers will be created to guide the design, analysis and use of the M&E system to inform policy decisions and promote learning regarding the impact of the program. - 31 -  Annex 2: Project Description COLOMBIA: COMMUNITY WORKS AND EMPLOYMENT PROJECT (Manos a la Obra: Proyectos Comunitarios) By Component: Project Component I - US$180.00 million Community Works Subprojects. Municipal and departmental governments, public services enterprises, EATs (workers' cooperatives), and NGOs can present subprojects for funding by the program. The menu of subprojects which are eligible for financing by theManos a la Obra: Proyectos Coniunitarios program includes: (i) minor construction, repair, expansion, or remodeling for schools, health facilities, basic sanitation facilities: (ii) small roads and bridges, culverts and canals: (iii) community centers; and (iv) pilot housing projects. Details on the definitioni of each category of subprojects, including restrictions and special requirements, are contained in the Operations Manual. Project Component 2 - US$11.19 million Project Managemenit. This component would finance the following activities needed for irnplementing the program: (i) final preparation and duplication of the Project's Manual of Operations and related guidebooks; (ii) establishment of project information system; (iii) office equipment; (iv) training of project personnel; (v) operating costs such as salaries for technical and administrative personnel, travel and per diem costs for in-counitry travel, external supervision services, external information (" outsourcing") services, and financial transaction fees; and (vi) project promotion campaigns and technical assistance activities for potential applicants. Project Component 3 - US$ 0.79 million Monitoring and Evaluation. This component would finance project impact evaluation and extemnal review including ex-post evaluations of subproject quality and other special topics related to experiences with subproject operations and maintenance, performance of executing agencies and women's participation. Draft terms of reference for these studies have been agreed with the GOC and are in the Project File. A managemenit information system (MIS) would be finaniced and established to ensure reliable and quickly available infornation needed for monitoring of subprojects and efficient payment of salaries. The MIS would also be used to minimize abuses (e.g. payment of "ghost workers" and non-completion of subprojects). The design of the MIS as well as its operations would be outsourced based on competitive bidding. - 32 -  Component 1: Community Works SubProjects (project cycle) I. Program Promotion. Program promotion would be divided into three main key activities: (i) nationial and departmental media campaigns; (ii) departmental workshops and other promotional events; and (iii) diffusion of infornation througlh local/community level institutions. General information about the program would be provided to the public through the use of television, newspapers and radio. Program promotion would vary in intensity during the life of the Project. During the first year, the campaign will be conducted at a high level of intensity. By year 3, the level of promotion would diminish with fewer events and media coverage. 2. Project Presentation. The menu of activities eligible for project financing includes the following: constructioon, extension, remodeling, rehabilitation of schools, basic sanitation systems, transportation networks, bridges, culverts, weirs, and canals, health facilities, community centers, and demonstration low-cost housing. Eligibility criteria for each category are presented in the Operations Manual and in the guides for presentation of project proposals. Proposals that fall in the environimenital negative list will not be accepted for presentation (Annex I1). Subprojects must be completed within 4-8 months. The application form includes information on executing agencies, total cost, benefits expected (including a description of the community, role of the community in project selection, and implementation and supervision), and location of the subproject. Completed applications are presented to regional FINDETER where local officers would verify the application form, supporting documents and compliance with eligibility criteria. Accepted applications would be entered into the MIS (Management Information System). In tlle case of municipalities and public services enterprises, proposals should be presented with their choseni Subproject Implementinig Entity (NGO or EAT). 3. Project Evaluation. Each subproject proposal would be evaluated by trained professionals (FINDETER staff and consultants). The latter would be contracted at the departmental level. The methodology to be used for evaluation covers economic, technical, financial, institutional, environmental, and social aspects of the subproject and incorporates checks on costs, usinlg a data base containing infonnation on unit costs for similar types of subprojects. Appraisal formats and guides were developed based on the experience of the Argentina's TRABAJAR program, various social projects currently being implemented in Colombia (Red de Solidaridad Social Banco de Proyectos, Sistema Nacional de Cofinanciaci6n) and the previous experience of FINDETER. Details on the subproject evaluation methodology are contained in the Operations Manual. Each trained FINDETER appraiser is expected to be able to evaluate between 20 and 40 subprojects per month. 4. Project Approval. Once a subproject is judged to be viable on economic, technical and other grounds, it is ranked according to specific criteria. These criteria are explained in both the Operations Maanual and the guide for presentation of subproject proposals. These proposals are scored accordilg to a point system that is based on the level of poverty in the area where the subproject would be located, contribution to workers' salaries, the share of subproject cost financed by private sources, and past performance of proponents in implementing projects funded - 33 -  by Manos a la Obra: Proyectos Comunitarios. For that purpose, the project management informationi system would compile relevant indicators and data. Proposals can be submitted every two months to one of ten regional selection and approval committees. The members of the committees would consist of the FINDETER appointed staff, a representative of the NCU, and a non-voting representative of the local supervision entity. The committees would review subprojects and approve them based on1 their rankings up to the limit of the resources assigned to each department. Once the committee approves a subproject, a resolution is issued by the FIP-DAPRE listing the names of the Project and the amount of Manos a la Obra: Proyectos Comunitarios financinig approved for each. The representative of the NCU designated for each region would sign the letter of agreement between the proponent of an approved subproject and the program, following standardized format agreed upon by the Bank and the Government. 5. Project Implementation, Financing and Payment of Workers. Once a subproject is approved, the selected SIE would have to present to the regional FINDETER office the list of workers of the subproject. Those agencies would prepare those lists following the beneficiary selection criteria established in the Operations Manual and SISBEN data. The list would have to include 20% more beneficiary names than the number of persons needed by the subproject to create a pool of potential replacements and facilitate project impact evaluation. Inclusion in such a list, however, would not be a prerequisite for working on a subproject. The list of workers would be verified on-line byFINDETER staff usiing the national MIS. Once the list of workers is accepted, the local private supervision agency would be informed about the official start of the subproject. An appointed supervisor will visit the field to verify the existence of materials and other conditions required to start implementation of the subproject. Upon his return from the site visit, the supervisor would infonn the NCU and the MIA of the official start of the subproject. During that month, the MIA prepares the Subproject payment orders for all approved subprojects. Those orders are then submitted to NCU, on basis of whichi it will request Treasury to pay from the Special Account (using,SIIF) the Subproject Implementation Entities For subsequent periods, supervisors would visit subprojects before the end of the month and inform the NCU and the MIA about any worker replacements or problems with subproject implementation. The payment process for the second and subsequent months would be like the first one. During the first five days of each month and after each payment period, the Subproject Implementing Entities would submit a report (following standard form) to the NCU about actual payments made. 6. Project Supervision. Trained professionals, contracted at the regional level would supervise each subproject. On average, each subproject would be supervised once a month during execution. The first supervision would take place at the beginning of implementation and before the first payment to workers is authorized. Subsequent supervision would occur between montl the first and the 25th day of the month. Technical assistance would be provided to agencies to resolve problems uncovered by supervision. Supervisors would be hired by the NCU based on agreed terms of reference to ensure technical quality and good management of the Project. They will review the budget of the subprojects, technical specifications, compliance with environmental guidelines, and site visits during project - 34 -  implementation . Guidelines will be included in the Operations Manual. An "interventor" (an inspector) would verify Government-owned subprojects and ensure compliance with Colombia's civil works regulations. In addition, the Project would contract "supervision firms" to check all subprojects at least thrice during their execution. 7. Financial Parameters. Budgetary Allocation and Contract Unit costs for specific types of subprojects and a data base for updating them would be established to guide their assessment. The size of the subproject is limited to between $20,000 - $100,000 and up to 50 workers, if it receives financing of materials from the loan. If it does not, its cost could go up to $150,000. Given that more than 80 percent of the unemployed are located in 78 municipalities (these include municipalities with more than 100,000 inhabitants, departmental capitals and metropolitan areas), it was decided to allocate 80 percent of the loan to these areas. The other 20 percent would be earmarked for the rest of the municipalities. The project would give economic assistance (wage contributionis) of about $90 per month for six hours of work per unskilled laborer working in approved subprojects. This is equivalent to about 70 percent of the take home minimum wage for nornal hours of work. The NCU would assign a budget for each region based proportionally on the regional distribution of unemployment and poverty. This quota system is aimed at preventing the concentration of project benefits in a few regions. Within each region proposed subprojects would be evaluated, ranked and visited by the Regional FINDETER Office (Unidad Regional de FINDETER or URF). The subproject ranking system is based on a formula that considers: the poverty strata of the localities in which a subproject would be undertaken (usinig theIndice de Calidad de Vida); compliance with agreements regarding satisfactory delivery of funded subprojects; the labor-intensity of the proposed subprojects; and the amount of non-public sector contributions. Tlhe formula, described in the Operations Manual, is designed to leverage the loan to maximize its effect on employment and to ensure that the expected benefits would actually be generated and directed to the poorest communities. Subproject funding would require a "convenio" (agreement) among DAPRE-FIP, the proponenit and its selected SIE in accordance with the Operations Manual. The agreement would follow a" Modelo de Convenio" acceptable to the Bank. This model will be incorporated in the Operations Manual. 8. Registry of SlEs. The NCU would establish a list of pre-qualified non-governmental entities based on agreed criteria (included in the Operations Manual). The list will be an open registration, which will be updated regularly. - 35 -  Annex 3: Estimated Project Costs COLOMBIA: COMMUNITY WORKS AND EMPLOYMENT PROJECT (Manos a la Obra: Proyectos Comunitarios) Local Foreign ~Total ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~s f Project Cos ByCmponent iUS $mlin Umil ilio US tmhonj 1. Manos a la Obra: Proyectos Comunitarios SubProjects 180.00 0.00 180.00 2. Project Management 10.67 0.52 11.19 3. Monitoring and Evaluation 0.49 0.30 0.79 Total Baseline Cost 191.16 0.82 191.98 Physical Contingencies 0.00 0.00 0.00 Price Contingencies 0.00 0.00 0.00 Total Project Costs 191.16 0.82 191.98 Front-end fee 1.00 1.00 Total Financing Required 191.16 1.82 192.98 Local ~~Forigotal Projec CostBy Caegory ~ US$mllion US $mlion USl$million 1. Subprojects 180.00 0.00 180.00 2. Goods 1.00 0.57 1.57 3. Services and Training 6.14 0.30 6.44 4. Operating Costs 1.40 0.00 1.40 5. Unallocated 2.57 0.00 2.57 Total Project Costs 191.11 0.87 191.98 Front-end fee 1.00 1.00 Total Financing Required 191.11 1.87 192.98 Note Physical contingencies: Since most of the project cost is accounted for by financing for subprojects and physical targets are not the principal objective, no contingencies have been provided for subprojects. Any increase in the average subprqject cost would be reflected in a smaller number of subprojects being implemented. Given the projected 18-month execution period for the Project, no contingencies have been calculated for project administration either. - 36 -  Annex 4: Cost Benefit Analysis Summary COLOMBIA: COMMUNITY WORKS AND EMPLOYMENT PROJECT (Manos a la Obra: Proyectos Comunitarios) Summary of Benefits and Costs: No rate of return or net present value estimates were calculated. The cost effectiveness of generating ajob, however, has been analyzed and presented below. Essentially, the estimates show that cost per job generated by the Project is within the range of international experience. The cost-effectiveness of the Project in terms of incomes transferred to poor families relative to the cost of transferring them has also been analyzed, in comparison with alternative schemes like cash transfers. The conclusion, which is discussed in Section E, is that the Project is probably marginally cost-effective, but that depends on what is assumed regardilg the value of the subprojects. Main Assumptions: The following are notes to the table below, analyzing the cost per job generated: 1. Current Program: Minimum wage + noni-wage benefits, 312 days/year. 2. Minimum Wage, no benefits 3 0.7 Minimum Wage, no benefits 4. GDP/Cap US$ withini 2 years of program (data from WDR various issues). 5. Adjusted by GDP/capita as measure of mean labor productivity. Since the dollar costs were calculated at market exchange rates, GDP/capita at market exchange rates is the appropriate variable, no the PPP corrected figures. 6. Labor costs share for all Colombia calculated using 2/. - 37 -  Sensitivity analysis I Switching values of critical items: Cost of Creating Jobs Argentina 1998 9.8 8410 1.2 0.6 Bolivia 1987-90 8 600 13.3 0.4 Chile 1987 0.5 1320 0.4 Honduras 1990-91 1 590 1.7 0.4 Costa Rica 1991-94 4 1900 2.1 Bangladesh 1991-92 1.6 210 7.6 0.5 Pakistan 1992 2.8 380 7.4 0.6 Niger 1993 11 270 40.7 0.3 Colombia 2000 12.5 2443 4.5 Colombia 2000 10.2 2443 3.5 Colombia 2000 8.6 .2443 2.9 0.5 Data not from Colombia or Argentina from Subbarao et al. 1997. - 38 -  Annex 5: Financial Summary COLOMBIA: COMMUNITY WORKS AND EMPLOYMENT PROJECT (Manos a la Obra: Proyectos Comunitarios) Years Ending May 31 - (in US$ million) -MFPLMENATIQN PERIOD Yearl i Year 2 l Year3 I Year 4 | Year 5 | Year 7 Total Financing Required Project Costs Investment Costs 30.6 73.8 75.6 0.0 0.0 0.0 0.0 Recurrent Costs 0.6 2.1 3.6 3.6 3.6 0.0 0.0 Total Project Costs 31.2 75.9 79.2 3.6 3.6 0.0 0.0 Front-end fee 1.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Financing 32.2 75.9 79.2 3.6 3.6 0.0 0.0 Financing IBRDIIDA 17.0 41.0 42.0 0.0 0.0 0.0 0.0 Government 16.4 40.2 42.7 3.6 3.6 0.0 0.0 Central 0.5 1.2 1.3 0.0 0.0 0.0 0.0 Provincial 15.9 39.0 41.4 3.6 3.6 0.0 0.0 Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 User FeeslBeneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Others 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Financing 33.4 81.2 84.7 3.6 3.6 0.0 0.0 Main assumptions: * Calculation of Total Financing based solely on investment cost and recurrent cost (operations and maintenance costs of completed subprqjects), whereas Total Project Financing includes cost for all 3 components (SubProject, Project Management, and Monitoring and Evaluation). * Operation and maintenance costs of completed subprojects are assumed to be 2% of the subproject cost which totals US$180 million at the end of Year 3. Annex 5 B. Availability of Municipal Co-financing Funds During pre-appraisal DNP estimated that the municipalities would receive new resources from the national Government worth about $2 billion during the Project period. Further analysis, however, at appraisal, revealed that while on the aggregate counterpart funds from eligible proponenits would be available to finance material requirements of subprojects, the amount is much less than initial estimates. Moreover, small municipalities do not appear to have the resources to participate in the Project. Backgrounid: Data from 1998 budgetary executions indicates that a total of about $790 million - 39 -  was used for physical investment in the 932 municipalities of Colombia for which data is available. Physical investment was defined to coincide with the sectors to be supported by subprojects under Manos a la Obra: Proyectos Comunitarios. However, investment capacity varies dramatically between municipalities. The six largest municipalities (Bogota, Medellin, Cali, Barranquilla, Bucaramanga and Cartagena) account for 82 percent of total capacity in the large municipalities (those scheduled to receive 80% of project funds) and 57 percent of the total for all municipalities in Colombia. Data indicate that the smallest municipalities, those classified as Category 4, 5, and 6 (totaling 809 municipalities) would have almost no resources to spare for physical investment. On the other hand, medium-sized municipalities in Categories 1, 2 and 3 have access to more substantial amounts for infrastructure investments. Project resources will be largely directed to the larger municipalities due to the concentration of poor unemployed in them. To respond to the possible lack of resources, up to 15% of project funds could be targeted to the provision of materials in the smallest and poorest municipalities. It is essential to note that these figures refer only to investments carried out by central municipal governmenits. They do not include investments made by local public utilities(en7presaspiblicas descentralizadas), or in-kind materials inputs by project proponents. Anecdotal evidence suggests that these additional resources may account for a very important portion of total investment. Actual cash disbursements by municipalities often constitute less than half of total investment contributions. Estimates: In estimating the total resources that could be available for municipal counterpart fuLids, the following assumptions were made: (1) ten percent of total resources available for physical investment could be directed to small projects of theManos a la Obra. Proyectos Comunitarios type, located in poor communities (this appears to be a conservative estimate, as DNP is assuming that 25% could actually be available), and (2) the availability of resources would decline by 10 percent in 2000, relative to 1998, due to the recession. Under these assumptions, it is estimated that a total of $62 million per year would be available in project counterpart funds ($50 million in the largest 72 municipalities and $12 million in the smaller ones), for a total of $186 million over the three-year duration of the program; again, this does not include funds from local public utilities or any own-resources of project proponents. If it is assumed that the labor share is 50% of total costs, these estimates would indicate that on the whole, municipalities would have access to the required counterpart funds ($75 million would be required over three years) to provide for materials. However, due to the wide variation in revenues, it is likely that some small, poor municipalities would not have the necessary counterparts. -40 -  Annex 6: Procurement and Disbursement Arrangements COLOMBIA: COMMUNITY WORKS AND EMPLOYMENT PROJECT (Manos a la Obra: Proyectos Comunitarios) Procurement Procuremeint for the proposed Project would be carried out in accordance with World Balk" Guidelines: Procurement Under IBRD Loans and IDA Credits", published in January 1995 (revised January/August 1996, September 1997 and January 1999); and "Guidelines: Selection and Employment of Consultants by World Bank BorrowerV' published in January 1997 (revised in September 1999 and January 1999), and the provisions stipulated in the Loan Agreement. Procurement methods (Table A) The methods to be used for the procurement described below, and the estimated amounts for each method, are summarized in Table A. The threshold contract values for the use of each method are fixed in Table B. - Procurement of Goods The Loan will not finance the procurement of goods, except for building materials under the Subprojects. - Selection of Consultants Consulting services will be contracted under this project in the following areas of expertise: monitoring and impact evaluation of the Project; design and operation of administrative software, designl promotion campaign, financial and procurement audits; supervision of subprojects; management, monitoring and evaluation of subprojects; staff for NCU and RCU as indicated in the Operations Manual; training and promotional workshops. These services are estimated to cost US$6,440,000 equivalent and would be procured using Bank Standard Request for Proposals pursuant to the following methods. a) Firms: Consultant services to be financed by the Project include: monitoring and impact evaluation of the Project which will be contracted using QCBS procedures. Design and operation of administrative software, design and implementation of promotion campaign, financial, monitoring and evaluation; monitoring and auditing services estimated to cost under US$100,000 would be contracted using CQ procedures, up to an aggregate amount of US$3,560,000 equivalent. Contracting of other minor services such as workshops and training logistics will be contracted usinlg Least-Cost Selection up to an aggregate US$30,000 equivalent. b) Individuals: Regional training, subprojects evaluators, staff for NCU and RCU as indicated in the Operations Manual; training and promotional workshops preparation of manuals and other services would be provided by individual consultants selected in accordance with the provisions of paragraphs 5.1 through 5.3 of the Consultant Guidelines, up to an aggregate amount of US$2,160,000, all costs included. - 41 -  Procurement Plan. The nature of the Project consists mainly of salaries subsidies to unskilled workers in approved subprojects in Colombia, some procurement of building materials, and contracting of specialized services to monitor, implement and follow-up the Project. The Borrower developed a procurement plan for project implementation listing subprojects, contracts, methods amounts and key dates of contracting and implementation to register the aggregate amounts assigned to the various procurement methods. The procurement plan and consultant selection process plan will be updated periodically, every 6 months. The plans include the (i) list of contracts completed, under execution, under procurement, to be procured in the upcoming calendar semester and, tentatively in the subsequent semester; (ii) costs of completed and under execution contracts, estimated costs for upcoming contracts; (iii) schedule of bidding; and (iv) particular methods of procurement of goods or selection of consultants. The first plan will be approved by the RPA and will be in the Project files. At the beginning of each calendar semester, the Borrower will update the Procurement Plan with a detailed procurement schedule for the coining semester. Procurement under Subprojects. The loan will finance under the subprojects the subsidies of salaries up to an aggregate amount of US$75 million. Building materials up to an aggregate amount of US$15.0 million will be financed up to 40% of each subproject according to the criteria established in the Operations Manual and when very small municipalities do not have enough or no counterpart funds. The procurement of these materials will be carried following national shopping procedures. The selection of the Subprojects will be made byFINDETER in accordance with a formula described in the Operational Manual. Subprojects public works, selection of beneficiaries and payment of salaries subsidies will be executed by NGOs and/or Empresas Administrativas de Trabajo (EATs) selected through a national process with eligibility and selection criteria acceptable to the Bank. These entities will be included in an open natiolnal registry. Criteria for eligibility, selection and TOR will be included in the Operational Manual. The technical supervision of each of the subprojects will be hired by the NCU based on agreed terms of reference to ensure quality and good management of the Project. Model TOR and guidelines will be included in the Operations Manual. The procurement of equipment is not envisioned in this project. - 42 -  Table A: Project Costs by Procurement Arrangements (US$ million equivalent) Proturement Method JExpenditure Category ICB NCB Other N.B.F. Total Cost 1. Goods 0.00 0.00 0.00 1.57 1.57 (0.00) (0.00) (0.00) (0.00) (0.00) 2. (a) Consultants' services 0.00 0.00 1.40 0.00 1.40 for the NCU and the RCUs (0.00) (0.00) (1.40) (0.00) (1.40) (b) Consultants'services 0.00 0.00 6.44 0.00 6.44 other than under (a) above, (0.00) (0.00) (5.03) (0.00) (5.03) and training 3. Subprojects 0.00 0.00 180.00 0.00 180.00 a). Salaries Subsidies (0.00) (0.00) (75.00) (0.00) (75.00) b). Materials (0.00) (0.00) (15.00) (0.00) (15.00) 4. Unallocated 2.57 2.57 (2.57) (2.57) Total 0.00 0.0 190.41 1.57 191.98 (0.00) (0.0) (100.00) (0.00) (100.00) N.B.F = Not Bank-financed (includes elements procured under parallel cofinancing procedures, consultancies under trust funds, any reserved procurement, and any other miscellaneous items). Footnote: I/ Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies - 43 -  Table Al: Consultant Selection Arrangements (optional) (US$ million equivalent) Consultan7 Seeo M ge hod Services Expenditure QlCBS X S ' iSF LS CQ Other ! N.BF. ota Cos A. Firms 0.78 0.00 0.00 0.03 471 0.00 0.00 5.52 (0.69) (0.00) (0.00) (0.03) (3.55) (0.00) (0.00) (4.27) B. Individuals 0.00 0.00 0.00 0.00 0.00 2.32 0.00 2.32 (0.00) (0.00) (0.00) (0.00) (0.00) (2.16) (0.00) (2.16) Total 0.78 0.00 0.00 0.03 4.71 2.32 0.00 7.84 (0.69) (0.00) (0.00) (0.03) (3.55) (2.16) (0.00) (6.43) 1\ Including contingencies Note: QCBS = Quality- and Cost-Based Selection QBS = Quality-based Selection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CQ = Selection Based on Consultants' Qualifications Other = Selection of individual consultants (per Section V of Consultants Guidelines), Commercial Practices, etc. N.B.F. = Not Bank-financed Figures in parenthesis are the amounts to be financed by the Bank Loan. Prior review thresholds (Table B) The proposed thresholds for prior review are based oni the procurement capacity assessment of the Project implementing unit and are summarized in Table B. In addition to this prior review of individual procurement actions, the plan and budget for the NCU Operating Costs will be reviewed and approved by the Bank annually. Bank Prior and Post Review. Prior Review by the Bank require the following procurement actions: (i) all consultants' services provided by a firm selected by QCBS, estimated to cost US$100,000 or more (prior review of all documentation including technical and final evaluation); (ii) services provided by firms selected by QCBS estimated cost US$70,000 or more and less than US$100,000 (prior review of all documentation and final evaluation only); (iii) consultants' services provided by an individual estimated to cost US$50,000 or more (prior review of all documentation); (iv) consultants'services provided by an individual costing over $20,000 (terms of reference); (v) for any amendment of contracts resulting in the increase of the contract value beyond the review limits set in (ii) and (iii) above; (v) all terms or reference for key personnel of the coordinating units irrespective of value; and (vi) any other activity below the mentioned thresholds identified by the Bank on the basis of the annual procurement plan. All other contracts not included above shall be reviewed ex-post by Bank supervision missions. - 44 -  Table B: Thresholds for Procurement Methods and Prior Review v ~~~~~~~~~~~~~~~~~~~~~~~~. ._._....... Contract Value 1 Contracts Subj_ect to Threshold Procurement Prior Review Expenditure C1aeo U___SS thousands) Method _ (1s$ millions) 2. Consultants (a) Consultants' services for the NCU and the CUs (b) Consultants'services other than under (a) above, and training: Firms >100 QCBS All docs, including Technical report >70 - <100 QCBS, CQ All docs, final report Individuals >50 See Section V of Guidelines All documents >20<50 See Section V of Guidelines Review of TOR and all TOR for key staff of NCU and RCU irrespective of value <20 See Section V of Guidelines Post Review 3. Subprojects Building Materials <50 Shopping All post review Total value of contracts subject to prior review: 3.0 Overall Procurement Risk Assessment Average Frequency of procurement supervision missions proposed: One every 6 months (includes special procurement supervision for post-review) and one procurement audit every year. Assessment of the agency's capacity to implement procurement. Procurement activities will be carried out by the National Coordinating Unit (NCU) under DAPRE-FIP, in close coordination with Department of National Planning (DNP) as the oversight agency. The Administrative/Financial Office of DAPRE-FIP, which is comprised of a Procurement specialist, Financial/accountant Coordinator and a Systems Coordinator, provides support to the NCU. The NCU is satisfactorily staffed by a Project Coordinator (Jefe), an Evaluation Coordinator, a Technical Assistance Coordinator, a Supervision Coordinator, and Peace Coordinator. FINDETER will evaluate and select the subprojects for approval by DAPRE-FIP. The Operations Manual will include, in addition to the procurement procedures, Contracting Documents to be - 45 -  used for each procurement method, as well as model contracts for building materials procured on the basis of three quotations or shopping. Procurement Risk Assessment. The Country Procurement Review (CPAR) for Colombia is dated April 1997. The assessment involved interviews with officials from NCU and DNP and the FINDETER. Based on this assessment, and taking into account that (1) the only procurement of goods financed by the Bank in this project will be building materials and the contracting of some consultants; and (2) Law 80, the current procurement law, stipulates that the procurement policies and procedures of the international financiers apply to their respective projects, the project's procurement risk rating is assessed to be average. This Capacity assessment was approved by the RPA on March 16, 2000. The detailed recommendations of the Assessment have been included in the Project design and in extensive details in the Project Operations Manual prepared before negotiations. - 46 -  Disbursement Allocation of loan proceeds (Table C) Table C: Allocation of Loan Proceeds ExpeditueItegory_ Amount In LS$m ilion Finantn Pecentage 1. Subprojects l.a. Salaries Subsidies: 75.00 (83%) 90.00 90% l.b. Materials 15.00 (17%) 2. Consultants' services for the 1.40 1 .4% NCUand the RCUs 3. Consultants' services other than 5.03 5.03% under 2 above, and training 4. Unallocated 2.57 2.57% Total Project Costs 99.00 Front-end fee 1.00 1.0% Total 100.00 Use of statements of expenditures (SOEs): In respect of disbursements for this project, it was agreed to establish project financial monitorinig mechanisms with the Borrower that will enable loan proceeds to be disbursed on the basis of quarterly project cash forecast linked to expected project activities during such quarter. In the event financial management arrangements acceptable to the Bank are not yet fully in place by loan effectiveness, reimbursement of expenditures paid out of the advance to the Special Account shall be made initially on the basis of SOEs, following Bank standard disbursement procedures. Special account: A Special Account shall be establish at the Banco de la Republica in accordance with Bank policies and procedures. The amount of the initial deposit shall be determined by the disbursement mechaniisms agreed with the Bank. Payments to the Subproject Implementing Entities (NGOs and EATs) will be directly paid through the SIIF (Sistema Integrado de Informaci6n Financiera, or the financial management system) from the Special Account. It was agreed that before the establishment of the Special Account, the Government will strengthen, in a manner acceptable to the Bank, the capacity of SIIF to make direct payments to the Bank accounts of Subproject Implementing Entities and train relevant NCU staff on how to use it. Retroactive financing: It has been agreed that in order to enable the Project to meet the deadlines established for appraisal, negotiations and implementation, it is necessary to hire staff for the NCU and other technical assistance advisors, valued at approximately US$2.0 million which will be financed retroactively. - 47 -  Annex 7: Project Processing Schedule COLOMBIA: COMMUNITY WORKS AND EMPLOYMENT PROJECT (Manos a la Obra: Proyectos Comunitarios) ~roectSchdul Pi rredActa Time taken to prepare the project (months) 4 6 First Bank mission (identification) 10/04/99 10/04/99 Appraisal mission departure 01/10/2000 02/02/2000 Negotiations 01/31/2000 03/21/2000 Planned Date of Effectiveness 03/15/2000 06/01/2000 Prepared by: Department of National Planning (DNP) Preparation assistance: Bank staff who worked on the project included: Name Speciality ___ ___ Vicente B. Paqueo Task Team Leader Constance A. Corbett Sector Leader, LCC4C/LCSHD Ana Maria Arriagada Sector Manager, Social Protection Connie Luff Country Officer for Colombia Zeinab Partow Country Economist for Colombia Jose Augusto Carvalho Lawyer for Colombia Efraim Jimenez Country Procurement Specialist for Colombia William Maloney Sr. Economist Carlos Eduardo Velez Sr. Economist Laura Rawlings Monitoring and Evaluation Specialist Jairo Arboleda Social Development Specialist Issam A. Abousleiman Disbursement Officer Thakoor Persaud Sr. Economist Maria Lucy Giraldo Procurement Specialist Juan D. Quintero Sr. Environmental Specialist Marta Ospina Procurement Analyst Yukiko Arai Operations Analyst Christian Hurtado Civil Engineer; Inst. & Implement. Arrangements, Including PIP; MIS Luis Carlos Guerrero Financial Management Officer Gary Costello Environmental Specialist Maria Claudia Vasquez Civil Engineer; Methology for Evaluation and Assurance of Quality Rosalia Sanchez-Rushton Task Assistant Theresa Jones, Eduardo Velez Bustillo, and Kalanidhi Subbarao were the peer reviewers. - 48 -  Annex 8: Documents in the Project File* COLOMBIA: COMMUNITY WORKS AND EMPLOYMENT PROJECT (Manos a la Obra: Proyectos Comunitarios) A. Project Implementation Plan Project Implementation Plan forManos a la Obra: Proyectos Comunitarios B. Bank Staff Assessments 1) Notes on poverty, unemployment and other social sector issues 2) Economic analysis of Manos a la Obra: Proyectos Comunitarios 3) Financial capacity assessment of municipalities and other eligible proponelits 4) Notes on financial management and assessments 5) Notes on institutional arrangement issues 6) Notes on legal issues regarding minimum wage and payment of fringe benefits C. Other I) Project Operations Manual, including Environmental Guidelines and Model Terms of Reference 2) Unit cost and budget estimates *Including electronic files - 49 -  Annex 9: Statement of Loans and Credits COLOMBIA: COMMUNITY WORKS AND EMPLOYMENT PROJECT (Manos a la Obra: Proyectos Comunitarios) Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Borrower Purpose IBRD IDA Cancel. Undisb. Orig Frm Rev'd CO-PE-39082 1999 INVIAS TOLL ROAD CONCESSION 13710 0 op o 00 10000 4000 000 CO-PE-50576 1999 GOVERNMENT YOUTH DEVELOPMENT 5.00 000 0.00 479 079 000 CO-PE-46031 1998 GOVERNMENT MAGDALENA MEDIO 5 00 000 0 00 338 013 0 00 CO-PE-46112 1998 GOVERNMENT OF COLOMBIA PASTO EDUCATION 720 000 000 589 119 000 CO-PE-53243 1998 MINHACIENDA PEASANTENTERPRISEZ 5.00 000 000 459 029 000 CO-PE-6861 1998 FINDETER URBANINFRASTRUCTURE 7500 000 000 7032 032 000 CO-PE-6891 1998 GOV OF COLOMBIA ANTIOQUIA EDUCATION 40 00 0.00 000 38 74 364 0 00 CO-PE-40102 1997 GOVT OF COLOMBIA REG REF TA 12 50 0 00 0 00 1169 4 70 000 CO-PE-6884 1997 GOVERNMENT OF COLOMBIA FIN MRKTS DEV TA 15 00 0 00 0 00 1337 687 000 CO-PE-39291 1996 GOVERNMENTOF COLOMBIA URBAN ENVIRONMENTTA 2000 000 000 1299 1097 000 CO-PE-6872 1995 BOGOTADISTRICT URBANTRNSPRT 6500 000 000 4293 2695 475 CO-PE-6887 1996 GOVERNMENT POWER MARKET DEVELOP 249 30 0 00 0 00 67 26 29 18 16 52 CO-PE-6894 1996 GOVT OF COLOMBIA SANTAFE I (WTR/SUPPL 145.00 000 000 8987 6620 000 CO-PE-6660 1995 GOVERNMENT AGRICULTURETECHNOLO 5100 0 00 0 00 37 30 2100 000 CO-PE-6893 1995 GOVERNMENTOFCLM ENERGYTA 1100 000 000 355 3.55 000 CO-PE-6868 1994 GOVERNMENT OF COLOMBIA SECONDARY EDUC 9000 000 000 5499 4326 11 52 CO-PE-6668 1994 GOV OFCOLOMBIA NATURALRESOURCEMAN 39.00 000 000 1781 1082 1037 CO-PE-6889 1994 GOV OF COLOMBIA PUBLIC FINANCIAL MAN 30 00 0 00 0 00 4 60 4 60 0 00 CO-PE-6854 1993 GOVERNMENTOFCOLOMBIA MUNICIPALHEALTHSER 5000 000 0.00 3030 2729 1929 GOV OF COLOMBIA IA Total: 105210 0 00 0 00 614 37 301 75 62 45 - 50 -  COLOMBIA STATEMENT OF IFC's Held and Disbursed Portfolio 3 1 -Jul- 1999 In Millions US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1963/90 Coltejer 6.32 0.00 0.00 0.00 6.32 0.00 0.00 0.00 1969/85/88/93/95 CF del Valie 0.00 0.00 7.43 0.00 0.00 0.00 7.43 0O0( 1977/89/92/94/96 Promigas 12.21 0.00 1.13 33.83 12.21 0.00 1.13 33.83 1981/85/87/89/91/92/9 Leasing Bolivar 4.00 0.00 0.00 0.00 4.00 0.00 0.00 0 0( 4 PRODESAL 0.00 0.00 0.59 0.00 0.00 0.00 0.59 (.00 1987 ODC 2.89 0.00 0.00 6.77 2.89 0.00 0 00 6.77 1990/92 Corfinansa 0.00 0.00 1.43 0.00 0.00 0.00 1.43 0.00 1994/95 Corfinsura 13.06 0.00 0.00 0.00 13.06 0.00 0.00 0.00 1995 Icollantas 11.00 0.00 0.00 0.00 11.00 0.00 0.00 0.00 1995/97 Proyectos 9.64 0.00 5.00 0.00 4.17 0.00 5 00 0.00 1996 Suleasing 30.00 0.00 0.00 0.00 7.43 0.00 0.00 0.00 1997 Total Portfolio: 89.12 0.00 15.58 40.60 61.08 0 00 15.58 40.60 Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic Total Pending Commitment: 0.00 0.00 0.00 0.00 - 51 -  Annex 10: Country at a Glance COLOMBIA: COMMUNITY WORKS AND EMPLOYMENT PROJECT (Manos a la Obra: Proyectos Comunitarios) Latin Lnwer- POVFRTY and SOCIAl Anerina middle- Coinnhbia A Crarib inome. Development diamond 199a Poo.lation mid-vear fmilliorsl .4r 8 502 908 Life expectancy GINP ser cacita (At-as method USS) 2 500 8 940 1 710 GNP (Atlas method USS billionsl 106 1 1 978 1 557 T Averace annual nrowth. 1992-98 T Pooulalion I% 9 1 6 1 1 Labor foroe %l 2 7 2 3 1 5 GNP Gross per a prim ary Most recent estimate al.estt ear available. 1992-981 pcpita --rimart Povertv (fo ot ooulation below national oovertv linel 198 Urban ooeulation (lb of total ooulationl 74 75 58 Life exoectancv at birth (vearsl 70 70 68 Infant mortalitv (oer 1 000 lion birthsl 24 32 38 Child malntrilion (la of children unde, 51 a 8 | Access to safe water Access to safe water (% of ooDolationl 75 75 75 Illiteracv (% of .o...tion aoe 15+1 9 13 14 Gross orirarv enrollment (% of school-aoe .o.ulationl 113 113 103 Colombia Male 113 105 Lower-middle-income group Female 112 100 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1977 1987 1997 1998 Economic ratios' GDP (USS billionsl 19 5 36 4 108 6 102 9 Gross domeslic investment/GDP 15 7 19 1 230 22 3 E.oorts of Ooods and services/GDP 16 9 17 0 13.9 130 Trade Gross domestic savinos/GDP 22 3 23 1 18 0 16 6 Gross national savinos/GDP 21 1 21 2 176 16 5 Current account balance/GDP 1 9 -0 1 -5 4 -5 7 <; Interest oa.mnenrsIGDP 0 a 3 7 1 5 1 7 Domestic Investment Total debt/GDP 2300 46 8 312 35 1 Savings Total debt serviceleonorts 10 7 39 1 46 7 47 3 N/ Present valon of debt/GDP 279 Present valoe of debtle.oorts 198 4 indebtedness 1977-87 1988-98 1997 1998 1999-03 (a,eraoe annual orowltl GOP 3 4 4 0 3 1 0.6 3 6 Colombia GNP Der caoita 0.7 296 1 1 -1 3 1 7 Lower-middle-income group Exoorts of ooods and serices 5 0 7 1 8 1 -4 8 3 .. STRIICTIIRF of the FCrONOMY 1977 1987 1997 1998 Grnwth rates of nutput and in-estment l#) (% of GOPI Aoriculture 250 174 14 1 145 lndustrv 303 348 290 271 30 Manufacturino 239 20 3 14 2 138 t5 Services 44 7 47 8 57 0 584 o Private consuMDtion 700 682 658 672 Is 93 04 59 96 97 98 General oovernment cons.motion 7 7 . 7 16 2 16 G- I -3GP Imoorts of ooods and servces 13.3 129 194 196 1977-87 1988-98 1997 1998 Growth rates of exports and imports (%) (averaoe annual o,rowth) Aoricullure 2 5 1 7 0.2 0 6 so Ind.strv 4 1 2 3 1 3 -2 3 o0 Ma-ufa-t-rin. 2 5 1 7 2 5 0 0 10 Services 3 4 57 36 2 4 20 Private consmotion 2 9 4 0 3 7 1 9 to General oovernmenl consumotion 51 53 47 0,3 o Gross domestic investment 23 14 0 35 10 93 94 95 9t 97 98 rmnorts of ooods and services 2 5 16 0 4 4 1 5 EaPyrts Imparts Gross national oroduct 29 39 3 1 -25 Notei 1998 data are preliminary estimates The diamonds show four kev indicators in the cocntrv 6n bold) comoared with its income-crouD averaee If data are missino the diamond will be incomolete - 52 -  Colombia PRICES and GOVERNMENT FINANCE 1977 1987 1997 1998 lnflation (%f Domestic prices (% change) Consumer prices 32 7 23 3 196 1 20 Implicit GDP deflator 29 2 23 4 17 0 17 5 Government finance (% of GDP, includes current grants) Current revenue 22 2 27 7 27.6 93 94 ss 5 97 98 Current budget balance 5 5 6 5 57 GDP deflator :CPI Overall surplus/deficit -2 3 -3 8 -3.7 TRADE 1977 1987 1997 1998 Export end import Ievels (US$ millions) (US$ millions) Total exports (fob) 2,660 5,254 11,680 11,331 16r000 Coffee 1,498 1,633 2,259 1,915 Hydrocarbons 106 1,342 2,707 2,387 12.000 Manufactures 1,025 1,556 5,293 5.614 nos Total imporls (Ctl) 1,970 3,793 14,409 14.836 Food 1.728 4,:000 Fuel and energy 136 148 240 Capital goods 664 1,351 5,561 5,680 s 92 93 9'4 9t 90 97 50 Eunort once index 1995=tOO) 6 26 126 112 imoort orice index 0995=1001 3 26 123 116 L Exports i Irmports Terms of trade (1995=100) 178 103 102 96 BALANCE of PAYMENTS 1977 1987 1997 1998 Current account balance to GDP ratio (%) (US$ mnillions) Exports of goods and services 3,379 6,421 14,238 13,339 4T Imports of goods and services 2,736 5,751 18,399 17,468 2 Resource balance 642 670 -4,161 -4,129 Net income -313 -1,692 -2.371 -2,187 j 92 19 ~. 9 al Net current transfers 49 1,001 640 407 2j g j Lj g . Current account balance 378 -21 -5,892 -5,909 ,-4 ' L Financing items (net) -1,280 43 5,982 4,454 6 Changes in net reserves 902 -22 -90 1,455 8 Memo: Reserves inoludino oold /USS millions) 3 197 3 587 9 611 6.397 Conversion rate (DEC local/USS) 36 8 242 6 1.142 6 1.426.0 EXTERNAL DEBT and RESOURCE FLOWS 1977 1987 1997 1998 (US.t millionsl Composition ot total debt, 1998 (USS millions) Total debt outstanding and disbursed 5,053 17,023 33,865 36,084 IBRD 716 4,111 1,723 1,740 A 1.740 IDA 22 17 10 9 G 6.403 S 9 Total debt service 379 2,830 7.131 6,863 5.451 IBRD 93 618 573 347 IDA 0 1 1 1397 Composition ot net resource flows Official grants 15 19 85 . Official creditors 65 232 -456 107 Private creditors 121 -318 4,053 566 Foreign direct investment 65 319 5,574 3,192 Porttolio equity 0 0 593 -286 F 21,084 World Bank program A - IBRD E - bilateral Commitments 281 180 28 227 8- IDA D - Other multilateral F - Private Disbursements 85 395 152 184 C-IMF 0 - Short-term Principal repayments 41 279 380 232 Net flows 45 116 -228 -48 Interest payments 53 268 150 115 Net transfers -8 -152 -378 -163 Development Economics 9/8199 - 53 -  Additional Annex No.: 11 Summary of Key Environmental Issues and Project Environmental Management Guidebook Background The Borrower has a legal framework and system of environmental laws and regulations. Under the current framework, often referred to as Law 99, a national system for environmental management was established which specifies both broad policy as well as detailed standards for pollution control, natural resource management etc. The Project design has fully taken account of this legal framework. The evaluation of subproject proposals will include environmental screening. Under Bank Loan 3973, the Governmelnt of Colombia is receiving technical assistance aimed at strengthening this system. Following recommendationis made by the Bank, the Borrower has prepared a report Manual para el Tratamiento de los Aspectos Ambientales Asociados al Progrania "Manos a la Obra: Proyectos Comunitarios" (The Environmental Guidebook) which identifies potential environmental impacts associated with the implementation of subprojects. The first draft of the project's Environ-mental Guidebook (EG) was reviewed by the Bank project preparation mission and discussed with the LCSES Environmental Specialist and the Quality Assurance Team. A revised EG was presented to the Bank Appraisal mission. That mission provided detailed comments to the Borrower on the EG. A revised EG was subm itted to the Bank shortly after the completion of the mission. Potential Environmental Impacts and Risks The Borrower and the Bank have identified the following environ-mental issues: (a) water and waste management; (b) soil management and erosion control; (c) solid waste management including management of construction waste; (d) public safety, land and materials management: (e) conservation and restoration of natural cover; (f) alteration of traffic pattemns; (g) air quality and noise levels; and (h) management of combustible material and liquid residues. The EG provides full details on these potential environmental impacts and identifies required mitigation measures. Typology of Subprojects The EG provides details on the enviro-nmenital review process (screening) and the role of key environmental institutions in this review process. The EG is based on the premise that the execution of all subprojects should be undertaken in a manner which insures sufficient attention to enviroinmental concerns. Subprojects which are proposed in areas of high environimenital risk will be rejected. This includes locations on steep slopes, over flood plains/wetlands and areas of high earthquake risk. Given the expected number of subprojects (over 15,000) and the different type of subproject activities, the subproject evaluation process will need to be kept agile and simple. Finally, the EG will serve as an important training and reference tool for project implementation. A copy of the approved - 54 -  EG can be found in the Project files and as an aniex to the Operations Manual. The EG identifies nineteen subproject types that include a variety of small construction projects such as water supply and sanitation, neighborhood road paving and construction, pedestrian walkways, renovation and repair of neighborhood health clinics and schools, extension of electrical networks, community centers, and extension of telephone networks. In addition, it is expected that communities will submit subprojects to improve and expand urban parks, improve urban land quality and erosion control and establish community sports facilities. The EG also identifies two categories of environmental evaluation: (i) nolle required; and (ii) minimum evaluation; Table I presents the typology of subprojects and the recommenided level of evaluation. - 55 -  Table 1: Level of Environmental Evaluation According to Project Type TYPE OF PROJECT NONE LIMITED 1. Water supply network extension X 2. Neighborhood road improvement X 3. Sidewalk constructions X 4. Construction of ditches and curbs X 5. Construction of Pedestrian Bridges X 6. Paving of Roads X 7. Construction of walkways and steps X 8a. Repair and Renovation of health centers X 8b. Construction of Health Centers X 9a. School renovation and repairs X 9b. School Construction x 1 Oa. Construction of child care centers X lOb. Construction of community centers X I1. Neighborhood Parks X 12. Sports Plaques X 13. Construction of rain water channels X 14. Erosion Control X 15. Pedestrian walkways X 1 6a. Construction of Court houses X 16b. Renovation of court houses X 17. Extension of electricity networks and installation X of public lighting 18. Extension of Telephone Networks X 19. Construction of Community Social Centers X Environmental Requirements during Subproject Preparation and Review Each subproject proponent will be required to formally submit a subproject proposal ( Manual de Preparacion y Presentacion de Proyectos Manos a la Obra: Proyectos Comnunitarios). This proposal will include basic information on location, project type, duration, beneficiaries and cost. The proponent will also be required to submit environmental information describing environmental conditions in the Project area such as soil conditions, vegetation, water sources, wetlands, terrain, along with current practices for solid and liquid waste disposal. The specific design and format for the presentation of environimenital infornationi has been evaluated by the Bank's Environmental Specialist and the final version reflects the Bank's input. Environmental information contained in the subproject proposal will be reviewed and verified during the subproject evaluation. If necessary, and depending on the type of project, proponents may be required to have their projects "screened" by the appropriate institution in their locality that is responsible for environmental management and the issuing of environmental permits and licenses. They - 56 -  will also be required to provide information on their community's land use plan, "Plan de Ordenatniento Territorial" (POT) and demonstrate that the proposed subproject is fully consistent with the guidance provided under the POT. FINDETER will review this information to insure that the established procedures for environmental screening have been followed. Subproject proposals that provide incomplete environmental infonnation will be rejected. If environmental impact is expected, subprojects will be required to include detailed mitigation measures in their proposal. Prior to the initiation of subproject financing, FINDETER'ssubproject evaluators will receive comprehensive training on Colombia's legal and institutional framework for environimenltal management along with details on environmental policies by sector (transport, construction, etc.). They will also be provided with the EG, a SubProject Evaluation Manual and the Project Operations Manual to assist them in the execution of their work. In the context of subproject review, they will act in an advisory capacity to proponents. In cases where environmental screening is required, the proponent will be advised to consult the agency which has that responsibility in their locality. Environmental Requirements during Subproject Implementation Prior to the initiation of subproject activities, proponents will be provided with the relevant sectoral guide (ie. roads, building construction, water supply) to assist them in undertaking their work in a manner which reflects good environmental practice. These guides have been included as Annexes to the EMP and will be made available to each zone management team in the 31 Management Zones. SEGs have been prepared for: (i) housing/building conistructioni; (ii) materials transport/roads; (iii) civil works; (iv) water supply and sewer systems; (v) solid and liquid waste management; and (vi) natural resources use and exploitation. This activity will be directly implemented by theFINDETER subproject evaluator. Efforts will be made to insure that overall design of the small subproject works includes the appropriate environmental activity (ie. septic tanks or sewer lines for new buildings) or good environimental housekeeping practices during construction (ie no construction wastes put in sewer drains or urban parks). The overall effectiveness of the activity will be evaluated by the Environmenital Specialist in the NCU. Subprojects will be monitored for compliance with environmental laws as well as with specific environmental management plans (if required). Given that the total number of subprojects and the fixed time frame of 5 months, it will be difficult and costly to do field monitoring of every subproject. Monitoring environmental compliance is an integral part of the overall project monitoring and evaluation plan. The Environmental Specialist based in the NCU will be responsible for overseeing the environmental monitoring of subprojects. Based on the initial evaluation and environmental categorization, subprojects will be selected for field monitoring visits. Results of those visits will be inputted into the overall project monitoring plan. If specific subprojects environimental performance is inadequate, the Specialist can request that the Project's review committee be convened to explore potential solutions. However, it is expected that - 57 -  most performance issues can be dealt with directly and most effectively with the proponent. Institutional Responsibilities The institutional setup for environmental review will conform to the processes and procedures established under Colombian law. DAPRE-FIP, the implementing agency, and FINDETER, the development bank responsible for subproject evaluation, will be responsible for insuring that these procedures are followed. DAPRE-FIP and FINDETER In order to insure adequate environmental analysis and subproject monitoring, the Project would hire during the first year an Environmental Specialist as a regular Consultant who would be based in the National Coordinating Unit (NCU). In year 2 and 3, the Specialist would be hired as a consultanit as needed. The requirements of the position will include solid background on the legal and institutional framework currently in place in Colombia, along with previous experience with environmental management and training. The Specialist will be responsible for providing environimental oversight on subproject approval and implementation. He will make subproject site visits, review subproject assessments and approvals undertaken by theFINDETER evaluators, and be available as a resource person on environmental issues related to project implementation. The Specialist will also be the key resource person for both the NCU and FINDETER on environmental screening and review procedures along with similar procedures identified in each participating municipality's POT(Plan Ordenamiento Territorial). In addition, the Specialist will oversee the implementation of the environmental training program that all subproject evaluators will be required to take prior to assuming their positions with FINDETER. The Specialist will provide substantive input on environmental subproject criteria to the Project team charged with overseeing the promotion of the Project througlhout Colombia. Specific terms of reference for the Specialist have been included in the final version of both the EG and Operations Manual. Under current operating guidelines, FINDETER is responsible for insuring that infrastructure investments are screened for environmental impact by the legally responsible agencies (national, regional or urban). FINDETER's management has the capacity to review proposed investments to insure that project proponents have adhered to the legally binding screening and review process. Proponents must submit, as needed, documents such as environmental licenses, permits and management plans before an investment project can be approved for funding. FINDETER is currently receiving support from the Bank under loan CO-PE 6861. Component 3 (Institutional Strengthening) of that loan provides support toFINDETER to improve its overall project management capacity. One of the activities which has been undertaken was the preparation of a plan to improve its capacity to review compliance with environmental laws and to evaluate on an ongoing basis the environmental performance of - 58 -  investment projects. It is expected that resources will be directed at developing monitoring and evaluations methodologies and information systems to environmental performance. The subproject proposals will be prepared taking into account social, financial, environmental and technical criteria identified during the Project preparation phase and detailed in the Manual de Preparacion y Presentacion de Proyectos Manos a la Obra: Proyectos Cornunitarios. Environmenital baseline information including the characteristics of the subproject site will be included in the proposal along with the results (if required) of the environmental screening process. For subprojects requiring (i) additional environmental review; required documentationi such as an environmental management plan will be submitted along with the proposal. These proposals will be reviewed byFINDETER's subproject evaluators based in FINDETER's 10 regional offices. The content of subproject proposals will be evaluated according to the criteria presented in theManual de Evaluacion Ex-Ante de Proyectos. Resource Requirements for Environmental Investment Activities Environmental Investments Investment Project Total Cost Responsible Institutions (thousands of US dollars) Environmental Specialist (full-time I year) 30,000 DAPRE-FIP Environmental Monitoring of Subprojects (travel and per 10,000 DAPRE-FIP diem) Reproduction and Distribution of Environmental 50,000 DAPRE-FIP, FINDETER Management Guidebooks Total $90,000 - 59 -  Additional Annex No.: 12 SOCIAL ASSESSMENT AND PARTICIPATION Social Assessment The Project is not expected to have a negative impact on any special population group. For this reason a full social assessment was not deemed necessary. Instead, a series of consultations were conducted with key stakeholders in order to ensure that measures will be taken to guarantee fair participation of special groups, as explained below. Women. The experience of workfare programs such as Trabajar in Argentina shows that the participation of women tend to be low due to the fact that traditionally they are less inclined to do construction work. The national Household Survey of March, 1999 in Colombia shows that only 2% of the total labor force of women is involved in construction work. Furthermore, of all construction workers, women represent only 0.6%. It is likely that the percentage is somewhat higher for community public works; nevertheless, participation of women is expected to remain low. During project preparation, consultations were conducted with several women's organizations, including representatives of Corporacion Vamnos Mujer from Medellin, the Mesa de Trabajo Mujeres y Economia in Bogota, a gender specialist from the Department of Economics of Javeriana University and the Adviser on gender issues to the Social Development Unit of DNP. They are all aware of the low level of participation of women in construction activities and they agree that efforts should be made to promote greater participation of women in the Project. In order to address the issue of women's access to project benefits, several measures would be taken. First, within the first year of project implementation, there would be an assessment of the extent of women's participation in the Project and, if necessary, steps would taken to develop an appropriate strategy to improve it. The assessment would be based on a monitoring system that would gather data and report the participation rate of women by region and type of activity. Development of corrective measures will include a review of the types of activities perforned in programs with similar features as Manos a la Obra. Proyectos Comunitarios, such as Obras con Dividendo Pedag6gico in Bogota, PRIMED (Programa de Mejoramiento de Barrios Sub-normales) in Medellin or Construcci6n de Acueducto y Alcantarillado por Autoconstruccion in Cali. Second, in developing and implementing the project's information and communications strategy, emphasis would be put on the promotion of women's participation. It is hoped that, as a result of these measures, the Project would show rising participation of women during implementation. Indigenous Peoples. The participation of indigenous groups in the Project is also expected to be low, given its concentration on large urban areas, where the presence of indigenous peoples is extremely low. Consultations were hield with representatives of indigenous organizationis, including two Indiani senators and the Executive Director of ONIC (National Indigenous - 60 -  Organization of Colombia). The objective of the consultation was to present the Emergency Social Fund and its components, particularly Manos a la Obra: Proyectos Comunitarios and to seek guidance on ways for indigenous peoples to access project benefits. The indigenous participants in the consultation made the following recommendations: (i) make an explicit effort to reach theResguardos Indigenas and the Cabildos and provide the necessary support for them to present project proposals; (ii) earmark a percentage of the Project funds for subprojects proposed only by the Cabildos, using objective criteria to define the amount (the different Resguardos would compete for these funds based project criteria); and (iii) test.the instruments for project formulation and adjust them as needed to make sure they are adequate for the Indian populations. These recommendations were considered in the design of the Project. The second recommendation was rejected as it would invite other special population groups to ask for the same deal, whichwould make the Project very complicated. Afro-Colombian Populations Poor Afro-Colombians unskilled workers living in urban areas would have access to project benefits on equal terms with other eligible beneficiaries. Their participation is expected to be high since they tend to represent a large percentage of the bottom income quintile. This expectation is substantiated by evidence from a recent study conducted as part of the poverty studies for the City Development Strategy in Cali (1999) Results of a specialized representative sample survey on access and perception of public services show that even though the coverage of public social programs is low among the poorest, Afro-Colombian households have higher coverage than others. A similar situation is expected in other urban centers, since the Project would use the same targeting instrument (SISBEN) to identify program beneficiaries. Internally Displaced Groups. Adult men and women who are displaced as a consequence of the internal conflict would have equal access to the temporary work opportunities offered by the Project. However, there would be no special component in the Project for this sub-population, as the Government is planning a special program under the Red de Solidaridad Social with other funding sources. Participatory Approach a. Primary beneficiaries and other affected groups The key stakeholders of the Project are poor workers, municipalities, NGOs and other non-profit organizations. The use of a mix of implementing agencies, combining public and non-governmental organizations, together with the project's demand-based approach and the decentralization of project implementation provides a framework that is conducive to a high level of social participation. However, this mix must be complemented by enhanced participation of local people in the identification and selection of the proposed subprojects for several reasons. First, local participation in subproject proposals builds ownership and interest, which are critical variables for the sustainability of community infrastructure works. Second, by financing community infrastructure the program provides an opportunity for developing social capital. - 61 -  During appraisal, the mission examined a couple of ideas for enhancinig local people's participation. One idea is that the inclusion in the Operations Manual of a requirement for subprojects proposed by Churches, community organizations, or NGOs to describe how the local population participated in the decision. Given their normal practice, these projects can be assumed to have already benefited from local people's participation and that, therefore, reflect closely the demand of the population. The same requirement would apply to the Government proposed works that are currently part of the Municipal Development Plan, since they too can be assumed to have benefited from local consultations. The other idea relates to new works proposed by these governmental entities, where the assumption of previous local consultations do not hold. In this case, the Project would require them not only to present a description of how the local population participated in the decision to do the proposed work, but also to provide evidence on how they will be involved in the use and maintenance of the subproject. The mission recommended that the above requirements be incorporated in the final version of the Operations Manual. A critical factor to the promotion of a participatory approach is the development of an effective information and communication strategy not only to generate public support but also to promote social control of project activities. For this purpose, the Project is developing such strategy with the help of a professional consultant and is allocating funds for its completion and execution during project implementation. The envisaged strategy would ensure that (i) the general public knows the existence of the social safety net program; (ii) the executing agencies (organismos de gesti6n learn and become familiar with how the system works; (iii) the potential beneficiaries know the eligibility criteria, their rationale and ways of accessing the program and its benefits; and (iv) citizens exercise social control over the program. The strategy would use a variety of methods and media appropriate to particular audiences to communicate program objectives, benefits, requirements, rules, procedures, and results. Implementation of such a communications strategy would increase transparency, efficiency and better targeting. The proposed communications strategy would have the following elements: (a) a nationial campaign using mass media to present the Project nationwide as a component of the Plan de Apoyo Social (PAS); (b) a clear message to all potential beneficiaries, using a combination of mass media as well as informationi posts indicating what the Project is about, how to benefit from the Project, and where to go for additional information; (c) use of a Veeduria Ciudadana (citizen watch) as a central social control mechanism; this would be partly accomplished by: (i) putting up a billboard for each project indicatilg the nature of the work, the sponsor, the names of the workers, the cost of the Project and the expected completion date (this would facilitate assessment and ilformed discussion by neighbors of the quality of project implementation and compliance with the "rules of the game"); and (ii) establishment of a specialized phone service center providing information and receiving complaints about specific subprojects; (d) establishment of informationi posts in key project service sites, such as the regional offices of FINDETER, the municipal hall, NGO buildings and parish social centers (brochures and leaflets about Manos a la Obra: Proyectos Comunitarios in general and specific - 62 -  subprojects in the locality in particular would be made available in these posts); (e) a series of video-conferences for the staff of the organismos de gesti6n to explain all project criteria and procedures, as well as changes thereof to avoid delays or misinformation. The Earthquake Recovery Project suffered great difficulties in its initial stage because the NGOs managing the reconstruction zones lacked timely access to such information; and (f) regular TV programs to feature excellent projects, gross failures, main complaints and most common questions. b. Other key stakeholders Other key stake holders include Mayors, heads of the local governmenits which have to provide the counterpart funds for materials and specialized labor. Consultations have been held with the Mayors of Santafe de Bogota, Valledupar and Manizales. They all support the Project and agreed with its objective, incentive structure and procedures. They indicated that they would give this project a very hiigh priority and would like to see it implemented immediately. A concern expressed by one of the Mayors is the need to have clear procedures for allocating project resources among the municipalities within theFINDETER regional office to avoid the risk of political manipulation favoring proposals from communities where the regional office is located. NGOs are another key stakeholder. The consultations with representatives of the Colombian Confederation of NGOs as well as with leaders of NGOs from various regions of the country also slhow a great amount of support for and interest in the Project. The conditions for NGOs to participate as well as the responsibilities and functions proposed in the Operations Manual are acceptable to them. Those conditions, responsibilities and functions are similar to the ones used in the Reconstruction project. Community Organizations such as Communal Action Boards (Juntas de Acci6n Comunal) and Local Administrative Boards (Juntas Administradoras Locales) also have a stake in the Project. They will most probably work in conijunictioin with the municipality as they usually do with other community infrastructure projects. Some of the Community Action Boards are very experienced and effective in community infrastructure projects, as it has been demonstrated in the Projects of Santafe de Bogota and Medellin. These Boards could be developed as Organismos de Gesti6n. - 63 -  Additional Annex No.: 13 Institutional Organization and Flow of Funds Organizational Chart of Red de Apoyo Social ADMINISTRATIVE DEPARTMENT OF THE PRESIDENCY INTERNAL MON IT. & > (DAPRE) , CONTROL EVALUATION -DNP-"i, -DNP- FONDO DE INVERSION os PARA LA PAZ (FIP) l DMCRATIZATION & |RED DE APOYO SECURITY PEACE SOCIAL lSOCIAL AND POESS DEVELOPMENT JUSTICE CEXTERNAL )- NT. C . l|STEERING COMMITTEE| _~~NL CO RD FINANCIAL AN TRAINING FOR S ADMINISTRATIVE UNEMPLOYED YOUTH U ( Ir I 1-11 - R 0.. LL JUDICIAL OFFICE CODTOA0 0 v _ ; SUBSIDIES _ G 4 . ~~~~~~~~~~~~~~~~R COMMUNICATIONS A OFFICE OBR S _~~~~~~~~~~~~~~~ OFFICE _ MANAGEMENT | INFORMATION SYSTEM - 64 -  2. Organizational Chart of Manos a la Obra: Proyectos Comunitarios 65 -  3. Flow of Funds and Information MULTILATBRAL BANKS Deposit the funds in the Speciai Account Banco de la Republica R Receivesfunds and informsthe DGTN. NATIONAL TREASURY (DGTN) DAPRE-FIP a Records Special Account transactions into the Gives instructions to DGTN SIF system. This information can be accessed 4 to make payments through immediately by Credito Publico who then the banks, using the SI F would authorize disbursement. system (see next chart). A NGOs'EAs Consulta & Supplier Beneficiaries Suppliers of Goods | FLOW OF FUNDS - l |FLOW OFINFORMATION - 66 -  4. Flow of Funds under the SIIF System 4. Banco de la Repuiblica debits National the Special Treasury Account for the (DGTN) amount of payment using the current exchange rate. _ 1. DAPRE-FIP through the SIIF Banco de la authorizes payments against the Republica Special Account. Entries should (BR) g r include required information of beneficiaries (name, bank account | DAPRE-FIP lnumber, amount and currency). 2. DAPRE-FIP through the SIIF will also have access to the following data: (i)PAC (Plan Annual de Caja); (ii) balance of the Special Account; and (iii) Credito P6blico approvals. INTEGRATE X FINANCIAI 3. DAPRE-FIP will pay to NGOs and EATs through the SIIF including minor foreign payments National Treasury.. NationalTreasu) y according to Bank policies. ENTMES g ACTIVITIES 7 -67 -   MAP SECTION   IBRD 26153 ...- -.,.....MINtCAN REP. JAMAICA,, A~, ROORAS , Alnc - COLeOM-'B-I - - - : vsX WS;NCARAGUA 12' 12- - IA - P RirJb-34J < 5ANrAFEDE4 1 (l 7f-R GUIANA ' - I - ATIA Tw 1WW V f i, . -Will m Hedu rERU BRAZIL \CSAR ! "". 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