Armenia - Social Investment Fund Project

Document of The World Bank Report No. 14655-AM STAFF APPRAISAL REPORT ARMENIA SOCIAL INVESTMENT FUND PROJECT OCTOBER 23, 1995 Municipal & Social Services Division Country Department IV Europe and Central Asia Region CURRENCY EQUIVALENTS 5/95 Currency Units = Drams (D/.) D/.1.00 = US $/0.0024 US$1.00 = D/425. WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS AAA Armenian Assembly of America AAF All Armenia Fund ASIF Armenian Social Investment Fund ASIFPU Armenian Social Investment Fund Preparation Unit CDC Centers for Disease Control (Atlanta, Georgia) DC Direct Contracting FSU Former Soviet Union GDP Gross Domestic Product GNP Gross National Product GOA Government of Armenia ICB International Competitive Bidding IDA International Development Association IMF International Monetary Fund JO Joint Office MC Microproject Committee MIS Management Information System MIU Microproject Implementation Unit NCB National Competitive Bidding NGO Non-governmental Organization(s) NS National Shopping OECD Organization for Economic Cooperation and Development PPF Project Preparation Facility SIF Social Investment Fund SOE Statement of Expenditure SDS State Department of Statistics TA Technical Assistance UNDP United Nations Development Program UNHCR United Nations High Commissioner for Refugees UNICEF United Nations Children's Fund USAID United States Agency for International Development ARMENIA - FISCAL YEAR January I - December 31 CONTENTS CREDIT AND PROJECT SUMMARY ................................................ i BASIC SOCIO-ECONOMIC INDICATORS......................................... iv I. INTRODUCTION AND COUNTRY SETTING.................................1 II. PROJECT OBJECTIVES ........................................... ...... 14 III. PROJECT DESCRIPTION.............. ............................ ..... 16 IV. PROJECT IMPLEMENTATION ...................................... ..... 20 V. PROJECT COSTS AND FINANCING ................................. ...... 29 VI. BENEFITS AND RISKS ........................................... ...... 39 VII. AGREEMENTS REACHED AND RECOMMENDATIONS ....................... 40 ANNEXES Annex A: ...................................Government Decree Establishing the ASIF Annex B: ...................................... ...... Outline of Operational Manual Annex C: .................... . ...........Integrated Monitoring and Evaluation System Annex D: ..........Capacity Building of Communities, Implementing Agencies, and Contractors Annex E: .......................................Institutional Organization of the ASIF Annex F: ......................... Terms of Reference for Targeting of the ASIF Annex G: .............................Selected Appraisal Criteria for ASIF Microprojects Annex H: ...........................................Monitoring of Living Standards Annex 1: ................................................ Environmental Concerns Annex J: ................................................... Detailed Project Costs Annex K: ............................Proposed Project Implementation Plan and Schedule Annex L: ........Terms of Reference for Financial Audit and Procurement and Technical Review Annex M: ....................................Implementation by Implementing Agency Annex N: ......................................... Estimated Disbursement Schedule Annex 0: ................................................ .....Monitoring Indicators Annex P: ...............................................Issues Relating to Women Annex Q: ............................... ...Proposed Supervision Schedule Annex R: ......................................Draft Procurement Plan and Schedule Annex S: ......... ........List of Recent Studies on Poverty and the Social Sectors in Armenia This report is based on findings of an appraisal mission which visited Armenia in April-May 1995. The mission comprised Alexandre Marc (Task Manager), Gita Gopal (Procurement and Disbursement Specialist), Mohini Malhotra (Microenterprises Support Specialist), and consultants Piet Goovaerts (Infrastructure Specialist) and Mary Schmidt (Social Funds Specialist). Usha Khanna and Jim Lynch provided assistance with text processing and editing. Antonio Lim provided assistance with costing. The Peer Reviewers are S. Jorgensen (AF6PH), L. Webster (PSD), and M. Nowak (EC3AW). Mr. Thomas A. Blinkhorn is the Division Chief and Mr. Basil Kavalsky is the Director. TABLES Table 5.1 Project Cost Summary Table 5.2 Proposed Financing Plan Table 5.3 Procurement Arrangements Table 5.4 Allocation of IDA Credit by Disbursement Category Table 5.5 Estimated Disbursements MAP: IBRD No. 23943R1 -1- ARMENIA SOCIAL INVESTMENT FUND CREDIT AND PROJECT SUMMARY Borrower: Republic of Armenia Implementing Agency: Armenian Social Investment Fund Beneficiaries: Unemployed and low-income groups in rural and urban areas, small private contractors, local governments, NGOs and community organizations, State Department of Statistics. Poverty Category: Program of Targeted Interventions Amount: SDR 8.1 million (US$12.0 million equivalent) Terms: Payable in 35 years with 10 years grace at standard IDA terms. Commitment Fee: 0.50 % on undisbursed credit balances, beginning 60 days after signing, less any waiver. Financing Plan: See Section V Net Present Value: Microprojects financed under the SIF project will be selected according to criteria described in the Operational Manual, integrating basic cost benefit analysis. Project ID Number: AM-PA-35768 Project Objective: The ASIF would aim to support the lower income groups among the Armenian population through improvement of basic social services and creation of employment opportunities. The primary objectives of the project would be to: (a) rehabilitate basic small-scale infrastructure that can result in immediate improvements of the living conditions of the poorest among the population; (b) strengthen the capacity of private small-scale contractors and other micro-businesses so that they can benefit directly or indirectly from contracts financed by the ASIF; (c) generate employment through financing of labor- intensive public works; and (d) build greater capacity for policy makers to monitor and analyze trends in the level and structure of poverty in Armenia. - II - Project Description: The project has four components: (i) Financing of ASIF Microprojects to Support the Rehabilitation of Small-Scale Infrastructure. Such works could include rehabilitation of local clinics, primary schools, sanitation work and water supply, energy saving repairs, repair of feeder roads, as well as rehabilitation of degraded village and town environments through cleanup and tree planting. The project could also provide furniture and basic equipment for rehabilitated infrastructure. (ii) Institutional Support for the ASIF. This component would support the ASIF through provision of equipment, vehicles, salaries, operating costs, training, technical assistance, and financing for monitoring and evaluation. (iii) Capacity Building of Small Contractors, Implementing Agencies and Communities. This component would provide training and technical assistance to contractors and other local private firms, implementing agencies and communities to increase their technical and managerial capacities. Training and technical assistance would focus on competitive bidding, preparing contracts, monitoring work progress and community participation. (iv) Support for Monitoring Living Conditions. This component would cover technical assistance, vehicles, equipment, enumerators' salaries, and supplies of the State Department of Statistics to refine its methods for conducting sampling and household consumption surveys. It would also finance implementation of two household surveys by the State Department of Statistics. Project Benefits & Risks: Benefits - The project would generate substantial benefits for the poor through the provision of basic social infrastructure financed through hundreds of microprojects. The microprojects would deliver immediate benefits in terms of generation of employment and income and improvements in the access and quality of basic services and infrastructure, as well as longer-term benefits in terms of improvements in the living conditions of the population. The project would strengthen the country's ability to target, appraise and monitor efforts to reduce poverty. It would assist the Government in mobilizing additional external financing in support of its reform objectives. The project would also have an important institutional effect by strengthening the capabilities of local government, NGOs, and local organizations, in particular helping to reinforce a sense of ownership and involvement at the community level. The ASIF would demonstrate the importance of beneficiary participation in poverty reduction and provide an efficient and effective model for implementation. Small private - 111 - contractors and other small entrepreneurs would benefit in the form of increased revenues and improved technical, managerial and institutional capacity through their execution of work contracts. Risks - Risks facing the project arise from possible political factors that could compromise the ASIF's autonomy, credibility and effectiveness; potential problems with microproject quality in the field; and limited managerial, technical and institutional capacity of local organizations responsible both for proposing and implementing microprojects and for financing operation and maintenance after the microproject is completed. The capacity of the ASIF to maintain a good and capable working team, maintain transparency, and oversee the implementation of about 125 microprojects a year remains to be tested. To reduce these risks, the ASIF would be granted autonomous status with adequate institutional checks and balances and transparent and efficient operating procedures developed during the pilot phase, incorporated in the Operational Manual, and subject to review during supervision. To reduce risks further, microproject appraisal would examine the capacity of contractors and local organizations to carry out and supervise works, and the ASIF would provide technical assistance and training to fill institutional, technical and management gaps. A participatory approach would be taken for identification and implementation of microprojects to ensure that microprojects respond to an urgent and felt need, thereby increasing the commitment of community members to sustain microprojects and demonstrating the benefits of collective actions surrounding local development.  - iv - REPUBLIC OF ARMENIA BASIC SOCIO-ECONOMIC INDICATORS INDICATOR ARMENIA YEAR Social and Demographic Indicators Area 29,800 km2 Population 3.740 million 1994 Urban (69%) Rural (31%) Male 1.812 million Female 1.928 million Population Density 120.8 per km2 GNP per capita(US$, estimated) 670.0 1994 Health Data Life Expectancy at Birth (overall) 70.7 1990 Female 73 1992 Male 67 1992 Infant Mortality Rate per thousand 17.7 1993 18.6 1992 Female 16.6 1993 Male 18.8 1993 Maternal Mortality Rate per 100,000 live births 35 1988 Under-5 Mortality Rate 24.2 1992 Female 21 1992 Male 29 1992 Physicians per 10,000 population 36.3 1993 Beds per 10,000 population 119 1993 Health expenditures as percentage of total government expenditures 5.2% 1993 Education Data Primary pupil/teacher ratio 10/1 1994 Education expenditures as percentage of total government expenditures 7.2% 1993 Health and Education expenditures as percentage of total government expenditures (estimated) 10.9% 1995 Sources: Country Economic Memorandum, March 1994, and update, November 1994; World Development Report 1994  REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND STAFF APPRAISAL REPORT I. INTRODUCTION AND COUNTRY SETTING A. Introduction 1.1 Before 1988, Armenia experienced relatively robust economic development, unparalleled among other former Soviet republics. Today, the small nation faces immense development challenges stemming from the breakup of the Soviet system, the transition from a centrally-planned to a market economy, a devastating earthquake in 1988, and war and civil disorder in bordering states. The Government of Armenia (GOA) aims at achieving macroeconomic stability, promoting sustainable growth, creating a strong private sector within the framework of a market-oriented economy, improving efficiency of the public sector, and protecting vulnerable groups among the population. Economic and public sector reforms are underway, but these are long-term processes. Meanwhile, there is an immediate need for meeting basic needs and reducing poverty. In response to the present difficulties, the Government will create the Armenian Social Investment Fund as an autonomous and demand-driven agency to finance small-scale projects for the rehabilitation of basic social and economic infrastructure. The proposed project will support the operations of the Armenian Social Investment Fund with an IDA credit of US$12 million over four years. This report discusses the GOA's program to reform the economy and the current and prospective status of the social sectors. It recommends an IDA credit in the initiation and operation of the Armenian Social Investment Fund. B. Historical Setting 1.2 Armenia is one of the smallest of the former Soviet republics, with a population officially estimated at 3.65 million, and a land area of 29,800 square kilometers. It is struggling to recover from the devastating effects inherent in the dismantling of the Soviet economy and adjustment from a centrally- planned to a market based economy. Formerly one of the most integrated republics in the Soviet system of production and trade, Armenia is now suffering correspondingly due to the disruption of the Soviet monetary, payments, trade and transport regimes. The country also is coping with destruction caused by the 1988 earthquake as well as the human and economic consequences of the dispute over Nagorno- Karabakh and instability in Georgia (both have effectively blocked imports, especially energy, and have sharply reduced the scope to expand exports).' As a result of the conflict, approximately 334,000 Armenians have entered Armenia as refugees. The disruptions have also led to a massive emigration from the republic. According to some unofficial estimates, up to 750,000 Armenians (approximately 20 percent) have left the country, at least temporarily, since 1992 as a result of the war or economic difficulties. 1.3 Since independence in 1991, Armenia has experienced very sharp falls in output. GDP fell by 52% in 1992 (to about one third of its 1989 level), and a further 15% in 1993. Living standards The earthquake resulted in 25-30,000 deaths, left 530,000 homeless, and destroyed schools, hospitals, homes, and approximately 40 percent of the republic's manufacturing capacity. By the end of 1994, unemployment in the earthquake zone was estimated to be as high as 75 percent. -2- have plummeted and the levels of real wages and benefits are now among the lowest in the FSU, resulting in a sharp increase in the numbers of people living in poverty. Average real wages at the end of 1993 had fallen to about 6% of their level two years earlier. The GNP per capita of US$2,160 in 1990 declined to an estimated US$670 in 1994. As a consequence of the economic crisis, government revenues fell from over 50% of GDP in 1989 to an estimated 13% in 1994. In spite of the devastating shocks, the GOA embarked on an ambitious structural reform program. Progress was made in creating the legal, institutional and economic base of a market economy. However, after an ambitious start, the pace of structural reform began to falter in the second half of 1992 as regional conflict, the decline in living standards, and rising social tensions began to dominate the GOA's agenda. C. Recent Developments 1.4 Reform efforts were intensified since 1993 and initiatives were made in price liberalization, privatization of agricultural land, tax reform and the liberalization of the exchange and trade system. Discussions with the IMF led to Armenia's use of a Systemic Transformation Facility. In early 1994, faced with rampant inflation and its new monetary independence, the Government tightened financial policies and limited public expenditures. Inflation declined from an average of 46% per month in the first quarter of 1994 to about 4% per month in the first 6 months of 1995. In 1994, real GDP is estimated to have grown by 5.4%. The overall state budget deficit is estimated to have been reduced to 16% of GDP in 1994 from 56% in 1993. It is projected to fall to 8.5% in 1995. 1.5 Efforts to settle the political dispute over the enclave of Nagorno-Karabakh have also shown positive results. A formal cease-fire was reached with Azerbaijan in July 1994 and a peace agreement is now under negotiation. This development offers the real prospect of a lifting of the blockade in the near future. In addition, trade with Iran has been growing rapidly and is now second in importance only to that with Russia, while increasing stability in Georgia has significantly eased Armenia's isolation. 1.6 Despite continuing efforts to achieve peace and implement economic reforms, the Government has been less able to provide tangible support for the poor, for earthquake victims, for refugees and for vulnerable groups hurt by the economic disruptions. It is estimated that the share of Government social expenditure (Health and Education) in GDP fell from 15.2% in 1992 to 11 % in 1993, and to an estimated 8.6% in 1994. (Projections for 1995 are 10.9% of total expenditures.) This, compounded by the lack of heating fuel and fall of living standards, has resulted in declining health and nutrition for the population. The tightening of fiscal and monetary policy will put further strain on social protection programs even though these programs already fall short in providing even the most basic needs. Ultimately, the poor and other groups will benefit from restored growth, but measures are needed to support these groups during the transition. D. Living Conditions and Poverty in Armenia 1.7 Poverty in Armenia has increased dramatically during the transition years, though there was some poverty in 1989. Under the Soviet system, heavy, ultimately unsustainable state subsidies gave most citizens access to adequate food, primary and secondary education, and basic health services. Salaries were augmented by benefits in kind, such as paid holidays, maternity, sick and family leave. Today, much of the population is concerned with securing enough food and fuel for winter. In general, -3- both wages and household incomes show relatively little disparity, suggesting that it is the sharp drop in incomes, rather than a deterioration of its distribution, that has driven the rise in poverty. Real wages fell by 58.6% in 1993 (6% of their level two years earlier), following a 45.5% fall in 1992, though it appears that wages are increasing faster than prices in 1995. More than two-thirds of average household expenditures were spent on food in 1992-94, peaking at 71 percent in fourth quarter 1993. Annual average consumer price inflation in 1992 and 1993 was over one-thousand percent and contributed to this fall in real income. Consumer subsidies which in the past helped to maintain the affordability of a wide variety of consumer items, including bread, essential milk products, education, hospital services, utilities, housing rents and transportation, have been or are being cut to decrease the fiscal deficit, while compensation mechanisms are being put in place to assist those with the greatest needs. 1.8 While official unemployment was 7% of the labor force in May 1994, the actual level of unemployment is probably much higher. Many people without jobs failed to register for unemployment because labor offices have few job vacancies to offer and the criteria for receiving benefits is restrictive. Furthermore, since employment benefits are of limited duration while unemployment is typically long- term, the share of those receiving benefits out of total registered unemployed is less than 20%. An estimated 12% of workers were on short-time work or forced leave without pay and were also not counted among unemployed. 1.9 The Government is currently undertaking a household survey from which a poverty profile will be formulated. A participatory rapid assessment is also underway which will provide further information on the dimensions and characteristics of poverty in Armenia. Preliminary impressions from preparation work for the poverty assessment and other available sources indicate that rural areas are better off than urban ones, because rural residents have access to private food plots as a result of the land reform which also led to some movement from urban to rural areas. There is also general agreement that in rural areas large families are better off than small ones because they have more income earners. Social services that in the past were provided by collective farms, including transportation, utilities and nurseries, are often not functioning. Many rural areas have experienced a complete breakdown of communication and transportation networks and are characterized by a subsistence and barter economy. The cold conditions and absence of heating have exacerbated the predicaments and well-being of Armenians with frequent reports of frostbite, particularly among the vulnerable population in urban areas. Days with only bread for meals and days without heat were common for many during the last three winters. Clearly, the earthquake victims and many of the refugees from neighboring Azerbaijan are among the poor, in terms of both income and assets. The U.S. Centers for Disease Control (CDC) Winter Preparedness Study of 1994 found that households of single mothers and pensioners with no family support were among the most vulnerable. In the summer of 1994, when the Government decided to eliminate the non-targeted general consumer subsidy on bread, it identified the unemployed, the low-paid families with children, and pensioners as the most vulnerable elements of society. E. The Social Safety Net 1.10 Humanitarian assistance, support from Armenians abroad, and privatization of agricultural land constitute a significant share of the safety net now that government benefits have eroded considerably. Social protection in Armenia is the primary responsibility of the Ministry of Labor and Social Protection, which has a regional network of 66 local social protection offices, although other -4- government agencies also participate in policy formulation, in particular, the Pension and Employment Fund, the Ministry of Finance, and the Ministry of Economy (which has a department dealing with social protection issues). Armenia has a formal system of cash transfers, based on the system inherited from the Soviet era, which is not targeted toward the poor. The core of this system is the Pension and Employment Fund (PEF), which is financed by a payroll tax of 35% from enterprises, plus 1% by employees and minor contributions from self-employed workers. Old-age, disability, survivor, child allowance, maternal leave, and unemployment benefits are paid from the PEF. In the first three quarters of 1992, total PEF revenue amounted to about 7% of GDP, while expenditures reached about 9% of GDP. The Government is having great difficulty maintaining the level of benefits above bare subsistence level. As unemployment rises the inflow to the PEF will fall further, making it difficult for the Government to continue paying even current benefit levels. However, recent steps have been taken in the framework of the preparation of the rehabilitation credit to increase the sustainability of the PEF. In particular, the Government has introduced pension reform which consists of increasing the retirement age, changing the nature of the benefit formulas, and reducing special exemptions and privileges. 1.11 An important factor that has enabled the Armenian population to cope with drastic impoverishment is the strong network of reciprocity which links relatives, close neighbors, friends and colleagues. Urban families with relatives in the countryside have greater access to food, for example, and families with workers abroad receive remittances which are distributed among relatives. Groups that lack such a network, such as those without kin, or those with a more limited network, such as refugees, are clearly more vulnerable. According to a CDC study, the selling of possessions and reliance on savings and gifts accounts for a majority of the revenues of the population. For the last two winters, (93/94 and 94/95), the government bread ration (supported through humanitarian food assistance) constituted a major portion of needed calories, and preempted acute malnutrition. The privatization of agricultural land in 1991 constituted probably the most effective way of ensuring a safety net for a large portion of the population in the short-term as private plot produce provides an important bulwark to real consumption. The percentage of the labor force in agriculture which was only about 18% in 1990, grew to 23% in 1991 and 30% in 1992. 1.12 In 1993-94 the Government's social sector reform strategy evolved toward a targeted system for poverty reduction through a new poverty benefit distributed through newly-established local social service offices. Although offices have been set-up, lack of revenue has limited fulfillment of the program, which is intended to identify and to provide cash and kind transfers to those at special risk. Until the program is in place, adequate expenditures on subsistence incomes are essential for maintaining the social safety net, especially in communities where the informal social safety net has weakened. 1.13 Resources from the Armenian Diaspora have been a very important source of investment in Armenia. A study by Alen G. Amirkhanian on the contribution of Armenian communities abroad to Armenia's social sector found that in 1993, Diaspora transfers to the health sector were equal to about 60 percent of the State budget for health expenditures 2 This figure does not take into account salaries of Armenian Diaspora doctors that provided free services nor drugs and equipment that were donated without estimation of their market value. In terms of welfare, Diaspora transfers represented 2 "Study on the Contribution of the Armenian Communities Abroad to Armenia's Social Sector: Health, Education, and Welfare," Alen G. Amirkhanian, Poverty Assessment Working Paper #2, Draft, June 1995. -5- approximately four times as much as the cash benefits from the State budget for social assistance. The study also found that the Diaspora was very responsive in periods of crisis. It provided important funding in 1993 and 1994 to emergency campaigns such as the Operation Winter Rescue and Winter Fuel Project. 1.14 Resources are desperately needed to support the restructuring of the economy and development of the social sector, but these are much more difficult to mobilize than those for emergency support. Amirkhanian projects that the improvement of the economic situation in Armenia, aid fatigue in many countries where Diaspora communities reside, and lack of accountability on the government's part for past aid will lead to diminishing aid flows unless new vehicles are found to channel funds and the investments of funds are more sustainable. New fundraising strategies are needed in Armenia to attract Diaspora funds, as well as better understanding on the part of the Diaspora of the neea for sustaining private financial flows to ensure that the economic and social reform continues. The study also shows that a lack of accountability in many programs has undermined the country's ability to attract more funding. 1.15 One successful campaign in attracting funds has been through the All-Armenia Fund. The All-Armenia Fund was created in Armenia six months after Armenia's declaration of independence in 1991. It was established as an NGO with some governmental officials on its board. The All-Armenia Fund relies on national committees around the world for fundraising. Since 1991, it has implemented social assistance programs and infrastructure works in Armenia. F. Health Sector 1.16 Health indicators in Armenia are comparable to those in other republics of the FSU despite a major deterioration in health service delivery since the beginning of 1992 and neglect of maintenance of facilities. The infant mortality rate in Armenia was estimated at 17.7 in 1993, down from 25.3 in 1970 and 22.6 in 1985, and 18.6 in 1992. This decline is explained by the effectiveness of humanitarian assistance and government efforts to redirect programs toward primary health care. According to a recent survey funded by USAID, there is no indication of acute malnutrition overall despite a possible few cases of chronic malnutrition. However, because of the sharp decline in living standards since 1991, many households can no longer maintain nutritional standards or afford basic health services. There was also an increasing number of outbreaks of waterborne communicable disease in 1994, most due to contamination of drinking water through damaged pipes. No epidemics have been reported, but the situation is of concern. Since 1992, cases of polio and diphtheria have been diagnosed, which had practically disappeared in Armenia. Immunization programs have been maintained so far with support from UNICEF, but interruption in electricity supply and non-availability of fuel is a major disruption to the cold chain. The health system also lacks basic equipment, drugs and other supplies. 1.17 On the one hand, the system of health care delivery in Armenia is characterized by widely distributed facilities, beds and medical personnel that are often excessive in number. On the other hand, the system is experiencing a clear shortage of drugs, supplies, equipment and maintenance of facilities. The highly centralized management of health care has resulted in inefficiencies. The health care delivery system has a high ratio of doctors and hospital beds to people (36.3 doctors and 80.4 beds per 10,000 inhabitants in 1993). The average length of hospital stay is 15.9 days, compared to 9 days for upper income countries. There is a clear case for reducing the number of hospitals and doctors and reducing the time patients spend in hospitals. The Government's plan to close some facilities or parts of -6- facilities will permit re-deployment of resources towards health promotion, illness prevention and more effective treatment. 1.18 Health services are funded almost entirely by government revenues with no official cost recovery system. In 1993 health expenditures accounted for 3.5% of GDP, down from 4.5% in 1992. Of total government expenditures, they accounted for 5.2% in 1993, down from 7.2% in 1992. The structure of expenditures shows that 89% of the budget is spent on hospital care and only 2% on outpatient care. Furthermore, resources have gone to immediate needs -- wages and imported drugs represent the largest budget items -- while investments have been negligible. Wages of health personnel are extremely low (about $2 per month on average for a doctor), resulting in an informal system of compensation by patients to doctors and hospitals. These costs are not necessarily equitable and may be very high, resulting in some patients not being able to afford care. 1.19 Considering the rapid fall in health expenditures as a percentage of GDP and overall budget expenditures in the last three years, it is important to avoid any further decline in order to sustain the provision of basic health services while the Government implements its health care reform program. These reforms include introduction of cost recovery, transition from a centralized health care and administration model to a decentralized one, reform of the health care budgeting process, establishment of a comprehensive primary health care system (currently being developed with UNICEF support) and eventual privatization of some facilities. Maintaining basic health programs, improving maintenance of facilities, and supporting health reform will not be possible without external contributions. G. Education Sector 1.20 Prior to the breakup of the FSU, Armenia enjoyed one of the highest levels of education among the republics. In particular, it had the highest proportion of university graduates among its population and continues to have enrollment rates at post secondary level comparable to European nations. Armenia enjoys an extensive educational system with over 1400 schools, 63,000 teachers, 606,000 registered students, and a well-developed preschool system. The teacher/pupil ratio is very high, 1 teacher per 10 pupils in 1994, although this number may be decreasing as teachers leave the field of education due to extremely low wages. While the quantity of facilities and teachers is over abundant, most schools are in dire need of rehabilitation after earthquake damage and years of little or no maintenance, and few new textbooks or supplies have been provided in the last four years due to tight budgets. 1.21 Two ministries are primarily involved in the provision of education: the Ministry of Higher Education oversees 24 institutions and the Ministry of General Education oversees preschools and primary and secondary schools. Other ministries oversee specialized technical schools. Education is funded almost entirely with government resources with only recent introduction of fees for higher education. In 1993, the education budget accounted for 4.7% of GDP and 7.2% of total government expenditures. Because of the drastic decrease in available education resources, the education budget is largely absorbed by salaries and other personal emoluments. 1.22 Considering the short- to medium-term need for austere budgets, greater efficiency is needed in the education system. This may be realized in the medium-term by rationalizing the supply of -7- teachers and improving education management. Furthermore, cost recovery mechanisms and development of private schools are potential avenues to strengthen the financial base of the educational system. However, to avoid a collapse of the existing system, improved heating, winterization and maintenance of facilities is needed. H. Local Level Institutions 1.23 Local level actors playing prominent roles in social infrastructure and service delivery include local government, NGOs and development agencies. Local government retains some responsibilities for maintenance of basic infrastructure, while NGOs and development agencies are contributing to humanitarian relief, service delivery, and reconstruction. Local Government 1.24 Little has changed in the last four years in regard to Armenia's structure of local government. Armenia is divided into 58 administrative units, comprised of republic level cities (that previously received funds directly from Moscow), regional cities, and rural districts. Villages and small towns in rural regions are administered under village councils while urban areas are administered by regional and city councils. Each of these regional-level and local-level councils is administered by elected members, who select a chairperson. The chairperson has authority to appoint the council's executive committee, which oversees issues in various sectors (e.g. health, education, women, roads, water and sanitation). Executive committee members are approved by the respective ministry or agency at the central level. Armenia's constitution which was adopted through the referendum in July of 1995 focuses on the Centralization process of Government. However, the constitution does not clarify the administrative divisions among the different government entities at the central, regional and local levels, obscuring delineation of power. Hence, the chain of responsibility between central, regional and local authorities remains obscure. 1.25 Control of resources is a key element in the distribution of power. Until 1993, tax collection was centralized in Armenia, and local and regional governments received budget allocations from the Ministry of Finance based on expenditure estimates. Local governments have discretion over use of funds for health and education facilities at the local level (excluding regional hospitals), while central ministries defme norms and standards and authorize opening of new facilities. In the last five years, the meager resources provided by the center or collected locally to cover health and education expenditures have met few needs other than salaries. Water and sanitation facilities are under both central water and sanitation authorities and local councils. A majority of recurrent expenditures for these services are covered by local budgets, while capital expenditures are covered by federal funds. Currently, local governments have the authority to collect minimal "communal" fees for water and sanitation from households and state enterprises, but most lack cash to make payments. There is little history of users fees at the local level, and the extent of power held by local government to collect user fees remains ambiguous. Distribution of humanitarian assistance is also often controlled by local councils, increasing their power and influence. -8- NGOs, Community-Based Organizations and Development Agencies 1.26 Non-governmental Organizations (NGOs) have become increasingly important actors in humanitarian relief and basic service provision in Armenia. The term NGO encompasses a wide variety of organizational types in Armenia characterized by a diversity of structures, functions and objectives. These include international and national NGOs, also called intermediary NGOs, which refers to their channeling of resources to the poor or other NGOs. Among the international community of intermediary NGOs are Diaspora Armenian charitable, religious, cultural and educational organizations. Many of these NGOs launched programs in response to the 1988 earthquake to assist earthquake victims and many have expanded to provide assistance to refugees and other vulnerable groups hurt by the tough economic conditions. Armenian national NGOs receive funds predominantly from individuals and enterprises within Armenia while international NGOs obtain support from external sources. While there are cases of international NGOs partnering with Armenian national or regional NGOs, there are also elements of resentment between various organizations. International NGOs tend to be well-funded and possess sufficient vehicles and equipment, while many indigenous NGOs lack comparable resources and support. 1.27 NGOs have also taken the form of social, cultural, professional and sports groups who share a common interest. Teachers, painters, writers, architects, engineers and other professionals have maintained their unions or societies that functioned under the Soviet system. While they no longer receive financial support from the state they still attract members because of non-financial privileges. Some Diaspora communities (Greeks, Russians, Assyrians) are well-organized around education, health and other issues (e.g. helping their nationals to emigrate) and frequently have institutional structures supported by volunteers. Other community-based organizations, which may or may not be officially registered, include dwellers and parents committees. Some dwellers committees, which are comprised of residents living in neighboring blocks of flats (apartments), are active in securing electricity and needed repairs, while others are dormant. Parents committees at schools also vary in their level of activity. Comprised of teachers, school administrators and parents, in some cases these committees have secured funds for teachers' salaries, heating fuel for school facilities and small repairs. In some communities, these committees have ceased functioning because they lack resources or volunteers. The NGO community is young and growing and has received great latitude from the national government in contrast to some other countries. Impediments to greater NGO activity stem from the legal framework for creation of local charities and associations and difficulties in transferring funds through the banking system. At the local level, relations with local government have important ramifications on NGO activities, especially in the realm of distribution of humanitarian assistance where local councils hold great authority. In the last year, the Armenian Assembly of America was designated by the GOA to be the coordinating body for all international and national NGOs in Armenia. It has set up a training center, funded by USAID, to assist Armenian NGOs in developing their skills in proposal writing, organizational development and basic management and accounting. The overall implementation capacity of NGOs varies greatly and remains largely untested, but a network for cooperation, information exchange, and institutional strengthening is operating and expanding. 1.28 Some NGOs and development agencies have moved from emergency aid toward more sustainable activities such as research, income-generation, and human resources development. UNDP, UNICEF, Save the Children, and Armenian research institutes and universities have partnered with government ministries and agencies to gather data on vulnerable groups, winter preparedness, retail -9- business development, and access to social services. UNDP plans to launch a rural rehabilitation program geared toward small-scale agro-industry and rehabilitation of some infrastructure. They will engage UN volunteers to work as animators in communities and to strengthen farmers associations. UNHCR and the Peace Corps are undertaking income generating and small/micro-business development activities as well. Oxfam and Armenian NGOs have also focused activities on rehabilitation and development. The Armenian NGOs Chene, Aznavour pour l'Armenie, and All Armenia Fund, have worked with villagers to rebuild roads, water supply, schools and small hospitals. Emerging Small and Medium Size Private Enterprises 1.29 The private sector in Armenia is nascent but growing. Official statistics on business registration estimate that 79,000 private businesses are registered in Armenia, nine thousand of which registered since April 1994. However, many of these businesses are reportedly operating at minimal capacity if at all, due to the blockade and subsequent fuel crisis. It is also widely recognized that official figures reflect only a small segment of the actual private business activity, as the size of the informal sector is believed to be considerable. The economy is largely fueled by employment in the informal sector. While there is no official figure on the size of employment in the informal sector, estimates range from 70-90 percent of the economically active population engaged in at least partial employment in the informal sector. 1.30 There are important constraints to private sector development irrespective of sector. The most severe constraints may be those caused by the blockade which have cut input supply and increased input prices. The simultaneous decline in purchasing power, with wages eroding from an average monthly salary of US$70 in 1992 to US$2 a month, has also undermined business activity. Other constraints mentioned by entrepreneurs surveyed during project preparation include ambiguous and discriminatory government policies toward private sector development (non-transparent tax policies and erratic collection), lack of investment capital, limited business management skills, and limited access to equipment. Lack of understanding of the privatization program and the Government's slow pace of privatization also undermine business activity. In spite of difficulties, some private contractors have transcended obstacles and gained valuable technical and managerial experience through earthquake reconstruction contracts and other works supported by NGO and donor-funded programs. They have also been exposed to competitive bidding procedures. I. Government and IDA's Strategy and Rationale for Bank Involvement 1.31 Furthering the peace process and achieving macroeconomic stabilization in order to give a new impetus to the economic reform program are the immediate objectives of the Government. The key objectives of the Bank's country assistance strategy are to raise the living standards of the people by deepening structural reforms to complete the transition to a market economy and by reducing the large pockets of poverty that have emerged over the last few years. The restoration of sustained growth is essential for this strategy. In terms of structural reforms, emphasis will be placed on promoting private sector development and establishing a targeted system of social protection. Continued strict macroeconomic policies and deepened structural reforms should lead to the resumption of economic growth and higher living standards. To complement economy-wide efforts, sector specific interventions - 10 - will focus on the delivery of social services, energy efficiency and the rehabilitation of other critical infrastructure. 1.32 In response to Armenia's launching of its reform process just after independence, the World Bank quickly prepared a Country Economic Memorandum to assist the Government in its policy formulation process. However, the World Bank's early focus on policy reform in its dialogue with Armenia could not be sustained due to renewed fighting in Karabakh in early 1993. Instead, the World Bank's strategy was reduced to supporting the development of market-oriented institutions and maintaining the delivery of key infrastructure services to meet basic human needs. In this context, the Institution Building Loan was approved in March 1993 to strengthen the institutional base for economic reform (US$12 million). Three IDA credits were approved in 1994 in support of infrastructure rehabilitation, including the Earthquake Reconstruction Credit for reconstruction of basic infrastructure and employment generation (US$28 million), the Irrigation Rehabilitation Project to rehabilitate critical parts of the irrigation system (US$43 million), and the Power Maintenance Project aimed at repairing and restoring six power plants and strengthening the electricity distribution system (US$13.7 million). The recently approved Economic Rehabilitation Credit (US$60 million) supports policies to achieve macroeconomic stability and structural reforms. The World Bank also plans support to the restructuring of the social sectors and social protection programs through advice and financing aimed at improving efficiency, sustainability and service delivery, but the process for social sector reform will take time. Meanwhile, rapid and visible actions, such as those supported by this project, are needed to protect vulnerable groups. In addition, the Bank plans to strengthen the institutional capacity of municipal governments. While the ASIF Project does not directly aim to build the capacities of municipal governments, its mechanisms for involving local governments in procurement disbursement and implementation of small works could be adopted and institutionalized through future World Bank supported interventions in the social sectors. 1.33 The Armenian Social Investment Fund is being designed as a short- to medium-term program to reverse the deterioration of basic social services infrastructure and stimulate some employment, thereby generating a positive, visible impact on the people and reducing hardship during economic transition. Medium-term objectives for the project are to orient and build the capacity of local governments, NGOs, and private contractors to undertake rehabilitation in a market economy, preparing them for an economy of restored growth. The project will target primarily local communities and local governments, which will be closely associated with microproject implementation so that they learn from the ASIF approach. It is justified to focus on strengthening local communities in order to provide municipal services with a strong base from which they can expand as needs of the community are articulated. The project will also generate additional external financing for urgently needed investments in the social sectors essential for human resource development, will complement other government efforts to reduce poverty, and will ease the transition to a market economy at the local level. - 11 - J. Lessons From Other Social Funds 1.34 The World Bank is financing social funds in Latin America, Africa, the Middle East, and Asia, often with the support of other bilateral and multilateral donors. The World Bank has carried out several evaluations and studies of social funds to discover the strengths, limitations, and requisite conditions for success. These include The World Bank Discussion Paper #274 by the Africa Technical Department, "Social Action Programs and Social Funds, a Review of Design and Implementation in Sub- Saharan Africa" (1995); a discussion paper prepared by the Education and Social Policy Department, "Social Funds: Strengths, Weaknesses, and Conditions for Success" (1995); and a technical note prepared by the Africa Human Resources and Poverty Division, entitled "Study of Procurement and Disbursement Issues in Projects with Community Participation" (1994). 1.35 A common finding of these studies is that social funds are successful when they have: (i) support and commitment among the highest political level to preserve the integrity, objectives and mandate of the fund; (ii) autonomous status enabling them to respond rapidly and directly to community demands, while at the same time having accountability and transparency features; (iii) participation by intended beneficiaries to ensure that proposals are genuinely beneficiary-initiated; (iv) a qualified and motivated staff operating in a system of incentives based on merit; (v) a rigorous management and MIS system and a streamlined, fairly flat organizational structure; (vi) flexible financing mechanisms subject to a rigorous appraisal process; (vii) effective coordination with line ministries; (viii) an intensive and thorough process of supervision and audit; and (ix) operated in an action-research mode to learn from experience through mechanisms such as beneficiary assessment. 1.36 The principal issues and challenges facing social funds include: (i) a trade-off between rapid implementation of projects and building indigenous institutional and technical capacity; (ii) demonstrated limited success in implementing credit programs, especially where the fund attempts to operate as a retailer of credit; (iii) due to limited resources, to be effective they must be an integral part of a larger program to reduce poverty; and (iv) to generate genuine and reliable community demand for social fund support, they must be able to directly reach out to poor beneficiaries and communities, rather than rely on indirect methods of assessing local needs. 1.37 Small infrastructure projects have generally been the most successful type of social fund initiative in terms of quality, sustainability, and beneficial impact, providing communities with assets that contribute to increased incomes and production. Small projects concerned with social assistance and income-generation are usually more complex and labor-intensive, and their success depends on the capacity of local support organizations. However, if designed in a way that maximizes their special potential, social funds can provide a parallel track to the conventional public sector planning cycle, allowing a community with energy and commitment to launch initiatives within its own time-frame. Social funds are an effective way of encouraging private efforts which can often deliver more cost- effective results than the public sector can achieve alone. A number of social funds have shown that community-initiated infrastructure projects can be implemented at a lower cost than equivalent publicly managed projects. The social fund mechanism can be an effective way of obtaining community investments, which reduces the cost to public funds and establishes a basis of ownership around which maintenance arrangements can be built. Finally, community participation can make a valuable - 12 - contribution to community development by helping to build managerial competency, encouraging community decision-making around shared assets, and developing a sense of self-reliance. K. Project Preparation And The Pilot Phase 1.38 The project to support the ASIF has been prepared in parallel with a pilot project during which 15 microprojects in three target zones are being implemented. The experience gained from implementation of these microprojects has generated information to develop the Operational Manual and other documents that will guide the ASIF. Additionally, the pilot phase will provide a pool of experienced workers from which ASIF staff will be drawn. The objectives of the pilot phase include: (a) to test various methods of selection, appraisal, implementation, monitoring and evaluation of microprojects; (b) to refine microproject selection criteria; (c) to test various methods for working with communities in undertaking infrastructure rehabilitation; (d) to test the suitability of various procurement and disbursement methods at the local level; and (e) to test procedures for contracting and paying small firms that carry out rehabilitation works. 1.39 To manage the pilot phase, an organizational structure was established consisting of the following: (a) a Steering Committee, chaired by the Minister of Economy and composed of representatives from government (50%) and non-governmental institutions (50%); and (b) the ASIF Joint Office (JO), composed of two units: the Microproject Implementation Unit (MIU) funded by USAID, and the ASIF Preparation Unit (ASIFPU) of the Ministry of Economy, funded by a World Bank Project Preparation Facility (PPF). An international NGO, the Armenian Assembly of America, was contracted by USAID to form the MIU and to cooperate with the ASIFPU to achieve the stated objectives of the pilot phase. The ASIFPU is responsible for managing the PPF special account, preparing the documents required for project appraisal and approval, testing and refining ASIF operation procedures based on implementation of pilot microprojects, and training of the core staff of the future ASIF. The World Bank preparation mission and the JO developed implementation guidelines for selection and implementation of pilot microprojects, procurement, disbursement and monitoring during the project preparation mission. Simplified selection criteria were set down and the importance of community participation was emphasized. A list of activities which needed to be tested during the pilot has also been established. The preparation mission prepared a two-day orientation and training workshop for the JO and its engineers responsible for identifying and supervising microprojects. The workshop focused on the microproject cycle as well as methods for working with communities in identification of microprojects, and approaches to assessing the capacity of contractors and potential implementing agencies to be involved in implementation and supervision of microprojects. The workshop was followed up with several days of joint field work during which a number of possible microprojects were identified. 1.40 The JO has implemented microprojects in three target zones: (i) Yerevan and Kotaik region; (ii) Akhurian region near the earthquake zone; and (iii) the areas of Karpan and Goris in the south. These areas were chosen for their variety in terms of socio-economic conditions and accessibility during winter. Thus far, the pilot phase is proceeding well. Fourteen microprojects have been appraised, two have been entirely completed, nine are under implementation, two are in the tendering phase, and one was rejected. Microprojects have been selected based on the implementation guidelines of the pilot phase. The criteria for selection of pilot microprojects included relevance to the needs and priorities of the community, available sources for operation and maintenance, labor content, - 13 - and positive effects on women and children. The microprojects completed or under implementation include rehabilitation of schools, basic health facilities, an orphanage, sanitation facilities, environmental improvements and potable water supplies. 1.41 The pilot microprojects have provided useful information for the formulation of the microproject cycle in the Operational Manual. It has been found that the participatory and demand driven approach is workable, although with stronger and easier response in rural areas than in urban areas. Methods for identifying and setting up a local microproject committee (MC) acting as an implementing agency as well as tendering procedures in accordance with World Bank guidelines were also satisfactorily tested. MCs have comprised representatives of beneficiaries, local government, and staff who work in the facilities being rehabilitated (e.g. doctor, school headmaster). Private contractors are numerous in all of the pilot regions. Small local contractors have successfully carried out works with close supervision by the MC and JO engineers. National shopping methods and national competitive bidding have been used successfully to procure civil works. The average size of the microprojects is US$22,000, and the average duration is approximately 12 weeks. More research is being conducted now to learn about more effective means of generating participation in urban areas and methods of paying contractors through the banking system. 1.42 Various actions were taken during the pilot phase to build up the ASIFPU capacity. The MIU-AAA was contracted to provide technical assistance to the ASIFPU to help prepare the Operational Manual. Members of the ASIFPU and the MIU-AAA went on a study tour of the Nicaraguan, Bolivian and Egyptian Social Investment Funds which also contributed to ASIFPU staff development. Two international consultants (the former Department Head of the Bolivian Fund and the Head of the Administrative and Finance Department of the Equador Fund) also assisted the ASIFPU with the design of the Management Information System (MIS) and the accounting systems. 1.43 In order to strengthen the capacities of the ASIFPU, it was decided at appraisal that the AAA will be providing technical assistance to the ASIFPU staff to increase their capacity. AAA is now training future ASIF staff in microprojects promotion, appraisal and supervision. 1.44 Another notable lesson that emerged from the pilot experience is that the ASIF should be prepared to establish logistical bases for efficient operations in the North and South. These will be minimally equipped and will not entail additional costs overall. Furthermore, during the pilot phase, it was observed that some rehabilitation suffered because it was carried out during the winter. Due to the severe winter in Armenia, strict rules on working under freezing conditions have to be developed and activities scaled down during the winter to avoid deterioration of quality of works.  - 14 - II. PROJECT OBJECTIVES A. Objectives and Approach 2.1 The project will aim to support the most vulnerable groups among the Armenian population through improvement of basic social services and creation of employment opportunities. The primary objectives of the project are to: 1. rehabilitate basic small-scale infrastructure that can result in immediate improvements of the living conditions of the poorest among the population; 2. strengthen the capacity of private, small-scale contractors and other micro- businesses so that they can benefit directly or indirectly from contracts financed by the ASIF; and build the capacity of local government staff and communities so that they can prepare and implement small projects; 3. generate employment through financing of labor-intensive public works; and 4. build greater capacity for policy makers to monitor and analyze trends in the level and structure of poverty in Armenia. 2.2 The project seeks to support the transition to a market economy by stimulating demand in the small-scale private sector and strengthening the capacity of small private enterprises and local organizations (local government, NGOs, parents and women's committees, and other community-based organizations) to undertake infrastructure rehabilitation and maintenance. The project also seeks to demonstrate to the public and the GOA the validity of a more participatory approach to rehabilitation by involving communities in the identification and management of works, which should provide for increased sustainability. If successful, the mechanisms to support participatory approaches used by the ASIF should be transferred to local governments. Institutional weaknesses of local governments, the loose legal framework for operations, and the lack of trust between some local governments and their constituents undermine their capacity to undertake ASIF-type microprojects on their own for the moment. Therefore, the ASIF will work closely with local government staff throughout the microproject cycle, and target training to them so as to promote adoption of the ASIF approach and strengthen their capacities for undertaking social services infrastructure rehabilitation. 2.3 To achieve these objectives, the project will support the Armenian Social Investment Fund (ASIF) which will be established as an autonomous agency reporting to the Ministry of Economy. As delineated in the declaration creating the ASIF (see Annex A), the ASIF will fund rehabilitation of basic social and economic infrastructure on a grant basis in response to requests from local organizations. While the maximum size of a microproject will be US$150,000, most are not expected to exceed US$50,000. The guidelines and operating procedures of the ASIF are stipulated in its Operational Manual which have been approved by the Government and the IDA (see Annex B for outline of Operational Manual). Requests for microproject financing will be considered for approval based on strict selection criteria presented in the Operational Manual. Rehabilitation of primary health care facilities, schools, potable water network, sanitation facilities, feeder roads and other small-scale social and - 15 - economic infrastructure are expected to be among the portfolio of ASIF microprojects. The ASIF will be a temporary institution to fill the institutional gap left by government agencies and ministries that lack the capacity to carry out urgently needed rehabilitation activities in addition to other important functions, such as defining the reform program and new sectoral policies. The ASIF is designed to help meet the short- to medium-term needs for rehabilitation and support capacity building at the local level while the country's economic position improves to sustain economic growth and while ministries and local government build their capacities. The decree establishing the ASIF was issued prior to negotiations. The Board of Directors and the Advisory Conunittee were set up prior to Board presentation. - 16 - III. PROJECT DESCRIPTION A. Description of Project Components 3.1 The project has four components: (1) financing of ASIF microprojects to support the rehabilitation of small-scale infrastructure; (2) institutional support for the ASIF; (3) capacity building of small contractors, implementing agencies and communities; and (4) support to the government for monitoring the living standards of the population. 3.2 Rehabilitation of Small-scale Infrastructure. Based on the ASIFPU's accrued experience during the pilot phase, the project will support rehabilitation of social and economic infrastructure. Such works may include rehabilitation of local clinics, primary schools, sanitation work and water supply, energy saving repairs, repair of feeder roads, as well as rehabilitation of degraded village and town environments through cleanup and tree planting. The project may also provide furniture and basic equipment for rehabilitated infrastructure. The maximum size of a microproject is US$150,000 though most will not exceed US$50,000. The average microproject size is estimated at US$32,000. ASIF operating procedures and microproject selection criteria are elaborated in the Operational Manual. 3.3 Microprojects will be proposed by local organizations, including local government, NGOs, parents' and women's committees, and newly-created microproject committees (MCs). During the ASIF promotion campaign, local organizations and community members will be informed of the procedures for proposing and implementing microprojects and the importance of involving members of the community in identification and implementation. When a proposed microproject has been approved by the ASIF, the local organization proposing the activity will become the "implementing agency" and will enter into a framework agreement with the ASIF. Most works will be carried out by private, small contractors using labor-intensive construction techniques in order to stimulate employment. Over the life of the project, an estimated 500 microprojects will be implemented, averaging US$32,000. The total cost of this component is estimated at US$15.7 million. 3.4 Institutional Support for the ASIF. This component, totaling US$1.9 million, supports the ASIF through provision of equipment, vehicles, salaries, operating costs, training, technical assistance, and financing for monitoring and evaluation. Training and technical assistance will be carefully designed to ensure proper implementation of the project and to support ASIF's financial planning and management capabilities. An international consultant experienced in construction and rehabilitation of social and economic infrastructure is planned to provide general support to the ASIF management during the first 12 months of the project. An international consultant will also provide support to the finance and administration department through short-term missions. Training will be provided to the ASIF staff on a range of topics such as participatory community development, institutional analysis, contracting and bidding procedures, project supervision, and computer training. A limited number of study tours will also be organized to complement training modules. 3.5 Institutional support to ASIF in the form of international and local technical assistance will also be provided under this component to maintain the Management Information System (MIS) that has been designed during the pilot phase. This computerized system will track progression of microprojects - 17 - through the microproject cycle, provide transparency and accountability of financial flows, monitor civil works progress based on field supervision reports, and flag microprojects experiencing unusual delays and cost overruns. MIS-generated information is intended to be input into the daily decision making and operations of the ASIF and will be an integral part of the reports submitted by the ASIF management to the Board of Directors and of quarterly reports and comprehensive annual reports submitted to donors. While the MIS generates information on physical and financial progress of works, other monitoring and evaluation devices will be utilized to evaluate the impact of ASIF-financed microprojects on benefiting communities. A beneficiary assessment will be undertaken each year to ascertain the impact of ASIF- financed microprojects on benefiting communities and institutional development of implementing agencies. A Study Fund will also be set up to fund complementary studies carried out by research or other institutions in Armenia to assess specific aspects of ASIF impact. The beneficiary assessment and other aspects of monitoring and evaluation are explained in greater detail in Annex C. 3.6 Capacity Building of Small Contractors, Implementing Agencies and Communities. Because the ASIF seeks to support private sector development through contracts with small construction and other local private firms, the capacity of contractors to prepare solid bids and undertake works successfully has important consequences on achievement of project objectives. Small firms are weak in terms of management, work organization and technical skills which might jeopardize the successful execution of work contracts. Therefore, the provision of training and technical assistance to contractors is deemed an effective way of responding to this risk. Furthermore, because the sheer number of small, private firms is low and the availability of ASIF resources is likely to stimulate formation of new private companies, the ASIF will work with these new enterprises so that their capacities can be assessed early on and strengthened. This component will provide funds to increase the technical and managerial capacity of small and micro firms in the building and construction trades as well as other microenterprises that could benefit indirectly from ASIF contracts. Such microenterprises include private artisans that produce furniture and equipment necessary to refurbish schools and clinics, those who run transport companies, small trade and other operations, as well as carpenters, plumbers and electricians. While there is a great need for support to microenterprises in all sectors in Armenia, the ASIF will concentrate its efforts only on those enterprises in the construction and construction-related sectors to avoid over-extension of its newly-acquired institutional capacity. 3.7 The component will also provide training to local government personnel, NGOs and MCs in community participation, conducting competitive bidding, preparing contracts, and monitoring work progress. Local governments and NGOs are expected to be among implementing agencies. However, they have little or no experience with competitive procurement and disbursement guidelines, as use of force account prevailed in the past. Thus, local officials and MC representatives will need orientation, training and follow-up if they are to successfully conduct bidding and contracting. This component, totaling US$0.4 million, is described further in Annex D. 3.8 Support for Monitoring Living Conditions. This component will finance refinement of the State Department of Statistics' (SDS) methods for conducting sampling and household consumption surveys, and implementation of two household surveys by the SDS. The US$0.5 million cost of this component will cover technical assistance, training, vehicles, equipment, enumerators' salaries, and supplies. Thematic and in-depth studies based on the results of the household surveys may be carried out with financing from the Study Fund. - 18 - 3.9 The benefits of this component will be improved capability to analyze poverty and design programs to reduce it. This component will result in improved sampling techniques, survey design and organization, data processing and analysis by the SDS (both quantitative and qualitative); collection of more reliable data on the living standards of the people; and greater understanding of the diverse characteristics of poverty, with disaggregation by gender, age, income, and other criteria. B. Institutional Set-up and Administrative Structure of the ASIF 3.10 The ASIF will be established by a declaration with financial and administrative autonomy and authority to enter into contracts, recruit staff from outside the civil service, and establish its own operating procedures, including those for procurement and disbursement (see Annex A for draft of declaration). The autonomous status of the ASIF is necessary to facilitate its ability to work with local governments, private sector contractors and community organizations in an efficient and effective manner. The ASIF will be established as a temporary institution for a period of four years. 3.11 The organizational structure and functions of the ASIF are set forth in the Operational Manual. (See Annex E for organization chart.) The Board of Directors, comprising one representative from each of the Ministries of Economy and Finance, the Prime Minister's Office, the Ministry of Social Security Employment Migration and Refugees, the NGO community, and one other member who is not part of government whose skills are likely to facilitate the successful operation of the ASIF has been established, and will be chaired by the Minister of Economy. It will be responsible for approving the policies, Operational Manual, and annual work program and budget of the ASIF, designating external auditors, approving quarterly and annual reports, considering ASIF financing of microprojects when required by the Operational Manual, and providing guidance to the ASIF Executive Committee. An Advisory Committee shall also be established with representatives from the concerned line ministries as well as one or more representatives from the NGO community and private sector. To keep operations agile, the Board of Directors will delegate responsibility for microproject review and approval, as well contracting and acquisitions, to the ASIF Executive Committee. This is consistent with the institutional set-up and autonomy of other successful social investment funds. ASIF staff will be recruited through advertising and short-listing and will be employed under fixed-term, renewable contracts. Regulations governing staff hiring, firing and compensation are stipulated in the Operational Manual and the Administrative and Finance Manual. 3.12 The Executive Committee shall comprise the General Manager, Finance and Administration Officer, and Microprojects Manager. It will have responsibility for approval of microprojects US$50,000 or below. The General Manager will be responsible for the coordination of all ASIF activities. He/she will prepare the ASIF's work programs; authorize all disbursements together with the financial and administrative officer; prepare reports on the progress of the ASIF and present them to the Board of Directors; and identify training needs of ASIF staff. A Financial Liaison shall be responsible for promoting the ASIF to the Armenian Diaspora and maintaining relations with donors. 3.13 The ASIF structure will comprise two departments and three units: the Finance and Administration Department, the Microprojects Department, the Information and Monitoring Unit, the Institutions Support Unit and the Legal Unit. The Finance and Administration Department will be headed by the Finance and Administration Officer. This department will be responsible for preparation of a - 19 - financial plan for the ASIF; overseeing procurement of equipment and materials; preparation of financial and administrative reports on the use of ASIF funds; authorization of all payments; preparation of disbursement applications to IDA; making requests for replenishment of the special account; and overseeing regularity of procurement activities for microprojects. The Microprojects Department will be headed by the Microprojects Manager who will be supported by Microproject Officers (including Promotions Officers, Appraisal Officers and follow-up Officers) with requisite technical skills to appraise and supervise works. The Microprojects Department will be responsible for the establishment of norms and standards for the infrastructure microprojects; for appraisal and supervision of infrastructure microprojects; and for maintenance of the unit pricing database. A special Promotions Unit within the Microprojects Department will be responsible for developing and executing a campaign to make communities, contractors, and potential implementing agencies aware of ASIF financing. The Information and Monitoring Unit will be responsible for maintaining the MIS. The Institutions Support Unit will be responsible for supervising the component for capacity building of contractors, implementing agencies, and communities. It will also be responsible for monitoring and evaluation processes; supervising the beneficiary assessment and Study Fund; providing for dissemination of their findings; and making recommendations to the General Manager for internalizing feedback from monitoring and evaluation activities. The Legal Unit will be responsible for preparing framework agreements and handling any other legal matters. In addition to its own staff, the ASIF will subcontract a number of supervision tasks and professional services to consultants and NGOs. - 20 - IV. PROJECT IMPLEMENTATION A. ASIF Microprojects 4.1 The implementing arrangements are critical for achieving the project's objectives. The project will be implemented in accordance with the Operational Manual which will be adopted by the ASIF Board. Any proposed changes to the Operational Manual would be subject to agreement by IDA. Implementation of ASIF-financed microprojects will be guided by the ASIF Operational Manual, which contains the criteria and procedures for appraising, approving, contracting and monitoring microprojects. The ASIF draft Operational Manual has been submitted to IDA as a condition of project negotiations. In order to avoid duplication of efforts and to ensure adherence to sector priorities, the ASIF has explicit guidelines, as stated in the Operational Manual, to finance microprojects that do not come under the coverage of existing programs and projects of sector ministries and other public agencies. To realize this coordination, ministerial representation shall sit on the Board of Directors, which shall approve the Operational Manual. Additionally, eligibility criteria and technical appraisal criteria shall follow sector norms and priorities which are currently being articulated. The ASIF will take a progressive, regional approach to operations, beginning in two or three target zones and will expand throughout the country as experience is gained and the capacity of the ASIF staff is built up. This regional approach is also important so that support to contractors and implementing agencies can be realized and utilized. The initial target zones have been selected by the Government based on information about poverty and needs from a poverty ranking exercise and needs and capacity study which has been undertaken prior to negotiations (see Annex F for terms of references and findings). As a condition for negotiations, priority regions have been identified for the first year of the project based on the poverty and needs ranking. These priority regions include an area around Goris in the South, an area around Stepanavan in the North and a region around Giumri covering part of the earthquake zone. IDA funds will be passed on as grants to the ASIF, which will also fund all microprojects as grants. B. Identification of Target Regions and Groups 4.2 One of the principal objectives of the ASIF is to reach the poor and vulnerable groups through rehabilitation of basic social and economic infrastructure which they utilize and through employment generation in their communities. To increase the likelihood that benefits reach the intended population, the ASIF will adopt a two-pronged targeting strategy. First, the type of microprojects eligible for ASIF financing, including primary health and education facilities and basic infrastructure, by their nature tend to be oriented to the needs of the poor. Second, the ASIF will utilize data and major findings on poverty and unemployment gathered from the poverty ranking exercise, needs and capacity study and the poverty assessment to identify and focus its promotional activities in regions where the needs are the strongest. The ASIF will expand its activities to other regions as it accrues greater capacity and experience. Third, most of the works will be carried out by small local contractors which will hire locally unemployed or underemployed workers. - 21 - C. Major Participants in the Microproject Cycle 4.3 The major participants in the microproject cycle include the community or group that is supposed to benefit directly from ASIF-financed microprojects in terms of increased employment and income and improved access to health, education and other facilities; the requesting agency, that is, the local government, NGO or community group that presents a microproject proposal to ASIF for financing- -any group, registered or unregistered, may be a requesting agency; the implementing agency (may be the same as the requesting agency) which signs the framework agreement with the ASIF and takes responsibilities for implementing the microproject and fulfilling tasks as stipulated in the agreement (such as hiring a supervisor and selecting contractors). The implementing agency may be an NGO, local government or other community group and must have status to enter into a framework agreement with the ASIF. Local-level Microproject Committees comprised of various community members will be created to implement microprojects directly, (in this case they will be considered as implementing agencies), or to participate in implementation with the implementing agency. The structure and roles of these committees are defined in the Operational Manual based on experience gained during the pilot phase. Other major participants include the microproject officer who is ultimately responsible for promotion, appraisal, supervision and quality control during the implementation of microprojects; the independent supervisor who signs a separate agreement with the implementing agency to provide supervision functions; and the small private contractors hired by implementing agencies or directly by the ASIF on behalf of the implementing agency to undertake works. D. Microproject Cycle 4.4 Like other successful social funds, the ASIF will conduct financing activities in accordance with a microproject cycle, which is elaborated in the Operational Manual and based on the lessons learned during the pilot phase. 4.5 Promotion efforts are designed to increase awareness among community members, potential requesting and implementing agencies, and the private sector of availability of funds, the type of microprojects supported by the ASIF, the centrality of community participation to identification and implementation of microprojects, and the selection criteria and procedures that must be followed in order to obtain funds. A promotion campaign will be developed by the Promotions Unit of the Microprojects Department that fosters information sharing through the national media and seminars with local governments, NGOs and other community groups. The campaign will parallel the regional targeting approach. A brochure outlining ASIF objectives, the menu of microprojects, selection criteria, and steps to submit a proposal will be widely disseminated and the Operational Manual will be available to local organizations. In the first year, Promotions Unit staff will visit communities to promote the ASIF objectives and help communities to identify microprojects. Promotions staff shall consist of technical specialists working in pairs with social promoters, i.e. individuals who are hired to facilitate community organization and problem solving. As the ASIF's portfolio grows, ASIF staff will devote less time to promotion as supervision tasks become more central. Consequently, the Promotions Unit will consider alternative means of reaching communities, such as hiring individual promoters who also have technical skills, or sub-contracting NGOs for promotion activities. In most cases, a general community meeting will be organized by the promoters to reiterate the goals and objectives of the ASIF and introduce the basics of competitive bidding. - 22 - 4.6 The purpose of identification is to establish the need for the proposed microproject and the local potential for implementing and sustaining its use. The core of participatory project identification is to change the perspective from problems to solutions, and to initiate a dialogue which, instead of recording only leadership opinions on solutions, will involve intended beneficiaries in a discussion on what problems exist and how to overcome them. Based on this concept of participation, during the promotions campaign the ASIF will encourage potential requesting and implementing agencies to consult a diversity of community members to ensure that intended beneficiaries are given "voice." 4.7 Preparation refers to the actual elaboration of microproject proposals. To support the ASIF's participatory objectives, microproject proposal documents will be simplified and standardized to enable communities to translate project ideas into feasible proposals. When technical studies are required, they will be undertaken by local government departments or engineers contracted by the ASIF. Preparation costs will be calculated and financed based on guidelines outlined in the Operational Manual. 4.8 Appraisal. As reflected in the Operational Manual, the basic elements of microproject appraisal include a desk screening of proposals to ensure they are complete and that microprojects are consistent with the ASIF typology of microprojects. Those proposals that meet precise selection criteria as summarized in Annex G and detailed in the Operational Manual will be followed-up by a site visit by an Appraisal Officer with representatives of the requesting agency to review the selection criteria and, in particular, determine the following: * Technical feasibility. Criteria have been developed for the main kind of microproject based on the existing norms adapted from respective sector ministries and other agencies. such as UNICEF. The analysis carried out during appraisal will ensure that no oversize infrastructure is rehabilitated. This analysis will also confirm that inputs are available, estimate labor content, ensure implementation is technically feasible, and consider impact on the environment. The labor component must comprise at least 15% of the microproject budget. If there is an adverse impact on the environment, mitigation measures must be taken (see Annex I). * Simplified economic analysis will be undertaken using a unit costs database to determine least cost alternative for rehabilitation works, cost per beneficiary, and operations and maintenance costs. * Institutional analysis will gauge the capacity of the implementing agency (IA) to call for bids and hire contractors for implementation and supervision and assess the relationship between the IA and the community. The Appraisal Officer will discuss with the IA the possibility of receiving training and technical assistance to fill managerial or technical gaps. The institutional analysis will also gauge the availability of qualified local contractors and identify mechanisms and commitment for operation and maintenance of the facility. * Social anaLysis will assess the potential impact of the proposed microproject on women and children, and the percentage of the community that is likely to benefit from it. The social analysis will also assess (a) the degree of beneficiary participation by the - 23 - community during preparation of the microproject; (b) the community's perception of the implementing agency and its knowledge of and support for the proposed activity; and (c) its commitment to sustain the activity. In rural areas, an acceptable level of community participation is demonstrated when: (a) the community holds a meeting where at least 30% of the adult population of the community attends (attendees must sign in and minutes are to be kept of the meeting); or (b) any person or group within the community organizes a petition supporting a microproject, which is signed by at least 50% of the adult population of the community. In urban areas, no such community authorization is required due to the difficulty of defining a community. In these cases, a proposal should indicate how the proposed microproject has been formulated and demonstrate to the satisfaction of the ASIF that it responds to a priority need of potential beneficiaries. Community contribution. At least 15% of community contribution are required for microproject acceptance. Contributions can be in-kind or cash. Contributions of food or goods which can easily be monetized will also be accepted. The rationale for requiring a greater contribution from local governments and NGOs is that these organizations have their own funds and can afford to contribute to microproject costs along with community members in general. The ASIF will make every effort to obtain the contribution directly from the requesting or benefiting community. However, any organization or local government can contribute to the microproject on behalf of the community. Details related to the community contribution, such as timing of payments and payment method, will be stipulated in the microproject framework agreement. 4.9 The scope and process of microproject appraisal will depend on the complexity and type of microproject. Considering the fact that such appraisal methods for small-scale infrastructure is very new in Armenia, the criteria will have to be refined based on the experience acquired during the first year of project implementation. 4.10 Approval. The Executive Committee consisting of the General Manager, Finance and Administration Officer, and Microprojects Manager, will meet weekly to consider microprojects costing US$50,000 or less. Projects between US$50,000 and US$150,000, must be approved by the Board of Directors. Microprojects above US$50,000 will also be subject to the IDA's non-objection. Approval of microprojects will be based on precise selection criteria detailed in the Operational Manual. 4.11 Implementation. The ASIF will decide the microproject implementation mode in consultation with the implementing agency. A standard multi-party framework agreement will be signed by the implementing agency and the ASIF, stipulating the responsibilities of each party, procurement methods, implementation schedule, and community contribution. The framework agreement will outline supervision and steps to ensure sustainability. The implementing agency will select and contract contractors based on regulations described in the Operational Manual. To speed up the selection process and ensure quality of construction, the ASIF will maintain a roster of eligible contractors. Payment to contractors will be made based on progress of works and as stipulated in the Operational Manual and individual framework agreements. The implementing agency may receive training to carry out procurement and will be assisted by ASIF staff when necessary. When no contractor is available, - 24 - implementing agencies will implement works directly by purchasing material and hiring labor and artisans to undertake works. Details on procurement are given in Section V. 4.12 Supervision. A Follow-Up Officer responsible for monitoring works will be assigned to each approved microproject. Implementing agencies will enter into a separate agreement with an independent supervisor for daily supervision of civil works contracts who will report to the implementing agency, and maintain a site logbook. The supervisor will be expected to work directly with contractors to identify problems and to bring them to the attention of the Follow-Up Officer. Costs for the supervisor's services will be included among microproject costs, not to exceed 3 % of the total cost of the microproject. The supervisor shall be paid according to the procedures and conditions as postulated in the Operational Manual and individual contracts. Payment to contractors will only be made directly by the ASIF after a field visit by the Follow-Up Officer. 4.13 Monitoring. Field visits by Follow-Up Officers are a key element in the monitoring system because they provide the baseline information for beneficiary and impact assessments and much of the input for the MIS of tracking the ASIF portfolio and progress of civil works. It is necessary, therefore, that the ASIF management convey to staff the importance of following up supervision with disciplined internal reporting and recording using the MIS. The MIS will be developed for the ASIF based on well-designed, interactive and user friendly software used in other social funds. As a monitoring device, it will provide transparency and accountability of financial flows and generate information needed for day-to-day management decision-making. MIS-generated performance reports will also be an integral part of the monthly and quarterly reports submitted to SIF Board of Directors and donors. A description of the MIS is provided in Annex C. The MIS was established for testing prior to negotiations. As a condition of effectiveness, the MIS, including the accounting system, shall be fully operational on the basis of indicators satisfactory to the Association. 4.14 Completion and Handover. Upon completion of civil works, an on-site completion and handover meeting will be held for each microproject. The Follow-Up Officer, requesting agency, implementing agency, supervisor, contractors and members of the community will gather to verify satisfactory completion of all works. Contractors, supervisors and implementing agencies will receive certificates from the ASIF stipulating that contracted works have successfully been completed with good quality. Relations with Local Authorities 4.15 Local authorities will be closely associated with ASIF activities. They will be able to present microproject proposals to the ASIF and have their staff represented on microproject committees alongside representatives of intended beneficiaries. In some cases, mainly urban areas, they will be implementing the microprojects directly with the support of the microproject committee. Local government staff will be trained as part of microproject committees in microproject management, accounting, procurement and supervision. As a condition for microproject approval, local government must sign a Memorandum of Understanding with the ASIF attesting to local authorities' commitment to maintain and operate the facility. - 25 - Sustainability of Microprojects 4.16 During the pilot phase, much attention was paid to finding methods and developing strategies to increase the sustainability of completed works. Some interesting experiments were carried out. In one community, residents planted fruit trees around a renovated clinic to generate future revenue to meet maintenance costs of the clinic. While the extent of the revenue to be generated is not estimated to be substantial, it demonstrates the seriousness with which some communities took their new responsibilities for ensuring investments are sustained. In effect, this represents a new mind-set in a formerly welfare state. 4.17 In another community, a potable water pipeline is being rehabilitated which will bring water to 103 inhabitants for the first time, as well to more than 500 other beneficiaries who use the water for domestic and agriculture use. The Microproject Committee in the community has set a monthly fee to recover some costs. While the current level of this fee might be insufficient to cover all repair and maintenance in the future, introduction of a user fee is not insignificant. More importantly, the initiative toward community-responsibility came from within the community. 4.18 The ASIF will introduce a number of mechanisms and safeguards to help achieve microproject sustainability. First, the ASIF will finance only repairs and reconstruction of facilities that are currently operating and for which salaries of service personnel are already budgeted. Second, communities would be required to develop a strategy for covering costs for operation and maintenance as part of the microproject proposal, including possible community contribution and cost recovery. These mechanisms will be described in the framework agreement with the implementing agency. Third, a Memorandum of Understanding between the ASIF and local authorities will stipulate the responsibility of local government for operation and maintenance. Fourth, the involvement of the respective community in the microproject design, implementation and follow-up should increase microproject sustainability. Through increased community participation, the ASIF can ensure that the microproject reflects an urgent need of the community, thereby broadening the commitment to sustainability. For this purpose, one of the goals of training seminars for ASIF staff and implementing agencies will be to reiterate the importance of intended beneficiary involvement and to provide practical guidance in generating participation and ensuring it is genuine. Fifth, the impact studies which will be carried out on a sample of completed microprojects will focus on sustainability issues, and their findings will be made available to ASIF management so that strategies and procedures can be adjusted accordingly. Finally, arrangements will also be reached with UN organizations and NGOs to concentrate efforts in a complimentary way whenever feasible. For example, under UNICEF's Healthy Village Program, communities that renovate small health facilities receive a package of goods and services, including essential drugs and staff training. During the pilot phase, one ASIFPU-supported clinic received this package, and an understanding was reached to try to replicate this arrangement for health microprojects under the large scale project. Expected Impact of Microprojects 4.19 The impact of the microprojects will be monitored regularly (see para. 4.13). The project is "demand driven" and therefore it is difficult to estimate quantitatively the impact of the microprojects. However, some assumptions were made during project preparation based on the - 26 - experience of the pilot and other similar programs being carried out by NGOs in Armenia. The expected impacts are as follows: Improve access to and quality of basic social services for lower income groups - The SIF will finance approximately 480 microprojects. Based on the experience with the pilot and the information provided by the Needs and Capacity Assessment, it is estimated that more than 80% of the microprojects will be in the water, sanitation, basic health care and general education sectors. The number of beneficiaries have also been roughly estimated at 480,000. According to this figure about 20% of the Armenian population should be able to benefit from the facilities and infrastructure rehabilitated through the SIF. (This is based on the assumption that a beneficiary will benefit only from one project). The microprojects will not benefit only the poor but it is safe to assume that the lower income groups will be the main beneficiaries for the following reasons: The poorest regions will be targeted by the SIF through promotional activities, and the studies carried out for the preparation of the Poverty Assessment showed that regional disparities are quite high in Armenia. The studies also showed that in the absence of a credible governmental social safety net, due to major fiscal constraints, ensuring access and minimum quality to basic health care and general education is essential to protect low income groups during the transition. Based on the household survey carried out in 1994 by the State Department of Statistics with the support of the Yerevan State University, the poverty headcount was estimated in 1994 at 31% in urban areas and 25% in rural areas. The Poverty Assessment studies also show that it is among the lower income groups where the higher dropout rates from schools are registered and where the number of visits to health centers has decreased the most. Access to potable water is also a problem for lower income groups. SIF projects will enhance the quality of these infrastructure and therefore make them more accessible to the poor. Employment creation and support to small contractors - Based on the pilot projects and on other similar activities conducted by NGOs and other groups in Armenia, it is estimated that the project will distribute about US$3.5 million in wages to unskilled workers and will create 8,400 jobs for an average period of 4 months each. About 500 skilled jobs will also be created for local supervisors and consultants for technical studies. About 450 contracts for civil works will be issued to small size contractors providing a boost to the small contractors industry. All contractors will be provided with short-term training to improve their managerial capacities. Community participation and sustainability - Community participation should increase local initiatives in the area of social support, and provide incentives to beneficiaries to get involved in the maintenance of the rehabilitated infrastructure (see para. 4.16 ). It is expected that economic growth will be sufficiently robust by the end of the project as a result of economic restructuring, to provide new work opportunities for the small contractors who benefited from the contracts and the training provided through the SIF Project. - 27 - E. Institutional Support for the ASIF 4.20 Technical assistance was provided during the pilot phase to the ASIFPU to build its institutional capabilities. Based on this foundation, the project will finance equipment, vehicles, salaries, staff training, technical assistance, studies and operating costs of the ASIF during the four-year project. Staff development will be conducted via local and international training courses tailored to the needs of the ASIF staff. Study tours will be organized to enable staff to visit social funds in other countries in order to foster their understanding and complement training modules. Technical assistance in the form of an international Technical Advisor to the ASIF General Manager on Microprojects is budgeted for the first 12 months of the project. The appointment of the Technical Advisor is a condition of project effectiveness. A Finance and Administration Advisor is budgeted for six staff weeks of short-term missions to assist the Finance and Administration Department, and follow-up visits by the international consultant on the MIS to ensure proper maintenance of the MIS are planned. 4.21 Under the project, funds will be provided to conduct beneficiary assessments which will provide the ASIF with necessary inputs to improve its interventions with target groups and to determine the relationship between ASIF's methods of promotion, appraisal and supervision, and the level of satisfaction among community members. The beneficiary assessments will be designed based on the experience and methodology of successful beneficiary assessments carried out in other social funds. The assessments will focus on four broad areas: (a) beneficiary satisfaction and perceived benefits of the microproject; (b) beneficiary participation in the microproject cycle; (c) institutional development of institutions participating in microprojects (e.g. local governments, NGOs, MCs); and (d) suggestions to improve ASIF performance. A pool of experienced researchers from the needs and capacity study and participatory poverty assessment are expected to be available to make it possible for the beneficiary assessments to be undertaken locally with some external technical assistance if necessary. The project will also finance a Study Fund for short-term studies carried out by research and other institutions in Armenia to assess specific aspects of ASIF impact. The integrated monitoring and evaluation activities are elaborated in Annex C. The procedures and conditions for accessing the Study Fund are stipulated in the Operational Manual. F. Capacity Building of Contractors, Implementing Agencies and Communities 4.22 The major vehicle of support for filling institutional and managerial gaps of contractors, implementing agencies and communities will be through training and technical assistance by linking small contractors, implementing agencies, and communities with local qualified training institutions, such as NGOs, consulting firms, and training institutes. The ASIF will enter into a contract or framework agreement with one or more qualified institutions to provide training and technical assistance in "clustered" areas that correspond with the ASIF's target regions to fill common institutional and managerial gaps. Selection of training institutions/firms will be made as much as possible on a competitive basis. When necessary, more specialized, on-site assistance will be provided by support agencies to fill in any remaining gaps that jeopardize microproject implementation. Technical assistance to contractors on engineering and construction standards and performance will be identified by Microproject Officers during appraisal and supervision visits and provided on-site chiefly by Microproject Officers and locally-contracted specialists. Training and TA at all levels will be need-based and demand- - 28 - driven, practical, participatory, accessible and closely integrated with more focused technical assistance. This component is described in greater detail in Annex D. G. Monitoring of Living Standards 4.23 The Monitoring of Living Standards component will be implemented by the State Department of Statistics (SDS). Under this component, the SDS will receive support in the form of training, TA, equipment, supplies and enumerators' salaries (temporary staff) to conduct two household surveys. The first survey will be adopted from the Priority Survey -- a multisector indicator survey that uses an extensive, nationwide sample in urban and rural areas. The SDS will conduct the priority survey in 3-4 months in 1995, covering 5-6000 households. The survey will be a good preparatory exercise for a complete and more intensive household survey. Ultimately, because of its patterns, this survey will constitute a useful instrument for monitoring trends in the population's welfare when repeated over a number of years. Information will be gathered on household size and composition, education, health, and employment conditions, migration, income, and household expenditures. A second, more intensive survey with a smaller sample and covering a 12-month period will be undertaken in 1997. It will include a household questionnaire and be supplemented by a qualitative module on community infrastructure and communal life. In order for the ASIF to benefit to the utmost from this component, the Head of the Promotions Unit will be responsible for acting as the ASIF liaison with the SDS in order to avoid duplication of effort. He/she will be responsible for coordinating with the SDS to maximize sampling in ASIF target areas and to fully integrate output from this component into the ASIF targeting strategy. 4.24 Approximately thirty staff-weeks of international consultants will be provided to improve the SDS staff capacity and competency in survey design, sampling, data processing and analysis. Training will be delivered through on-site workshops, study trips, and short- and long-term training in specialized institutions. Temporary enumerators, data processing personnel and computer specialists will reinforce current staff at SDS regional and central levels for the duration of the surveys. The GOA will promote an easy access policy with regard to data generated under this project component with a view to promoting wide use of the information by interested users and analysts. The World Bank, among other users, would be granted full access to poverty survey data. This component is described further in Annex H. H. Environmental Impact 4.25 The proposed project is not expected to have adverse environmental effects. The overall project should have a positive impact on the physical and social environment, especially by rehabilitating latrines, sanitation and water-supply facilities. To safeguard physical resources, the ASIF will incorporate environmental criteria into microproject appraisal and selection. Use of environmental criteria will be monitored during Bank supervision of the ASIF and will be included in the terms of reference of the mid- term review. The environment was carefully considered during project appraisal, and these concerns are summarized in Annex I. The project has been rated Category C.  - 29 - V. PROJECT COSTS AND FINANCING 5.1 The total cost of the project is estimated at US$20 million equivalent. The average cost of microprojects is estimated at US$32,000 and the maximum size of a microproject will be US$150,000. The average operating costs excluding equipment of the ASIF are estimated at 5% of total project costs, with investments (vehicles, equipment and training) at 9%. These costs are expected to be higher during the first year of implementation and to decrease progressively in later years. Some of the start-up costs are really investments whose benefits will accrue even after the life of the project, such as trained staff who could serve other projects and the government. Project costs are summarized in Table 5.1 and detailed project costs are given in Annex J. A project implementation schedule is provided in Annex K. 5.2 No contingencies have been applied to the microprojects component. Any increase in the average microproject cost would be reflected in a reduced number of microprojects financed. The projected costs of technical assistance to the ASIF and operating costs have been calculated according to costs of these items by NGOs and UN agencies in Armenia and the experience of the pilot phase. Contingencies on the technical assistance, operating costs, and equipment of the other components amount to about 5% of the total project costs, as is indicated in Table 5.1. 5.3 IDA will finance US$12 million equivalent representing 60% of the total estimated project costs. Of this amount, US$2 million will be matching funds with private donors. The Government's contribution is estimated at US$1 million, and community contribution at US$2.5 million. Therefore, the national contribution to the project represents US$3.5 million, or 29% of IDA's contribution. Other donors will contribute US$3.4 million but these amounts are currently uncertain. The German and Dutch governments have expressed strong interest in cofinancing the project. Discussions are currently underway to secure financing from these two donors. An absence of cofinanciers or private sector contributions would be reflected in a reduced number of microprojects financed and would not jeopardize implementation of the project overall. Operating costs would be automatically adjusted to the number of microprojects. To allow for this flexibility during project implementation an unallocated category of US$1 million has been established. (See Table 5.2 for financing summary). Table.1 Project Cost Summary (in US$ million): LOCAL FOREIGN TOTAL ASIF Microprojects 15.7 15.7 Institutional Support to ASIF 1.3 0.6 1.9 Support to Contractors, lAs, Communities 0.3 0.1 0.4 Living Standards Monitoring 0.1 0.4 0.5 Total Base Cost 17.4 1.1 18.5 Contingencies: Physical 0.6 0.3 0.9 Price 0.1 0.0 0.1 Reimburse PPF 0.1 0.3 0.4 Total Project Cost 18.3 1.7 20.0 * Numbers may not add up due to rounding - 30 - 5.4 The Armenian Social Investment Fund is a potential vehicle to channel private money for community-based projects. As was introduced in Section I of this report, resources from the Armenian Diaspora have been a very important source of emergency support in Armenia, but in order to maintain these flows and orient them towards more sustainable activities, new channels are needed. The ASIF is a potential vehicle to channel private money for community-based projects because of its accounting and management information systems as well as its comprehensive monitoring and impact assessment features. These features enable reporting to be standardized so as to achieve transparency and accountability of funds which is a very important condition for attracting private donor funds. 5.5 US$2 million of the IDA credit are set aside for funding ASIF microprojects as matching funds, dollar-for-dollar, to private sector contributions, as an encouragement for private sector transfers to the ASIF. An account would be opened in a commercial Bank by the ASIF for these contributions. Private sector contributions would be untied and used according to the Operational Manual. The special account for private donors would be audited every year with other ASIF accounts. The attractiveness of the ASIF as a channel for funds could be made even stronger by providing potential private donors with the possibility of targeting their funds to specific geographic areas and types of investments. This would be achieved by providing them with a list of approved microprojects from which they could select microprojects for funding. Expenditures under each Sponsored Microproject will be financed on a pari passu basis with the proceeds of the Credit. 5.6 In order to promote the ASIF to Diaspora communities, a fund raising campaign will be organized with assistance from the Armenian Assembly of America. A position of Financial Liaison reporting directly to the ASIF General Manager has also been created to lead activities in this regard for the ASIF. Table 5.2 Proposed Financing Plan (in US$ million): LOCAL FOREIGN TOTAL % OF TOTAL IDA* 10.3 1.7 12.0 60% Donors 2.5 2.5 12% Private Sector 2.0 2.0 10% Local Communities 2.5 2.5 12% Government 1.0 1.0 5% Total 18.3 1.7 20.0 100% * Includes US$0.4 million PPF - 31 - A. Procurement 5.7 Procurement arrangements have been designed to: (i) increase project sustainability through involvement of communities and local governments in implementation and maintenance of microprojects; (ii) increase capacity of contractors at the local level; (iii) respond to the need for flexible use of procurement methods, given the differences and disparities in the institutional capacity of communities, availability of services, markets and local contractors, and familiarity of local contractors with competitive bidding in different regions; and (iv) be in compliance with the "Guidelines for Procurement under IBRD Loans and IDA Credit" (January 1995) and the "Guidelines on Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" (August 1981). In order to achieve these objectives, a simplified procedure for national competitive bidding has been developed and is described in detail in the Operational Manual. It follows the model described in the June 1994 ECA Region: "Bidding Documents for Procurement of Works." During project mid-term review, the need to continue with such a simplified procedure will be reevaluated. 5.8 The government decree establishing the ASIF will exempt it from the public procurement and disbursement regulations, present or future, and will permit the ASIF to follow the procurement guidelines detailed in its Operational Manual. Management of Procurement 5.9 The ASIF will be responsible for ensuring that all implementing agencies undertake procurement according to rules stated in the Operational Manual. For each microproject, the ASIF will enter into a framework agreement with an implementing agency, which usually will be a community microproject committee, but may in a few instances be an NGO or a local government. The implementing agency will be selected or formed based on clear and well defined criteria stated in the Operational Manual. The implementing agency will be permitted to procure goods, works and services according to terms and conditions stated in the framework agreement and consistent with the Operational Manual. The ASIF will pay contractors or suppliers directly when requested by the implementing agency and after ensuring that requested payment is justified. Procurement for vehicles, equipment and technical assistance for the ASIF will be conducted by the Procurement Unit of the ASIF Finance and Administration Department. 5.10 At the microproject level, the Appraisal and Follow-Up Officers will be responsible for ensuring that procurement arrangements for microprojects are in compliance with procurement procedures as stated in the framework agreement, and for assisting implementing agencies in meeting procurement requirements as and when required. The Finance and Administration Department of the ASIF will include a trained procurement officer who will assist the officers in determining procurement arrangements based on the guidelines in the Operational Manual. Procurement training will be provided for ASIF staff, implementing agencies and contractors involved in procurement. The general procurement notice for technical assistance will be provided to the IDA prior to negotiations. 5.11 The Finance and Administration Department will also develop and maintain a roster of qualified contractors based on their institutional capacity, experience, and ability to work in specific regions using labor intensive methods. Procedures acceptable to the World Bank will be used in - 32 - developing and maintaining the roster which will be kept open during the life of the project and all members on the roster will be able to obtain information on ASIF contracts. In addition, as part of the MIS, the ASIF will maintain a database of unit costs for works, materials and services commonly required for project implementation as part of the cost control system. This database will be updated as necessary and will be used to review and modify the microproject budget during appraisal. In the initial stages, given the wide disparity in unit costs across the country, it may be necessary to maintain district specific or region specific data. Contract terms will be defined, in the case of direct contracting, based on the database of unit costs to ensure economic procurement. In competitive procurement, the database will be used as a means of tracking the efficiency of procurement. Procurement Arrangements and Procedures 5.12 Table 5.3 provides the procurement arrangements and Table 5.4 shows the procurement methods. 5.13 Procurement of vehicles and equipment for the ASIF office is estimated to be about US$0.5 million (IDA: US$0.5 million). Two different procurement packages will be prepared through international shopping: one for vehicles, estimated at US$0.3 million (IDA: US$0.3 million) and one for equipment (mainly computers), estimated at US$0.2 million (IDA: US$0.2 million). The upper limit for international shopping is set at US$ 300,000. 5.14 In determining procurement methods for civil works under microprojects, the ASIF will be guided by Bank Guidelines and Armenian contractors experience in civil works operations in Armenia. Hands-on experience under the Armenian Earthquake Reconstruction Project has helped build the capacity and capabilities of Armenian contractors in civil works construction. Furthermore, the experience gained from implementation of 15 microprojects in three target zones as part of a one-year pilot phase has been most encouraging and further strengthened Armenian construction industry. All procurement methods will be described in the Operational Manual, which will be consistent with Bank Guidelines and the Credit Agreement and subject to prior approval of IDA. This is consistent with a recent decree enacted by the Armenian Government stating that all Government contracts will be processed following World Bank guidelines. The Operational Manual will have to be at all times acceptable to IDA. All civil works contracts above US$30,000 will be procured through a process of National Competitive Bidding (NCB) which was tested during the pilot phase and described in the Operational Manual, US$11.9 million (IDA: US$5.9 million). Sample bidding documents and contracts, in accordance with IDA policies, and based on the Bank's standard bidding documents for small works, will be ready before negotiations. The maximum size of a microproject being US$150,000, no contract will be above this amount. All contracts below US$150,000 will be through NCB. Civil works contracts below US$30,000, US$1.50 million (IDA: US$0.6 million), will be procured through lump sum, fixed priced contracts awarded on the basis of quotations from three qualified contractors. In view of the small size and dispersed nature of the works, international bidders will not be interested in contracts of such small value. Therefore, International Competitive Bidding (ICB) is not considered as feasible. 5.15 In exceptional cases in remote areas where contractors are not available, the ASIF may permit the implementing agency to implement directly microprojects costing below US$30,000, US$0.80 million (IDA: US$0.40 million). In such cases, the implementing agency would hire labor locally - 33 - US$0.20 million (IDA: US$0.10 million) and purchase goods necessary for implementation through national shopping US$0.60 million (IDA: US$0.30 million). The mechanisms for implementation by the implementing agency are detailed in Annex M. 5.16 For purchase of goods and materials below US$30,000, national shopping based on price quotations from at least three different suppliers may be used, provided such shopping results in economic procurement, US$0.60 million (IDA: US$0.30 million). Training and technical assistance in conducting competitive bidding will be provided under the component for capacity building of contractors, implementing agencies and communities. When necessary, the ASIF will provide direct assistance to ensure that the implementing agency has the necessary skills to conduct the required procurement and consequent award of contracts. 5.17 Operating costs would include: (a) maintenance and operation of equipment procured and rented under the project; and (b) salaries of ASIF staff, and per diems paid to ASIF and State Department of Statistics staff for field trips or field work carried out for project purposes; (c) consumable office supplies; and (d) office maintenance, utilities and telecommunications pertaining to the project. Items under operating costs will be procured in accordance with procedures contained in the Operational Manual and the Administrative and Financial Manual. ASIF staff will be recruited on fixed term contract through a competitive mechanism acceptable to the World Bank. Table 5.3 Procurement Arrangements: Category ICB NCB OTHER* NIF Total Works Civil Works for 11.9 2.3 14.2 Microprojects (5.9) (1.0) (6.9) Goods Vehicles and 0.5 0.5 Equipment (0.5) (0.5) Goods/Materials for 0.6 0.6 Microprojects (0.3) (0.3) Consultancies TA and Training 1.8 1.8 (1.8) (1.8) Service Contracts for 1.0 1.0 Microprojects (0.6) (0.6) Operating Costs 1.5 1.5 (1.5) (1.5) Reimburse PPF 0.4 0.4 (0.4) (0.4) Total 11.9 8.1 20.0 IDA 5.9 6.1 12.0 *"Other" under Civil Works for Microprojects refers to National Shopping 1.5 (IDA 0.6) and Special Procedures (IDA 0.4). "Other" under Vehicles and Equipment refers to International Shopping 0.5 (IDA 0.5). "Other" under Goods/Materials for Microprojects refers to National Shopping 0.6 (IDA 0.3). -Other" under TA and Training refers to Consulting Services 1.8 (IDA 1.8). Under Service Contracts for Microprojects it refers to Consulting Services 1.0 (IDA 0.6) for supervision. - 34 - Procurement of Technical Assistance 5.18 Technical assistance and training contracts of the ASIF will be awarded in accordance with World Bank Guidelines, "Use of Consultants by World Bank Borrowers and the World Bank as Executing Agency" (Washington D.C., August 1981), and the procedures are detailed in the Operational Manual. Consultancies for technical support are expected to total US$2.8 million (IDA: US$2.4 million). These contracts will relate to training of ASIF staff, contractors and implementing agencies as well as conducting impact assessment studies and analysis of the living standards of the population and local supervision of microprojects. Technical assistance will be mainly for a long-term advisor for microprojects (12 months), and short-term consultants to support the financial management of the ASIF and impact assessment, (3 missions of about two weeks each) to support the analysis of the living standards of the population and provide training and technical assistance to implementing agencies. Such contracts are expected to total US$1.8 million (IDA: US$1.8 million), spread over a period of four years. As much as possible, the contracts will cover a set of services and will be with firms and training institutions on the basis of short-listing, to avoid burdening the ASIF with too many contracts. Training and technical assistance under the project is described in greater detail in Annex D. Service contracts in Table 5.3 refers to local supervisors hired by implementing agencies to supervise microproject implementation, and in cases when a technical study is needed for finalizing a project proposal, the hiring of a local engineer. The supervisors will be recruited for the duration of a microproject (3 months to 4 months on average). Such contracts are expected to total US$1 million (IDA: US$0.6 million). Details of technical assistance procurement for major assignments are described in the procurement plan in Annex R. Prior Review of Procurement Arrangements 5.19 Prior review combined with independent annual ex-post external procurement and technical reviews financed under the Bank, with specific focus on community related procurement and disbursement, will ensure that procurement is in compliance with agreed procedures. These ex- post external reviews are justified considering the large number of small contracts for civil works that will be implemented under the ASIF. They will facilitate the task of IDA supervision missions. Procurement and technical reviews will also evaluate the quality of infrastructure microprojects. They will be conducted by private entities with experience in national procurement and construction of infrastructure. Terms of reference for the procurement and technical reviews are presented in Annex L. 5.20 All contracts above US$50,000 will be subject to the Bank's prior review procedures. Documentation for microprojects above US$50,000 will be subject to prior review by the IDA (see para. 4.10). It is estimated that 15-20 contracts above US$50,000 will be concluded over the life of the project. As a condition of Board presentation the GOA has provided to IDA Framework Agreements and satisfactory appraisal documentation for ten microprojects. In addition, as a condition of effectiveness, all framework agreements and appraisal documents for microprojects will be reviewed for the first five hundred thousand dollars (US$500,000), and for not less than 25 microprojects. Other framework agreements, contracts and bids will be subject to selective ex-post review by Bank staff during regular supervision missions. All contracts for consulting and training services estimated to cost the equivalent of US$30,000 in the case of consulting firms and US$10,000 in the case of individuals will require prior review by the Bank. Terms of reference for all consulting and technical assistance contracts - 35 - will require prior review by the IDA. All single source training contracts regardless of the value will be subject to prior review. All contract documents will be retained by the ASIF and made available to the Bank upon request. Procurement Monitoring Requirements 5.21 Procurement will be carefully monitored by the ASIF. All documentation on procurement will be kept at the ASIF. ASIF Quarterly and Yearly Reports will provide information on procurement which will be monitored through the MIS. B. Disbursement 5.22 It is estimated that the proposed IDA Credit of US$12.0 million will be disbursed over a period of four years. Year-by-year IDA disbursements of credit for the project are summarized in Table E and greater details are provided in Annex N. The completion date will be December 31, 1999 and the closing date June 30, 2000. The credit will be financed in accordance with Table 5.1. Table 5. Allocation of IDA Credit by Disbursement Category Category of Total % To Be Financed Expenditure Uss minion By IDA 1. Microprojects a. Part I 5.8 90% of total expenditures b. Part II 2.0 50% of total expenditures 2. Goods a. Vehicles and Equipment 0.5 100% of foreign expenditures 100% local expenditure (ex factory) 80% of other items procured locally 3. Consultancies a. Technical Assistance and Training 1.2 100% of total expenditures 4. Miscellaneous a. Operating Costs 1.2 100% of total expenditures b. Unallocated 1.0 c. Reimbursement of PPF 0.4 TOTAL 12.0 - 36 - Table 5. Estimated IDA Disbursements (in US$ million): IDA FY 1996 1997 1998 1999 Annual 3.4* 3.2 3.2 2.2 Cumulative 3.4* 6.6 9.8 12.0 * includes US$0.4 PPF 5.23 For microprojects, goods, and single purchases of less than US$50,000, disbursements will be made on the basis of statements of expenditures (SOE). For microprojects, disbursement will be made based on expenditures incurred under the framework agreement for microproject implementation. For services, disbursement will be made on the basis of SOE for disbursement less than US$30,000 to consulting firms and less than US$10,000 to individuals. All other disbursements will be fully documented by the ASIF in a manner acceptable to IDA. The SOEs and all records, including framework agreements between the ASIF and implementing agencies, contracts, bidding documents, invoices, and payroll vouchers, will be retained by the ASIF to facilitate inspection by supervision missions and external audit. Withdrawal applications for direct payment and special commitments will be 20% of the authorized allocation to the special account. 5.24 To expedite disbursements, the ASIF will open a Special Account for the project in a bank acceptable to the IDA, with an authorized allocation of US$800,000 corresponding to the average four-month expenditure under the proposed project, on receipt and approval of appropriate withdrawal applications. The authorized allocation will be limited to an amount equivalent to US$400,000 until an aggregate amount of withdrawals from the loan account plus the total amount of all outstanding special commitments will be in an amount of US$3.0 million. Replenishment applications will be submitted monthly and will be accompanied by full documentation for all items except those eligible for disbursement on the basis of certified statements of expenditure. The ASIF will also open a project account into which a share of the Government's counterpart contribution will be deposited every year. Initial deposits by the Government of its share of project expenses for the rust semester, equivalent to US$80,000 into such project account will be a condition of credit effectiveness. 5.25 For disbursements for microprojects, the ASIF will transfer the funds directly to the accounts of the supplier and the contractor, upon authorization from the implementing agency. This will reduce wherever possible the need for the microproject committee to open a bank account. In order to pay small sums to the microproject committee for transportation costs and payment of a supervisor, as well to pay contractors who were not able to open an account, the ASIF will be permitted to open bank accounts in regional centers. In this case, upon fulfillment of disbursement conditions, payment instructions will be issued to the bank to make payments to the representative of the implementing agency or to the contractor. The appraisal mission visited several banks and it seems possible for the ASIF to enter into such agreements with selected banks. Procedures for disbursement of funds for operating costs are described in the Operational Manual. Disbursement of IDA matching funds for microprojects (Microprojects Part II in the disbursement table) would be made on a pari passu basis with the counterpart funds from private sector donors. Microprojects Part I in - 37 - the disbursement table refers to microprojects funded under the IDA allocation that do not require matching funds. C. Accounts, Audits, Reporting and Supervision 5.26 The accounting system is being developed and established with the assistance of international consultants selected on the basis of terms of reference developed in consultation with IDA. The accounting system being developed is linked effectively with the Management Information System and has been established as a condition of negotiations. 5.27 The Finance and Administration Department will be comprised of skilled staff to handle the ASIF's financial responsibilities and accounting. The ASIF will maintain accounts in accordance with the required financial standards which will be audited annually by independent auditors acceptable to IDA. During the first year of project implementation, such audits will be conducted on a semi-annual basis. The ASIF will submit to IDA certified copies of audit reports containing balance sheets, income statements and the auditor's opinion on whether the ASIF is achieving its objectives in a cost-effective and efficient manner. The ASIF will provide IDA copies of reports submitted to the Board of Directors, including Quarterly Progress Reports, the Annual Plan, Annual Budget, and Annual Report. 5.28 The Bank would supervise the project four times in the first year, including the project launch, and three times a year subsequently. Supervision will include field visits to review a sample of microprojects. Staff involved in the preparation of the project would be directly involved in the project launch and the initial supervision missions. In addition, a local consultant will be hired and based in Yerevan to supplement supervision by headquarters staff who are not able to visit the project site more frequently during the first year of the project. If the arrangement is effective, it will be extended to subsequent years. The consultant will be based in the resident mission and will have a command of engineering and Bank procurement guidelines. An IDA supervision schedule is provided in Annex Q. At the end of the project a Project Implementation Report will be produced. D. Performance Indicators 5.29 The ASIF must justify its creation as a new and exceptional institution designed to function with a level of efficiency and transparency beyond that of existing government agencies. The emphasis on effective management and institutional performance of a social fund reflects one of the fundamental lessons learned in the experience of other social funds. To this end, a series of institutional performance indicators has been developed for the ASIF which set monitorable targets of capacity, efficiency, quality and impact. These are listed in Annex 0. Agreement on performance indicators will be reached during negotiations and initial annual targets will be established for ASIF's first year of activities. Thereafter, targets will be reviewed and revised annually. E. Mid-Term Review 5.30 The Bank, ASIF and other donors will carry out a joint Mid-Term Review to evaluate the performance of the ASIF. This exercise will be scheduled for November 30,1997. The Mid-Term Review will be designed to evaluate the experience of the ASIF at the operational level as well - 38 - as in the context of the Government's overall social policy and related programs. The scheduling of the review will allow for a full two-years of operational experience, including initial results of the beneficiary assessment and other monitoring and impact evaluation tools. Draft terms of reference for the review will be provided by the Bank to the Government and will be finalized in consultation with the ASIF and other donors. - 39 - VI. BENEFITS AND RISKS 6.1 The project will generate substantial benefits for the poor through the provision of basic social infrastructure financed through hundreds of microprojects selected on the basis of detailed socio- economic criteria. The microprojects will deliver immediate benefits in terms of generation of employment and income and improvements in the access and quality of basic services and infrastructure, as well as longer-term benefits in terms of improvements in the living conditions of the population, in particular, the poorest groups. It is estimated that during the life of the project, 480 microprojects benefitting roughly 480,000 people, (20% of the population) will be implemented. While microprojects are likely to result in a substantial number of temporary (estimated at 8,400) unskilled jobs, and approximately 500 skilled jobs, there is potential for a smaller number of longer-term jobs due to future demand for maintenance and other works once economic growth resumes. In addition, the project will strengthen the country's ability to target, appraise and monitor efforts to reduce poverty. The support for monitoring of the living standard component of the project will help in targeting cash benefits and other governmental programs to support the poor. The project will assist the Government in mobilizing additional external financing in support of its reform objectives. The project will also have an important institutional effect from strengthened capabilities of local government, NGOs, and other local organizations to prepare and implement projects, undertake competitive bidding, and manage contracting. This would allow local governments to carry out maintenance and rehabilitation work more efficiently under other projects or under their own financing. It would also reinforce a sense of ownership and involvement at the community level contributing to the change of attitude necessary for successful transition at the grass roots. The ASIF will also demonstrate the importance of beneficiary participation in poverty reduction and provide an efficient and effective model for implementation. Small private contractors and other small entrepreneurs will benefit in the form of increased revenues generated through about 450 contracts and improved technical, managerial and institutional capacity through their execution of the work contracts (see para. 4.19). 6.2 Risks facing the project arise from possible political interference by line ministries in daily operations of the ASIF which would compromise its autonomy, credibility and effectiveness; potential problems with microproject quality in the field; and limited managerial, technical and institutional capacity of local organizations responsible both for proposing and implementing microprojects and for financing operation and maintenance after the microproject is completed. The capacity of the ASIF to maintain a good and capable working team, maintain transparency, and oversee the implementation of about 120 microprojects a year remains to be tested. To reduce these risks, the ASIF will be granted autonomous status with adequate institutional checks and balances and transparent and efficient operating procedures. Implementing the project using existing local government structures would represent a much greater risk considering their very weak capabilities and their unclear status. Furthermore, to minimize risks, microproject appraisal will examine the capacity of contractors and local organizations to carry out and supervise works, and the ASIF will provide technical assistance and training to fill in institutional, technical, and management gaps. A participatory approach will be taken for identification and implementation of microprojects to ensure that microprojects respond to an urgent and felt need, thereby increasing the commitment of community members to sustaining microprojects and demonstrating the benefits of collective actions surrounding local development.  -40- VII. AGREEMENTS REACHED AND RECOMMENDATIONS A. Conditions and Agreements 7.1 Prior to Negotiations, the GOA has: a) issued the Decree establishing the ASIF (para. 2.3); b) provided IDA with the draft of the Operational Manual (para. 4.1); c) established an accounting system acceptable to IDA (para. 5.26); d) established an MIS for testing (para. 4.13); e) identified regions of concentration for the first year of the project (para. 4.1); 7.2 Prior to Board Presentation, the GOA has: a) established the ASIF Board of Directors and the Advisory Committee (para. 2.3); b) provided to IDA Framework Agreements and satisfactory appraisal documentation for ten microprojects (para. 5.20); 7.3 As a Condition of Credit Effectiveness, the ASIF will have: a) made the MIS, with an integrated accounting system fully operational (para. 4.13), (Article VI, section 6.01 (a))*; b) selected and appointed a resident Technical Advisor to the SIF General Manager with qualifications and under the terms of reference acceptable to IDA (para. 4.20), (Article VI, section 6.01 (b))*; c) selected and appraised at least twenty-five microprojects, of a total cost of at least US$500,000, in accordance with the norms and procedures stated in the ASIF Operational Manual (para. 5.20), (Article VI, section 6.01 (c))*; d) opened a Project Account in a commercial bank on terms and conditions acceptable to the Association with an initial deposit in local currency equivalent to US$80,000 (para. 5.24), (Article VI, section 6.01 (d))*; -41- 7.4 Assurances have been obtained during Negotiations on the following: a) the project will be implemented in accordance with the Operational Manual which will be adopted by the Board; and that any proposed changes to the Operational Manual would be the basis for IDA remedy (para. 4.1); b) the GOA will conduct an independent technical and procurement review of microproject implementation annually, with specific focus on community-related procurement and disbursement, under terms of reference satisfactory to IDA (para. 5.19); c) the GOA will conduct a mid-term review of project implementation and impact with IDA before the end of the first 24 months of project operation (para. 5.30); d) the GOA will promote an easy-access policy with regard to data generated under the "Monitoring of Living Standards" component of the project with a view to promoting wide use of the information by interested users and analysts. The IDA, among other users, would be granted full access to poverty survey data (para. 4.24); e) Prior to approval of any Microproject estimated to cost more than US$50,000 equivalent, SIF shall furnish to the Association a summary, project costs and other information about such Microprojects as may be reasonably requested by IDA for IDA's review and approval (para. 4.10); f) Disbursement of IDA matching funds (US$2 million) would be made on a pari passu basis with the counterpart funds from private donors (para. 5.25). Note: Parenthesis with an * refer to corresponding sections of legal documents. B. Recommendation 7.5 Subject to the above assurances and conditions, the project would constitute a suitable basis for an IDA credit of SDR 8.1 million (US$12 million equivalent) to the Republic of Armenia on standard IDA terms, with a maturity of 35 years. m.\km\e1 95 Oct. 23, 1995 ARMENIA SOCIAL INVESTMENT FUND PROJECT ANNEXES  -42- ANNEX A Page 1 of 5 PRIME MINISTER OF THE REPUBLIC OF ARMENIA DECREE September 12, 1995 # 165 YEREVAN on the Establishment of the Armenian Social Investment Fund Taking into consideration the urgency to improve the situation of the Republic's social sphere and the necessity to meet the vital needs of the most vulnerable groups of population: 1. To approve the Charter of the ARMENIAN SOCIAL INVESTMENT FUND (is attached). 2. This Decree shall come into effect from the day of effectiveness of the corresponding credit agreement between the Republic of Armenia and the International Development Agency according to the established order. H.BAGRATIAN -43- ANNEX A Page 2 of 5 Approved by the Decree of the Prime Minister #165 , September 12, 1995 CHARTER OF THE ARMENIAN SOCIAL INVESTMENT FUND L General 1. The Armenian Social Investment Fund (hereinafter referred to as the ASIF) is an agency whose activity is aimed at the rehabilitation of the Republic's social infrastructure and the improvement of this sphere. 2. The ASIF is a non-profit agency. 3. In its activities the ASIF is guided by the current legislation of the Republic of Armenia, this Charter and the Operational Manual. The Operational Manual is a document establishing the procedures of the ASIF and is prepared in consultation with the World Bank and Donors, subject to the approval of the ASIF Board (hereinafter referred to as the Board) and the World Bank. 4. The ASIF is a juridical entity having its own financial statements and bank accounts, its official stamp bearing the State Emblem and its name in Armenian and English and its square stamp. 5. The ASIF shall have its main office in Yerevan. Its address is 31 Ulnetsi St. Yerevan, 375037. H1. Objectives and Goals of the ASIF 6. The ASIF shall have the following objectives: a. Raising the living standards of coinmunities by providing funding for the rehabilitation of small-scale social infrastructure; b. Provision of assistance in employment generation and the enhancement of the capacity of economically vulnerable groups to be engaged in income-generating activities; particularly through the financing of reconstruction and rehabilitation of micro-projects (hereinafter referred to as micro-projects) in the social sphere; c. Support the study and development of the information base used to enhance the living standards of the population of Armenia. 7. According to its objectives the ASIF shall: a. provide necessary information to the local governmental bodies, non-governmental organizations and communities regarding the ASIF's activities; -44- ANNEX A Page 3 of 5 b. assist communities, grassroots non-governmental organizations in the course of micro-project preparation and implementation by providing them technical assistance. c. organize appraisals and approve the micro-projects submitted to the ASIF in accordance with the procedures stated in the Operational Manual, provide fumding for their implementation, supervise the competitions for consultants and the execution of the construction works; d. solicit or carry out studies, design works and appraisals necessary for the ASIF's activities; e. assist the capacity building of small-scale contractors and other non-govermental enterprises involved in micro-project implementation. [IL. Financial Recourses and Assets of the ASIF 8. The ASIF exercises the power to acquire, make use and dispose of financial resources and goods according to the objectives and goals of its activities; and the intent of its assets. 9. The sources of assets, including financial resources shall be the following: a. financial and material contributions made by the Government of the RA; b. financial and material contributions provided by multi-lateral and bilateral international programs; c. charitable contributions from individuals and organizations; d. financial and material contributions and donations from domestic and foreign non- governmental organizations; e. other sources not prohibited by the legislation of the RA. 10. The ASIF could open settlement and other type accounts (including foreign currency ones) with banking institutions in the RA and abroad according to the established order. 11. The financial resources provided by the Government of Armenia shall be deposited in the ASIF's account at the Central Bank of Armenia. 12. All withdrawals from the ASIF's bank accounts shall be made in accordance with the procedures established in the Operational Manual and supported by necessary documents. 13. The financial resources of the ASIF shall be used in accordance with the conditions laid out in credit and grant agreements. 14. The accounting of the ASIF shall be organized and kept, and accounting reports shall be made in accordance with the current regulations of the RA established for juridical entities and when necessary according to international standards and World Bank requirements. 15. All financial obligations and disbursements of the ASIF shall be made according to the Operational Manual. 16. Financial and technical audits of the ASIF shall be made by independent auditors at least once a year. The auditors shall be chosen on a competitive basis subject to the approval of the Board. -45- ANNEX A Page 4 of 5 IV. Management of the ASIF 17. The governing bodies of the ASIF shall be the following; a. ASIF's Board , headed by a Chairman of the Board (hereinafter referred to as Chairman) b. General Manager, accountable to the Board.. 18. The Board shall be composed of the following ftembers: - Minister of Economy of RA, - Minister of Finance of RA. - Minister of Social Security, Employment, Migration and Refugee Problems; - Representative of the Prime Minister's Secretariat; - One representative of a non-governmental organization; and - One representative of the private entities. The representatives of non-governmental organizations and of the private entities are appointed and removed according to the Chairman's proposal and the decision of the Prime Minister of the RA_ The representative of the Prime Minister's Secretariat is appointed and removed by the decision of the Prime Minister of the RA. 19. The Board shall be chaired by the Minister of Economy of the RA. The General Manager of the ASIF shall participate in the meetings of the Board in a consultative role and having no voting right. 20. The Board shall: a. decide the policies of the ASIF activities and approve the Operational Manual; b. approve the ASIF's annual budget and work plans; c. approve the results of the competition of independent auditors for the audit of the ASIF's reports; d. approve the funding of micro-projects in accordance with the Operational Manual; e. exercise other powers in accordance with this Decree and the Operational Manual. 21. Regular meetings of the Board shall be held at least every three months. Extraordinary meetings shall be held at the initiative of the Chairman or by the request of two members of the Board. The meetings of the Board shall be valid only if more than half of the members are present. Any decisions of the Board shall be made by a simple majority vote of the members present. In case of a deadlock the Chairman's vote shall be decisive. 22. The executive body of the ASIF shall be the Executive Office. Its activities and goals are established in the Operational Manual. 23. The Executive Office will be headed by the General Manager who will be responsible for the execution of the activities of the Executive Office. -46- ANNEX A Page 5 of 5 24. The General Manager shall be appointed and removed by the Board at the Chairman's request. 25. The General Manager shall: a. act on behalf of the ASIF and represent its interests without any written authorization; b. dispose of the assets and financial resources of the ASIF in accordance with the Operational Manual and the budget approved by the Board, c. open bank accounts; d. establish the remuneration rates and order for the office employees in accordance with the Operational Manual; e. distribute the work between the office key staff in accordance with their scope of activities; f. exercise other powers required by the ASIF's activities and not contradicting the legislation of the RA. V. Termination of the AS[F's activities 26, The ASIF shall be reorganized or liquidated by the Government of the RA, or by any other procedure established by the legislation of the RA.  ANNEX B Page 1 of 2 REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND Outline of ASIF Operational Manual PART A: OBJECTIVES AND STRUCTURE OF THE ASIF Chapter 1: Objectives and Methodology of the ASIF Political and social background Objectives of the ASIF Typology of microprojects Regional targeting methodology Chapter 2: Organization Structure of the ASIF Structure of the ASIF Board of Directors Executive Office PART B: ASIF ACTIVITIES Chapter 1: Promotion and Local Study Objectives of promotion and local study Methods and types of promotion Methodology and approach of the promotion and local study Chapter 2: Subproject Cycle Microproject identification Microproject appraisal Microproject appraisal criteria Microproject approval Microproject implementation Microproject follow up Chapter 3: Training/Technical Assistance Capacity building of ASIF staff Training/TA for communities Training/TA for implementing agencies Training/TA for contractors Procedures for selection and procurement of training/TA services -48- -48-ANNEX B Page 2 of 2 Chapter 4: Monitoring and Evaluation Management information system Special studies and impact assessment Annual work plan and budget Chapter 5: Monitoring of Living Conditions Living standards surveys Coordination of ASIF and SDS activities PART C: FINANCIAL AND ADMINISTRATIVE ASPECTS Chapter 1: Annual Work Plan and Budget Preparation of quarterly and annual work plans and budgets Institutional responsibilities and formats Approval procedures by the Board of Directors Chapter 2: Procurement Guidelines Chapter 3: Disbursement Procedures Chapter 4: Accounting, Reporting and Auditing Accounting obligations Monthly statements Reporting obligations Accounting system Auditing Chapter 5: Administrative Procedures Personnel hiring procedures Contractual terms for employment Staff governing regulations LIST OF ANNEXES Decree Organizational chart TOR Targeting for the ASIF TOR for key staff Standard documents for the microproject cycle TOR impact assessment study TOR technical audits Instruction to bidders Monitoring indicators Reporting documents -49- ANNEX C Page 1 of5 REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND Integrated Monitoring and Evaluation System 1. Monitoring is a process for reviewing continuously and systematically different aspects of project implementation. An integrated monitoring system seeks to do the following: (a) to determine if there is compliance between ASIF operating regulations and procedures for implementing microprojects and contracts (transparency and accountability); (b) to provide information regularly on progress toward achieving desirable results and facilitating reporting to the Board of Directors, the Government and donors. (c) to alert managers to actual or potential problems in implementation so that adjustments can be made; and (d) to determine if the project is affecting the intended people and how (impact). 2. Collecting and processing too much information is expensive in terms of staff time. Emphasis should be placed on collecting information that is immediately relevant for keeping implementation on schedule and consistent with the overall aims of the ASIF. In order to successfully generate a monitoring system for the ASIF, a group of components need to be elaborated and integrated. These include: (a) microproject monitoring (by ASIF staff and by communities); (b) a management information system (MIS); (c) a beneficiary assessment; (d) complementary studies, and (e) project mid-term review Micrproject Monitoring 3. At least initially, most monitoring will be done by ASIF Microproject Officers: individuals on the ASIF staff or contracted by the ASIF who are responsible for a number of microprojects which he/she visits periodically, and for which individual reports are prepared and fed into the computerized Management Information System (MIS). Good microproject monitoring is crucial because it provides the baseline information for beneficiary and impact assessments, and provides much of the input for the MIS system of tracking the project portfolio. For these purposes, the appropriate personnel, approach and frequency of microproject monitoring should be considered carefully -50- ANNEX C Page 2 of 5 4. Microproject Officers decide what to do in a work month according to what senior management requires in a monthly report. When ASIF management gives relatively low priority to internal reporting tasks, staff lack incentive to comply with data reporting and recording requirements, which may lead to delays and discrepancies, undermining the usefulness of the system. Therefore, it is necessary that ASIF management convey to staff the importance of monitoring and reporting responsibilities. 5. To be consistent with the participatory nature of the ASIF Project, it is desirable to involve communities to the greatest degree possible in monitoring of microprojects. This means involving "representatives of beneficiaries," primarily local government officials and NGOs that put forward microproject proposals on behalf of communities, as well as "ultimate beneficiaries" such as microproject committees selected by members of the community in monitoring. A number of steps may be taken to facilitate participation by representatives of beneficiaries and ultimate beneficiaries, including: (a) simplifying microproject proposal documents and procedures so that requesting communities can contribute to the collection of baseline data; (b) enabling communities to have voice in the choice of indicators to be monitored during implementation and after completion of a microproject; (c) encouraging technical specialists to prepare checklists of indicators that community members monitor on a weekly basis, in between visits by Microproject Officers or technical personnel who cannot reach communities more frequently; (d) encouraging technical specialists and Microproject Officers to discuss the indicators with communities; and (e) creating an incentive for Microproject Officers to devise their own strategies for involving community members in monitoring functions MIS -- Management Information System 6. The MIS is the computerized, internal monitoring system of the ASIF. When operational, it will provide up-to-date data on operations to ASIF management. As a monitoring device, it will provide transparency and accountability of ASIF activities, maintain data relevant to targeting, and facilitate contracting and payment by storing information on contractors, unit prices, and field progress. It will track ASIF activities in the subproject cycle, including basic microproject data; monitor progress of works based on microproject supervision visits; provide timely reports to the administrators and staff of the ASIF; flag microprojects experiencing unusual delays and signal cost overruns. MIS-generated performance reports would be an integral part of the monthly reports submitted by ASIF management to the Board of Directors for their review and of the quarterly reports and comprehensive annual reports submitted to donors. 7. The MIS for the ASIF is being developed during the pilot phase by the ASIFPU MIS Specialist and the AAA Computer Specialist. Fifteen days of international TA was provided during the month of February to conceptualize and provide guidance in development of the MIS. When completed, the MIS will comprise five interconnected sub-systems: -51- ANNEX C Page 3 of 5 Resources Targeting Sub-System, which will facilitate targeting decision making. It will store data on distribution of resources by region, sub-region and socio- economic characteristics, receiving input from the Microprojects Portfolio Sub- System. MicroproJects Portfolio Sub-System, which is an electronic "file" of each microproject. It enables each microproject that enters the ASIF to be tracked through the microproject cycle. It will generate reports of microprojects at each stage of the microproject cycle and other administrative data. Compound Prices Sub-System, which is a library of work items incorporated from a Unit Costs Database. This sub-system will be a guiding index of work item prices that will provide the data to the Microproject Budgeting Sub-System. The Unit Costs Database will comprise prices reported by suppliers and contractors of various materials, labor, equipment and transportation. Prices of common items will be collected monthly and those of less common items will be collected regularly but less frequently. The Microprojects Department Manager will designate one workday per month for Microproject Officers to collect this information by region and input it into the MIS. Microproiect Budgeting Sub-System, which will calculate the estimated microproject costs at appraisal based on data from the Compound Prices Sub- System. Contractors' bids will be considered by the Microproject Officer in reference to this price. This sub-system will enable labor content, imported materials, equipment use, etc. to be calculated for each microproject and the ASIF portfolio. Follow-Up Sub-System, which will be based on the Schedule of Work and Bill of Quantities. In the field, the Microproject Officer will monitor periodically progress of satisfactory work and record it on paper. The Officer will ensure this information is input into the MIS. This sub-system will send a message for action to the Accounting Department when a contractor has requested payment. Beneficia Assessment 8. A beneficiary assessment is a tool for project managers who seek to gather information to assess the value of an activity as it is perceived by its principal users, the beneficiaries. While the MIS system can provide information on the direct impact of service delivery, other methods are needed to detect changes in overall living conditions and, in addition, to explore specific aspects of impact, either by type of microproject or by type of beneficiary. A beneficiary assessment can provide the ASIF with necessary inputs to improve its interventions with the target population and to determine the relationship between ASIF's methods of microproject promotion, appraisal and supervision, and the level of satisfaction of beneficiaries. Findings are not intended to be input into the daily decision-making and operations of the ASIF, but rather to be part of the basis on which overall policies, budgets and annual work programs are set by the Board of Directors. 9. A beneficiary assessment employs qualitative techniques (group interviews and site visits) to collect information from select areas about the beneficiaries' relationship to the -52- ANNEX C Page 4 of 5 microproject and their perception of its benefits. A beneficiary assessment therefore will provide ASIF with an important element of transparency, since it is the target population directly who provides feedback. The elements to be determined in the beneficiary assessment include four broad categories: (a) beneficiary satisfaction and perceived benefits of the microproject; (b) beneficiary participation in the microproject cycle; (c) institutional development of institutions participating in microprojects (local governments, NGOs, microproject committees); and (d) suggestions to improve ASIF performance. 10. A beneficiary assessment requires a period of field work (several months); followed by analysis and report writing (several months). Typically, such an assessment is carried out in phases, conducted annually. The ASIF will provide data from its MIS and support the beneficiary assessment team by organizing site visits to selected communities. Conducting a study of this nature requires considerable experience in the application of beneficiary assessment techniques and in the preparation of institutional evaluation reports. In Armenia, the ASIF will contract out the beneficiary assessment to a qualified NGO or research entity that will employ local researchers. Complementary Studies 11. Short-term studies will be carried out by research and other institutions in the country to assess specific aspects of ASIF impact. ASIF's impact can be measured with statistical procedures that determine to what effect ASIF has participated in raising the living standards of the beneficiary populations, either directly through temporary employment and income, or indirectly through the provision of basic social services. Findings are not intended to be input into the daily decision-making and operations of the ASIF, but rather to be part of the basis on which overall policies, budgets and annual work programs are set. Therefore, the primary readers of these studies will be the Board of Directors, donors and staff of the ASIF. 12. The study fund will complement the household surveys by commissioning studies which will bring to light specific aspects of ASIF's impact on target groups and on participating institutions, as well as the impact linked to certain types of microprojects, and support various distribution processes to ensure effective dissemination of research. Impact studies on particular population groups may include: (a) a survey of laborers employed by ASIF-financed microprojects; (b) a study of the operations and maintenance performance in a given period following ASIF interventions; (c) the appropriateness of promotion efforts, microproject classifications and appraisal criteria in responding to the needs of poor women; (d) how the institutional characteristics of the requesting and implementing agencies affect ASIF's impact on the target population; and (e) the impact of training and TA to contractors and implementing agencies. 13. The institutional requirements for the agencies or institutes which will perform these complementary studies are defined in the Operational Manual, and necessarily include significant experience in ex-post evaluations and qualitative evaluation techniques. Mid-Term Review 14. A mid-term review is common to World-Bank supported project. In the case of a four-year ASIF Project, the mid-term review will begin two years after project launch. The mid- term review has several purposes: (a) to evaluate project performance during implementation; (b) -53- ANNEX C Page 5 of 5 to provide management with immediate feedback on project achievement as well as on areas needing improvement, which would lead to corrective actions and even possible changes in project design; and (c) to document the status of project execution for the benefit of the Borrower and financing agencies. The mid-term review will assess progress of all components of the ASIF Project. Specifically, it will review administrative, financial and technical aspects of microprojects and the ASIF as an institution. 15. A mid-term review cannot substitute for a beneficiary assessment or complementary studies because of its broad mandate. It is useful as a compilation of all monitoring components -- subproject supervision and monitoring reports, MIS data and reports, beneficiary assessment and complementary studies. Thus, it is helpful if impact and other studies are timed to coincide with the mid-term review. A mid-term review consists of three stages: (1) An initial period (perhaps two weeks) of data collection by specialists focusing on technical, administrative and financial aspects of the ASIF. Data and information is provided by ASIF staff and personal observations made during field visits to ASIF- financed microprojects. (2) A brief report is then prepared to highlight the strengths and weaknesses of the ASIF against its original objectives and targets, and recommendations are made for management action. Typically, this corresponds with a World Bank mission. (3) Finally, results and recommendations are discussed with the ASIF management and efforts are made to arrive at concrete agreements surrounding proposed changes and new project targets.  -54- A M ANNEXJD Page 1 of3 REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND Capacity Building of Communities. Implementing Agencies and Contractors Introduction 1. The key instruments for support to small private contractors, implementing agencies (lAs), and communities under the ASIF are training and technical assistance. During the pilot phase, a considerable amount of staff time was spent on explaining to communities the concepts underlying the ASIF on community development, participation, and competitive bidding and on assisting contractors to comply with the tender procedures, particularly in the areas of pricing, accounting and general business and financial planning. The purpose of this component is to systematize the delivery of training to address common constraints encountered by contractors and lAs in the pilot stage, particularly given the increased volume of activity in the main phase. More specific technical assistance will be provided on a demand-driven basis to address other constraints and issues faced by communities, lAs and contractors in the course of implementation. Support to Communities 2. The objectives of the training at the community level are to: disseminate information on ASIF, its objectives and procedures; foster community participation in prioritization and identification of the needs of the community; clarify the roles and the responsibilities of the community and how they relate to the different players in ASIF. This is an informational session to introduce the ASIF, the process by which microprojects will be identified, and the criteria upon which contracts will be awarded. The topics of the workshop will focus on: the ASIF goals and objectives, ASIF procedures of community participation, contracting through competitive bidding, the project cycle, and the roles and responsibilities of the community and the committee it selects to act on its behalf. 3. This general community meeting will be conducted by the Promotion Unit of the ASIF Microprojects Department. It will be a half-day session held on-site at the community, and will be preceded by visits and smaller community discussions. The meeting will be advertised during prior visits, and via flyers and local newspaper advertisements to ensure wide participation by the community and small contractors. Support to Implementing Agencies (IAs) 4. The objectives of the training and TA to IAs are to: introduce concepts of participatory community development; train in microproject preparation, identification, implementation, supervision, and reporting; and build the capacity of the IAs to fulfill their responsibilities, tasks and roles on behalf of the community to undertake the microprojects. 5. The key topics will focus on ASIF objectives and procedures; with emphasis on the contracting mechanisms and procedures related to competitive bidding, preparation, issuance and evaluation of bids, contractor and supervisor selection, microproject monitoring, maintenance and sustainability. This workshop will be offered after identification of the microproject. The workshop will consist of a two day session held on-site at the community level. When appropriate, training sessions for several lAs will be conducted at a regional level. ANNEX D Page 2 of 3 Support to Contractors 6. The objectives of the technical support to contractors are to disseminate information on ASIF and contracting procedures; and assist contractors to prepare bids in compliance with ASIF procedures, in order to help create a competitive viable small contractor industry. The constraints faced by small private contractors do not differ from those faced by the emerging private sector in general. Business management is of critical importance in order for firms to comply with the requirements for service delivery under the public works component. 7. A two day module will be conducted at a community site or regional center for contractors interested in ASIF bidding procedures. This module will focus on contract proposal preparation. A mock tender will be used to illustrate the concepts and procedures underlying a bid. The training will include business planning for the small contractor. Practical training on each of the elements of preparing a proposal in response to a tender will be provided. Attendance will be limited to 20 persons per session to encourage participation and a practical teaching approach. Training will be provided free of charge in the first year of the project. This policy will be reviewed after the first year. All workshops will be publicized via newspaper advertisements, flyers, radio newspaper advertisements, or whatever means are determined most effective to encourage participation. The training will take place at a regional center at hours that accommodate the target audience. Participation in the workshop will not be an eligibility requirement for contractors to bid on a tender. Technical Assistance 8. In addition to the more standardized training, technical assistance to contractors on engineering and construction standards and performance will be provided by the supervisors contracted by the local implementing agency, and by the Follow-up Officers during supervision visits. Additional experts will be contracted to address constraints requiring more specialized attention. The technical assistance and support to address the business management related constraints of small private contractors will be provided primarily by specialists from qualified agencies contracted by the ASIF. Technical assistance to contractors will be provided free of charge in the first year. Procurement of Services 9. The ASIF will deliver training and TA to enterprises and lAs by contracting two or three local training institutions via a competitive bidding process in the first year of the project. The Institutions Support Unit within the ASIF will be responsible for developing mechanisms to identify managerial and technical gaps at the contractor and IA level and for contracting local expertise to deliver the training modules and provide other assistance as deemed necessary in the course of implementation. The ASIF is expected to stimulate competition and new entrants in the delivery of training and TA services. Local Training/TA Institutions 10. Local training institutions were assessed during the preparation and appraisal missions for their capacity to deliver the types of training and TA services required by the ASIF. There are currently over 700 local NGOs registered in Armenia. The majority are registered but inactive due to a lack of funding. The active organizations are international institutions still largely involved in humanitarian relief. Many of the institutions are relatively new, are grant-based and are thus implementing activities linked to their grants. However, they are now in the process of shifting their activities from humanitarian to development activities. There is good capacity in terms of staff, and much interest in tailoring activities to meet the demand that will be generated by the ASIF. -56- Page 3 of 3 11. The ASIF project itself will have to play a catalytic role in assisting to develop capacity in local training institutions to undertake the tasks necessary for project implementation. This local capacity building will occur in several ways: the selected local training organizations will be invited to participate in some of the training activities for ASIF staff; ASIF engineers will work with the trainers to explain the Project, the microproject cycle and the constraints faced by IAs and contractors and local supervisors in project implementation; in the first 3 months of project implementation, trainers will work closely with ASIF engineers in the field during which period the training modules will be delivered by both the trainers and the responsible ASIF engineer to ensure adequate coverage of technical and management issues, and transfer of knowledge from the engineers to the local training institutions. 12. The following institutions were assessed for their capacity to deliver the types of training and TA services required: Care, Save the Children Fund, VOCA, the AAA NGO Training Center, the Armenian Foundation for Small and Medium Enterprise Development, Oxfam, The American University of Yerevan, the Business Communications (BCC), Peace Corps, the Private Enterprise Development Institute of Armenia (PEDIA), Haigazian Associates, Technical Assistance to the Republic of Armenia (TARA), and the Environmental Research and Management Center. Other institutions met with during previous visits include All Armenian Women's Union, Armenian Intellectual Women's Organization, and the Chamber of Commerce. 13. On the basis of these assessments, the likely institutions to provide services to the ASIF include: The AAA NGO Training Center, Oxfam and Save the Children Fund in the areas of community development and participation; American University of Yerevan, AFSME, and Haigazian Associates for the training to lAs and contractors; and the Environmental Research and Management Center of American University of Yerevan on the inclusion of environmental issues in the microproject cycle. Credit Activities 14. During the preparation mission, the feasibility of including a micro-credit component in the ASIF project to provide small loans to microentrepreneurs was explored. It was decided that such a component at this stage would diffuse the activities of the ASIF, in light of the innovativeness of the concepts of the ASIF project, and the scale of activities to be undertaken in the public works component. ASIF will instead link with micro-credit programs which will become operational in the near future in Armenia, particularly with those programs that will operate in the same regions as the ASIF. 15. The Eurasia Foundation, a U.S.-based international NGO, and the proposed Agricultural Bank are planning to begin operations in small business and rural finance respectively by the end of 1995. The ASIF will explore the possibilities of negotiating bank guarantees and performance bonds for private contractors working with ASIF microprojects, and raising issues of small enterprise access to working and investment capital loans from these institutions as they become operational. I Inclusive of private entrepreneurs such as carpenters, plumbers, electricians, transporters, consultants, producers and suppliers of building and construction materials.  -57- ANNEX.E lag ifi cac 1 2 8« T1' i  -58- XF Page 1 of 7 REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND TOR Technical Assistance for Targeting of the ASIF Background 1. The Government of Armenia is setting up the Armenian Social Investment Fund (ASIF) as an autonomous institution to respond to requests from local level organizations for funds to carry out microprojects in communities. The ASIF has four main objectives: (i) rehabilitation of basic small-scale infrastructure, such as schools, health clinics, sanitation and water facilities, that will have an immediate impact on the improvement of the living conditions of the poorest elements of the population; (ii) strengthening capacities of private small contractors, artisans and other small private businesses that can benefit from ASIF contracts; (iii) employment generation through the use of labor-intensive construction techniques to carry out rehabilitation works; and (iv) to obtain greater understanding of the living conditions and poverty in Armenia. 2. The ASIF will not directly implement rehabilitation microprojects; instead, it will respond to requests for funds, from local level organizations to implement microprojects. Local organizations may include village councils and other forms of local government, NGOs, parents committees, and any other group or organization that may or may not be registered. The ASIF will receive proposals from local organizations and approve them based on strict criteria. Local-level organizations will be encouraged to work with community members to identify, prepare, implement, and maintain microprojects so as to ensure that the community has influence over the type of microproject to be implemented, and to ensure that the microproject responds to a collective, urgent need. 3. The ASIF will support local-level organizations in carrying out their microprojects by assisting and training them in selecting and hiring private contracting firms to carry out work in an efficient manner and with good quality. Small contractors may also receive training and technical assistance to bid on construction works and to improve their basic management skills. 4. Because the ASIF has a finite amount of resources, not everyone can be helped. The ASIF will delineate several groups of intended, direct beneficiaries so that resources can be channeled selectively to them. "Targeting" is the term for identifying and selecting those groups from among the larger population. 5. To increase the likelihood that benefits reach the intended beneficiaries, the ASIF will adopt a targeting strategy which includes two steps: first, undertake a poverty ranking exercise of administrative districts; and second, undertake a Needs and Capacity Study in those regions ranked as the poorest to verify and improve the rankings. -59- ANNEX F Page 2 of 7 Ranking of Administrative Districts 6. The ASIF will respond to requests from throughout Armenia, but will progressively reach this goal through targeting specific administrative districts of the country. In order to identify the specific or "priority" areas, districts are to be ranked according to the following indicators: 1. The availability and the state of the basic social services infrastructure (education, health system, potable water, roads, community centers, post offices, etc.). This information will be received from the line ministries and the other governmental bodies. 2. The poverty level. Since information on poverty is not available and a poverty line or poverty level has not been established yet, proxy indicators of poverty will be used so as to rank the districts. The proxies include: (a) vulnerable groups as a percentage of the district population. These will include: - homeless families (earthquake, war, other causes); - internally-displaced families as a result of war; - refugees living in communal dwellings; - single-headed households with children; - families with 5 or more children. (b) unemployment in urban areas and land and cattle ownership in rural areas. 7. The list in (a) above is a suggested list of vulnerable groups. The consulting firm should advise on the list. The percentage of those groups in the total population of the district will be used as an indicator. 8. Such data is available at the regional level. In rural areas, data on land ownership, quality of land, and number of cattle per person should be obtained from regional governments. 1. The altitude of the district. 2. Location in zones of destruction (the earthquake and military conflict zones). 9. Taking into account these variables, districts are to be ranked with numerical values. Armenia is divided into 37 districts. For the purposes of ASIF planning and operations, the largest cities -- Yerevan, Gyumri, and Vanadzor -- are regarded as separate districts. Thus, the ranking should be done in 40 districts. 10. The estimated time for collecting relevant data and conducting the ranking exercise is 2-3 weeks. -60- ANNEXF Page 3 of 7 Needs and Capacity Study 11. After ranking the districts, a Needs and Capacity Study will be undertaken in the ten districts ranked as the most vulnerable, in order to verify the utility of the ranking indicators, and refine the ranking within the 10 most vulnerable districts. Purpose of the Needs and Capacity Study 12. There are two broad purposes of the Needs and Capacity Study: 1. To assess rapidly the needs and problems of the Armenian population in the ten most vulnerable districts. This includes an assessment of the demand among different categories of the population for rehabilitation of basic social and economic infrastructure at the community level; 2. To analyze the management, programming and operational capabilities of local level organizations in the districts. Needs of target groups 13. In collaboration with local level organizations, an assessment of the social and economic conditions and needs of groups living in the ten districts will be conducted. The needs assessment study will provide detailed information on the demographic, social and economic conditions of the communities living in each of the ten districts. The data to be collected will include: - demographic compositions of the district (women, children, disabled, elderly, refuges, ethnic minorities); - current economic activities, assets and income; - availability of educational, health, potable water and other social infrastructure and services; - need for rehabilitation of education, health, potable water and other basic social infrastructure; when rehabilitation is needed more information for each type of potential microproject should be noted, e.g. major rehabilitation, slight repair, etc.; - availability of economic infrastructure such as arable land, markets, credit, industrial enterprises, roads, electricity, irrigation system, telephone/telegraph, radio/TV, training; - current welfare and development programs in area (NGOs, government, church activities, donor-supported projects). Assessment of local level organizations 14. The study will focus on a sample of the activities and capacities of various local level organizations in the target districts. These organizations include village councils, NGOs, parents' committees, women's committees, and other groups. Both registered and non- registered groups or organizations will be assessed. The following aspects of local level organizations will be studied: -61- ANNEX F Page 4 of 7 - the existence of local-level organizations and classification of their initiatives and activities; - whether the organizations have the necessary structures and administrative systems to deliver basic social and economic services to the community; - whether these structures and systems are consistent with the ASIF approach to the microprojects; - whether they have the required personnel with relevant skills, knowledge and experience to identify and implement microprojects; - whether these personnel have a vision that is consistent with the ASIF approach to microprojects; - their access to financial resources, including their ability to mobilize local resources, and ability to account for use of those resources; - their relationship or collaboration with other local level organizations; - their relationship to community members; how they are perceived by community members; - the quality of their leadership and accountability to local membership or community members; - existence of specific procedures for beneficiary input and influence; - service delivery can be expanded without overextending the organization; - the poor and vulnerable are among the beneficiaries of their activities; - they have a monitoring process to know when progress and objectives are being met. 15. The study will also rapidly collect basic data on existing/potential contractors in the district: - kinds of services or works they are capable of providing; - their reputation in the community for dependability and quality of work; - their capacity indexes; - their constraints in securing inputs and materials needed; - their need in technical assistance and training (aspects to be specified). Methodology 16. A multi-disciplinary team led by a central coordinator and consisting of sociologists, anthropologists, and technical persons (e.g., engineers) will undertake the study. The team should be made up of men and women to be conscious of gender-based biases. The study will consist of three phases. 1. Conceptualization Phase will consist of a desk study of available reports and studies relevant to the objectives of the needs and capacity study. Information will be collected from government and non-governmental sources, including relevant studies by donor agencies. 2. Field Work Phase will consist of field surveys in the selected districts. The team will introduce the objectives of the study to local authorities and representatives of the target districts. They will gather information from local officials, other community leaders, and representatives of NGOs and development agencies operating in the target districts. Based on these interviews, they will -62- ANNEX F Page 5 of 7 select a sample of five or six villages in each target district to carry out in-depth interviews with members of the community and their representatives. 17. The interviews will combine group interviews and individual interviews with different categories of the local population -- including women, youth, elderly, unemployed, local leaders, minority religious or ethnic groups, and disabled--in order to have a cross- sectional analysis of the varied composition of communities. The reports should mention with whom the interviews have been conducted, and show that different levels of interviewing have taken place with local governments, NGOs associations, staff of schools and health centers, beneficiaries, etc. 18. A questionnaire will be designed to provide guidance and direction to those undertaking the interviews in order to derive conclusions surrounding the needs and institutional capacity issues presented above (Purpose of Needs and Capacity Study), but researchers should have the flexibility to adapt the questionnaire to particular circumstances. 19. The survey will also include direct observations of essential social and economic infrastructure in the community. 20. Researchers will come together each night to discuss their interviewing methods and to share their insight into how they apply surveying techniques and what they are learning. The questionnaire can be adapted based on these discussions so as to expand the information base on local problems and needs. As priority problems and options begin to emerge, it is important to collect technical data about facilities and services in the community. 3. Report Writing Phase. Once data gathering is complete, the team will encourage the community to come together to discuss the findings of the research team. The team will compile and synthesize the data for each target district in a comprehensive report to be prepared for the ASIF. The results of the survey in each village will be attached as an annex. 21. If possible, in a few cases the team may prepare a participatory discussion of the findings. To do so, community members will be encouraged to lead the discussion while the research team acts more as a facilitator and provider of needed technical information. The goal is to help the community to come to a rational assessment of their problems and possible solutions, and to rank them according to their feasibility of success. During this process, new information can be included and corrections made to the team's findings. Based on the data collection and community-wide meeting, a report will be prepared synthesizing the major issues relevant to the study. Organization of the Needs and Capacity Study 22. A Central Coordinator for the Needs and Capacity Study should recruit the multidisciplinary team, train them, prepare the questionnaire, and oversee all aspects of the field work and report writing. Once the researchers are hired, the schedule of the study may be the following: -63- ANNEX F Page 6 of 7 Training of researchers in the purpose, objectives, and methodology of the study, preparation and desk study of available information. 1 week Field surveys in selected districts 4 weeks Report writing. 2 weeks Estimated time for the Needs and 7 weeks Capacity Study. 23. Upon completion of the Needs and Capacity Study, a reevaluation of the ranking is to be made. 24. Expected output: Report on the methodology used for ranking exercise Findings of ranking exercise Questionnaire for Needs and Capacity Study Report on the Needs and Capacity Study Report on reevaluation of ranking Total estimated time: 10 weeks Preferred time to begin: June 1, 1995 -64- Page 7 of 7 Poverty Ranking of Districts of Armenia Poverty District name Final 1 Stepanavan 76.0 2 Vaik 67,5 3 Spitak 67,5 4 Amasia 65.5 5 _ Goris 64,0 6 Krasnoselsk 63,0 7 Sisian 63,0 8 Tashir 61, 9 Gugark 57,0 10 Giumri 57,0 11 Kapan 56,0 12 Aragats 56,0 13 Idjevan 52,0 14 Taush 47,0 15 Akhurian 46.5 16 Talin 46,0 17 Vanadzor 44,0 18 Ashotsk 43,0 19 Ani 43,0 20 Eghegnadzor 42,5 21 Aparan 42,0 22 Kamo 40,0 21 Martuni 40,0 24 Hrazdan 32,0 28 Artik 32,0 26 Ashtarak 32,0 27 Meghri 31,5 28 Sevan 31,0 29 Tumanian 31,0 30- Nairi 28,0 31 Baghramian 28,0 32 Vardenis 26,0 33 Ararat 23,0 34 Yerevan 22,5 3T_ 'Kotaik 20,0 36 Noemberian 17,0 37 Artashat 16,0 38 Echmiadzin 13,0 Masis 9.0 Armavir 8,0  -65- ANNEX G REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND Selected Appraisal Criteria for ASIF Microprojects * Proposal falls within typology of microprojects. * An acceptable level of community participation was demonstrated through 1 of 3 ways: (1) The community held a meeting where at least 30% of the adult population participated; (2) A person or group within the community organized a petition supporting the microproject, which was signed by at least 50% of the community; and (3) A proposal by a local government or NGO demonstrates to the satisfaction of the ASIF that it represents the community's priorities and needs. * The proposed microproject does not exceed US$150,000. * The community contribution must meet the 15% minimal requirements. * An acceptable plan for sustainability prepared by the communities, and commitment from the local authorities to participate in the maintenance of the facility. * Labor creation comprises at least 15% of the microproject cost. * The requesting community lacks basic infrastructure. * There are no other plans to provide such facilities in the area. * The microproject conforms with national norms and standards. * The microproject does not harm the environment, or has mitigation measures. * Written authorization of permits from local and regional governments have been obtained. * The project should demonstrate an acceptable cost per beneficiary. * The project should demonstrate an acceptable level of maintenance and operational costs per beneficiaries. * Technical feasibility of microprojects should be demonstrated. 瓦 -66- ANNEX H Page I of 4 REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND Monitoring of Living Standards I The Monitoring of Living Standards Component will support the State Department of Statistics (SDS) to improve its capacity to monitor the living conditions of the population. A new information system will be established that will carry out sampling household surveys and to develop data processing capacity. It will monitor trends in the population's welfare and the social impact of economic reforms. The SIF Project will provide funds for developing SDS staff skills in statistical techniques related to a free market economy, and provide assistance to SDS to carry out two household surveys. International experts in sampling techniques, survey design and organization, data processing and analysis will be funded under the project. Background 2. Despite SDS' efforts to modify its structure in order to meet the statistical needs of a market economy, reduced human and financial resources have made the modifications difficult and painful. A draft Statistical Law has been submitted to the parliament for approval. SDS' structure has been changed, but it lacks resources to hire staff and temporary workers and to acquire badly needed computer equipment. SDS technicians are in need of new sampling techniques and methods for measuring welfare, organizing sampling surveys, and processing data. They also need statistical software to improve data analysis. 3. Efforts are ongoing to fill SDS' institutional gaps. The IMF and the OECD are providing training to SDS in order to update the SDS' National Accounting System and its price data collection. Yerevan State University is assisting the SDS in carrying out a pilot Random Sampling Household Survey, the first of its kind in Armenia. The sample contains 2400 urban households randomly selected from street lists, and 1200 rural households selected from rural council lists. Four rounds of one-month sampling will take place in order to gather information on household incomes and expenditures for each quarter of a 12-month period. The questionnaire includes information relevant to household size and composition, housing conditions and ownership, current incomes and current expenditure. The SDS plans to compare the results with data collected by use of the former Branch Sampling Household Survey, which it has carried out since the 1950s. A review of the pilot survey methods revealed some deficiencies in the way information on household expenditure is being collected. There is room for improvement and SDS is willing to make efforts in this direction. Project description 4. Analysis of the 1994 Pilot Household Survey. The project will provide financial and technical assistance to SDS to complete the pilot household survey. The Living Standards and Social Problems Unit (LSSPU), which is responsible for implementing the pilot survey, has completed four rounds in the urban areas and will receive supplementary resources to complete field work in rural areas. 5. The Research Group Project on "Family in a Changing Society" at the State University is associated with the LSSPU and responsible for processing and analyzing the results. -67- ANNEX H Page 2 of 4 It will receive assistance from the World Bank as part of the preparation of the poverty assessment to finalize data processing and analysis. 6. The project will provide technical assistance to SDS under the PPF to assess the adequacy of the pilot method and the quality of the results, and to prepare a consumer basket for the price index. On the basis of this assessment, a new survey system will be designed. 7. Design and scope of a system for monitoring welfare. The new system will be adapted from other pilot surveys and surveys developed by the World Bank to measure and monitor living conditions, such as the Living Standards Measurement Survey (LSMS), and the Priority and Integrated Surveys (PS and IS) to measure the social impact of economic reforms). 8. Sampling. A sampling expert will assist and train SDS staff for drawing the national master sample, using existing sampling frames. These frames include the 1989 census lists and maps (which are incomplete in the earthquake area), local passport lists and other exhaustive lists. 9. The size of the survey samples will be fixed by the expert based on the survey objectives. It is assumed that a sample of 400 to 500 households in each socio-economic group (SEGs) will be taken to ensure a national representation in each group. It is estimated that the number of SEGs will not be more than 10 to 12 groups. This implies a sample size of about 5000 to 6000 households for a rapid survey like the PS. However, an intensive survey, like the IS or LSMS, will use a smaller sample of about 2500 to 3000 households. In both samples, urban areas will be overweighed to ensure a good coverage of the diversity of urban SEGs, while the homogeneity of the rural population will require a smaller sample. 10. Because of the earthquake and massive migration, passport and census lists must be updated prior to undertaking sampling. Updating will be done through a listing operation carried out before drawing households. Drawing the sample from the passport lists may imply special procedures that will be fixed by the expert. 11. Survey design and organization. In the first phase, the project will carry out a rapid survey (three/four months), using an adaptation of the World Bank Priority Survey. This survey offers several advantages. It is easier to design and organize because it uses a lighter questionnaire than a thorough Living Standards Survey. Another advantage is that it can serve as a preparatory exercise for a complete and more intensive household survey. Ultimately, when repeated over the years, this survey will constitute a useful instrument for monitoring trends in the population's welfare. 12. The questionnaire will be applied during a single visit when information on the following topics will be gathered: household size and composition; education (e.g. enrollment, level, history, cost); health conditions, use of and access to public and private services, and costs; employment (e.g. main, secondary, wages, history, unemployment, employment search); migration (e.g. origins, reasons, former occupation before moving); income from farm activities; incomes from non-farm activities; other sources of income (e.g. transfers and remittances); and food and non-food expenditures. Nutritional status of children under 5 will be estimated through anthropometric measurement. -68- ANNEX H Page 3 of 4 13. Qualitative questions relevant to the social and cultural situation in Armenia will be added, as well as a community module describing access to public services, equipment and public infrastructure in the sampling areas. 14. A special exercise will be carried out for measuring expenditure. Currently, the pilot survey method for estimating expenditure consists of one day observation of food and one week observation of other expenses. It carries notable weaknesses that protract the lack of reliable data on very important and needed indicators. The project proposes to add a diary to the questionnaire and an extended module on expenditure. Diaries will be distributed to selected families prior to the survey and will be collected during interviews. While daily expenses will be reported in the diaries by the households over a period of two weeks, the questionnaire expenditure module will gather retrospective information on normative expenditure over the past 12 months. 15. The timing of data collection for this survey is important, particularly for the rural areas. It is recommended that incomes are measured during seasons that follow major crop sales while vulnerability is measured during winter. 16. It is proposed that a more comprehensive survey be carried out during the second phase. The objective of this survey will be to thoroughly measure costs of living and undertake detailed analysis of household coping systems and household members' participation in generating household welfare. This survey will cover 12 months and will measure seasonal variations in income and expenditure. Each household will be interviewed and visited during a full month. A diary of receipts and expenses will be kept for the same period. 17. The Household Questionnaire will consists of individual and household level queries. At the individual level, information will include the following: household composition; education, including history, current attendance and cost; recent and chronicle health conditions, including immunization, fertility and infant mortality; employment history, current status of employment, actions taken to improve or secure family welfare, job searching, unemployment, and sector of employment activity; income amount, frequency, type, benefits and other job related advantages. At the household level, information will cover expenditure patterns; credit and other forms of borrowing and saving; other income, pension, remittances, transfers, and foreign currencies; farm enterprises, assets, revenues, production, expenses, issues and obstacles to development; non- farm enterprises, assets, revenues, expenses, issues and obstacles to development; and anthropometric measurement. 18. The household questionnaire will be supplemented by a qualitative module on people's aspirations and a community module on infrastructure and community equipment and communal life. 19. Tabulation/Analysis of the results will be based on an analysis plan that will be prepared prior to the survey design. The objective of the analysis plan is to identify and set up the major themes of the surveys, which will in turn lead to the questionnaire design and establish priority fields for analysis. These fields are likely to include identification of the most vulnerable groups of the population; poverty assessment; effects of privatization on farming; privatization and the development of the informal sector; household accounts and Social Accounting Matrix. 20. Training and Technical Assistance. Technical Assistance will be provided through the project to improve SDS staff capacity and competency in areas such as survey design, -69- ANNEX H Page 4 of 4 sampling design and execution, data processing and analysis. Over project duration, 61 staff- weeks of international consulting will be provided. Training will be delivered through on-site training workshops with local and international specialists, organized study trips, and specialized institutions. Among others, the Munich Training Center, Statistics Canada, and the ISPC at the US Bureau of the Census will be asked to help implement the training program. 21. In order to make worldwide information on statistics and socio-economic research and methods accessible to SDS staff, an English language course has been initiated. 22. Personnel. The project will provide supplementary resources for hiring local consultants to do field work and data processing. These local consultants will reinforce the current SDS staff at the regional and central levels. They will be hired for short and long-term assignments related to listing operations and data collection and processing for the main surveys. A computer analyst, programmer, and accountant will also be hired on a short term basis to support SDS on all related activities. 23. Equipment. The SDS has prepared a plan for updating its computer equipment, for which a proposal for financing through the Institution Building Loan was prepared. In particular, it proposes the purchasing of one PC/586 and four PC/486s with auxiliary equipment (e.g. printers and stabilizers) and ten portable 486s. These are to be allocated to the Household Survey Unit. In support of development of the programming and analytical capacity at the regional level, the IBL proposal also includes the installation of computers (386/486) at regional offices and the purchase of fax machines to ease communications with international partners. 24. In order to supervise project implementation by the Central Office's senior staff, the SIF project will provide for the purchase of two vehicles and two 486s and auxiliaries to complement the equipment of the Household Survey Unit. 25. Estimated budget. The project will cover: Technical Assistance: 220,000 Vehicles: 36,000 Computer Equipment: 11,600 Training (study trips/workshops): 140,000 Local Personnel: 50,960 Supplies: 6,500 Operating cost: 7,000 Total: $472,060 -70- ANNEX I Page 1 of 2 REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND Environment-Related Concerns 1. Given that the ASIF will focus on rehabilitation and enhancement of existing facilities, no adverse environmental impact has been identified. It is anticipated that the subprojects would actually have a positive impact on the environment, given that each subproject is expected to upgrade existing infrastructure including the improvement of sanitary and water supply facilities and protection of small works from soil degradation. However, in order to generate and encourage environmental awareness, the project has incorporated a project specific environmental plan which will have two main objectives. These are: A. to ensure that subprojects financed by the ASIF will have no adverse impact on the environment, and also that each subproject is seized as an opportunity to enhance related environmental aspects within the community; and B. to increase awareness among a range of policy makers in the ASIF and implementing partners (local government, NGOs, and subproject committees) on the importance of environmental issues. 2. To attain these objectives, an environmental plan has been drafted, the key elements of which are provided in Table A: To ensure that An environmental checklist has been incorporated into the microproject microprojects do not have appraisal form, based on the types of microprojects that the ASIF is expected an adverse impact on the to finance (brief summary provided in Table B). The checklist may be environment amended or changed as different types of microprojects are proposed. Where adverse impact is identified and mitigatory action cannot be incorporated, the microproject will not be financed. Monitoring and a) Indicators to evaluate the impact of the microproject on the environment Evaluation will be incorporated into the MIS system for the project; b) The mid-term review will focus on environment related issues and make modifications as found necessary. To enhance the Examples include: (a) the financing of simple but environmentally safe environmental aspects of mechanisms for disposal of medical waste as part of the rehabilitation of rehabilitated health facilities; (b) planting of trees on unused grounds around microprojects infrastructure rehabilitation; (c) providing or rehabilitating sanitation facilities for all health and education infrastructure microprojects; and (d) requiring the removal and safe disposal of debris. Indicative Stand-alone a) Soil conservation: Microproject b) Social forestry microprojects; Interventions c) Provision of clean water or improvement of existing water supply infrastructure; d) Improvement of existing sanitation and sewerage microprojects; and f) financing renewable energy sources. To integrate a) Integrated training modules will be designed that will increase the environmental concerns awareness of participants to take a global approach to transition that into policy and decision identifies, addresses and integrates environmental concerns into local making development. -71- ANNEX Page 2 of 2 Table B: Summary of Environmental Checklist (to be completed) TYPE OPSuBPROJrg AcyM CHECKLIST All Construction If wood is used for construction, can an alternate material be used? If not, examine need to establish mitigatory actions like replanting trees to replace wood used. Ensure that the contractor or implementing agency has a plan for removal and safe disposal of any debris left over from the rehabilitation activity. Examine whether the limited construction or rehabilitation results in clearing of land or cutting down of trees and, if so, ensure compensatory afforestation. Health Clinic/School Rehabilitation Verify the inclusion of proper sanitation system in the school/clinic. Verify the need for the safe disposal of medical waste in health clinics, and if not examine the need to introduce an acceptable system. Verify the possibility of tree planting on unused grounds around clinics and schools. Verify the need to winterize the buildings, both in order to benefit its users as well as to conserve energy sources. Sanitation and Sewerage Rehabilitation Verify the suitability of the pit and sewerage design to the local terrain and ground conditions. Verify the possibility of the communal pit in light of access to suction trucks, where applicable, as part of a sustainable maintenance and operation plan. Verify the existence of properly functioning disposal systems in controlled sites. Verify the need to impart environmental awareness to users. Water Supply Construction or Rehabilitation Verify the requirements for protecting the water point with proper drainage and protection sources. Verify the suitability of the technology of construction and operation to ensure proper maintenance and thus ensure proper use of water resources. Small Scale Irrigation Rehabilitation Verify the need to ensure adequate soil conservation measures and the willingness of the community to undertake the necessary actions. Verify the need to provide adequate extension support to farmers to prevent any problems of water logging or salinization. -72- ANNEXJ Page 1 of 2 REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND Project Costs Summary TABLE A: Project Cost Summary By Expenditure Account % % Total (US$ Million) Foreign Base Expenditure Category Local Foreign Total Exchange Costs I. Investment Costs A. ASIF Microprojects 15.7 - 15.7 - 83 B. Project Preparation Facility 0.1 0.3 0.4 80 2 C. Vehicles - 0.3 0.3 100 2 D. Equipment 0.0 0.2 0.2 100 1 E. Technical Assistance Foreign TA - 0.4 0.4 100 2 Local TA 0.3 - 0.3 - 2 Subtotal Technical Assistance 0.3 0.4 0.7 58 4 F. Training Study Tours - 0.2 0.2 100 1 Staff Training 0.0 0.0 0.0 50 - Subtotal Training 0.0 0.2 0.2 94 1 G. Studies Beneficiary Assessment 0.1 - 0.1 - - Study Fund la 0.1 - 0.1 - - Subtotal Studies 0.1 - 0.1 - 1 Total Investment Costs 16.3 1.4 17.6 8 93 II. Recurrent Costs A. Operating Costs /b 1.3 - 1.3 - 7 Total Recurrent Costs 1.3 - 1.3 - 7 Total BASELINE COSTS 17.5 1.4 18.9 7 100 Physical Contingencies 0.6 0.3 0.9 30 5 Price Contingencies 0.1 0.0 0.2 25 1 Total PROJECT COSTS 18.3 1.7 20.0 8 106 \a Other impact studies on women, local governments, labor, institutions, etc. \b Office supplies, fuel, maintenance, communications, audits, etc. -73- ANNEXJ Page 2 of 2 REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND Project Costs Summary TABLE B: Expenditure Accounts By Components (US$ Million) Support to Institutional Contractors, Living Project ASIF Support to lAs, & Standards Preparation Microprojects ASIF Communities Monitoring Facility Total I. Investment Costs A. ASIF Microprojects 15.7 - - - - 15.7 B. Project Preparation Facility - - - 0.4 0.4 C. Vehicles - 0.3 - 0.0 - 0.3 D. Equipment - 0.2 - 0.0 - 0.2 E. Technical Assistance Foreign TA - 0.1 0.1 0.2 - 0.4 Local TA - 0.0 0.3 0.0 - 0.3 Subtotal Technical Assistance - 0.1 0.4 0.2 - 0.7 F. Training Study Tours - 0.0 - 0.1 - 0.2 Staff Training - 0.0 - - - 0.0 Subtotal Training - 0.1 - 0.1 - 0.2 G. Studies Beneficiary Assessment - 0.1 - - - 0.1 Study Fund /a - 0.1 - - - 0.1 Subtotal Studies - 0.1 - - - 0.1 Total Investment Costs 15.7 0.7 0.4 0.4 0.4 17.6 II. Recurrent Costs A. Operating Costs /b - 1.2 - 0.1 - 1.3 Total Recurrent Costs - 1.2 - 0.1 - 1.3 Total BASELINE COSTS 15.7 1.9 0.4 0.5 0.4 18.9 Physical Contingencies - 0.4 0.6 0.0 - 0.9 Price Contingencies - 0.1 0.0 0.0 - 0.2 Total PROJECT COSTS 15.7 2.4 1.0 0.5 0.4 20.0 Taxes - - - - - - Foreign Exchange - 0.7 0.2 0.4 0.3 1.7 \a Other impact studies on women, local governments, labor, institutions, etc. \b Office supplies, fuel, maintenance, communications, audits, etc. -74- ANNEXIK Page 1 of 3 REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND Proposed Project Implementation Plan and Schedule 1. The Armenian Social Investment Fund (ASIF) has been established to fund rehabilitation of basic social and economic infrastructure on a grant basis in response to requests from local organizations, including local governments, NGOs, and existing or newly created community-based organizations. ASIF would aim to support the most vulnerable groups among the Armenian population through improvement of basic social and economic infrastructure and creation of employment opportunities Implementation Arrangements 2. ASIF has been established pursuant to Government Decree #165 dated September 12, 1995, as a financially, technically and administratively autonomous body (Government Declaration is provided in Annex A to this SAR). The Fund will operate on the basis of a detailed Operational Manual which would provide detailed information on the organization and structure of the Fund. A draft of the new Operational Manual has been developed jointly by the ASIF and the Bank team. The final version of the Operational Manual will be reviewed and approved by the Board, after negotiations, and before credit effectiveness and once approved cannot be amended without approval from the Board and IDA. 3. The Operational Manual details all implementation arrangements, including the organizational structure, describes the duties and obligations of the implementing agency, the responsibility of the various stakeholders, and the administrative arrangements for project implementation. In addition it also establishes the key impact and progress indicators for the project and establishes a system for continuous monitoring and evaluation of project activities. 4. Procurement and Disbursement: Given the nature of the project, it is difficult to give a well defined estimate of project implementation. However, procurement and disbursement schedules are based on rough estimates and the pilot experience which are summarized in Table 1. A procurement schedule is also provided in Project Implementation Schedule (Attachment K) 5. Financing_Plan: The total project costs are currently estimated to be US$20 million, out of which IDA will finance US$12 million. The Government and community contribution is expected to reach US$2.6 million. US$3.4 million is expected to be financed by a number of donors. US$2 million will be funded by the private sector and the Armenian Diaspora. 6. Project Accounting and Monitoring: A project accounting, monitoring and Management Information System would be established as agreed with the Bank before credit effectiveness. This system would ensure review of whether the Fund activities are carried out in accordance with the principles and processes stated in the Operational Manual and whether the projects are well targeted and have the intended impact. An accounting system providing relevant financial information would also be part of the monitoring system. External auditing both of the accounting system as well as of procurement would be conducted on an annual basis. Impact assessment surveys would be conducted by the Head Office during the course of the project. Monitoring indicators have been jointly developed with the Bank. Information obtained from monitoring would be fed back to policy makers to permit revision and adjustment of Fund components or policy when necessary. -75- ANNEX K Page 2 of 3 7. Timetable for the appointment of Auditors: Independent auditor would be appointed by the SIF Board to audit the financial activities of the Fund. The audit report is expected to be completed no later than six months after the close of each fiscal year. 8. Role of the World Bank during Project Implementation: During the start-up phase, the Bank and SIF will organize a "project launch workshop" which would focus on (i) introducing the Fund's objectives, approaches, project appraisal and approval procedures and implementation arrangements; (ii) project monitoring and evaluation arrangements including reporting to the Bank; and (iii) procurement and disbursement requirements. 9. During the implementation phase, the Bank's main concern would lie with the supervision of the project. The Bank's supervision and mid term evaluation missions would examine the following: (i) the effectiveness of the Fund in attaining its objectives; (ii) the compliance of the Funds' financial management, accounting and disbursement operations and procurement practices with the Manual; (iii) the utilization of the results of the monitoring activities for project management decisions; and (iv) the previous years plan implementation and the following year's plan and budget. 10. Specific Steps to Attain Development Objectives: The Fund, as part of the pilot phase, has an already established head office in Yerewan. The following steps will be taken towards the expansion of the pilot: (a) recruitment of key staff has already commenced; (b) secure office space for ASIF, before credit effectiveness; and (c) selection and appraised of at least twenty-five microprojects, of a total cost of US$500,000 in accordance with norms and procedures stated in the ASIF Operational Manual. 11. Environmental and Gender Action Plans have also been developed by the Government in consultation with the Bank team. GOA will also conduct an independent technical audit of microproject implementation annually with specific focus on community-related procurement and disbursement, under terns of reference satisfactory to IDA. 12. Critical Factors that could affect the Projects Success: The following factors have been identified and addressed during project preparation: (i) effective promotion would be critical in motivating target groups to initiate projects; (ii) ensuring that ASIF maintains a good and capable working team, maintain transparency, and oversee implementation of about 125 microprojects a year; (iii) ensuring that ASIF maintains its autonomy and credibility and ensuring transparency in conducting its activities. 13. In order to respond to these factors and to ensure the success of the project, it is expected that promotional and basic capability building programs will be scheduled during the initial years. For the attraction and retention of qualified staff, the fund would design adequate incentive structure. The Operational Manual has also been drafted with the full cooperation and participation of existing staff so that there is ownership of the procedural systems that will be established. 14. Major loan covenants that require special attention: It is expected that the major loan covenants would relate to the need to ensure that the project is implemented by the implementing agencies in accordance with the Operational Manual. -76- ANNEXK Page 3 of 3 Projed Implenentation Plan Passirn of D -r i l)00 Fkiakzton of Op. Manu JomxC AppohiLfnt of Boavd 000X Establhrmnt ofAcountin Sysyte mm00 Tcasting of MiS x~oo Estabklhrmn of MIS xxx00( Aproval of Op. Man, by ASIF Board xxJx Financi and Administrative Manut Issued by ASI txxxx iii00tic Final PriorKiraton of Region xxx Ag~em4n wth Comnrial Bank to facillatc paymene prndur«s t - A andm corcorxxx Selödion and Appraisal of First 3 Opening of Bank Accou xx Proc ~~at0 Offic* Eqipnillnt Preparafion of bi documerts xPxurntOOv~Eup n Adiverlisemnt of tenders/Solcako of Quotstion xxxx selection of supplier4 xx Pior Review of ContracIs by IDA xx Contractual Arrngeman ts100_ Re~cei of Goods/Equipmas | xxx Estb~sr nt of EO Secrin% or~e Spcc xxxxxxxx i | Apponmeng of Key Stadre xxx x)000000=< LX Appkointnt of DeparilmnVnl Appolniment of Mkropraoc Enginecr XXX)O000000~0 Appoitmanl of Support Stafi 00000000000000x Appoantsmento n Resient n Ador X x J 3 xxx xxxxxxx 0 xxxx 3 x 3000 So**t~ton for c p resio of intanaTRrades n M u ~ h to bid for local traIning contracl ~ i ii i Prepaton of shortid XXXXX l Shortlist or ~im for iende x+Do Sel~bmin f taoners 30000( Training Sesslons xx ,cvOL00Xv,000 ~ - - Micropron d nmplementation ofx M ~oJ= xxxx xxxx lu m 0m m J = = I00Z i - I00. i0 i I -0 Monitoulng. nd EvdatlUn Worl Bank Launch Msixxxxxor._200 Md-ern Re~ xxxxx__ ipac Asesmnrr 2000Cx 30000 3000 X>O00[ Joooot >0000C _000 300CJ0D 300 00(X00 >0000 20000 20 00 Procurmanf And x o000 XOx 3000 ~m Annual Finandal Aud xxxxx x000 (xx Key stf Include GM, DOM. H"d o MU. I8, FAO S L.eal Advimor.  -77- ANNEX L Page 1 of 6 REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND Draft Terms of Reference For Financial Audits Background 1. The Armenian Social Investment Fund has been established by a Decree of the Government of Armenia as an autonomous non-profit agency to assist in the rehabilitation of small-scale infrastructure through community-initiated and demand-based activities. It is governed by a Board of Directors, chaired by the Minister of Economy. A detailed Operational Manual governs the activities of the SIF. ASIF is mainly financed by international donors, the single largest creditor being IDA. 2. The Executive Office located in Yerevan is headed by a General Manager who is in charge of day-to-day activities and is accountable to the Board. The Finance and Administration Department in the Executive Office, headed by a Finance and Administrative Manager, is responsible for proper accounting of funds received by ASIF. The Finance and Administration Department consists of an Accounts Unit, a Procurement Unit and an Administrative Unit. Objective 3. The objective of the audit is to enable the auditor to express his professional opinion on the financial position of the ASIF at the end of each fiscal year and of the funds received and expenditures of the accounting period ending on that date, as presented by the financial statements of the project, and on the Special Accounts. 4. The Project Accounts, which provide the basis of the financial statement preparation, are those established to reflect the financial transactions in respect of the project, as maintained by ASIF. The Special Accounts are special bank accounts set up by ASIF and the World Bank to facilitate the speedy disbursement of the Bank's portion of project expenditures. Scope 5. The audit will be carried out in accordance with International Standards on Auditing and will include such tests and controls as the auditor considers necessary in the circumstances. The auditor should indicate any material differences from international accounting standards, where relevant, and their effect on the annual financial statements. In conducting their review, the auditors should pay special attention to the following: (a) All external funds have been used in accordance with conditions of the relevant financing agreements, with due attention to economy and efficiency and only for the purposes for which the financing was provided. Relevant financing agreements refer to Development Credit Agreement and.... -78- ANNEX L Page 2 of 6 (b) Goods works, and services financed have been procured in accordance with the relevant financing agreements; 6. All necessary supporting documents, records and accounts have been kept in respect of all project expenditures (including expenditures reported via SOEs or SAs). Clear linkages should exist between the books of account and reports presented to the Bank; 7. The Special Account(s) have been maintained in accordance with the provisions of the relevant financing agreement; and 8. The financial statements have been prepared in accordance with consistently applied International Accounting Standards and give a true and fair view of the financial situation of the project at mm/dd/yy and of resources and expenditures for the year ended on that date. Statement of Expenditures (SOEs) 9. In conducting the audit of the Project Accounts, the auditor should pay special attention to those expenditures for which withdrawal applications for the project reimbursements were made under SOE procedures. These expenditures should be carefully compared for project eligibility with the Credit Agreements, with reference to the Staff Appraisal Report for guidance where considered necessary. Where ineligible expenditures are identified as having been included in withdrawal applications and reimbursed against, these should be separately noted by the auditor. Annexed to the Project Financial statements should be a schedule listing individual SOE withdrawal applications by specific reference number and amounts. The total withdrawals under the SOE procedure should be part of the overall reconciliation of Bank disbursements described above. Project Financial Statements 10. The project accounts should include: (a) Summary of Funds received, showing the World Bank, and funds from other donors separately; (b) a Summary of Expenditures shown under the main project headings and main categories of expenditures, for the current fiscal year and accumulated to date; and (c) a Balance Sheet showing Accumulated Fund of the Project, bank balances, other assets of the project, and project liabilities, if any. The financial statements should include (possibly as a part of (a) above), a reconciliation between the amounts, shown as "received by the project from the World Bank" and that shown as being disbursed from the Special Accounts. In addition, there should be an annex attached to the Summary of Expenditures (b) above listing individual SOE withdrawal applications by individual reference number and amount. The total withdrawals under the SOE procedure should be added to expenditures financed by the World Bank under regular procedures, which together will be equal to total expenditures financed by the World Bank. Audit Opinion 11. Besides a primary opinion on the Project Financial Statements, the annual audit report of the Project Account should include a separate paragraph therein, commencing on the accuracy and proprietary of those expenditures withdrawn under SOE procedures. The audit report should be received by the World Bank no later than three to six months after the end of the accounting period to which the audit refers. The auditor should submit his report to the -79- ANNEX L Page 3 of 6 borrower's designated agent rather than to any staff member of the project entity, which agent should then promptly forward two copies of the audited accounts and report to the World Bank. Audits of Special Accounts 12. In conjunction with the audit of the Project Accounts, the auditor is also required to audit the activities of the Special Accounts associated with the Project. The Special Accounts usually comprise: (a) deposits and replenishments received from the World Bank; (b) payments substantiated by withdrawal applications; (c) interest that may be earned from the balances and which belong to the borrower; and (d) the remaining balances at the end of each fiscal year- end. For this project, the Special Accounts referred to in .... of the Development Credit Agreement. Management Letter (a) In addition to the audit reports, the auditor will prepare a "management letter". In this letter the auditor will: (b) give his comments and observations on the accounting records, systems and controls that he has examined during the course of his audit; (c) identify specific deficiencies and areas of weakness in systems and controls that have come to his/her attention and make recommendations for their improvement; (d) report on the degree of compliance of each of the financial covenants of the Credit Agreement and give comments on internal and external matters affecting such compliance; (e) communicate matters that have come to his/her attention during the audit that might have a significant impact on the implementation of the project; and (f) bring to the borrower's attention any other matters that the auditor considers pertinent. General 13. The auditor should be given access to all legal documents, correspondence, and any other information associated with the project and deemed necessary by the auditor. Confirmation should also be obtained of amounts disbursed and outstanding at the Bank (and of amounts disbursed under [specify other donor]). Bank Task Managers can assist in obtaining these confirmations. 14. It is highly desirable that the auditor receive a copy of the Bank's Guidelines on Financial Reporting and Auditing of Projects Financed by the World Bank, which summarize the financial reporting and auditing arrangements required for projects financed by the World Bank. The auditor should also be familiar with the Bank's Disbursement Manual. Both documents will be provided by the Task Manager. -80- ANNEX L Page 4 of 6 REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND Draft Terms of Reference for the Procurement and Technical Review Background 1. The Armenian Social Investment Fund has been established by a Decree of the Government of Armenia as an autonomous non-profit agency to assist in the rehabilitation of small-scale infrastructure through community-initiated and demand-based activities. It is governed by a Board of Directors, chaired by the Minister of Economy. A detailed Operational Manual governs the activities of the ASIF. ASIF is mainly financed by international donors, the single largest creditor being IDA. 2. The Executive Office located in Yerevan is headed by a General Manager who is in charge of day-to-day activities and is accountable to the Board. The Finance and Administration Department in the Executive Office, headed by a Finance and Administrative Manager is responsible for proper accounting of funds received by ASIF. The Finance and Administration Department consists of an Accounts Unit, a Procurement Unit and an Administrative Unit. 3. ASIF will finance the implementation of many microprojects for the rehabilitation and reconstruction of local level infrastructure, selected and implemented by small local or grassroots level entities. Such entities in most cases will be comprised of members from the community and will be in charge of implementation. ASIF enters into Framework Agreements with each Implementing Agency (IA) which governs the terms and conditions for microproject implementation. It also defines the procurement and disbursement works or services required for microproject implementation and therefore is authorized to enter into the necessary contracts. The most common contracts are those that the IA enters into with a contractor to execute the works and with a supervisor who supervises the work as an agent of the IA. In some small and simple microprojects, mostly below US$30,000, the IA may be permitted to execute the works themselves. In some cases, registered non-governmental organizations or other local government agencies may also act as implementing agencies. Objective 4. The objective of the technical audit is to seek a professional opinion on the consistency of procurement conducted by Implementing Agencies and on the quality of the rehabilitation works with the procurement procedures described in the operational manual, at the end of each fiscal year from a qualified agency. Scope 5. The procurement and technical review will be carried out of a sample number of microprojects in differing regions at differing stages of the microproject cycle. The auditor would ensure that the sample also covers microprojects that have used different implementation -81- ANNEXL Page 5 of 6 modes. The auditor should visit sites of selected microprojects and discuss with all participants involved in microproject selection, identification and implementation to ensure a correct basis for his opinion. 6. In conducting their review, the experts should pay special attention to the following: (a) All funds have been used in accordance with conditions of the relevant Framework Agreements and consequent contracts and according to regulations described in the Operational Manual, with due attention to economy and efficiency and only for the purposes for which the financing was provided. Relevant agreements refer to all Framework Agreements signed by ASIF with its implementing partners and all contracts entered into by the IA with other contractors, suppliers or consultants for the provision of works, goods or services required for microproject implementation; (b) Goods, works, and services have been financed by the Implementing Agencies in accordance with the above relevant Framework Agreements and that contracts entered into by the IA conform to acceptable payment procedures; (c) Works financed under the Framework Agreements are of standard and acceptable quality; (d) All necessary supporting documents, records and accounts have been kept in respect of all microproject expenditures by the Implementing Agencies; clear linkages should exist between the books of account and reports presented by such IAs to the Fund; and (e) All procurement methods have been conducted in a transparent and fair manner giving all potential participants at the local and international level a chance to participate in procurement-related activities in accordance with procurement procedures acceptable to IDA and agreed within the Framework Agreement; and (f) the utility and reliability of the unit cost data base in monitoring local procurement and guiding price determination for non-competitive procurement and whether methods adopted for price paid can be relied upon. 7 In addition to the Review reports, the experts in charge of the review will prepare a "management letter". In this letter, the expert will: (a) give his comments and observations on the economy and efficiency of procurement methods, systems and controls that he has examined during the course of his audit; (b) identify specific deficiencies and areas of weakness in systems and controls that have come to his/her attention and make recommendations for their improvement in the procurement of works, goods or services by the IA; (c) report on the degree of compliance of IAs to their Framework Agreements; -82- ANNEX L Page 6 of 6 (d) communicate matters that have come to his/her attention during the review that might have a significant impact on the implementation of microprojects; and (e) bring to the ASIF's attention any other matters that the expert considers pertinent. General 8 The experts in charge of the review would be given access to all legal documents, correspondence, and any other information associated with the project and deemed necessary by the auditor. The auditor or his authorized personnel should be permitted access to all infrastructure for inspection, provided reasonable notice is given to the relevant authorities in charge of management of facilities. 9 It is also desirable that the experts receive a copy of the Bank's Guidelines on Financial Reporting and auditing of Projects Financed by the World Bank, which summarize the financial reporting and auditing arrangements required for projects financed by the World Bank. The experts should also be familiar with the Bank's Procurement and Consultant Guidelines, as well as with the Bank's Disbursement Manual. These documents will be provided by the ASIF-PU. -83- ANNEXM Page 1 of 2 REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND Implementation by Implementing Agency 1. In rural areas, ASIF may permit a Micro-project Committee (MC) to execute works of US$30,000 or below, when there are no contractors interested in the works. The works should be simple, requiring little or no technical assistance or skills . Establishing Costs 2. The prices for such microprojects will be negotiated based on ASIF's unit cost data base. The Executive Committee may at the recommendation of the Microproject Head adjust the price taking into consideration any special characteristics of the physical location or typology of microproject. Additionally, as in all Framework Agreements, the contribution of ASIF, the community and any other partner must be clearly distinguished by source and stated with a schedule for payment. Procurement by the MC 3. In addition the Framework contract should specify clearly the procurement methods that the MC must use. The MC must hire labor from within the community. All goods and materials must be purchased through national shopping. 4. Where any skilled labor is necessary, and not available within the community, the MC must be required to hire such labor from outside the community. A supervisor may also be required by the Framework Agreement, if considered necessary in consultation with the MC. Payment to the IA 5. The Framework Agreement signed with the MC will specify the terms, conditions and schedule for payment. To facilitate the work of the IA, a detailed schedule of activities must be established and agreed and attached to the framework contract in addition to the detailed costs. 6. The MC will be required to open an account with a bank acceptable to ASIF before the signing of the Framework Agreement. The Framework Agreement must contain details of the bank account as well as the signatories authorized to operate the account. 7. Advance Payments: An advance payment may be paid when required to initiate the works, up to a maximum of 10% of the ASIF's contribution to the total project costs. The community contribution, when in the form of cash or non-perishable items, must be collected by the community and deposited into the bank account (or stored) as a condition for payment of advance by ASIF. 8. Subsequent Payments: Subsequent payments may be made only upon satisfactory evidence of work completed and payments may be made in tranches equivalent to the -84- ANNEX M Page 2 of 2 proportion of work completed. Payments will be calculated based on the unit rates and costs specified in the estimated budget attached to the Framework Agreement. The FE during his follow up visit will calculate or measure the amount of work that has been satisfactorily performed and enter it in on a Statement of Works. Based on such works completed, a request for payment will be duly filled and submitted as required in the Operational Manual. 9. Administrative Costs: The Framework Agreement will not cover any administrative or overhead charges of the MC. This will be part of the community contribution and may be costed to equal a maximum of three per cent (3%) of the estimated total costs of the microproject. Financial and Reporting Obligations 10. The treasurer of the Microproject Committee will be responsible to maintain all financial accounts related to the microproject implementation. The MC will also provide any other reporting documents in accordance with the terms and conditions stated in the Framework Agreement. The Treasurer, will under the guidance of the MC, maintain a roster of materials, works, or cash provided by the community, itemizing such contribution both by type, amount, and source. 11. The IA will retain an updated statement at all times during the life of the project which will reflect the following: (i) number of man days of labor contracted for the microproject implementation, names of workers, and wages paid with signed receipts of wages from the workers; (ii) list, quantities and costs of all items purchased; where required to be purchased through local shopping, maintain in the files receipt of the price quotations that were received, reasons for selection, if the lowest offer was not selected; where purchased through direct contracting, the invoices must also be filed. 12. The Implementing Agency must meet every month, on a specified day, after giving notice to all members of the microproject Committee to discuss the financial and physical progress of the microproject implementation. At this meeting all accounts must be verified by the members of the Microproject Committee, and the minutes of the meeting should specifically state that the accounts have been verified and found to be correct. Such minutes must be signed by all members present. 13. The account books must remain accessible to any member of the benefiting community, the local government officials, or the ASIF who may request to see such accounts.. In addition, a summary statement of the accounts must be published on the local bulletin board or on a notice board where village people tend to gather, in order to inform them as to how the funds are being utilized. REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND TABLE A: Project Cost By Component By Year (US$ Million) Base Cost Totals Including Contingencies Component 1996 1997 1998 1999 Total 1996 1997 1998 1999 Total 1. ASIF Microprojects 2.9 4.8 4.8 3.2 15.7 2.94 4.8 4.8 3.2 15.7 2. Institutional Support to ASIF 0.9 0.4 0.4 0.3 1.9 1.07 0.5 0.5 0.5 2.5 3. Support to Contractors, lAs, & Communities /a 0.2 0.1 0.1 0.1 0.4 0.30 0.2 0.2 0.1 0.8 4. Living Standards Monitoring 0.2 0.1 0.1 0.0 0.5 0.23 0.1 0.2 0.1 0.5 5. Project Preparation Facility 0.4 - - - 0.4 0.40 - - - 0.4 Total BASELINE COSTS 4.6 5.3 5.4 3.6 18.9 Physical Contingencies 0.4 0.2 0.2 0.2 0.9 Price Contingencies 0.0 0.0 0.1 0.1 0.2 Total PROJECT COSTS 4.9 5.5 5.6 3.8 20.0 4.95 5.5 5.6 3.8 20.0 Taxes - - - - - Foreign Exchange 1.2 0.1 0.2 0.1 1.7 \a lAs: Implementing Agencies 0 REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND TABLE B: Project Cost By Expenditure Category by Year (US$ Million) Base Cost Totals Including Contingencies Foreign Exchange 1996 1997 1998 1999 Total 1996 1997 1998 1999 Total % Amount 1. Investment Costs A. ASIF Microprojects 2.9 4.8 4.8 3.2 15.7 2.9 4.8 4.8 3.2 15.7 - - B. Project Preparation Facility 0.4 - - - 0.4 0.4 0.0 0.0 0.0 0.4 80.0 0.3 C. Vehicles 0.3 - - - 0.3 0.3 - - - 0.3 100.0 0.3 D. Equipment 0.2 0.2 - - - 0.2 100 0.2 E. Technical Assistance Foreign TA 0.2 0.1 0.1 0.1 0.4 0.4 0.1 0.1 0.1 0.7 100.0 0.4 Local TA 0.1 0.1 0.1 0.0 0.3 0.2 0.1 0.1 0.1 0.6 - - Subtotal Technical Assistance 0.3 0.1 0.1 0.1 0.7 0.6 0.2 0.2 0.2 1.3 58.0 0.4 F. Training Study Tours 0.1 0.0 0.1 - 0.2 0.1 0.0 0.1 - 0.2 100.0 0.2 Staff Training 0.0 0.0 0.0 - 0.0 0.0 0.0 0.0 0.0 50.0 0.0 Subtotal Training 0.1 0.0 0.1 - 0.2 0.1 0.0 0.1 - 0.3 93.8 0.2 G. Studies Beneficiary Assessment 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.1 - - Study Fund /a 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.2 - - Subtotal Studies 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.3 - Total Investment Costs 4.3 5.0 5.1 3.3 17.6 4.6 5.1 5.2 3.5 18.4 7.7 1.4 II. Recurrent Costs A. Operating Costs lb 0.3 0.3 0.3 0.3 1.3 0.4 0.4 0.4 0.4 1.6 - - Total Recurrent Costs 0.3 0.3 0.3 0.3 1.3 0.4 0.4 0.4 0.4 1.6 - - Total BASELINE COSTS 4.6 5.3 5.4 3.6 18.9 7.2 1.4 Physical Contingencies 0.4 0.2 0.2 0.2 0.9 29.8 0.3 Price Contingencies 0.0 0.0 0.1 0.1 0.2 24.6 0.0 Total PROJECT COSTS 4.9 5.5 5.6 3.8 20.0 4.9 5.5 5.6 3.8 20.0 8.3 1.7 Taxes - - - Foreign Exchange 1.2 0.1 0.2 0.1 1.7 \a Other impact studies on women, local governments, labor, institutions, etc. o \b Office supplies, fuel, maintenance, communications, audits, etc. -87- ANNEX Page 1 of 6 REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND Suggested Monitoring Indicators 1. Key monitoring indicators will be the basis for performance quarterly and annual reports prepared by the ASIF. Such reports will complement quarterly financial reports and scheduled technical and financial audits. Key monitoring indicators should be monitored from project effectiveness. For reporting purposes, indicators will be broken down by district whenever feasible and useful for management decision making. Targets will be set for year one and revised on an annual basis. I. Key Monitoring Indicators Indicator Source Unit Yr. 1 Yr. 2 Yr. 3 Yr. 4 Microproject Portfolio No. of projects proposed MIS project 110 190 190 130 No. of projects rejected before appraisal MIS project 10 20 20 10 No. of projects rejected after appraisal MIS project 5 10 10 5 No. of projects approved MIS project 95 160 160 115 Average cost of projects approved MIS US$ 30,000 30,000 30,000 30,000 No. of projects under implementation MIS project 90 150 150 110 Average cost of projects under implementation MIS US$ 30,000 30,000 30,000 30,000 No. of projects completed MIS project 90 150 150 110 Average cost of projects completed MIS US$ 30,000 30,000 30,000 30,000 Average cost per beneficiary for completed projects MIS US$ 75 75 75 75 -88- ANNEX Page 2 of 6 Indicator Source Unit Yr. 1 Yr. 2 Yr. 3 Yr. 4 Typology of Implemented Microproiects No. of potable water projects MIS project Average cost of potable water projects MIS US$ No. of sewage projects MIS project Average cost of sewage projects MIS US$ No. of school projects without sanitary component MIS project Average cost of school projects w/o sanitary compo MIS US$ No. of school projects with sanitary component MIS project Average cost of school projects with sanitary compo MIS US$ No. of medical facilities projects (health post level) MIS project Average cost of medical facilities projects (health post MIS US$ No. of medical facilities projects (higher level) MIS project Average cost of medical facilities projects (higher leve MIS US$ No. of irrigation projects MIS project Average cost of irrigation projects MIS US$ No. of road and accessory projects MIS project Average cost of road and accessory projects MIS US$ No. of social buildings rehabilitation projects MIS project Average cost of social buildings rehabilitation projects MIS US$ No. of other projects: environmental cleanup MIS project Average cost of other projects: environmental cleanup MIS US$ No. of other projects: .c.n . (specify) MIS project Average cost of other projects: . .. MIS US$ No. of other projects: . .. MIS project Average cost of other projects: . .. MIS US$ No. of projects containing special equipment/material MIS project Average cost of projects containing special eq/mater MIS US$ No. of projects with water and/or sanitation compon. MIS project Average cost of projects with water and/or san. comp. MIS US$ Geographical Distribution of Microprojects Proportion of projects in urban areas MIS % 65 Proportion of projects in rural areas MIS % 35 Subproject Distribution by Cost Proportion of No. of projects under US$10,000 MIS % 10 Proportion of total microproject costs for projects MIS % 3 under US$10,000 Proportion of No. of projects US$10-25,000 MIS % 63 Proportion of total mp costs for mps US$10-25,000 MIS % 50 Proportion of No. of microprojects US$25-50,000 MIS % 24 Proportion of total mp costs for mp US$25-50,000 MIS % 40 Proportion of No. of microprojects over US$50,000 MIS % 3 Proportion of total mp cost for mp over US$50,000 MIS % 7 -89- ANNEX O Page 3 of 6 Procurement and Disbursement Indicator Source Unit Yr I Yr 2 Yr 3 Yr 4 Total Cost of Contracts by Procurement Method Direct Implementation by IA MIS US$ 50,000 Direct Contracting MIS US$ 150,000 Local Competitive Shopping MIS US$ 350,000 Local Competitive Bidding MIS US$ 2,150,000 No. of contracts with IDA prior review MIS No. 3 Total cost of contracts with IDA prior review MIS US$ 190,000 Proportion of contracts for which performance bonds MIS % 3 were provided Proportion of contracts for which bank guarantees were MIS % 90 provided Contracting Proportion of total contracts with positive change order MIS % 40 Proportion of total contracts with negative change order MIS % 5 Proportion of contracts justifiably extended MIS % 25 Proportion of total contracts suspended before MIS % 5 completion Proportion of total contracts completed on time MIS % 80 Proportion of total contracts completed on original bud MIS % 60 Proportion of total contracts completed behind schedule MIS % 20 inclusive of justifiable extension Average lag of contracts vs those lagging MIS weeks 2 Performance of the ASIF Average time to respond to microproject proposal MIS days 3 Average time between response and appraisal MIS days 14 Average time spent for appraisal MIS days 8 Average time between appraisal and approval MIS days 5 Average time between approval and framework agree MIS days 5 Average time between framework agree. and contracti MIS days 21 Average time between payment request and payment MIS days 7 Proportion of payments for which contractors have MIS % 5 been paid more than 10 days after the payment request _ I I -90- ANNEXO Page 4 of 6 Training and TA Indicator Source Unit Yr 1 Proportion of microprojects for which training was MIS requested from contractors Proportion of requests fulfilled MIS Proportion of microprojects for which training was MIS requested from supervisor Proportion of requests fulfilled MIS Proportion of microprojects for which training was MIS requested from IA Proportion of requests fulfilled MIS No. of training sessions conducted (to be broken auxiliary down by module) database Average cost per training session (to be broken down auxiliary by module) database Total No. of trainees auxiliary database Average No. of attendees per training module auxiliary Average cost per trainee auxiliary database Proportion of total attendees who received certificate auxiliary (to be broken down by module) database Proportion of contractors who completed training that auxiliary bid database Proportion of contracts awarded that went to auxiliary contractors who completed workshop database Proportion of microprojects for which TA was MIS requested from contractor Proportion of requests fulfilled MIS Proportion of microprojects for which TA was MIS requested from supervisor Proportion of requests fulfilled MIS Proportion of microprojects for which TA was MIS requested from IA Proportion of requests fulfilled MIS Total No. of beneficiaries auxiliary database Average cost per beneficiary auxiliary database Gender Proportion of MCs with women survey Average No. of women on MC survey Proportion of MCs with woman chairperson survey Proportion of attendees at contractor/supervisor auxiliary training courses that are women database Proportion of female members of ASIF management GAU Proportion of consultants contracted by ASIF that are Acctg women -91- ANNEX Page 5 of 6 Community Participation and Sustainability Indicator Source Unit Yr 1 Proportion of microproject proposals presented by MIS NGO Proportion of all proposals presented by local gov't MIS Proportion of all proposals presented by community MIS Proportion of all proposals presented by other MIS Proportion of microprojects with less than 10% MIS % 0 community contribution Proportion of microprojects with 10% or more MIS % 100 community contribution Proportion of microprojects with 15% or more MIS % 20 community contribution No. of microprojects with monetary form of MIS community contribution vs No. of microprojects with community contribution No. of microprojects with support to contract (labor, MIS equip, or material) as form of community contribution vs No. of subprojects with community contribution No. of microprojects with in-kind support unrelated to MIS contracts as form of community contribution vs. No. of subprojects with community contribution Proportion of microprojects for which a maintenance MIS trust fund was set up by community Proportion of microprojects for which an O&M MIS % 100 agreement was reached with local government Proportion of microprojects in which SC is the MIS % 75 implementing agency -92- ANNEX O Page 6 of 6 II Secondary Indicators 2. As the capacity of the ASIF increases over the lifetime of the project, the following indicators should be added to monitoring indicators and included in quarterly and annual reports, starting the second year. Such information should be available through some other means while the monitoring capacity of the MIS or other source is expanded. Indicator Source Unit Yr 1 Operating Costs as a Percentage of Total Disbursed Proportion of microproject costs for local supervisor Acctg % 3 Proportion of microproject costs for IA administration Acctg % 2 Proportion of microproject costs for ASIF MIS % administration and operation Social and Environmental Information Average labor intensity per microproject MIS % 20 Average No. of beneficiaries per microproject survey No. 4000 Demographic information on hired laborers survey Demographic information on beneficiaries survey Level of satisfaction of beneficiaries survey Increased demand for services provided via survey rehabilitated infrastructure Impact of microprojects on local-level organizations survey Employment Generation Average No. of laborers hired per microproject survey No. 30 Ave. No. of person days of employment created per survey person 900 microproject days Average duration of employment per microproject survey days 30 -93- ANNEX P Page 1 of 2 REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND Issues Relating to Women Brief Background 1. The status of women in Armenia is paradoxical. The gender disaggregated social indicators are favorable to women. All men and women in Armenia are literate. In 1994, 51% of the secondary school children were girls, and 58% of college students were women. Life expectancy at birth for women is 75.6 years (1980). As in developed countries, the female-male ratio in Armenia favors women. 2. A quick review of substantive legislative provisions reveals little or no gender discrimination. Armenian legislation is substantively gender neutral. The draft constitution confers equal rights on men and women. The Marriage and Family Code, which has been not been amended, provides equal rights to women within the family structure though this leaves alimony and child maintenance rates established at levels that are inadequate. The labor code stipulates equal pay for equal work. On July 8, 1991, the Parliament adopted a law "On Employment", which provides for affirmative action for single mothers with young children and for parents of three young children or more. Other laws which benefit women have also been adopted. 3. Yet, the socio-economic status of women is different when compared to men due to cultural and traditional considerations. The inside-outside dichotomy in division of labor is prevalent within the household with women being in charge of most domestic chores. The head of the household is assumed to be the male member. Official statistics show single-mothers households at 2.4% (State Statistics Committee) of which 56.7% live in Yerevan. However, it is not clear whether the definition encompasses only unmarried women with children or includes divorced women or other female headed households. A Government report prepared by the Human Rights Department in the Ministry of Foreign Affairs points out that "health, pedagogic, arts, language and literature remain traditionally "female fields". Thus, for example, women are over-represented in the less paying jobs within the economy, with more women being employed, for example as teachers (94% in primary schools, and 79% in secondary schools; 1994 where the salary is 68.5% of the average salary ). The same report also notes that levels of political participation have declined in independent Armenia, from 121 out of 219 in 1980 and 1985, to 9 out of 240 members of the Parliament in 1994. Out of 22 state ministries and 21 state departments, 3 and 4 are respectively women. In the middle and lower echelons of the Government, there is greater participation (36.8%). Project Assistance for Women 4. Given the above background and the objectives of the current project, the planned activities relating to women are expected to focus on three specific concerns. The first relates to the identification and evaluation of any adverse impact of subproject related activity on women, and addressing to the extent possible such impact through appropriate and sensitively designed mitigatory actions. The second relates to increasing and strengthening the active participation of women in developmental activities, which is seen as an essential ingredient for the participation of women as equal partners in the development of Armenian economy. The third relates to collection of gender disaggregated data for the planning of future developmental activities through the Monitoring of Living Conditions Study and the monitoring and evaluation of project activities. 5. The key elements of these activities for women are summarized in the following table: ACTIONS TO BENEFIT WOMEN Objectives Specific Actions Comments To identify the impact of Ensure processes used for subproject identification, design and Very few microprojects are expected to have an adverse impact on women. Many of the subproject activity on implementation, monitoring and evaluation address issues related to microprojects will involve the rehabilitation, and in a few cases, the construction of small-scale women women including: (i) examination of all operational documents and infrastructure which will have a significant benefit on women. For example, rehabilitation of schools processes to ensure that they are sensitively designed to access will benefit larger number of women because 76% of secondary school and 95% of primary school women; (ii) planning when necessary female focused mitigatory teachers are women. Similarly , in 1994, 51.1% of the students in primary schools and 57.8% of the measures in consultation with the community; (iii) focusing students in secondary schools were girls. Similarly, household chores, including the collection of promotional activities to women, NGOs or other organizations water when necessary is normally allocated to women and any improvement in access to water will working with women, to encourage the proposal of micro-projects have a positive impact on them. The repair of child care facilities will be undertaken by AASIF if priwarily benefiting womenl and (iv) giving prionty to micro- reflected as a priority for women. projects that respond to the priorities of women. Increase the role of Efforts will be made to ensure that there is more equitable Given the highly qualified women in Armenia, this is not expected to be a burdensome requirement. women in AASIF's representation of women in the professional staff of the AASIF Further, during the pilot stages, two of the 8 engineers were women and have expressed no concerns management Management Team. Advertisements seeking qualified applicants about performing the tasks required by their terms of reference. will specifically state that women are encouraged to apply. Increase the role of Every Microproject Committee will include women representatives. A staff member of the pilot fund recalled how at the first meeting of the community, he refused to io women in decision making begin proceedings until women members from the community were involved. After an hour, when within their communities the community realized that this was a serious requirement, the message went out am! women arrived. During the meeting, one woman (a nurse) nominated herself to the Community Committee, anw a women engineer was also selected. The women reportedly thanked the staff for having involved them in the decision making - the first time in the history of the village, they said. In fact, in two of the fourteen microprojects under implementation, Microproject committees are chaired by women: a headmistress of the school, and the head of the Epidermialogy Clinic (sanitation project). Microproject Officers of the pilot Fund perceive that such steps to incorporate women are appreciated by the beneficiary women as a positive step. Training in gender Fund staff, staff of NGOs & collaborating agencies, community sensitization leaders, would be sensitized to identify and address needs and priorities of women to facilitate gender sensitive decision making . While at the Fund Staff level, this will be a separate course, for the others it will be integrated into other training modules. Training for women to set Promotion aid advertisement for such training will target In 1989, 34.21% of the 72,200 engineers in the country were women. It is therefore hoped that such up contracting firms unemployed women engineers. a training module will be useful to women. Even though it is not a traditional activity for women, a few women engineers questioned did not oppose the idea and said that they would consider theCJ Z possibility. for better policy making Armenia". and developmental planning To identify and evaluate Monitoring indicators include indicators to examine and understand the impact of the project the impact of the project on women. TORs for impact assessments on women and such other studies will also include evaluation of randomly selected micro-projects on women. -95- ANNEXQ REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND Proposed Supervision Schedule Date Activity Skill Requirements Staff Input November 1995 Project Launch Workshop Task Manager, specialists in 8 staff weeks procurement and disbursement, (sw) infrastructure, microenterprises, and monitoring and evaluation February 1996 First Supervision Mission: Task Manager, procurement 4 sw Focus on microprojects, and disbursement specialist ASIF organization, operating procedures May 1996 Second Supervision Mission: Task Manager, microenterprises 4 sw Focus on microprojects, support support specialist to contractors, lAs, September 1996 Third Supervision Mission: Task Manager, procurement 3 sw Focus on microprojects, and disbursement specialist targeting, beneficiary assess. January 1997 Fourth Supervision Mission: Task Manager, survey specialist 3 sw Focus on microprojects, beneficiary assessment May 1997 Fifth Supervision Mission: Task Manager, infrastructure 3 sw Focus on microprojects specialist September 1997 Sixth Supervision Mission: Task Manager, procurement 3 sw Focus on microprojects, prepare and disbursement specialist for mid-term review November 1997 Mid-Term Review Task Manager, specialists in 10 sw procurement, disbursement, construction, microenterprises, and monitoring and evaluation June 1998 Seventh Supervision Mission: Task Manager 3 sw Focus on microprojects January 1999 Eighth Supervision Mission: Task Manager 3 sw Focus on microprojects June 1999 Ninth Supervision Mission: Task Manager 3 sw Focus lessons learned December 1999 Project Implementation Review Task Manager 3 sw s -96- ANNEX R REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND Draft Procemcdu Nature or Package Tes cot Meta f Pawaie umalna ls Awr4Cno .. .. .. . ..... .. .*.* .. *.. ... GOODS Vehicles 300,000 International October 1995 November 30, 1995 December 15, 1995 Shopping Computer and Office 200,000 International October 1995 November 30, 1995 December 15, 1995 Equipment Shopping CONSULTANT SERVICES Long-term 100,000 Short list October 1995 November 15, 1995 November 30, 1995 Consultant Impact Assessment of 100,000 Short list March 1995 April 1996 May 1996 Microproject Training and TA for 200,000 Short list of February 1995 March 15, 1996 April 1, 1996 Contractors Firms Training and TA for 200,000 Short list of February 1995 March 15, 1996 April 1, 1996 Implementing Firms Agencies Support for Survey 100,000 Short list of January 1996 February 15, 1996 March 1, 1996 Undertaking Firms  -97- ANNEX S REPUBLIC OF ARMENIA SOCIAL INVESTMENT FUND Recent Reports on Poverty and the Social Sectors in Armenia Used for Project Preparation - A Qualitative Assessment of The Living Standards of the Armenian Population - October 1994 - March 1995. Nora Dudwick, June 1995 - Using Land as a System of Social Protection: An Analysis of Rural Poverty in Armenia in the Aftermath of Land Privatization. Sharon Holt, August 1995 - Study of the Contribution of the Armenian Communities Abroad to Armenia's Social Sector. Alen Amirkhanian, June 1995 - Armenia - A Poverty Profile. Jeanine Braithwaite, August 1995 - Needs and Capacity Study of Administrative Districts of Armenia - Armenian Environment, August 1995 r IBRD 23943R1 To Suov 45'' ... To Shykhi Vto,yye GEORGIAEORGIr oos... -'GEORGIA To Bogdonovka To Akholkolok Irgonchay L.k A,\, . Lake A opak To Kokh Gukosyan 4 1 ( -oep no o n -- fT umany an To Kaos- bu ton idzheyo Berd G ROVAKAN Kors rKor i ,han Gelkeno To K Ko :ahc -Artsvashen To Kors Morati~ ,- ATsovogyukh Krasnosel s Sevon To Kedabek ---at Ts.khk.dior, ' Aragots RAZDA Vern Talin lus t ,jbrTenI \ \K LAKE r iByroo Komo ToShor,khor A R M E N I A - \ eTS *CMA T~ M,,-Bosh,r Dams SREVAN YeonZod TOWNS / VILLAGES ernberon--Garn, ---, 'vordenikvodnsMAIN CITIES vora"-lkhTo Ke ,Bodzho V emn K a ra nl uk h @ N A T IO N A L C A P IT A L Vernn Art.s, Gjulliuz AZERBAIJAN RIVERS To 1d. Artoshat - PRIMARY ROADS A -To bt.,s- SECONDARY ROADS RAILROADS INTERNATIONAL BOUNDARIES TURKEY A zbeko - To P¢hr, To Shokht¢khty An gekýrdka To Shakhtokhty - S. S s n .Gor, To Nakh,che"~ 1 bnu yr) \ To TNakhchrevonToe_ __) AZERBAIJAN T To Nakhiochevan ISLAMIC T -g T. o REPUBLIC Tozonpeon MILES 0 10 20 30 40 OF |RAN 3 FLOMETERS 0 10 20 30 40 50 60 70 0~ *O~~~ , Tý Ordobod ýMogn - To.ogno 44 45 46 47 48 JANUARY 1994   b