Cambodia - Social Fund II Project

Document of The World Bank Report No: 18979-KH PROJECT APPRAISAL DOCUMENT ONA PROPOSED CREDIT IN THE AMOUNT OF US$25 MILLION EQUIVALENT TO THE KINGDOM OF CAMBODIA FOR A SOCIAL FUND II PROJECT March 3, 1999 Environment and Social Unit Southeast Asia and Mongolia Country Department East Asia and Pacific Regional Office  ii CURRENCY EQUIVALENTS (Exchange Rate Effective March 1, 1999) Currency Unit = Cambodian Riel US$1 = 3,770 Cambodian Riels FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS ADB - Asian Development Bank BA - Beneficiary Assessment CCC - Cooperation Committee for Cambodia CDC - Council for the Development of Cambodia CIF - Cost, Insurance and Freight CG - Consultative Group CR - Cambodian Riel CRDB - Cambodia Reconstruction and Development Board GDP - Gross Domestic Product MEF - Ministry of Economy and Finance MIS Management Information System MOEYS - Ministry of Education, Youth, and Sports MOH - Ministry of Health NBC - National Bank of Cambodia NGO - Non-Government Organization O & M - Operations and Maintenance ODA - Official Development Assistance OED - Operations Evaluation Department (World Bank) SFI - Cambodia Social Fund Project SFII - Cambodia Social Fund II Project SFKC - Social Fund of the Kingdom of Cambodia TA - Technical Assistance UCDB - Unit Cost Data Base UNDP - United Nations Development Programme UNESCO - United Nations Educational, Scientific and Cultural Organization UNICEF - United Nations Children's Fund Vice President: Jean-Michel Severino Country Manager/Director: Ngozi Okonj o-Iweala Sector Manager/Director: Kristalina Georgieva Task Team Leader/Task Manager: Christopher Chamberlin  iii CAMBODIA Social Fund II Project CONTENTS Project Financing Data 1 A. Project Development Objective 2 1. Project development objective and key performance indicators 2 B. Strategic Context 3 1. Sector-related CAS goal supported by the project 3 2. Main sector issues and Government strategy 3 3. Sector issues to be addressed by the project and strategic choices 4 C. Project Description Summary 5 1. Project components 5 2. Key policy and institutional reforms supported by the project 5 3. Benefits and target population 6 4. Institutional and implementation arrangements 6 D. Project Rationale 7 1. Project alternatives considered and reasons for rejection 7 2. Major related projects financed by the Bank and/or other development agencies 8 3. Lessons learned and reflected in proposed project design 8 4. Indications of borrower commitment and ownership 9 5. Value added of Bank support in this project 9 E. Summary Project Analyses 9 1. Economic 9 2. Financial 9 3. Technical 9 4. Institutional 10 5. Social 10 6. Environmental assessment 10 7. Participatory approach 10 F. Sustainability and Risks 11 1. Sustainability 11 2. Critical risks 11 3. Possible controversial aspects 12 G. Main Loan Conditions 12 1. Effectiveness conditions 12 2. Other 12 H. Readiness for Implementation 13 I. Compliance with Bank Policies 14  iv Annexes Annex 1. Project Design Summary 15 Annex 2. Detailed Project Description 17 Annex 3. Estimated Project Costs 19 Annex 5. Financial Summary 20 Annex 6. Procurement and Disbursement Arrangements 21 Table A. Project Costs by Procurement Arrangements 23 Table B. Thresholds for Procurement Methods and Prior Review 24 Table C. Allocation of Loan Proceeds 25 Annex 7. Project Processing Budget and Schedule 26 Annex 8. Documents in Project File 27 Annex 9. Statement of Loans and Credits 28 Annex 10. Country at a Glance 29 Map IBRD No. 30123  CAMBODIA Social Fund II Project Project Appraisal Document East Asia and Pacific Regional Office Southeast Asia and Mongolia Country Department Date: March 3, 1999 Task Team Leader/Task Manager: Christopher Chamberlin Country /Director: Ngozi Okonjo-Iweala Sector Manager/Director: Kristalina Georgieva Project ID: KH-PE-50601 Sector: Social Protection Program Objective Category: Poverty Reduction Lending Instrument: Specific Investment Credit Program of Targeted Intervention: [XI Yes [ ] No Project Financing Data [] Loan [XI Credit [ Guarantee [ Other [Specify] For LoanslCredits/Others: Amount (US$m/SDRm): US$25m/SDR 17.9m Proposed terns: JBRD (IDA) [X] IDA [] IBRD: Single cunrency: US$ Proposed terms: [] Multicurrency [ Single currency, specify Grace period (years): 10 [ Standard Variable [ Fixed [] LIBOR-based Years to maturity: 40 Commitment fee: 0.50% Service charge: 0.75% Financing plan (US$m): Source Local Foreign Total Government 0.30 0.02 0.32 Cofinanciers Japan Relief for Cambodia (TBD) IDA 18.11 6.89 25.00 Local Cornmunities 2.42 0.03 2.45 TO=ta 20.83 6.94 1 27.7 Borrower: Kingdom of Cambodia Guarantor: Responsible agency(ies): Social Fund of the Kingdom of Cambodia Estimated disbursements (Bank 1999 2000 2001 2002 2003 FY/US$M): Annual 1.0 7.9 7.9 8.0 2.9 Cumulative 1.0 8.9 16.8 24.8 27.7 Project implementation period: 3.25 yrs. Expected effectiveness date: Apr 30, 1999 Expected closing date: Dec 31, 2002  2 A: Project Development Objective 1. Project development objectives (see Annex I for key performance indicators): The Social Fund II Project will refinance the Social Fund of the Kingdom of Cambodia (SFKC), which has successfully implemented the first Social Fund Project (SFI) financed by an IDA credit of US$20 million. Declared effective in December 1995 and now nearly completely disbursed, well ahead of schedule, the first Social Fund Project was designed to address three critical objectives. The first objective was to provide financing for small scale, community based sub- projects in the areas of social and economic infrastructure, as a part of the overall reconstruction effort in Cambodia. Although Cambodia has made important strides with donor support in addressing infrastructure needs, the many years of civil war and neglect have created a still substantial backlog of basic investment requirements in such areas as small scale irrigation, rural bridges and culverts, sewerage and drainage, water supply, education and health facilities, and other investments. This is reflected in the large accumulation of unfinanced and eligible applications sent to the Social Fund from communities, NGOs and local governments (currently totaling over US$50 million). Thus, in the Social Fund II Project (SF11), the objective of helping to meet small scale infrastructure needs at the local level will remain a key project objective. To insure that SFKC sub-projects are productive investments, appraisal and monitoring criteria will be strengthened to improve measurement of cost effectiveness. The second objective of SFI was to create short term employment opportunities in order to assist in the return to a peace time economy and help absorb soldiers and refugees returning to their homes. This objective was built into project design through sub-project eligibility rules, which limited SFI to the financing of sub-projects with a high labor content (as opposed to materials or equipment). Although the return of refugees has abated, the Asian economic crisis is causing a new wave of returnees to Cambodia from Thailand where expatriate workers are no longer in demand or welcomed by the authorities. The defeat of the Khmer Rouge forces and their return to civilian life, although limited in number, may also prompt long delayed demobilization of regular Cambodia army units, thus adding to unemployment levels. These developments, which will exacerbate the general poverty and underemployment in the country, argue for a continuation of employment generation as an objective for SFII, but with less emphasis. The third objective of SFI was to strengthen communities and local government through a demand driven sub-project identification and design process. The response of local groups to the SFKC has been overwhelming, thus providing evidence of much greater dynamism and self help capacities at the local level than was expected. In this area, however, SF II will seek to improve the local "ownership" of sub- projects and elevate this objective to higher importance within SFKC policies, procedures, and structures. This shift is justified primarily by the challenge of sustainability of SFKC sub-projects, which at this early stage has only materialized in the water sector, but sustainability problems are expected to emerge in other sectors. The SFKC is committed to implementing this shift of operational policies to promote more sustainability, local ownership and community empowerment, without losing the broad coverage, operational efficiency and impact achieved during SFI. The fourth objective of the SFI Project was to improve line ministry capacities to develop investment criteria for local sub-projects. This has proved to be a limited area of activity, as basic designs for SFI sub-projects (schools, health centers, culverts, bridges, etc.,) were approved by ministries at the outset, and with little follow-up required. The main area of coordination is now at the local level, where district authorities in particular have taken an active role in encouraging and supporting applications to the SF from community and village groups, and more recently, have comrnmitted more local counterpart resources to strengthen sub-project applications. This objective is thus revised for SFII to include more thorough appraisal of sub-project costs and financing, including counterpart, so that coordination with local government and other financing entities are defined at the appraisal stage.  3 To summarize the planned changes in SFII compared to SFI, the successful implementation of SFI will be improved further through three programs: i) sustainability program to increase community participation and local ownership of sub- projects and through those changes improve the post handover performance of sub-projects in the areas of maintenance and utilization; ii) technical standards program to raise the quality of SFKC sub-projects in a few problem areas, namely rural water supply, and to improve appraisal and supervision techniques overall; iii) productivity program to upgrade SFKC appraisal in the calculation of sub-project cost effectiveness and rates of return. B: Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1): CAS document number: 16255-KH Date of latest CAS discussion: June 8, 1997 The Project would support directly two CAS objectives: enhancing rural development and natural resource management; and improving human resources and reducing poverty. SFII will remain highly targeted to rural communities and will improve its capacity to rank application by poverty on a district basis. It would indirectly support a third CAS objective which is to support critical infrastructure rehabilitation, as the importance of small-scale economic infrastructure will continue to grow as a proportion of total sub-project activity. 2. Main sector issues and Government strategy: The Government has articulated since 1994 a national development strategy focused on rural development and poverty reduction. This remains in place, despite recent instability. Sectoral issues have developed in concert with implementation of Social Fund I, and can be summarized as follows: i) construction of schools, an early SFI priority, has been augmented by other donor programs and most prominently by a school building program sponsored by the Prime Minister. The SFKC has built or rehabilitated over 600 schools. For SFII, SFKC will limit school construction to less than one third of total sub-project approvals in value terms; ii) the health sector also contains multiple donor financed initiatives, including the World Bank's and Asian Development Bank's respective health projects, both with substantial civil works components. SFKC has agreed at the request of the Ministry of Health to supervise construction of health centers and some categories of hospitals under the World Bank Disease Control Project. For SFII, SFKC will approve very few independent applications for health facility constructions, and concentrate on executing its agreement with the MOH; iii) the third sectoral issue is the role of SFKC as a financier of more complex rural development projects benefiting the poor, including irrigation, transport, and other high cost sub-project types. High demand for such sub-projects and the substantial benefits to rural poor justify SFKC financing of such sub-projects, and the government is in full support of this role for SFKC. SFKC will allocate at least two thirds of total sub-project financing to rural economic infrastructure, including water supply;  4 iv) the issue of community ownership and the sustainability of sub-project investments is of particular concern for SF11 and a government priority, especially in the rural water supply sector and for the growing number of irrigation and transport sub-projects. 3. Sector issues to be addressed by the project and strategic choices: In response to the shift in objectives discussed earlier and the sector issues outlined above, the strategic choices of SFII are therefore to initiate the following major changes in the SFKC Operational Policies and Procedures: i) modify the sub-project eligibility requirements to achieve a reduced role in the education sector, an increased emphasis on irrigation and flood control investments, transport improvements, and water supply and sanitation. Health facilities will be built in close coordination with the Ministry of Health existing projects and plans. Water supply will be the subject of an intensive study on how to improve technical and sustainability performance, after which new eligibility requirements will be set; ii) modify applicant eligibility requirements to include more groups and de-emphasize individuals, with priority given to "village development committees", community production groups, irrigation user groups, water supply user groups, and others, as part of the "sustainability program"; iii) improve the sub-project operational cycle to increase the role and responsibility of communities in defining sub-project choices, provision of co-counterpart, and commitment to long term maintenance; iv) increase applicant contribution requirement to 10 per cent; v) engage an expatriate "sustainability advisor" to assist SFKC in the implementation of the sustainability program; vi) modify SFKC institutional structure to include regional offices, which will assume responsibilities in promotion, supervision, and monitoring; vii.) modify SFKC legal capacities to develop instruments for donor co-financing at the SFKC level and for ministerial cooperation agreements; viii) improve SFKC monitoring capacities and procedures to include sustainability variables and introduce new SFKC procedures and structures for addressing sustainability issues at the sub-project level after handover (Post Handover and Monitoring Unit); ix) expand SFKC accounting and financial excellence to merge operational and financial variables in its management reports; x) regularize the schedule of beneficiary assessments so as to increase the frequency and effectiveness of this "feedback" mechanism; xi) revise the targeting policy of SFKC given new poverty data and priorities of the Government, particularly at the district level; xii) introduce more rigorous cost effectiveness indicators and minimum standards, utilizing the well maintained Unit Cost Data Base for costs, and developing appropriate cost effectiveness ratios and rates of return thresholds for appraisal.  5 C: Project Description Summary 1. Project components (see Annex 2for a detailed description and Annex 3for a detailed cost breakdown): Component Category Cost Incl. % of Bank- % of Contingencies Total financing Bank- (US$M) (US$M) financing A.Sub-Project Grants. This 24.46 88 22.01 90 component will fmance sub-grants for sub-projects in social and economic infrastructure, community services, social services, training, and other socially productive activities. The sub-grants will be made to communities, local groups, local governments, NGOs and other entities. Contracts for implementation will be signed with private contractors, NGOs, and local groups depending on the type of sub-project supported, capacities of the applicant, availability of private contractors and other variables. B. Institutional Support. This 2.97 11 2.68 90 component will fnance the costs of staffing, equipping, and operating the SFKC. It includes the costs of establishing three regional offices of the SFKC, replacement of vehicles, and new office equipment to upgrade and replace existing computers, copiers, printers and network equipment. Staff salaries and fees, training of staff, and provision for short term technical assistance are also included. C. Unallocated. This component 0.34 1 0.31 90 provides an unallocated amount of $.3 million to provide for flexibility in outyear implementation. Total 27.77 25.00 90 2. Key policy and institutional reforms supported by the project: SFKC as an autonomous government institution, has achieved high standards in two areas: finance and administration, and initial technical quality of its sub-projects at low cost. These achievements have been recognized by the government and civil society in Cambodia as evidenced by: the willingness of the Ministry of Finance to delegate all financial management responsibilities over IDA and counterpart funds to SFKC for SFI and II; the continuing willingness of the Ministry of Finance not to exercise its prior review procedure for SFKC procurements; the agreement with the Ministry of Health to undertake procurement and construction management of over US$9 million of health facility civil works under another Bank project; the demonstrated interest of donors and NGO's to cofinance SFKC sub-projects; and their expressed demand for more substantial and formalized cooperation with SFKC. SFKC, now managed with only occasional expatriate TA, demonstrates to the government and civil society that Cambodians are capable of high levels of project management, governance, and technical excellence. A  6 central objective of SFII is to sustain and improve upon that record, and to achieve new standards for sub- project sustainability. 3. Benefits and target population: The benefits of the Project will be: (i) improved and rehabilitated infrastructure, both economic and social; (ii) improved social services provided with benefit of the improved infrastructure (clinics, schools, district hospitals, training centers, etc.); (iii) improved productivity of rural enterprises and farms through improved economic infrastructure (bridges, culverts, small-scale irrigation works, etc.); (iv) improved sanitation and health through provision of clean water supply and sanitation facilities; (v) strengthening of community self help and project management capacities through increased community control over sub- project resources and implementation; (vi) development of improved coordination mechanisms and better targeting to rationalize local development. The target population for the Project will be the poor, who live overwhelmingly in rural areas. This will be achieved through an improved poverty targeting map, using more recent poverty analysis than was available for the first project. The targeting map will allocate sub-project financing resources to provinces based on population adjusted for poverty levels and measures of access to social and economic services. Targeting performance under the SFI has conformed closely to the agreed targeting map, and therefore there are only minor inequities in SFI allocations that would need to be addressed by SFII at the province level of aggregation. Second level targeting will be accomplished through identification of districts within provinces that are poor and underserved by SFKC and other donors. Another important aspect of targeting will be achieved through a new coordination mechanism to permit SFKC to enter into agreements with especially capable donor, NGO or government institutions. These agreements, at SFKC's discretion, will help SFKC target its resources to areas and sectors where spontaneous demand is weak but the priority for SFKC is high. 4. Institutional and implementation arrangements: Implementation period: April 30, 1999 to December 31, 2002 Executing agencies: Social Fund of the Kingdom of Cambodia Project coordination: The SFKC continues to operate under a charter enacted by Royal Decree, which gives to the SFKC considerable autonomy under the authority of its President (the Prime Minister) and a broadly representative SFKC Board of Directors. The Charter was recently renewed by Royal Decree. Day-to-day coordination with other ministries, donors and civil society are entrusted to the General Director and the SFKC staff. The Ministry of Economy and Finance exercises oversight and conducts annual audits of the SFKC (in addition to audits conducted by Coopers & Lybrand). Under SFII, the SFKC will adopt new procedures to improve coordination with government agencies and other donors, as described above, and to improve appraisal and supervision criteria that require SFKC to cover all sub- project activities, whether SFKC financed, co-financed, or community contribution. Project oversight (policy guidance, etc.): SFKC Board of Directors and the Ministry of Finance are responsible for project oversight. Accounting, financial reporting and auditing arrangements: Under SFI, technical assistance was provided to help SFKC build a capable and reliable accounting and financial management capacity. Coopers & Lybrand was engaged to perform monthly spot checks on segments of the accounting and financial management system. Audits have been performed on time by both Coopers & Lybrand and by the Ministry of Economy and Finance, with unqualified results. To ensure that SFKC is able to build on this strong foundation, SFII will include training funds for financial and accounting skills at regional institutions. In addition, the SFKC will establish a Post Handover and Monitoring Unit that will be responsible for introducing the sustainability program and for engaging consultants to conduct field assessments of SFKC sub-projects, both during and after implementation. To assure that the planned expansion of the SFKC to three in country regional offices sustains sound accounting and financial standards, SFII includes financing for TA to suggest the most efficient and transparent mechanisms for  7 managing disbursements and supervision in the new decentralized setting. Monitoring and evaluation arrangements: Under SFI, the SFKC has submitted monthly operational reports to the Bank and to its Board. The indicators used have emphasized operational steps in processing applications, from screening through appraisal, approval, supervision and handover. Two areas of improvement will be introduced in SFII: new sustainability variables and new community participation variables. In the first category of sustainability, the SFKC will build into their operational cycle at appraisal a requirement for a maintenance plan and a committee or other agency to carry it out as well as an eligibility criterion for nearly all sub-projects that beneficiaries meet as a group to prepare the SFKC application and decide on community counterpart and maintenance commitments. Secondly, SFKC through its new Post Handover and Monitoring Unit, will adopt a program of visits to completed sub- projects of different ages, with reporting to the Executive Committee of maintenance quality, technical quality, and the carrying out of required complementary investments by local government, co-financiers and community groups (as required at appraisal and in the contract). The staff would recommend follow up actions for problem sub-projects, including a formal letter indicating applicant responsibilities for maintenance or complementary investments, or a follow up SFKC sub-project to remedy unforeseen technical flaws, or training for the community/applicant by the SFKC. The SFKC would include appropriate quantitative variables in its monthly monitoring report to the Bank on sustainability performance in the sub-project cycle through Post-Handover. D: Project Rationale 1. Project alternatives considered and reasons for rejection: The principal alternatives considered involved a major overhaul of SFKC objectives and procedures, so as to recast the SFKC as either: (i) a construction management organization specializing in local, but large scale infrastructure, with community and employment objectives de-emphasized; or (ii) a community capacity building organization, using its sub-projects (more oriented to services) as vehicles to build cooperative mechanisms at the village level, develop new community institutions for decision making and to build community capacity to manage finances and projects. The first model maximizes speed, coverage, and construction efficiency, while the second pursues social objectives as the highest priority with some sacrifice on either coverage or costs. Few social funds strictly adhere to either of these two pure models, but choose a point between them. The strategic choice in the case of the SF11 is to exploit the demonstrated strengths of the SFKC, as shown in the technical and beneficiary assessments. These are SFKC's ability to respond rapidly to local demand for small scale sub-projects (over 1400 completed in SF1), to deliver above average quality of construction, to contain unit costs well below other programs in Cambodia, and to manage its program at low overhead cost with excellence in financial and accounting management. Although either of the two strategic alternatives would clearly yield substantial benefits, the strategic and policy framework of Cambodia at the present time still retains a substantial reconstruction agenda, making the SFKC emphasis on delivering benefits quickly, widely and efficiently still the highest priority in the country. However, SFKC will undertake selected significant changes in procedures to improve its performance in regard to sustainability (through stronger community ownership and sub-project participation). The challenge for SFKC under these revised guidelines will be to achieve the broad impacts and coverage of the first credit, while making important qualitative gains toward sustainability requiring additional time, effort, and expense. SFKC is fully committed to achieving a higher standard of community ownership and sustainability.  8 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned): Net Board Revised Development Proj. Project Commitment Approval Effective Closing Implementation Objectives ID (USSM) Date Date Date Progress Rating Rating 4033 Agricultural Productivity 27.0 02-28-1997 06-20-1997 06-30-2002 S S Imnprovement 4034 Disease Control & Health 30.0 12-24-1996 06-23-1997 03-31-2002 S S 4032 Phnom Penh Power 40.0 09-28-1995 12-20-1995 12-31-1999 S S Rehabilitation 37088 Social Fund 20.0 06-08-1995 12-21-1995 12-31-1999 HS HS 34755 Technical Assistance 17.0 12-06-1994 03-23-1995 06-30-2001 S S 45629 Urban Water Supply 31.0 02-17-1998 06-02-1998 12-31-2002 5 S IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 3. Lessons learned and reflected in the project design: The SFI project was designed in response to an already rich accumulation of experience with Social Funds in Latin America and Africa. SFII will both continue to observe those lessons and reflect more recent experience that has been integrated in several recent reports, including an influential OED "Portfolio Review of Social Funds" in 1997, an OED conference on Social Funds and its 1998 report "Social Funds and Reaching the Poor", and a working paper on "Design of Social Funds. Participation, Demand Orientation..." in 1997. Design of SF11 will therefore reflect lessons of experience as follows: i) Protect institutional autonomy and freedom from political interference. This is strengthened through the use of a Project Agreement between the Bank and the SFKC to insure that SFKC obligations and accountabilities under the credit agreement are directly linked legally to the Bank, as well as to the Government. ii) Insure transparency and accountability. SFKC promotional activities, contracting procedures, and publication of contract awards have helped achieve high standards. iii) Attract high caliber staff through competitive salaries. The quality engineering and accounting staff will be expanded to include under SFII social experts to help implement the sustainability program. iv) Provincial and district coordination is at the heart of SFKC operations, and will be strengthened to improve sustainability and cofinancing performance. v) High commnunity ownership to achieve sustainability of sub-projects was a SFI priority, which will be given new importance under SFI. vi) Strong supervision mechanisms to assure sub-project quality and rapid implementation. This will be improved further with regional offices providing more intensive supervision and post handover monitoring. vii) The more complex the mandate, the more likely implementation problems. A major finding of the OED review noted that reconstruction/emergency type social fund projects typically are able to implement more smoothly than more complex, service oriented, "developmental" social funds. SFII will continue the reconstruction mandate, but adjust it to emerging longer term issues, particularly sustainability and community ownership.  9 4. Indications of borrower commitment and ownership: The Government has requested a second credit on many occasions over the past year, and this was reiterated at the Annual Meetings in October 1998. The SFKC itself is managed without benefit of long term technical assistance, and has managed to achieve high output efficiencies under very demanding physical and political conditions. The Ministry of Finance has strongly supported the SFKC for three main reasons: the ability of SFKC to deliver tangible social benefits to rural populations in every province; its high standards of transparency and efficiency; and its role as a leader in demonstrating the benefits of quality financial, accounting and procurement management. 5. Value added of Bank support in this project: A key issue for SFI was the absence of direct cofinancing from other donors. For Social Fund 11, two partner NGOs (Japan Relief for Cambodia; American Assistance for Cambodia) are raising funds for co- financing school construction with SFKC. This will be first co-financing of SFKC at the institutional level, with a target amount of US$2 million. Donors continue to co-finance SFKC at the sub-project level. SFKC has now accumulated over $1 million in sub-project co-financing, principally in the transport and irrigation sectors. The rationale for Bank support for SFII is based on three considerations: first, the performance of SFI has been highly satisfactory, and unmet demand is very large; second, other donors are developing more confidence in SFKC's capacities and have begun to commit funds directly to SFKC; third, the Ministry of Finance has expressed its commitment to help mobilize more SFKC co- financing. E: Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic: []Cost-Benefit Analysis: NPV=US$ million; ERR= % [X] Cost Effectiveness Analysis: [XI Other (Specify) SFKC utilizes appraisal techniques appropriate for sub-projects averaging well under US$10,000 each. Thus, using a regularly updated unit cost data base SFKC is able to contain construction costs well below competitive public programs. On the benefit side, SFKC employs counts of potential beneficiaries to assess the potential "return" of sub-projects. Under SFII, those techniques will be refined and updated with benefit of TA, particularly for transport and irrigation sub-projects. SFKC will revise its Operational Manual to reflect new cost effectiveness measures (ratios) and relatively simple calculations of an economic rate of return for larger economic infrastructure sub-projects. 2. Financial (see Annex 5): SFKC does not participate in credit programs or micro credit programs. Fiscal impact: The SFKC policies require that all SFKC sub-projects rehabilitate or replace existing social and economic infrastructure. Building an entirely new school or a new road is not eligible. This limits therefore the fiscal obligations of the Goverunent in terms of maintenance and later replacement. Counterpart contribution from sub-project applicants/beneficiaries covers all of the counterpart requirement in SFII, thus minimizing cash counterpart obligations. 3. Technical: Four technical assessments of sub-project quality, adherence to procurement rules, and supervision quality have been carried out since the inception of SFI. The results are consistent: above average technical quality for Cambodia, adherence to the procurement procedures for direct contracting and local shopping (applicants conduct procurement, not SFKC), and sustainability and water availability problems with some types of water supply sub-projects. Other technical problems have been detected in each assessment, but have been successfully addressed. For example, the design of foundations and floors was considerably strengthened above the usual local standards to enable floors to survive floods, settling of  10 the foundation, and other wear and tear. Another problem subsequently addressed was SFKC financing of parts of larger projects, without adequate assurance that the complementary investments would be carried out in a timely fashion. Performance has improved as SFKC has paid more attention at appraisal to the quality of donor or local government or community commitment to carry out the complementary works, but this will be addressed more rigorously in SFII. For SF11, the Supervision Department will undertake training and decentralization (to regional offices) to improve site visit frequency, contractor monitoring and strong community involvement in supervision and payment authorization. For the water supply sub projects (hand dug well sub-component), TA will be engaged to study designs, appraisal techniques and supervision requirements to help raise SFKC performance. 4. Institutional: a) Executing agencies: The SFKC has established itself as a reputable manager of small scale infrastructure construction contracts, and its sub-projects are widely known and welcomed at the local level. MIS system, accounting and finance, supervision, appraisal, legal and promotion departments all function well, and have been able to support at SFI's peak operational output, a disbursement rate of $1 million per month. Preserving the impartiality of SFKC operations will be an important objective of SFII. b) Project management: see above. 5. Social: A social assessment was carried out as part of SFI preparation. A 43 community Beneficiary Assessment (BA) was carried out as part of preparation of SFII. It's results, combined with those of the final 120 sub- project Technical Assessment, have shaped many of the changes for SFII. The BA recommended and the SFKC is adopting a number of modifications in procedures and policies to improve sustainability and demand responsiveness of SFKC operations, including raising the community contribution percentage and requiring that some of it be demonstrated before groundbreaking, community preparation of a maintenance plan, appraisal of community involvement and eligibility changes to require group instead of individual applicants, and systematic post handover monitoring of sub-projects to measure sustainability performance. 6. Environmental assessment: Environmental Category []A [X] B [3 C The SFKC finances small infrastructure projects, averaging under $10,000 each. All sub-projects rebuild or rehabilitate existing structures. SFKC appraisal criteria include an environmental assessment. If the assessment reveals substantial environmental impact, appraisal is halted and the impacts further studied. This has not been an issue yet in SFKC operations, but improved appraisal procedures for environmental assessment will be developed by SFKC. 7. Participatory approach: Participatory Approach: Identification/Preparation Implementation Operation Beneficiaries/community groups IS, CON, COL IS, CON, COL COL Intermediary NGOs IS, CON, COL IS, CON, COL COL Academic institutions CON IS, CON, COL COL Local government IS, CON, COL IS, CON, COL COL Other donors IS, CON, COL IS, CON, COL IS, CON, COL Numerous donors and NGOS cofmance at the sub-project level, including UNICEF, ILO-WPA, UNDP-CARERE, Action Nord Sud, etc. Note: IS=Information Sharing; CON=Consultation; COL=Collaboration  11 F: Sustainability and Risks 1. Sustainability: As discussed above, improving sustainability of SFKC sub-projects motivates many of the major changes in SFKC operational policies and procedures. Social funds share with other government projects the problem of adequate attention to and financing of maintenance, at the community level, at the local government level and at the central level. This issue tends to be more acute in the poorest countries. The design of SFII aims to help SFKC to become an innovator in Cambodia on the issue of sustainability. This will be attempted through both ex ante and ex post interventions. Before a sub-project is financed, the SFKC will at the promotion, appraisal and contracting stage inform, and if appropriate, train applicants in their maintenance responsibilities. Requirements for a maintenance or operations committee and plan will be built into appraisal and the contract. Ex-post, the SFKC will monitor maintenance and sustainability performance, and will be empowered to take various steps to address shortcomings, from further training, group problem solving interventions, written requests for action to responsible groups, and financing of urgent and unforeseen repairs. Monitoring of post handover performance will become a regular segment of the operational cycle through the Post Handover and Monitoring Unit. 2. Critical Risks (reflecting assumptions in the fourth column of Annex 1): Project outputs to development objectives Risk Risk Risk Minimization Measure Political instability disrupts SFKC Moderate This risk was present during SFI, and indeed operations, lowers productivity of SFKC it materialized, but with minimum impact on investments. SFKC's operations and its rural clients. Extreme instability, however, would have an impact, and that risk cannot be mitigated. Investments are not used or not Moderate SFKC investments are used but some are maintained having maintenance or quality problems (hand dug wells). Risks will be minimized through changes in policies and procedures. Political interference in SFKC Moderate Political pressures on SFKC were contained operations in SFI; close Bank supervision, autonomy of SFKC, external audits, transparency requirements all reduce the risk. Project components to outputs Risk Risk Risk Minimization Measure Rating Macroeconomic instability low Cambodia's macro economic management has for the most part been prudent, avoiding major imbalances, despite major failings on the revenue side. The regional crisis and political instability have slowed the economy, and reduced revenues, but _______ _instability has been contained.  12 Misallocation of project resources low SFKC's accounting and financial system is a high performer and monthly audits are carried out by Coopers & Lybrand; frequent technical assessments and beneficiary assessments will confirm outputs and check _____ _____ _____ _____ ______ ___beneficiary opinions. Slowdown in SFKC disbursement rates moderate Increased emphasis on community control and ownership, as well as post handover monitoring will stretch SFKC capacities, and may cause a slowdown in the sub-project cycle. The 8% limit on operational costs places a budget constraint. PFP has funded pilot sub-projects, experimenting with some new procedures and policies. Introduction of changes will be gradual, but time bound. Excessive influence on SFKC sub- low Procedures to further empower group projects by special interests, contractors, applicants at the local level will be non-local actors introduced (adding to the slowdown risk, but reducing the risk of low community ownership and contractor manipulation). Overall project risk rating Risk Risk Rating ____ Instability, political interference, moderate Most of these risks are external, macro risks, "shock" of new procedures and policies which the SFKC has weathered well in the on disbursements past. Autonomy will be strengthened. Changes will be introduced gradually, based on pilot work carried out under PFP. Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk) 3. Possible Controversial Aspects: There are no controversial aspects to this project. G: Main Loan Conditions 1. Effectiveness Conditions: Fund agreement will be signed satisfactory to IDA; legal opinions on IDA credit agreement and project agreement; submission of revised and updated operational manual and administration and finance manual to include new resettlement and environment guidelines and the agreed principle for the sustainability program and the new targeting strategy. 2. Other: Financial, Procurement, and other Covenants: i) The Government will make the proceeds of the Credit available to SFKC on a non- reimbursable basis pursuant to a Fund Agreement satisfactory to IDA; ii) IDA prior approval will be required for any changes to the following provisions of the operational manual: the menu of eligible sub-projects; the $250,000 maximum sub-project cost limit; the no objection deadline period within which line ministries are required to clear sub-projects; the $300,000 ceiling amount that can be awarded to any one contractor  13 through direct contracting using the proceeds of the Credit; and the threshold for prior review of sub-project on IDA; iii) Social Fund management positions will be staffed satisfactory to IDA; iv) SFKC will ensure that all sub-projects are carried out on public land and that each sub- project shall be operated according to an operation and maintenance plan agreed by SFKC at sub-project appraisal; v) SFKC reporting requirements are to submit monthly progress report to IDA on SFKC operations and finances; annual reports to IDA within three months after the end of the calendar year; a mid term report by June 30, 2001; and a final report on the implementation of the project, within 6 months after the closing date; vi) the Government will provide the specified amount of counterpart funds, and sub-project applicants will be obliged by SFKC to provide a minimum of 10% counterpart contribution; vii) annual audits will be conducted by an independent private auditor acceptable to IDA, according to TOR acceptable to IDA, and such audits will be submitted within 4 months of the end of the year; viii) SFKC with prior IDA approval may enter into cooperative agreements that involve the use of the proceeds of the credit. Dated Covenants: i) The SFKC will prepare and submit to IDA quarterly Project Management Reports integrating financial and physical progress indicators, beginning no later than July 31, 1999, and for each year thereafter; ii) By September 30, 1999, SFKC shall submit, satisfactory to IDA, a detailed proposal to target poor or under-served communities using a revised provincial targeting map and district ranking and develop a revised sub-project ranking methodology to incorporate provincial and district factors; iii) By September 30, 1999, the SFKC shall recruit a sustainability advisor with terms and conditions satisfactory to IDA; iv) By March 31, 2000, SFKC shall submit a detailed proposed, satisfactory to IDA, for a sustainability program, including a Post Handover and Monitoring Unit, establishment of regional offices, and recruitment of qualified staff to carry out the sustainability program; v) By March 31, 2000, SFKC will submit a detailed proposal, satisfactory to IDA, to implement improved economic and technical procedures on appraisal and supervision including detailed environmental assessment procedures and improvement in the design, appraisal, and supervision of rural water supply projects. H. Readiness for Implementation [] The engineering design documents for the first year's activities are complete and ready for the start of project implementation. Not applicable.  14 [X] The procurement documents for the first year's activities are complete and ready for the start of project implementation. [XI The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. [X] The following items are lacking and are discussed under loan conditions (Section G): (i) The revised and updated Operational Manual and Administration Manual shall be submitted to IDA for its approval prior to effectiveness. I. Compliance with Bank Policies [X] This project complies with all applicable Bank policies. Task Team Leader/Task Manager, Christopher Chamberlin Sector Manager/Director: Kristalina Georgieva _______-_-_____ Country Manager/Director:Ngozi Okonjo-Iweala J OILO 4(3 ,* zJf z l ~0 m04) z '  15 Annex 1 Project Design Summary Cambodia: Social Fund II Project Narrative Summary Key Performance Indicators Monitoring and Evaluation Critical Assumptions Sector-related CAS Goal: (Goal to Bank Mission) * Enhancing rural * Increased access to small- * Assessment Surveys Synergy with other Government development. scale physical and social and donor programs * Improving human resources infrastructure services in and reducing poverty. rural areas. * Strengthening institutional capacity. Project Development (Objective to Goal) Objective: * Provision of small scale, * Provincial targeting * Management Information * Rural poor are the major comrnunity based sub- coefficient, sectoral Systems (MIS). beneficiaries of, and projects in the areas of social targeting coefficient; * Beneficiary assessments to participate in SFKC II and economic infrastructure * Sub projects in priority monitor community activities. with emphasis on the poor. districts as percentage of contribution and community * Cooperation between the * Creation of short-term total approvals; satisfaction with sub- central government, local employment opportunities * Man-months of employment projects. governments and the SFKC to absorb increase in generated by SFII * Post Handover random for coordinating donor unemployment associated activities. surveys of maintenance financed development with post-crisis reverse * Cofinancing as percentage performance. programs. migration of workers from of total value of sub- * Technical assessments to * Sustainability program Thailand, and with the projects. monitor technical quality by builds community demobilization of * Proportion of total independent firms or NGOs. ownership and 10 % Cambodian army units. approvals with community counterpart is achieved. * Strengthening the capacity contribution delivered at * Political interference in of commnunities to ground breaking. SFKC operations is implement development * Community contribution as prevented. projects and to sustain them. percentage of total value of * Political stability is * Improve donor coordination sub-projects. sustained. and co-financing; * Total community * Improve poverty and district contribution as percentage targeting of applicant counterpart. * Number of handover sub- projects with maintenance problems over total number of past handover projects visited, by age of sub- project, by sector. * Economic infrastructure. Sub- projects approved as percentage of total approvals. Outputs: (Outputs to Objective) * Small-scale social service * Average unit cost of sub- * Independent technical * Rapid disbursements sub-projects. projects completed; number assessments. * Locally responsive and * Small-scale infrastructure of infrastructure, * Management Information sustainable service delivery. sub-projects. agriculture, education and Systems (MIS). SFKC * Sustained macroeconomic * Employment opportunities. training, health, social supervision of physical and stability. affairs, capacity building, social infrastructure * SFKC transparency is equipment and other sub- services: On-site sustained. projects completed. supervision of sub-projects _  16 * Time lag between sub- by independent local project cycle steps. specialists; regular site * Average sub-project visits by SFKC II internal technical quality. supervision specialists. Project Components/Sub- Inputs: (budget for each (Components to Outputs) components: (see Annex 2 component) . MIS monitors activities * SFKC II will continue strong for project description) through regular project supervision, accounting, * Sub-Projects * $ 24.5m reporting and supervision. auditing, independent * Institutional Support * $ 2.96m * Disbursements are reviews, and flexibility in * Unallocated * $ .342m monitored by internal terms of regional and accounting and financial sectoral targeting of systems, and by regular investments. World Bank supervision. Baseline and targeted values should be shown, with the latter divided into values expected at mid-term, end of project and full impact.  17 Annex 2 Social Fund II Project Detailed Project Description Project Component 1 (Sub-Project) - US$24.5 million (total cost of component) This component will finance sub-project grants for eligible sub-projects. The operational cycle followed in SFI will be continued in SFII, in accordance with the operational manual, with changes linked to the new sustainability program (see below). The operational manual governing SFKC operations will be updated to reflect recent changes in technical criteria, procedures, and any other immediate changes agreed at appraisal, as a condition of effectiveness. Three programs of change will be introduced into SFKC operations as part of SFII. The first program will improve technical quality, particularly of rural water supply projects and other components as well. This will be achieved through first a technical review of water supply projects, where the issues are more complex and sectoral. In addition, appraisal criteria will be improved for these sub-project components where appropriate. The regional offices initiative will place SFKC supervisory staff in the field so as to insure frequent site visits and interaction with communities, local governments and contractors. A second area of change will be more attention to economic analysis in appraisal, using cost effectiveness ratios and in some cases cost benefit analysis. Aggregated unit costs will be tracked for sub-project types, and reported to the Bank every six months as part of the UCDB reports. Under SFI, such unit cost analysis featured prominently in Bank supervision. In SF11, SFKC will track these variables more closely, and integrate the costs with measures of benefit streams, such as number of beneficiaries or utilization of the investment. Appraisal of cost effectiveness will be adjusted to indicate a sub-project's ranking above or below the SFKC standard, and the exceptional rationale for financing the sub-project if it falls below the SFKC standard. Technical assessments of completed projects will on a sample basis compare appraised cost effectiveness with the actual ratio. Cost beneift analysis will be introduced for larger economic infrastructure sub-projects. In all cases, appraisal and supervision will be improved to cover all sub-project activities, whether financed by SFKC, the applicant, a co-financier or the community. A third area of change is the sustainability program, which will alter the policies and procedures governing sub- project eligibility, appraisal and supervision. Group applicants will be required for certain sub-project types (water supply and irrigation for example); maintenance plans and committees will be required; applicants may in some cases receive and disburse sub-project funds; procedures for applicant approval of contractor payments will be tightened up; and contracts will be modified in several ways to assign responsibility for maintenance after handover. In the Project cycle, SFKC will pilot a number of changes developed during appraisal: a pre-appraisal site visit to ascertain community commitment and participation; and up front community contribution at ground breaking. There will be one important addition of a post handover monitoring step, which will visit sub-projects on a random basis. The purpose of such visits will be to identify problem sub-projects requiring follow up by SFKC. The unit will also conduct maintenance and repair training and seminars throughout the country, distribute technical guides and manuals, and publicize excellent performance, as well as very poor performance (if necessary), in the Cambodian media. In all other respects, SF11 will follow SFI procedures and policies in regard to sub-grants. On legal issues, SFKC will review and improve agreement formats for cooperation arrangements with donors and ministries and for direct co-financing by donors to SFKC itself (as opposed to sub-projects). A new memorandum of understanding will be designed to facilitate arrangements for co-financing with especially capable donors or agencies able to stimulate demand for high priority sub projects in high priority districts.  18 Project Component 2 (Institutional Support) - US$2.97 million (total cost of component) This component will support the costs of staffing, managing, monitoring, reporting, and operating the Social Fund of the Kingdom of Cambodia. It will include: salaries and fees of SFKC staff, who are hired as temporary consultants, not as civil servants; office equipment, vehicles, and motorcycles needed to carry out operational work; minor civil works to prepare three new regional offices; operating costs not covered by Government counterpart; and technical assistance in the areas of monitoring, MIS, accounting, technical and beneficiary assessments, legal services and other specialist areas. The organizational structure of the SFKC will continue, with some modifications, as it was under SFI. The President of the SFKC will be the Prime Minister who appoints a Board of Directors with members from civil society and the General Director of the SFKC. The Board appoints a daily decision making body, the Executive Committee, as its representative with power to approve sub-projects. The operating Departments under the General Director will include, as before, Finance and Administration, Promotions, Appraisal, and Supervision. A new SFKC unit, Monitoring and Post Handover, will carry out expost reviews of sub-project utilization and sustainability (maintenance performance), and will commission the external monitoring reports (technical assessments and beneficiary assessments). This new unit will not be an internal auditor, as SFKC already contracts for intensive external auditing, but assume its role as part of the expanded operational cycle. Staffing of the SFKC will be modified to include new required skills in the social area, particularly in the area of social appraisal. Such staff will be distributed in the operational departments, such as appraisal, promotions, and monitoring, to assure that sustainability program to be implemented by SFKC is carried out effectively at the sub- project level. A sustainability advisor will be recruited by SFKC to assist with implementation of the Sustainability Program. Total staff at SFKC reached 40, including drivers and support, at its peak operational output. Given the 8% limit, which SFI attained, any additional payroll must be associated with high levels of operational efficiency and disbursement. The decentralization of SFKC will be carried out after an initial study of options and costs is completed. Three offices are contemplated: in Battambang (NW); Kompong Cham (N); and Kampot - Sihanoukville (S). Phnom Penh would continue to serve the east and center. Project Component 3 (Unallocated) - US$0.43 million (total cost of component) As in SFI, a portion of the credit will be set aside as unallocated, in order to facilitate adjustments to out year disbursement category management.  19 Annex 3 Social Fund II Project Estimated Project Costs Project Component Local Foreign Total --------------U------- US $ million------ A. Sub-Projects Infrastructure Sub-Projects 15,382.5 5,873.8 21,256.3 Equipment Sub-Projects 1,173.4 340.7 1,514.1 Services Sub-Projects 1,352.2 338.0 1,690.2 Subtotal Sub-Projects 17,908.1 6,552.5 24,460.6 B. Institutional Support 2,466.1 371.5 2,837.6 C. Unallocated 342.7 342.7 Total 20,716.8 6,924.0 27,640.9 Total Baseline Cost 20,716.8 6,924.0 27,640.9 Physical Contingencies Price Contingencies 111.8 16.8 128.6 Total Project Cost 20,828.6 6,940.9 27,769.5  20 Annex 5 Social Fund II Project Financial Summary Years Ending December 31, 2002 (US $ '000) Implementation Period 1999 2000 2001 2002 Total Project Costs Investment Costs 3,649.5 7,355.5 7,362.2 7,368.3 25,735.5 Recurrent Costs 278.1 571.1 585.7 599.1 2,034.0 Total 3,927.7 7,926.5 7,947.9 7,967.5 27,769.5 Financing Sources (% of total project costs) IDA 3,534.5 (13%) 7,134.6 (26%) 7,155.7 (26%) 7,175.2 (26%) 25,000.0 (90%) Government Central 45.9 (0.16%) 92.3 (0.33%) 92.6 (0.33%) 92.2 (0.33%) 323.4 (1.2%) Local Communities 347.3 (1.2%) 699.6 (2.5%) 699.6 (2.5%) 699.6 (2.5%) 2,446.1 (8.8%) Total 3,927.7 (14%) 7,926.5 (26%) 7,947.9 (28%) 7,967.5 (29%) 27,769.5 (100%) Main assumptions: Effectiveness is declared quickly, by end April 1999.  21 Annex 6 Social Fund II Project Procurement and Disbursement Arrangements Procurement Procurement methods (Table A) For civil works, no international competitive bidding is expected under the Project. National Competitive Bidding procedures acceptable to IDA would apply to civil works contracts valued between $100,000 and $250,000, the limit on project size for SFKC. Procurement of Small Works procedures will apply to works contracts between $50,000 and $100,000 (aggregate value of $6.6 million). Direct Contracting or Community Participation will apply to contracts valued less than $50,000. Direct contracting (aggregate value of $10.6 million) and community participation (aggregate value of $1 million) procured works will be costed on the basis of the SFKC Unit Cost Data Base (UCDB), so as to maintain competitive pricing of works. Small Works contract prices will be reviewed by SFKC to both check on the validity of the Unit Cost Data Base and to ensure that contract prices under the Small Works method are competitive. Applicants will continue, as in SFI, to be responsible for carrying out procurement; SFKC will provide training, basic documents, and legal services, but will not participate in any direct way in local applicant procurement. The ceiling on cumulative direct contracts to one contractor will remain at $300,000. The use of Direct Contracting for works is justified as follows. Experience with SFI Project shows clearly that small local contractors in Cambodia are capable of producing quality civil works, and SFKC has encouraged local contractors through prohibitions on full sub-contracting and use of the direct contracting method. Applicants vary in their capacity to conduct procurement, and direct contracting enables low capacity applicants to gain access to SFKC resources. The Direct Contracting method has proved, for the very small projects constructed, to be a time efficient and cost effective method of procurement. Unit costs of direct contract procurements (square meter for buildings, for example) have remained flat in nominal terms over the entire 3 year period of the Project, due to the application of a well maintained Unit Cost Data Base. Quality has remained above average according to technical assessments. Local contractors participate heavily in Direct Contracting. Direct Contracting has encouraged contractors to assist communities in the design of more complex projects, such as small bridges and culverts. Given the good performance to date and the importance of reaching more low capacity and poor communities in SFII, Direct Contracting will continue to be an important procurement method. For equipment and goods, SFKC sub-projects only on rare occasions support the purchase of equipment as these are usually imported and do not contribute to local employment. In those exceptional sub-projects, local shopping will govern contracts valued at $50,000 or less (aggregate value of $1.5 million), and NCB will apply to contracts over $100,000 (aggregate amount of $200,000). These arrangements include both Parts A and Part B of the Project. For consultant services, SFKC will utilize QCBS for all contracts with firms valued at over $100,000 (Part B), and for contracts with firms under $100,000, Quality Based Selection may be used. Single source procurement may be undertaken for contracts less than $100,000 with firms, with the Bank's prior approval. Under Part A of the project, applicants may procure NGO services using single source methods (direct contracting) for contracts under $50,000 with the Bank's prior approval. For all SFKC staff, consultant services procurement will govern all recruitment.  22 Prior review thresholds (Table B) As shown in Table B, prior review will be required for the first three NCB procurements under Part A and of any goods contracts over $50,000. The first three community participation procurements and the first three small works contracts will be subject to prior review. All single source consultant contracts with firms will be subject to prior Teview. Disbursement Allocation of loan proceeds (Table C) Allocation of loan proceeds follows the same framework of SFI, so as to minimize discontinuity and help sustain good performance. Part A and B are not indicated, however, but "Sub-grants" remains as the exclusive Part A disbursement category at 100%. Applicant contribution will be set at a minimum of 10% in addition to the sub-grant. Use of statements of expenses (SOEs): SOEs will be used to justify all payments from the Special Account. In SFI, full documentation was required on the largest civil works and equipment contracts, but this will be dropped. Special account: The Special Account will again be opened in the name of SFKC, as delegated by the Ministry of Economy and Finance (MOEF). Replenishment applications will be copied to MOEF.  23 Annex 6 Table A: Project Costs by Procurement Arrangements' (in US$million equivalent) Expenditure Category Procurement Method Total Cost (including contingencies) ICB NCB Other\b N.B.F 1. Works 1,161.3 20,194.9 21,356.2 (1,161.3) (18,034.3) (19,195.6) A. CW SP - 1,161.3 20,094.9 21,256.2 (1,161.3) (17,944.3) (19,105.6) B. CW IS - - 100.0 100.0 (90.0) (90.0) 2. Goods 181.9 1,664.4 1,846 (145.5) (1,513.0) (1,628.5) C. EQ SP - - 1,514.1 1,514.1 (1,362.7) (1,362.7) D. EQ IS - - 150.3 150.3 (120.3) (120.3) E. Vehicles - 181.9 181.9 (145.5) - (145.5) 3. Services 2,190.2 2,190.2 (2,046.2) (2,046.2) F. Services Sub-Projects - - 1,690.2 1,690.2 (1,546.2) (1,546.2) G. TA for Institutional Support - - 500.0 500.0 (500.0) (500.0) 4. Miscellaneous 342.7 2,034.0 2,376.7 (308.4) (1,821.3) (2,129.7) H. Operating Costs\a - - 595.6 595.6 (382.9) (382.9) I. Salaries and Fees - - 1,438.4 1,438.4 (1,438.4) (1,438.4) J. Unallocated 342.7 2,034.0 2,376.7 (308.4) (1,821.3) (2,129.7) Total 342.7 1,343.2 26,083.6 27,769.5 (308.4) (1,306.8) (23,384.7) (24,999.9) Note: N.B.F. = Not Bank-financed (includes elements procured under parallel cofinancing procedures, consultancies under trust funds, any reserved procurement, and any other miscellaneous items). The procurement arrangement for the items listed under "Other" and details of the items listed as "N.B.F." need to be explained in footnotes to the table or in the text. SP = Sub Projects under Part A of the Project IS = Institutional Support under part B of the Project. Figures in parenthesis are the amounts to be financed by the Bank loan/IDA credit \a Includes travel, utilities and minor office supplies. \b Includes: Shopping (total: 8,345.3; IDA: 8,153.9), Direct Contracting (total: 10,613.4; IDA: 10,613.4), Community Participation (total: 1,343.2; IDA: 1,343.2), SFKC Operations (total: 595.6; IDA: 382.9), and Unallocated (total: 342.7; IDA: 308.4). For details on presentation of Procurement Methods refer to ODI 1.02, "Procurement Arrangements for Investment Operations." Details on Consultant Services can be shown more easily in the Table Al format (additional to Table A, where applicable).  24 Annex 6 Table B: Thresholds for Procurement Methods and Prior Review2 Expenditure Contract Value Procurement Contracts Subject to Category (Threshold) Method Prior Review / Estimated Total Value Subject to Prior Review US $ thousands US $ millions 1. Works less than $50,000 Direct Contracting or post review of sub- Community project summaries; prior Participation review of first three community participation contracts / $ 30,000. less than $100,000 Local Shopping post review on sample basis less than $250,000 NCB prior review of first three / $ 30,000 2. Goods less than $50,000 Local Shopping post review of SOEs less than $100,000 NCB prior review / $100,000 3. Services Special NGO managed Direct Contracting prior review of sub- sub-projects: recurrent project grants and post costs review of SOEs Social Fund World Bank guidelines audit Administrative not applicable. Expenditure Technical Assistance World Bank Guidelines Bank guidelines for and Consultant on Consultants. consultants Contracts 4. Miscellaneous Total value of contracts subject to prior review: $ 430,000 2Thresholds generally differ by country and project. Consult OD 11.04 "Review of Procurement Documentation" and contact the Regional Procurement Adviser for guidance.  25 Annex 6 Table C: Allocation of Loan Proceeds Expenditure Category Amount in US$ Financing Percentage million Expenditure Category Amount in US$ Financing Percentage million Sub-Grants (Part A) 21.615 87.5 Consultant Services (Part B) 1.938 100 Goods (Part B) 0.266 80 Operating Costs (Part B) 0.383 64 Works (Part B) 0.090 90 Refund of PPF (Part A) 0.400 100 Unallocated 0.308 90 Total 25,000.0 90  26 Annex 7 Social Fund II Project Project Processing Budget and Schedule A. Project Budget (US$000) Planned Actual (At final PCD stage) Fiscal Years 98 and 99 65 65 B. Project Schedule Planned Actual (At final PCD stage) Time taken to prepare the project (months) 7 months First Bank mission (identification) 04/01/1998 4/0111998 Appraisal mission departure 01/15/1999 1/31/1999 Negotiations 02/01/1999 2/17/1999 Planned Date of Effectiveness 03/31/1999 4/30/1999 Prepared by: Social Fund of The Kingdom of Cambodia Preparation assistance: PPF of $400,000 Bank staff who worked on the project included: Name Specialty Christopher Chamberlin Task Team Leader Wijaya Wickrema Finance Omowunmi Ladipo Finance Caroline Robb Sociologist Raj Soopramanien Lawyer Norbert Mugwagwa Operations - Sustainability Negda Jahanshahi Consultant Gaye Lindsey Disbursements Oithip Mongkolsawat Procurement Rodrigo Cisneros Consultant - Operations Willem Struben Peer Reviewer Soniya Carvalho Peer Reviewer Steen Jorgensen Peer Reviewer Ramanathan Natarajan Country Liaison Officer Shahnaz Ahmed Documentation/Coordination Juliana Williams Documentation/Coordination  27 Annex 8 Social Fund II Project Documents in the Project File* A. Project Implementation Plan Operational Manual t SFI Administration and Finance Manual / SFI B. Bank Staff Assessments Appraisal Mission AIDE Memoire and Annexes, Feb 12, 1998 Annex on Technical and Economic Analysis Program Annex on Sustainability Program C. Other Technical Assessment IV (SAWA), July 1998 Beneficiary Assessment, July 1998 Technical Assessments I, II, III. (1996, 1997, 1997) Social Assessment, 1995 Water Supply and Irrigation TA (1995)  Annex 9 CAS Annex B8 Generated: 02/09/99 gtatement of Loans and Credits Status of Bank Group Operations in Cambodia Operations Portfolio Difference Between expected Original Amount in US$ Millions and actual Last PSR Fiscal disbursements a/ Supervision Rating b/ Project ID Year Borrower Purpose IBRD IDA Cancel. Undisb. Orig Frm Rev'd Dev Obj Imp Prog Number of Closed Projects: 2 Active Projects KH-PE-37088 1995 !(INGDO6I OF CAMBODIA SOCIAL FUND 0.00 20.00 0.00 .40 1.85 0.00 HS HS KH-PE-34755 1995 GOVT. OF CAMBODIA TECHNICAL ASSISTANCE 0.00 17.00 0.00 4.40 3.07 0.00 5 S KH-PE-4032 1996 KINGDOM OF CAMBODIA PHNOM PEHN POWER REH 0.00 40.00 0.00 13.32 12.71 0.00 S S KH-PE-4034 1997 KINGDOM OF CAMBODIA DISEASE CONTROL&HEAL 0.00 30.40 0.00 26.24 10.36 0.00 S S KH-PE-4033 1997 GOVT OF CAMBODIA AGRI.PRODUCT IMP. 0.00 27.00 0.00 26.00 10.98 .02 5 S KH-PE-45629 1998 CAMBODIA URBAN WATER SUPPLY 0.00 30.96 0.00 30.96 .78 0.00 S S Total 0.00 165.36 0.00 101.32 39.75 .02 Active Proiects Closed ProJects Total Total Disbursed (IBRD and IDA): 56.29 101.77 158.06 of which has been repaid: 0.00 0.00 0.00 r Total now held by IBRD and IDA: 165.36 102.70 268.06 Amount sold : 0.00 0.00 0.00 Of which repaid : 0.00 0.00 0.00 Total Undisbursed : 101.32 0.00 101.32 a. Intended disbursements to date minus actual disbursements to date as projected at appraisal. b. Following the FY94 Annual Review of Portfolio performance (IAPP), a letter based system was introduced (HS - highly Satisfactory, S - satisfactory, U - unsatisfactory, HU - highly unsatisfactory): see proposed Improvements in Project and Portfolio Performance Rating Methodology (SecM94-901), August 23, 1994. Note: Disbursement data is updated at the end of the first week of the month. Generated by the Operations Information System (OIS) Page I  29 Annex 10 Cambodia at a glance East POVERTY and SOCIAL Asia & Low- Cambodia Pacific Income Development diamond 1997 Population, mid-year (millions) 10.5 1,753 2,048 Life expectancy GNP per capita (Atlas method, US$) 300 970 350 GNP (Atas method, US$ billions) 3.2 1,707 722 Average annual growth, 1991-97 Population (%/6) 2.7 1.3 2.1 Labor force (%) 2.4 1.4 2.3 GNP Gross per primary Most recent estimate (latest year available, 199147) capita enrollment Poverty (% of population below national poverty line) Urban population (% of total population) 22 32 28 Life expectancy at birth (years) 54 69 59 Infant mortality (per 1,000 live births) 102 38 78 Child malnutrition (% of children under 5) 38 16 61 Access to safe water Access to safe water (% of population) 13 84 71 Illiteracy (% of population age 15+) 35 17 47 Gross primary enrollment (%6 of school-age population) 122 115 91 Cambodia Male 134 118 100 - Low-income group Female 109 116 81 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1976 1986 1996 1997 Economic ratios* GDP (US$ billions) . . 3.1 3.1 Gross domestic investment/GDP .. .. 20.6 16.5 T Exports of goods and services/GDP .. .. 26.4 29.7 rade Gross domestic savings/GDP .. .. 4.6 4.8 Gross national savings/GDP .. .. 8.4 Current account balance/GDP .. .. -15.4 -11.2 Domestic ns Interest payments/GDP .. .. 0.2 0.2 Stic Investment Total debt/GDP .. .. 67.1 66.2 Savings Total debt service/exports .. .. 1.2 0.6 Present value of debt/GDP .. .. 48.0 Present value of debt/exports .. .. 181.6 Indebtedness 197646 1987-97 1996 1997 199842 (average annual growth) GDP .. 5.4 7.0 2.0 -Cambodia GNP per capita .. 2.2 3.9 -0.3 .. Low-income group Exports of goods and services .. .. .._.._.. STRUCTURE of the ECONOMY 1976 1988 1996 1997 Growth rates of output and investment (%) (%6 of GDP) Agriculture .. .. 50.7 51.0 Industry .. .. 15.3 15.3 0 Manufacturing .. .. 5.3 5.7 Services .. .. 34.0 33.7 2-. 0. Private consumption .. .. 87.1 86.4 92 93 94 96 96 97 General govemment consumption .. .. 8.2 8.8 GD - -GDP Imports of goods and services .. .. 42.4 41.4 _. 197646 1987-97 1996 1997 (average annual growth) Agriculture .. 3.1 2.4 2.1 Industry .. 9.1 18.2 2.9 Manufacturing .. 7.2 12.8 8.8 Services .. 6.8 6.9 1.3 Private consumption .. General govemment consumption .. Gross domestic investment .. Imports of goods and services .. Gross national product .. 5.2 6.5 2.0 Note: 1997 data are preliminary estimates. The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete.  30 Page 2 of 2 Annex 10 Cambodia PRICES and GOVERNMENT FINANCE 1976 1986 1996 1997 Inflation (%) Domestic prices (% change)10 Consumer prces .. .. 9.0 9.1 oe! Implicit GDP deflator .. .. 7.1 10.0 s0 Government finance 0 (% of GDP, includes current grants) 92 93 94 95 93 97 Current revenue .. .. 9.2 9.5 -50 Current budget balance .. .. -0.6 0.8 -GDP deflator CPI Overall surplusideficit . .. -6.6 4.5 _ TRADE. 1976 1986 1996 1997 Export and import levels (US$ millions) (US$ millions) Total exports (fob) .. .. 659 734 1,500 Rubber .. .. 32 36 Logs . .. 149 103 Manufactures 113 258 1000 Total imports (cif) . .. 1,110 1,037 m Food soo 99 Fuel and energy .. .. .. Capital goods .. .. d i 92 9 99 97 Export price index (1995=100) .. Import price Index (1995=100) .. .. .. .. a Exports ! Imports Terms of trade (1995=100) .. .._.._.. BALANCE of PAYMENTS 1976 1986 1996 1997 Current account balance to GDP ratio (%) (US$ mnillions) Exports of goods and services .. .. 831 920 0 Imports of goods and services .. .. 1,332 1,281 Resource balance .. .. -501 -361 - Net income .. . -9 -5 II m Net current transfers .. .. -10 Current account balance .. .. -485 -346 -15 Financing items (net) .. .. 537 376 Changes in net reserves .. .. -52 -30 .20 - Memo: Reserves including gold (US$ millions) .. .. 234 264 Conversion rate (DEC, 1ocabUS$) .. .. 2,624.1 2,989.0 EXTERNAL DEBT and RESOURCE FLOWS 1976 1986 1996 1997 (UISS millions) Composition of total debt, 1996 (US$ millions) Total debt outstanding and disbursed .. .. 2,111 2,049 IBRD 0 0 G: 19 0 :108 IDA .. .. 108 132 F: 10 C: 69 Total debt service 10 5 _:84 IBRD .. .. 0 0 IDA 1 1 Composition of net resource flows Official grants .. .. 206 116 Official creditors .. .. 81 37 Private creditors - .3 0 Foreign direct investment .. .. 240 135 Portfolio equity .. .. 0 0 E: 1,821 World Bank program Commitments .. .. 0 7 A - IBRD E - Bilateral Disbursements .. .. 46 30 B - IDA D - Other multilateral F - Prvate Principal repayments .. .. 0 0 C - IMF G - Short-term Net flows .. .. 46 30 Interest payments .. .. 1 1 Net transfers .. - 45 30 Development Economics 9/18/98  10 ""6LAO PEOPLE'S DEM. REP.O CAMBODIA lORD30123 T H A I L A N D ., i SOCIAL FUND 1- o-_q-8 i"# \ out^_>'v@t''' , ^