Cambodia - Economic and Public Sector Capacity Building Project

Document of The World Bank Report No. 23842-KH PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 4.4 MILLION (US$5.5 MILLION EQUIVALENT) TO THE THE KINGDOM OF CAMBODIA FOR AN ECONOMIC AND PUBLIC SECTOR CAPACITY BUILDING PROJECT May 23, 2002 Poverty Reduction and Economic Management Sector Unit East Asia and Pacific Region  CURRENCY EQUIVALENTS (Exchange Rate Effective May 22, 2002) Currency Unit = Cambodian Riel I Cambodian Riel = USSO.000256 US$1 = 3,900 Cambodian Riel FISCAL YEAR January I - December 31 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank AEP Advanced Executive Program CAS Country Assistance Strategy CAR Council for Administrative Reform CIDA Canadian Intemational Development Agency CG Consultative Group CSSS Civil Service Secretariat of State DSG Deputy Secretary General DDG Deputy Director General DFID Department of International Development EFI Economics and Finance Institute EFPPMU Economic and Financial Policy, Planning, and Monitoring Unit EPSCB Economic and Public Sector Capacity Building Project EU European Union GAP Govemance Action Plan GDLN Global Development Leaming Network HRD Human Resource Development HRiMIS Human Resource Management Information System IDA Intemational Development Association IDF Institutional Development Fund IMF International Monetary Fund ISDN Integrated Services Digital Network LIL Learning and Innovation Loan LSU Logistics Support Unit MEF Ministry df Economy and Finance MDP Management Development Program MOEYS Ministry of Education, Youth, and Sports MOP Ministry of Planning MOU Memorandum of Understanding MTfEF Medium-Term Expenditure Framework NAA National Audit Authority NGO Non-Governmental Organization NPAR National Program for Administrative Reform PAP Priority Action Program PDP Professional Development Program PER Public Expenditure Review PIM Project Implementation Manual PHRD Policy and Human Resources Development Fund PMG Priority Mission Group PRSC Poverty Reduction Support Credit PRSP Poverty Reduction Strategy Paper RAC Royal Academy of Cambodia RSA Royal School of Administration SEDP Socio-Economic Development Plan SG Secretary General SRCS Strategy to Reform Civil Service TA Technical Assistance TCAP Technical Cooperation Action Plan TCO Training Coordination Office UNDP United Nations Development Program UNTAC United Nations Transitional Authority in Cambodia VSAT Very Small Aperture Terminal Vice President: Jemal-ud-din Kassum (EAPVP) Country Manager/Director. Ian C. Porter (EACTF) Sector Manager/Director Homi Kharas (EASPR) Task Team Leader/Task Manager. Su-Yong Song (EASPR)  CAMBODIA ECONOMIC AND PUBLIC SECTOR CAPACITY BUILDING PROJECT CONTENTS A. Project Development Objective Page 1. Project development objective 2 2. Key performance indicators 3 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 5 2. Main sector issues and Government strategy 5 3. Sector issues to be addressed by the project and strategic choices 13 C. Project Description Summary 1. Project components 24 2. Key policy and institutional reforms supported by the project 25 3. Benefits and target population 26 4. Institutional and implementation arrangements 26 D. Project Rationale 1. Project alternatives considered and reasons for rejection 28 2. Major related projects financed by the Bank and/or other development agencies 29 3. Lessons learned and reflected in the project design 31 4. Indications of borrower commitment and ownership 33 5. Value added of Bank support in this project 33 E. Summary Project Analysis 1. Economic 33 2. Financial 34 3. Technical 34 4. Institutional 34 5. Environmental 36 6. Social 37 7. Safeguard Policies 37 F. Sustainability and Risks 1. Sustainability 38 2. Critical risks 39 3. Possible controversial aspects 40  G. Main Credit Conditions 1. Negotiation Conditions 40 2. Effectiveness Conditions 40 3. Disbursement Conditions 41 3. Other 42 H. Readiness for Implementation 42 I. Compliance with Bank Policies 43 Annexes Annex 1: Project Design Summary 44 Annex 2: Detailed Project Description 51 Annex 3: Estimated Project Costs 56 Annex 4: Cost-Effectiveness Analysis Summary 57 Annex 5: Financial Summary 59 Annex 6: Procurement and Disbursement Arrangements 60 Annex 7: Project Processing Schedule 72 Annex 8: Documents in the Project File 73 Annex 9: Statement of Loans and Credits 74 Annex 10:Country at a Glance 76 Annex 11 :Detailed Description of Capacity Building Programs 78 Annex 12:GDLN Feasibility Study 92  CAMBODIA Economic and Public Sector Capacity Building Project Project Appraisal Document East Asia and Pacific Region EASPR Date: May 23, 2002 Team Leader: Su-Yong Song Country Manager/Director: Ian C. Porter Sector Manager/Director: Homi Kharas Project ID: P071247 Sector(s): BA - Civil Service Reform, BF - Public Financial Management, BI - Institutional Lending Instrument: Technical Assistance Credit Development (TAC) Theme(s): Capacity building of the public sector Poverty Targeted Intervention: No Program Financing Data [ I Loan I x ] Credit [ ]Grant [ jGuarantee [ jOther: For Loans/Credits/Others Amount (US$m): $5.50 Financing Plan (US$m): Source Local Foreign Total BORROWER 0.17 0.09 0.26 IDA 2.05 3.45 5.50 Financing Gap 0.00 0.00 0.00 Total 2.22 3.54 5.76 Borrower: Kingdom of Cambodia Responsible agency: Council for Administrative Reform (CAR), Council of Ministers Contact Person: H.E. Sum Manit, Secretary of State, Council of Ministers, Secretary General of CAR Estimated disbursements (Bank FYIUS$m): FY 2003 2004 2005 2006 Annual 1.48 1.15 1.40 1.47 Cumulative 1.48 2.63 4.03 5.50 Project Implementation period: 08/01/2002 - 06/30/2006 Expected effectiveness date: 08/01/2002 Expected closing date: 6/30/2006  A. Project Development Objective 1. Project development objective: (see Annex 1) The Project's development objective is to reduce poverty by enhancing the capability of the Cambodian public sector to perform critical tasks more effectively. Poverty is deep and pervasive in Cambodia, the legacy of almost three decades of armed conflict. This political upheaval left the country bereft of skilled human resources, a problem that now seriously undermines government's capacity to fulfill its proper role in the country's economic development. With the formation of the Royal Government in 1993, significant first generation reforms focusing on macroeconomic and fiscal management were initiated, resulting in robust economic progress and apparent improvements in physical security. These vital reforms need to be continued and reinforced. But to achieve the broad-based growth necessary for significant poverty reduction, a second generation of reforms that build state capacity and strengthen governance institutions must now be undertaken. Government's ability to formulate and implement sound policies and to deliver essential public services to address the needs of the poor depends, in large part, on the capabilities of its public officials. The acute shortage of skills in Cambodia's post-conflict government that hobbles its ability to play this crucial role in poverty alleviation must be overcome. Inevitably, this undertaking is a long term process; it will take many years and a series of external assistance interventions to accomplish. Helping Cambodia on this agenda will involve a coordinated effort to shift civil service incentives to a sustainable basis and to create systems of accountable and transparent governance. Support for this multi-year program may include ongoing analysis, technical assistance, adjustment, investment, and dialogue. This Project begins this process. It will provide a jump-start to capacity building through immediate bridge support for skill enhancement in key reform areas, with an appropriate degree of participation of female civil servants. The Project will build capacity among a targeted cadre of executive and legislative officials to carry out urgent and essential development tasks, while the basis for longer-term institutional development is being established. This small operation will emphasize behavioral and technical training and knowledge transfer along with systematic, on-the-job learning for government staff. The Project is intended as a catalyst to spur the gradual substitution of Cambodians for the expatriate advisors who now proliferate in a wide range of government functions. The Project will pilot this approach that could be replicated and expanded in follow-on phases, conditional upon the satisfactory outcome of the operation. A hallmark of the Project is to introduce innovative approaches to extend the reach of capacity building by leveraging new technologies, such as a Global Development Learning Network (GDLN) facility. From the outset, the Project will also seek to distinguish itself from traditional training interventions by focusing major attention on impact and results. Its success will be determined by measurable improvements in Cambodian staff skills, monitorable retention of trained officials in key government positions after project completion, and assessments of the contribution of capacity building initiatives to raising the quality of outputs and, where possible, outcomes on the ground in policy and service delivery activities. The limitations on this approach are also explicitly recognized; without significant improvements in the incentive framework for the civil service, long-term performance improvements will be difficult to achieve. This issue will be tackled mainly in the context of an upcoming Public Expenditure Review (PER), Poverty Reduction Strategy Paper (PRSP), and a potential Poverty Reduction Support Credit (PRSC). The Board discussed the Interim Poverty Reduction Strategy Paper (I-PRSP) on January 23, 2001 (Document number IDA/SecM200 1-0022). -2-  2. Key performance indicators: (see Annex 1) The ultimate objective of civil service reform activities is to improve national welfare through improved delivery of public sector programs and services. Improved effectiveness and efficiency in such programs is dependent on improvement in managerial and operational systems and in the quality of personnel responsible for delivering government programs under these systems. If improved standards of service delivery are to be achieved, previous practices have to become more effective and efficient and skill gaps have to be remedied. In this context, the proposed Project will seek to achieve the following key outcomes/impacts: * Expanded exposure to and knowledge for selected Cambodian civil servants of international public administration practice with particular emphasis on the range of managerial techniques being used to improve the effectiveness and efficiency of public sector programs within the region and globally. * Better managerial and technical skills of targeted Cambodian staff to support improvements in policy development, management, and formulation and implementation of main reform initiatives, including: public finance reform, civil service reform, and governance reform. * Strengthened capacity of key training institutions to provide quality training activities to Cambodian civil servants on an ongoing basis, and of policy development institutions for financial management and human resource management. * Access to distance learning through GDLN that provides innovative, timely, and cost-effective development learning opportunities (e.g., seminars and dialogues on international and regional best practice) not only to Cambodia's public sector but also to civil society and the private sector. * Building capacity of Cambodian nationals with a view to substituting Cambodian nationals for expatriate advisers in key policy formulation and implementation. * Retention of trained public officials in the civil service after completion of training program. In order to achieve these objectives, the current Project is structured to yield the following outputs by the end of the Project: * a cohort of gender balanced senior executives and parliamentarians who have strengthened their leadership and management skills to formulate government policies and guide public sector and governance reform initiatives ( up to 300 participants). * groups of gender balanced middle managers who have enhanced technical knowledge and skills to implement key public sector reforms, which should ultimately result in improved public service delivery (up to 400 participants ). * groups of gender balanced junior professionals who have improved their technical skills and policy skills to support the works of senior executives and managers (up to 100 participants ). * groups of provincial officials who gained knowledge and skills to manage deconcentration, budget management, and procurement (up to 200 senior officials and 400 middle managers). * enhanced institutional and human resource capacity of key civil service training institutions, and of key policy development institutions for financial management and human resource management. * a newly established GDLN center that can offer development learning tools and opportunities for innovative capacity building activities in a cost effective manner through seminars and policy dialogues on international and regional best practice for public institutions, NGOs, and the private sector. It is difficult to define performance indicators that clearly link training activities and subsequently improved performance in the workplace, because many factors are at play in the workplace. Improved performance may be observed over time (and beyond the life of the Project) but a causal link with training can be difficult to demonstrate. Training design, such as the use of action learning methodologies related -3-  to workplace reform issues, as envisaged in this Project, can strengthen the likelihood of performance improvement arising from the training program. The only readily available measurable indicators for a project such as this will be intermediate in character. These would cover key input and output data related to the implementation of the training program, but cannot include data on outcomes, such as the extent of performance improvement in the workplace, and ultimately the improvement in the quality of service delivery. Key measurable performance indicators and benchmarks (Attachment I to Annex 1) will therefore be related to the delivery of training programs, covering: * The number of people trained under each Program, and progressive totals * The number of inception workshops for Priority Mission Groups (PMG) * Data on numbers attending and completing (i.e., passed exams and/or obtained certificates) Management Development Program (MDP) and Professional Development Program (PDP) * Extent of participation of female officials in training programs * Participant feedback information on quality of Programs and delivery and support arrangements * Program cost information and comparisons * Extent of involvement of expatriate and local trainers * Use of training materials translated into Khmer language * Expansion of the use of HRMIS in the government * Development and use of a macro/financial model and expenditure monitoring instruments * Use of GDLN under each Program, and progressive totals * Extent to which the GDLN center business plan will have achieved its targets Furthermore, tracking the subsequent career path of participants in the structured programs (MDP and PDP) is essential to gauge the effectiveness of the Project. For one, it is important to know how better trained staff are used in the workplace and whether their new skills encourage and underpin further advancement. For another, there is a concern that better trained staff may leave the civil service for better paid jobs elsewhere. Therefore, a critical performance indicator should be whether a significant portion of trained staff will be retained in government service. This could be done by tracking the subsequent career moves of MDP and PDP participants, and providing analytical quantitative data on a regular basis (see Attachment I to Annex I for the benchmarks of those measurable indicators). One way this could be done is by utilizing the recently developed Human Resource Management Information System (HRMIS) to include coverage of data relevant to this issue. The current Project will provide institutional strengthening support for extension of HRMIS. Therefore, one key measurable performance indicator is: * Retention of trained public officials measured by tracking the subsequent career moves of MDP and PDP participants, and providing analytical quantitative data on a regular basis. A monitoring mechanism for key performance indicators, such as through HRMIS, will be established for this Project. Once the training begins, relevant indicators will be compiled regularly, and made available, on a quarterly basis. The Training Coordinator will be responsible for ensuring that these indicators are compiled and circulated on a regular basis. In addition, there will be an annual evaluation of training components. -4-  B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: 20077-KH Date of latest CAS discussion: February 29, 2000 The Project supports the CAS goal to build the foundations for sustainable development and poverty reduction. The CAS states that capacity building elements will be integrated into all interventions, with an emphasis on knowledge transfer and the development of long term skills and leadership qualities. The proposed Project will contribute directly to the key areas of CAS focus: (a) supporting good governance with public sector reform including civil service restructuring; (b) greater access of the poor to basic social services and economic opportunities; and (c) rebuilding human capital by investing in skills development that will contribute to institutional capacity and good governance. The Board discussed the Interim Poverty Reduction Strategy Paper (I-PRSP) on January 23, 2001 (Document number IDA/SecM2001-0022). 2. Main sector issues and Government strategy: Background. Following the Paris Peace Accord in 1991 and general elections under the UNTAC in 1993, a coalition Government was formed under a new Constitution promulgated in late 1993. Since then the Government's public sector reforms have focused primarily on the first generation of reform, i.e., achieving macroeconomic stability and improving fiscal management. These reform efforts achieved reasonable success in containing inflation and restoring fiscal discipline. Since 1996, however, the reform efforts weakened significantly due partly to conflicts between the two coalition parties. A new coalition Government was formed in November 1998. This, along with a mass defection and eventual collapse of the Khmer Rouge, finally brought the highest levels of political stability, security and peace in Cambodia ever achieved in the last three decades. Since its inception, the new Government demonstrated strong commitment to developing and implementing economic and social policies with a focus on poverty reduction. To help reduce poverty, improving public service delivery for the poor is essential. The major challenge facing the Cambodian government now is to formulate and implement the second generation of reform, emphasizing, in particular, improvements in pubic financial management and public administration, moving toward good governance, and strengthening government capacity for poverty-focused policy formulation. These reform efforts should build on the achievements made during the first generation of reform in the 1990s. This second generation of institutional reform should include efforts to rationalize organizational structures and streamline business processes as well as to provide adequate incentives and training for public officials. Such initiatives should improve government's capacity to deliver public services to the poor with greater efficiency and effectiveness. Government strategy. The new Government committed itself to institutional reforms on multiple fronts. At the Consultative Group Meeting in February 1999, the Government highlighted key reform sectors, including demobilization of the military, fiscal and financial reforms, public administrative reforms, and forestry management. In addition, legal and judicial reforms and the strengthening of good governance were also incorporated in the group of key reforms. Since 1999 the Government has made some important progress in public sector reforms: * Civil service reform. Development of the National Program for Administrative Reform (NPAR) has been the mandate of the Council for Administrative Reform (CAR). The NPAR was approved by the Council of Ministers in March 2000. The stated aim of NPAR has been to proceed with a three- -5-  phased reform process: (i) building the foundations to better manage the civil service and sustain the course of reforms; (ii) reorganization and redeployment to enhance productivity; and (iii) strengthening and rationalizing capacity. Significant progress has been made on the first phase. Achievements include the completion of a civil service census and important steps toward the full computerization of the personnel information system, providing a more reliable basis on which subsequent reform efforts can be built. These efforts have already contributed to the elimination of approximately 9000 ghosts from the payroll. Reinforcing linkages between this personnel database and treasury functions will be important to ensuring the robustness of this system. Strategy to Reform Civil Service (SRCS). The Government presented a draft medium-term Strategy to Reform Civil Service (SRCS) at the Tokyo CG meeting in June 2001. After presenting the document to donor partners, the Council of Ministers approved the SRCS and circulated it at a donor meeting in October 2001. Two elements of the strategy have been legally authorized and are in the process of being implemented: (i) a new classification system; and (ii) a new remuneration regime. A third element, the Priority Mission Group Program, is to be launched shortly. Three other initiatives are also in train for implementation from 2003: (i) deconcentration of public services, (ii) human resource development, and (iii) further computerization of the civil service with regard to the HRMIS. The Government's concern has been to focus efforts on the core ministries for poverty reduction (education, health, agriculture and rural development), particularly emphasizing the need to provide support for civil servants working directly in provinces (over 60% of civil servants). While acknowledging the very low level of remuneration for these workers, Government's policy is to adjust civil service remuneration upward on a modest basis, recognizing the cap imposed at higher levels by relativities with compensation for elected officials and political appointees and wary of the potential reverberations of pay hikes for other public service workers, including military and police. Moreover, the employment reductions that would be required to finance higher levels of pay, particularly at higher professional levels, have been rejected as politically infeasible before national elections, tentatively scheduled for mid-2003. The new remuneration policy has improved salaries on average by 38%, but this starts from a very low level, leaving still a highly compressed ratio of top- to-bottom salaries. The main thrust of the pay and employment scenario the Government proposed in June 2001 comprises: (1) raising average base salaries across the service from $24 per month in 2001 to $52 per month in 2006; (2) increasing education employees by 14,000 (16%) and reducing non-education employees by 13,500 (18%) between 2001-2006 thereby maintaining constant the total level of employment; and (3) largely self financing the wage bill, with some subsidization through the priority mission group scheme described below. Under the SRCS, the Government is enhancing its current allowance system to provide allowances to compensate for special conditions associated with selected positions, such as risk, remoteness, and other difficulties. Allowances of $200 with the introduction of Category AA will complement take- home pay of some 500 senior officials. Priority Mission Group Program. As part of the SRCS, the Government has also proposed the creation of priority mission groups (PMGs), a tool intended to help ministries and councils accelerate their reform agenda through the mobilization of a highly motivated cadre of civil servants who can rise above current civil service performance standards to implement key development programs with greater energy, skill and dedication. In particular, the program is seen as a means by which to kick- start crucial anti-poverty initiatives. According to the current proposal, the Government will select 1,000 PMG members in 2002 and 500 members each year from 2003 and 2006, specifically to implement the government's reform agenda (Governance Action Plan, SEDPII and PRSP) and to -6-  improve the delivery of public services. PMGs members will be paid additional incentive allowances aimed at raising on-the-job performance, to be specified in their contracts. Provisions to withhold these allowances in light of poor performance have not been elaborated, however. The members will receive incentive allowances of $150 for grade A, $100 for grade B, and $50 for grade C. The 2002 National Budget allocated initial funding for PMGs. The Government's intention is that the PMG program be flexible in order to accommodate the needs of individual ministries and potential external partners. The plan is to establish core principles to guide PMG activities across sectors. These principles include: (i) performance criteria set at the outset; (ii) a focus on team performance; (iii) transparent selection of PMG staff; and (iv) participatory monitoring and accountability measures. The UNDP has been supporting this activity with the help of a series of technical assistance missions. * Public finance reform - Reorienting expenditures towards key social and economic sectors and enhancing the effectiveness of the expenditure management system. In particular, the Government introduced a Priority Action Program (PAP) to enhance cash disbursement to key social and economic sectors (Health, Education, Agriculture and Rural Development). The budget reform has been gathering pace recently in two directions: (1) a move from pre-audit to post-audit is being piloted through Sub-Decree 92 (October 2001), under which financial controllers at Ministry of Health and Ministry of Education are to be located in the provincial offices and commitment ceilings are likely to be on a quarterly rather than a monthly basis; and (2) the TCAP Program (IMF, ADB, UNDP) is promoting a move to program budgeting and a medium term expenditure framework is being experimented. These developments create major capacity building needs both in the MEF and in line ministries as well as in provincial departments receiving new financial management responsibilities. In addition, a National Audit Authority (NAA) was established in mid 2001 to carry out external auditing of public institutions. While top executives have been appointed, the NAA has yet to become operational. On public procurement, the Government recently renewed its commitment to reform by issuing a Prime Minister's Decision (December 10, 2001) requiring full implementation of public procurement procedures in the four priority ministries (Agriculture, Health, Education and Rural Development) and by a further commitment to extend the Decision to all ministries. Capacity building of procurement staff at MEF, line ministries and provinces will be critical to strictly enforcing the Sub- Decree. * Governance reform - Completion of a diagnostic survey on anti-corruption and governance, and the development of a Governance Action Plan (GAP) by the CAR. The GAP is a compendium of reform actions to enhance governance, including cross-cutting reform areas (judicial and legal system, public finance, public administration, deconcentration and decentralization, anti-corruption, and gender equity), and sector-specific reform areas (military reform including demobilization, and natural resources management in forestry, land and fishery). The Government adopted the GAP in March 2001, and established a network of reform councils and ministries to plan reform actions, and monitor and report the progress of GAP in May 2001. In December 2001 a National Forum (chaired by the Prime Minister) was held to launch a dissemination campaign of GAP, an anti-corruption diagnostic study, and the NPAR for broad stakeholders in the Government and civil society. * Poverty-focused policies and strategies - The Board discussed the Interim Poverty Reduction Strategy Paper (I-PRSP) on January 23, 2001 (Document number IDA/SecM2001-0022). The Government also developed a Socio-Economic Development Plan II (SEDP-II). The SEDP II was completed in December 2001 for adoption by the Cambodian Parliament. In addition, the Government prepared a PRSP preparation status report in January 2002. Building on these, the -7-  Government is preparing a full-PRSP to be completed by October 2002, followed by several regional workshops. Main issues. The Government has made important strides in a broad range of reform areas, but a number of critical issues and challenges remain to be addressed over the coming years: Leadership. management and policy Two training needs assessments carried out in November 2001 and February 2002 revealed that there are glaring deficits in leadership, management and policy skills in the civil service. These are difficult to address in isolation. Skill development needs to be linked to organizational and cultural change and to the implementation of pay and employment reforms to retain talent in govermment. Support for these changes is needed at the highest levels of government. The focus of reforms must include a broad spectrum of participants, especially younger staff with good long-term career prospects. It is also essential to involve provincial officials fully. In addition to the executive branch, a selected number of parliamentarians are also included. While the importance of training officials from the judicial branch is also acknowledged, in view of the limited scope of the Project and the expected training of these officials under the proposed Legal and Judicial Reform Project, they are not included in the training programs under this Project. Civil service reform Addressing low pay problem. Perhaps the most serious obstacle to improving civil service performance is the lack of adequate incentives to motivate and retain talented, capable staff within the public administration. Extremely low remuneration across grade levels saps morale throughout the civil service and leads to high absenteeism, corruption and, particularly for skilled professionals, brain drain. The failure to attract and retain essential skills in government is seriously aggravated by the large numbers of donors and NGOs that compete for staff with the Government, offering compensation far above that provided by government. The salary practices of donors since the early 1990s have become part of the problem rather than the solution. To the extent that donors are supplementing particular civil servants' salaries, they are undermining the development of a rational system of remuneration within government. And, to the extent that donors are directly employing scarce talent in development projects that would otherwise be available for core government employment, they are closing off the possibilities of longer term institutional development within the civil service. Cambodia's economic, social and political objectives would never be achieved without a robust civil service. The Government has made progress in addressing civil service pay problems by developing the SRCS. In laying out a multi-year framework and providing moderate pay raises to civil servants, it has taken an important initial step toward reform. But the current pay and employment scenario for 2002-2006 does not go far enough to solve Cambodia's civil service problem. The plan envisages limited employment redistribution to emphasize education expansion, but no total reduction. While overall employment numbers are not huge in relative terms, they include vast contingents of unqualified patronage hires who are drawing (admittedly very low) salaries for little productive work. Moreover, redundant functions and portfolios among non-education sectors also carry surplus staff. Within the present aggregate wage bill envelope, the lack of any employment adjustment has left government only with the option of extremely modest pay improvements that do not raise or decompress pay enough to compete with the alternative (donor, private sector, and NGO) labor markets. This option leaves the civil service with similar incentives that are now associated with absenteeism, corruption, and poor performance. -8-  To address the low pay problem, the Government could consider two types of approaches: (1) the self- financing approach--a modest cut in employment to release funds for salary relief to achieve competitiveness at higher civil service levels with NGOs, donors and the private sector; and (2) the budget support approach--pooling donor resources now applied to salary supplements for a carefully designed program of budget support and civil service management improvements. Under the second approach, the balance between the cost for this program and government funding for civil service wages could be funded by the donors' direct, recurrent budgetary support (grants) on a sunset basis, including the mainstreaming of the current ad hoc salary supplementation provided to project staff. Failure to adequately address this issue in the current SRCS would raise potential risks for this operation, as the civil service would not be able to provide adequate incentives to motivate and retain trained officials (particularly younger generation) at the time of the completion of the Project (see Section F. Sustainability and Risks). While Government has not yet committed to immediate action on this agenda, dialogue on a set of steps that would be necessary to prepare for reforms did advance in the appraisal mission. As described below, agreement was reached with government on a robust program of analytic work, including functional analysis, labor market and pay comparator studies, development of departure and safety-net programs for employment transition, and analysis of possible financing options for civil service pay improvements as discussed above. The result will be a refined medium-term civil service reform plan that can be implemented in the post-electoral period. Agreed work plan for analytical tasks. Building on activities already underway or planned, the Government and IDA have agreed on steps that must be taken between May 2002 and August 2003 to accelerate the civil service reform and prepare for follow-up measures to the strategy now being implemented. The common objectives of this action plan are to: * improve civil service pay so that it offers a broadly competitive wage in the labor market. * ensure that the size and shape of the civil service are financially sustainable and meet organizational requirements (needs and means). * ensure that pay proposals have an agreed financing plan. * ensure that the Government has the administrative machinery needed to implement its strategy (e.g. separation mechanisms, training, public information campaign taking account of political, social, and other requirements). In collaboration with other donor agencies, IDA would support the Government to carry out the following, via the ongoing PHRD grant and additional trust funds, etc., including facilitating discussions amongst donors on the development of options for harmonizing and streamlining current donors' remuneration practices: * Labor market analyses to determine the wages/benefits needed to be offered by the Government to provide the incentives needed to recruit and retain well-qualified staff. (This may involve a comparator pay survey, attitudinal surveys amongst staff and potential recruits, studies of private sector/NGO/government markets.) * Conduct studies to determine the appropriate institutional arrangements, organization, processes, and staffing of government functions to improve efficiency and effectiveness. (This will be a targeted exercise, conducted urgently in order to inform the rest of the program.) -9-  * Develop options to accelerate increases in remuneration to competitive levels beyond those already planned and the introduction of performance based compensation in ways that would maintain relativities within and between the different branches of the state. In this context, IDA will investigate with donors the feasibility of pooled donor support and review current donor and NGO pay policies and salary supplementation practices. * Develop proposals for departure mechanisms; identification of staff to be separated; administrative systems to support separations; communications; transition schemes and safety net mechanisms, etc. * All studies and proposals will take account of the ongoing process of decentralization and its implications for pay and employmnent policy. Utilizing these studies, the Government will further develop its reform program, undertaking the following: * Accelerate pay and employment reforn that provides for competitive wages for the civil service. * Establish financing mechanisms to ensure the sustainability of pay and employment policy. * Establish mechanisms to support a well-managed transition. * CAR will act as an oversight committee to monitor, evaluate, and report progress. The CAR will meet the donor group on Public Administration Reform once every quarter to report progress and discuss issues arising. * The CAR will, upon completion of this program in August 2003, prepare a medium-term plan to implement these reforms. Clarifying the role and the scope of PMGs. The PMG program could be a useful stimulus to civil service performance if *t is well designed and tightly focused. There are dual objectives currently assigned to PMGs; that is, (i) to catalyze change; and (ii) to become mechanisms for modest pay reform. PMGs need to act primarily as change catalysts, working as small teams from within individual ministries to trigger better management practices and more effective approaches to service delivery. This role is best suited for the relatively small number of staff to be mobilized in PMGs. It also makes sense to carry this out on a limited, pilot basis in a few critical areas. The Government is finalizing documentation and duties that would clarify the nature and scope of the PMGs. A pilot PMG will be formed at CAR soon, and a few PMGs are expected to be formed in the first half of 2002. Strengthening human resource management. The Government's ability to monitor, manage and develop civil service personnel is crucial to the improvement of financial management and service delivery. In addition, given the important role that CAR's Human Resource Development (HRD) Unit has in the delivery and management of the Project, strengthening its capacity is urgent and essential. In this regard, many aspects regarding the strategic use of human resource management could be strengthened, such as: (i) human resource planning (use of human resource management informnation system (HRMIS)); (ii) staffing rules and practices (appointments, transfers, motivation); (iii) remuneration system; (iv) performnance management (performance appraisals, accountability); (v) human resource development plans; and (vi) cooperation and teamwork in the workplace. The recent progress on the development of a computerized payroll system was an important step forward. However, this should be extended from the CAR to other key ministries with adequate training in the use of HRMIS. In addition, the Cambodian civil service training institutions should be significantly strengthened to improve and sustain training programs for many generations of civil servants to come. -10-  Public finance reform Decentralizing budget management. Reducing central control and establishing budget management responsibilities in spending ministries and sub national levels of government is the core element in the Govermnent financial management reform program. This will encourage more streamlined, responsive, and transparent budget execution. The Government is piloting budget management centers at the national level in major hospitals and at sub national levels in provinces and districts. Effective operation of the new budget management centers, particularly at the sub national level of government, requires a set of skills for which there is little opportunity to develop under the current highly centralized budget arrangements. These skills include planning for the cost effective use of budget funds and monitoring of the way in which funds are spent and benefits generated. A closely related problem at sub national levels of government is the ineffective operation of procurement committees that approve larger disbursements. These procurement committees lack skills in costing and in the timely management of their work-loads resulting in long delays in procurement. These problems in financial management can be ameliorated by capability building in management budget and procurement. Another set of problems is linked with budget preparation. Since detailed spending patterns are set at the central level rather than by spending agencies themselves, they do not reflect information about the actual benefits generated in each spending line. MEF central budget staff are remote from this level of detail, and base budget allocations on historical precedent, modified by an adjustment factor that is normally impenetrable to the spending agency. Nor is information on the benefits of spending collected by line agencies. In this rule-driven environment, the benchmark of good line agency management has been to preserve or increase historical levels of funding in each budget line rather than to make funding levels more responsive to client need, target programs more effectively, deliver existing services with less resources, or identify areas in which the level of services needs to be improved. Agencies given little responsibility for the way in which they spend their funds take little responsibility for spending their funds better. Strengthening capability in this area has potentially large benefits for the participants in Government programs without requiring increased overall Government spending. Enhancing skills of spending units. Reducing central control through a shift from a pre-audit to a post- audit (program budget) system requires spending units to take more responsibility for managing their budgets in an effort to improve program results (i.e., less control by MEF, and within ministries less control by the central ministry over regional spending units). This points to the need for spending units at all levels (in particular, provinces and districts) to acquire new financial management skills. However, there is little reason or opportunity for spending units to develop better internal management systems and competencies while highly centralized arrangements continue. The absence of such systems and competencies, on the other hand, is a major obstacle to relaxing the central controls and giving weakly managed spending units increased responsibilities. Improving performance of public procurement. This is critical to the success of service improvement through the deconcentration and decentralization processes being pursued by the Government. The GAP lists procurement as a key area for improved use of resources, greater transparency and better governance. Currently, public procurement is governed by a detailed set of regulations and the 1995 Sub-Decree Governing Public Procurement. Although periodic amendments have been made to reduce loopholes, -1 1-  they have instead added further red tape and complexity to the procurement administration. Complex clearance processes also offer additional opportunities for corruption. As the Government made a political commitment to procurement through the recent Prime Minister's Decision on procurement discussed earlier, capacity building of procurement staff at MEF, line ministries, and provinces will be critical to strictly implementing the 1995 Sub-Decree. Governance reform Monitoring and coordinating the implementation of the Governance Action Plan. Reform agencies (the CAR and other reform councils and ministries) are tasked to plan, monitor and coordinate the implementation of GAP. It is critical that they develop and strengthen capacity to monitor the progress of reform by developing objective benchmarks and indicators, and to prioritize and sequence reform actions with costing. Raising awareness and prevent corruption. A World Bank-supported diagnostic study "Cambodia Governance and Corruption Diagnostic: Evidence from Citizen, Enterprise, and Public Official Surveys" (May 2000) showed that households perceived corruption in the public sector as one of the most serious constraints to development. In addition, public officials perceived their low salaries as the main cause of corruption. As a result, training of civil servants is needed to raise awareness about, and prevent, corrupt activities. In this regard, the Government is in the progress of widely disseminating the diagnostic study. A National Forum on governance and anti-corruption for high-level government officials was conducted in December 2001 and provincial workshops are currently underway. It is essential for the Government to ensure extensive dissemination of the study, involving not only government officials but also other stakeholders such as civil society, NGOs, the press, the private sector, and donors. In addition, long- delayed legislation on anti-corruption needs to be prepared as a matter of urgency. Promoting deconcentration and decentralization. The Government is pursuing deconcentration, a move of responsibilities from the central bodies to the ministries, and within ministries from the center to the provincial level. Deconcentration holds out the prospects for improvement in the delivery of services, and has broad implications for other governance improvements including financial reform, procurement, and corruption issues. The Government's policy to decentralize functions to the commune level also introduces a wider range of issues for civil service management. The move to place governance responsibility with the 1,621 communes will only be successful if it is accompanied by the right skills and participatory and transparent practices. The commune councils, elected in February 2002, will eventually be responsible for development plans and the delivery of some services. As of now, they have very few tools to manage these activities. The administrative, financial and planning capacity of the communes will need to be developed through provincial and district levels. Poverty-focused policies and strategies The Government needs to formulate policies and programs more sharply focused on poverty reduction. The Government is in the process of preparing a full PRSP. Based on the I-PRSP and the SEDP II, the Government needs to develop a poverty reduction action plan that translates sectoral strategies into concrete policy and program priorities; establishes a link to the recurrent and investment budgets; sets up a monitoring and evaluation mechanism; and embraces a fully participatory approach. Experience so far clearly indicates that the authorities have weak institutional capacity and inadequate inter-ministerial coordination. -12-  3. Sector issues to be addressed by the project and strategic choices: The proposed Project will assist the Goverrment in strengthening the capability of public agencies to formulate and implement key reform programs and deliver key public services more effectively. It will underpin the development of a culture of change and reform, by improving leadership, management and policy skills. In particular, it will enhance working level skills in budget management, human resource management, and govemance to achieve the overarching goal of poverty reduction. The Project will make Cambodian officials more aware of best practice approaches in other countries, through carefully structured programs of training and development. It will also address the need and expectations of public sector customers and Cambodian society by improving public services, while promoting good govemance by increasing the standards of transparency and accountability and supporting the fight against corruption. This Project will pilot a new approach to capacity building with action learning methods and distance leaming with the introduction of GDLN (see page 19, Annex 12). The Project aims to serve as a bridge toward larger, more comprehensive public sector reforms that need to be articulated in the future. While the Project would have an important impact on developing core professional skills among government staff for key development tasks in the absence of significant civil service pay reform, the Govemment may have difficulty retaining trainees in government. Low salaries in the public sector could lead to a brain drain of newly trained staff into the donor, private or NGO sectors - in Cambodia or abroad. IDA has raised this concem in its discussions with the Govemment, seeking assurance that the Govemment will have meaningful plans to address this issue in the near term. It is further recognized that the capacity of the civil service to carry out poverty reduction programs would be seriously compromised without pay relief, especially for professional cadres. As described earlier, the Govemment and IDA agreed on the steps that constitute an action plan on civil service pay and employment reforn by August 2003. Outline ofproposed training prograns Time frame: The implementation of the proposed Project will be sequenced over 4 years starting from mid 2002. The first nine months will be allocated for curriculum development and detailed planning for the delivery of the training programs, including negotiations with external providers selected through competitive bidding. Within this time period and as early as possible, the training coordinator will be selected and take up his responsibility for training implementation. In addition, specific workshops and seminars may begin by September 2002 to meet immediate training needs. Training needs: The training needs assessments carried out in November 2001 and February 2002 identified six categories of training needs relevant to the Cambodian civil service, and related to the Government's reform agenda and programs described below. Specific curriculum will be developed for each category, with due consideration to the progress of reform programs during the duration of the Project (see below and Annex 11 for more detailed training contents): (1) Leadership and management practices; (2) Policy development and implementation; (3) Public financial management; (4) Human resource management; (5) Govemance and public administration; and (6) Poverty reduction. Target groups and Programs: The Project aims to build capacity of three target groups--Executives, Managers and Professionals. For each target group and program, an appropriate degree of participation of female civil servants will be ensured. In addition, the Project will include joint training with the legislative branch of the Government, as a means to achieve good governance, especially in the context of the upcoming participatory PRSP process. This will include training in the areas of leadership and management, financial management, and poverty reduction. Participation of parliamentarians and their staffers is planned to amount to 5-10 percent of total participation. The Project will also pay special -13-  attention to training delivery to officials at the provincial level. This will be particularly pronounced in the area of public financial management in which the capacity building of spending units at provincial levels is critical to the success of ongoing budget management reforms (financial decentralization) and in the area of deconcentration. The proposed Project will provide a means of synchronizing the devolution of control to spending units and the acquisition of financial management skills by those units. Based on the training needs of the respective target groups, three training programs will be developed during the first nine months of project implementation (see Table 1 for a summary of each Program): * Advanced Executive Program (AEP)for the Executive Group This Program is designed for higher-level Government officials who have a significant role in introducing and managing change in key reform areas, and in achieving desirable outcomes in service delivery under new policies. The Program will be linked strongly with the Government's reform program and activities. In particular, the Program will have a clear focus on improving the leadership and management skills of this group, so as to improve the prospects of success with reform activities. A selected number of parliamentarians will also participate in this program. The Program will comprise a series of Executive Seminars, and a provision for selective high-level seminars at the political level of the Government. There would be about 4 seminars per year, for about 30 to 40 participants. The GDLN will be used to provide part of these seminar activities. In addition, short-term programs and courses would also be provided. * Management Development Program (MDP)for the Management Group This Program is designed for officials engaged in, on a day-to-day basis, the implementation of Government reform programs and projects, and who need to upgrade their management skills to make a greater contribution to reform in the future. The Program is planned to help develop a stronger management orientation in key parts of the Cambodian civil service and to support the decisive implementation of concrete economic and public sector reforms, and improved service delivery. This Program will have linkages with the Government's Priority Mission Group (PMG) initiative. PMG participants will be encouraged to undertake this Program. The Program will comprise both regular coursework (on a part-time basis) and appropriate occasional workshops. Up to 400 participants will participate. Training will be provided to "teams" of about 20 participants at a time (up to 20 teams in total). * Professional Development Program (PDP)for the Professionals Group This Program is designed for those officials below management level who work in professional areas and who undertake policy preparation and implementation work on reform activities under the guidance of senior managers. This Program aims to help junior professionals - with potential to become future policy makers - become more strategic in their thinking and rigorous in their analysis and monitoring of policy issues. The first priority will be given to developing and upgrading policy formulation skills. The Program will comprise both regular coursework (on a part-time basis) and appropriate occasional workshops relevant to the Program. There will be up to 100 participants, made up of groups of 15 to 20 participants. -14-  Table 1. Proposed Program Structure Group Name Target Group Program Supplementary Workshops Executive SGs and DSGs Advanced Executive (Selected SSs and USSs); Program (AEP) IR1 DGs and DDGs; (High level seminars) Governors of province/municipality Selected MPs Management Director of Cabinet; Management Directors and Department Development El Directors; Program (MDP) Deputy Governors of (including PMG province/municipality; inception Governors and Deputy workshops) Governors of district; Chiefs and Deputy Chiefs of Bureau; Chiefs of Cabinet; Senior Technical staff Selected Parliamentary staff Professionals Junior Professionals Professional (graduates with some Development experience in government Program (PDP) e.g., 3-5 years) (including PMG inception workshops) Note: SGs (Secretary Generals), DSGs (Deputy Secretary Generals), DGs (Director Generals), DDGs (Deputy Director Generals); some high level seminars under AEP may be appropriate for attendance by higher level political officials (Secretaries of State, Under- Secretaries of State). -15-  Contents of Training Program: Leadership and Management Practice Leadership and management practice will focus on personal and organizational leadership skills, supervisory skills, strategic planning, results-based management, organizational reform and development, and the concepts of modem management, including gender issues. Change management concepts and practices will need to be included as these are important in implementing reforms. This area will focus mainly on the AEP and the MDP groups. For the MDP group, the coverage will tend to focus more on organizational structures and methods, work organization, and project management. Practical issues of work allocation and programming, delegations of responsibility, and task management will also be covered. Policy Development and Implementation Policy development and implementation focuses on policy analysis, formulation, the policy approval process, policy implementation, and monitoring and evaluation needed to review progress and results. This category will focus particularly on the PDP group. Public Financial Management Public financial management will focus on budget planning and implementation issues, financial accounting, controls and accountability, public procurement, and the use of information technology in financial management particularly at the sub national levels of Government. A further important focus of the training will be refocusing program managers on the results of their programs against Government objectives and identification of options for improving results within existing budget parameters. There will be a greater focus on financial management for the MDP and the PDP groups. For the MDP group, the focus will be on basic training in financial management and planning, the role of budget processes, public procurement, and the use of financial information and controls. For the PDP program, the training objective will not be to provide extensive specialized training in fiscal practices and execution but to inculcate an understanding of the relevance of modem public sector financial management highlighting differences from existing international practice in Cambodia. This will draw on international best practice that could be relevant to Cambodia. Human Resource Management Human resource management will focus on strategic human resource management practices and issues, managing performance, working relationships and teams, selection, appointment and development policies, back office employment relations practices, personal efficiency issues, and the use of information technology (HRMIS). This category will focus on the MDP and PDP groups. For the MDP group, focus will be specific and practical. Some exposure to the more strategic issues of HRM will be provided, but this training will be more concerned with the performance of human resources in the workplace through better work allocation, team-work and motivation and engagement of junior staff. For the PDP group, the focus will be on the strategic use of HRM as well as specifics such as appointments, transfers, motivation and performance, supervision, and guidance. -16-  Governance and Public Administration Governance and Public Administration will focus on good governance, decentralization and deconcentration, communications and participation methods, compliance with civil service legislation and standards, and ethics and anti-corruption. This area will be particularly emphasized for the AEP group. For this group, there is a need for this program to build a greater awareness of the policy implications of the Governance Action Plan (GAP) and the civil service legislation and principles and actions on ethics and anti-corruption. In addition, participants in this program need to gain broad knowledge of and a deep understanding of governance issues, with a view to formulating and designing future governance policies and reforms in Cambodia. Poverty Reduction Poverty reduction will focus on improving the understanding of poverty frameworks and poverty-focused policy formulation, analysis, planning, and implementation and monitoring, including gender equity. This area will focus on developing strategic abilities in the design and improvement of government programs, appropriate implementation of poverty-oriented reforms, and the efficient use of funds within programs. Poverty-focused content will include analyzing poverty reduction objectives, identifying cross-sectoral linkages and their tradeoffs in the context of poverty reduction, financing and designing service delivery options for teaching. Target agencies: Public officials for these three target groups will be selected from the following ministries and agencies that play a critical role in key reform programs. An appropriate degree of participation of female civil servants will be sought in the selection of trainees, with an effort to ensure that women are not only selected from social ministries but also from the targeted policy coordination and economic line ministries listed below: * policy coordination ministries and agencies (Council for Administrative Reform, Economy and Finance, Planning, Council for Development of Cambodia, and Reform Councils); * social ministries (Health, Education, Social Affairs, and Women's and Veterans Affairs); * economic line ministries (Agriculture, Rural Development, Transport, and Commerce); and * members of the National Assembly and their staffers concerned with parallel substantive issues. Once the Government's priority mission groups (PMGs) are formed with clearly defined missions and work schedules, the Project aims to provide training for the PMGs to the extent possible within the limited scope and focus of this small operation. Training modality: The mode of training will go beyond conventional classroom type training courses with a curriculum. It will take an action learning approach that emphasizes on-the-job learning and improvement through assignments and projects directly related to current work priorities. Since action learning is a new mode of training for Cambodia, in particular for civil service staff development, an external consulting service will be provided for the preparation and implementation of training programs. Foreign consultants will team up with the appropriate Cambodian counterparts in the training institutions to develop training curricula of international standards that is directly relevant to the Cambodian context. The main training materials will be translated into Khmer language so that the command of foreign language is not a barrier to the capacity building of qualified candidates. The delivery of training programs will also require participation of foreign trainers (at least at the initial phase) because action leaning methods will be new to the majority of local trainers. The involvement of -17-  foreign trainers will phase out over the course of the Project, as local trainers gain experience in new teaching methods and build capacity to deliver courses independently. Given this, it is important that the TORs' of foreign trainers explicitly specify knowledge and skills transfer to local trainers as part of their responsibilities, and the local assumption of responsibilities will be closely monitored as a performance indicator of the operation. Partnership arrangements: The nature of the training programs and the teaching methods proposed under the Project will present important new challenges. Extemal advisory services will be necessary for curriculum development, training delivery planning, initial delivery of the courses and the identification and development of local trainers. A partnership model will have value and more than one partner will be involved, because a diversity of expertise is needed. Internationally reputable civil service training institutions and/or regional universities will be identified as partners of CAR through a process of competitive bidding. Participation and networkin: The Project is expected to increase networking and communications between government officials. An alumni approach to maintain contact and "recall" meetings is envisaged. It is important to ensure that gender is effectively mainstreamed during implementation and monitoring and evaluation of the Project. In addition, it is expected that the quality of dialogue and networking externally will be enhanced by the global nature of the GDLN, facilitating consultation and sharing of experiences. Oualifications: It would be desirable to provide an officially recognized diploma or certificate for participants of MDP and PDP. This should be explored with Cambodian authorities as the Project proceeds. Training curriculum: The curricula will be differentiated among the three proposed programs, although there will be inter-linkage and some common areas of coverage. For AEP, curriculum will be designed to address specific reform challenges or policy issues they are or will be facing at their level. The objective would be to create an environment where individuals could apply the training to on-the-job issues. For MDP, the curriculum will be more practical and applied in nature, taking into account deficiencies in office skills and workplace management. This training will focus on enhancing participants' knowledge and skills that directly contribute to improving targeted service delivery. Costs will be minimized by recognition of the similarities in topics to be covered, but differentiation in degree would have to be recognized as well. To achieve this, the programs will be modular in character and intended to allow those with specialist requirements to undertake more intensive training in those areas through the use of supplementary specialized workshops. For example, additional elective units could be provided in public financial management and in human resource management to assist with more training in these areas. Training delivery: Delivery of the training programs will be hosted by the Royal School of Administration (RSA) and the Economics and Finance Institute (EFI), under agreed arrangements with CAR as the executing agency. Existing areas of expertise would be relevant to a sensible division of delivery of subjects, e.g., EFI for financial management oriented topics and RSA for the other topics. The mode of training envisaged will go beyond classical classroom type training courses. It aims to match the training being provided with the changing demands being placed on key officials and managers at the relevant level of the government. Emphasis will be given to action learning, involving on-the-job activities and improvement in workplace competencies through assignments and projects directly related to current work priorities. -18-  Institutional strengthening: Complementary to the training programs, this Project provides support for the institutional development of some targeted agencies. This aims to strengthen their institutional capacity vital to effective financial and human resource management. Those targeted agencies are: (a) CAR's Human Resource Development Unit (HRD), including its Human Resource Management Information System (HRMIS) initiative; (b) Economic and Financial Policy Planning and Monitoring Unit (EFPPMU) at MEF; and (c) Core civil service training institutions (RSA and EFI) in relation to training delivery planning and implementation. (a) CAR's HRD Unit and HRMIS initiative. The Government's ability to monitor, manage, and develop its civil service is crucial to sound financial management and effective service delivery. Therefore, the provision of technical assistance, training, and related equipment to CAR's HRD Unit is necessary to ensure sound management and effective delivery of the Project. In addition, the development, operationalization, and maintenance of a full-fledged Human Resources Management Information System is critical to success. The planned HRMIS will not only support the payroll but also facilitate the control and management of the workforce through the use of applications to: maintain the integrity of the database developed through the census; plan, monitor and control staff movements; prepare and monitor personnel budgets; and plan skill requirements and manage training. Support to the HRMIS has the following main objectives: (i) institutionalizing the census and the computerized payroll for central and provincial employees and ensuring that technical staff in the CAR have the ability and means to maintain it; (ii) completing the HRMIS through the further development of applications to manage the workforce and the development of human resources; (iii) deconcentrating the HRMIS towards ministries to facilitate access and usage; and, (iv) strengthening the competency of personnel in the operation and maintenance of the HRMIS. (b) Economic and Financial Policy Planning and Monitoring Unit (EFPPMU) at MEF. EFPPMU is expected to serve as the center for a new strategic budget management system. The tasks and responsibilities of the Unit will require highly competent staff with advanced technical skills as well as exposure to best practices in regional and developed countries in relation to (i) macroeconomic modeling and (ii) evaluation and monitoring methodologies. Strengthening the Unit to develop into a well- functioning institution is critical for the success of budget reforrn in Cambodia. The Project will provide specialized institutional support to the EFPPMU at MEF in relation to the areas referred to above. (c) Institutional strengthening of core training institutions (RSA and EFI). The Project will assist the institutional strengthening of RSA and EFI by their exposure to international partners and the practical experience of hosting comprehensive training programs over the period of the Project. It was agreed that within the Project there would be development of a pool of local trainers. These future trainers will be given special development support and, as a condition of this support, they would be required to deliver a certain number of courses at no cost to the institutions concerned. In addition, the Project will renovate, furnish and equip the Training Coordination Office and two classrooms at the RSA for the use of the training programs. Global Development Learning Network (GDLN) Jointly with the Government, the task team assessed the readiness of the GDLN component including: (1) the Govermment's commitment and consensus; (2) findings from the financial feasibility study (based on a market and cost analysis in Cambodia); (3) the status of consultation with donors for grant assistance; (4) local connectivity options for developing future partnership arrangements within institutions within Phnom Penh; and (5) the implementation plan for the GDLN center establishment. Based on the joint assessments, it has been agreed that a GDLN center will be established under the EPSCB project. -19-  Development Rationale The Government's objectives regarding the dissemination of global development knowledge are strongly aligned with those of the GDLN. The Government has voiced strong support of the GDLN concept as an important vehicle to support the training and development agenda of the country. The GDLN center will contribute to the development of Cambodia by: * Providing its policy makers, government officials, academia, donors, the business sector, NGOs and other development practitioners with the opportunity to engage in development related dialogues with their counterparts in the region and around the world; * Expanding access to development management information and strengthening the capacity of key-decision makers through ongoing consultation and training; and * Establishing a resource capacity for the collection and distribution of learning products and development information available within and outside of Cambodia. Facility Design The GDLN center will include two technology-based classrooms, a synchronous and asynchronous one, connected to the switching hub in Washington through two-way multimedia facilities for video, data, and voice exchange. Both classrooms will be outfitted with 30 computer stations (which includes hardware, software, pedagogical tools, internet hook-up, and the installation and/or upgrading of electrical and telephone wiring). There will also be administrative areas for the staff, which includes a reception, offices and support facilities. A Documentation Center will be used as a depository of information (media and documents) on development related issues for donors, NGOs, Government, and other development practitioners. The Government has reviewed and discussed the technical proposal with IDA and an agreement was reached on the facility design. Global Connectivity The World Bank explained to the Government that because the ISDN (Integrated Services Digital Network) was not available, GDLN connectivity would based on the VSAT (Very Small Aperture Terminal) satellite technology. As the new IP/Dama technologies are implemented, it is expected that there will be additional cost efficiencies made available. These technologies are currently being piloted in preparation for full implementation in the near future. The GDLN center will be designed with full compatibility to the new IP technologies. Local Connectivity Options The GDLN center will have the appropriate technology to receive and/or deliver learning programs through the network. As the designated "Hub", it will also have the capacity to receive selected programs and redistribute them within Phnom Penh and the country as the network is expanded. As a result of investigating local connectivity options, the Task Team concluded that local connectivity between the GDLN center and subsequent nodes within Phnom Penh would be possible through a leased line service as suggested by EFI. The World Bank also noted that subsequent affiliate connections, such as one with EFI, would share the videoconferencing link of the GDLN center and its operational capacity. Therefore, subsequent affiliate connections would be connected on a fee-for-service basis (to be determined to a large extent by -20-  utilization and the GDLN center management). This could be based on metered usage or a membership fee, which would allow affiliates a certain number of access hours per month. The rationale aims towards a market-driven self-sufficiency approach, in the sense that it provides an additional revenue stream for the GDLN, and at the same time, fosters collaborative learning activities and partnership arrangements between the country gateway and other institutions within Cambodia. Affiliate centers would also need to consider the cost/benefits of subscribing and how it will seek cost recovery for its contributions to the GDLN. It was suggested by the Government that another option could be to make the GDLN center a sub-site linked with the local World Bank video-conferencing facility. This would have the effect of reducing the connectivity costs. However, a feasibility assessment showed that while this linkage would reduce the connectivity cost, the revenue options for the facility would be significantly limited and this would mean that the GDLN center could not achieve financial sustainability over the long term. In addition, there would be practical issues of agreeing on access times for the GDLN center, as the World Bank would retain management rights for the bandwidth and would have its own priority requirements. Given this, it was agreed that this option should not be pursued further. However, it was also agreed that access to the World Bank video-conferencing facility during the period while the GDLN center was being constructed and established would provide an excellent opportunity for familiarization, training, and advanced marketing for the new GDLN facility. Arrangements to proceed on this basis would be discussed by the Government and the World Bank as soon as possible. Since the Project implementation period is limited to four years, the Government agreed that in order to ensure that the country gateway (GDLN center) is able to mobilize an increasing share of financing for its operating expenses and achieves self-sufficiency at the completion of the project period, the implementation of any other affiliate centers would be staged. This is to ensure that sufficient services, capacity, and the market can be properly developed. This approach would allow for central coordination, which is necessary in quality distance learning systems and will strengthen the potential impact of the center as a development tool and an effective platform for information exchange within Cambodia. Cost Estimates Following the World Bank's technical mission in January 2002, the indicative costs for the GDLN were further reviewed by the Government and the World Bank. A number of additional items were carefully considered and included in the project cost tables (see Annex 12). This included (1) a full-time simultaneous interpreter as part of the GDLN center staff; (2) leasing arrangements for transportation; (3) twenty-four hour security; (4) capacity building and travel; (5) technical assistance; (6) provision for equipment replacement and spares; (7) fuel to operate the generator; and (8) insurance. Salaries for key GDLN center management staff were also increased to meet appropriate standards. Total one time costs for the GDLN center are estimated at $752,000; and the total 4 year investment and operational costs for the Project is $1,920,000. The extent of usage of the credit for the GDLN component will depend on donor contributions and revenue raising results from the GDLN activities described below. Sustainability of the Project (Feasibility Study) The sustainability of the GDLN center is heavily dependent on a number of factors: a) entrepreneurship and innovative management; b) strong relationship with the donor community; c) good marketing; d) strong assessment of training needs; e) strong relationships with other GDLN centers in the region; f) good accounting practices; g) good personnel practices (retention of staff); h) strong concern for service delivery and quality of programming; and i) strong focus on development as a national priority. -21-  The following is a summary of the feasibility study's main findings (see Annex 12 for details): Likely costs and revenue for the GDLN center over a 5-year timeframe were examined. Cost estimates were based on the results of a World Bank Technical Mission in January 2002, cost components determined by the appraisal mission, and data obtained from the operation of other GDLN sites. Revenue estimates were based on interviews with donor country representatives, government departments and national organizations, intemational organizations, NGOs, and incorporating the experience of other GDLN sites. The approach taken in the feasibility study is based on a fairly accurate estimation of GDLN capital and operating costs over a 5 year period as well as an assessment of the reasonableness of various revenues streams from the usage of the GDLN center, financial support of the GDLN center, and in kind contributions. Full or near cost recovery of the GDLN center will require a combination of revenue-based use of the facility, operating/start-up contributions by donors, and a recognition by the government of travel cost savings by using video conferencing as an alternative to international travel. This Project is expected to deliver some training programs through GDLN, mostly workshops and seminars for the Advanced Executive Program (AEP). In addition, the proposed GDLN center will have considerable capacity available for users other than the training programs to be delivered under the EPSCB project. Many organizations and projects (including other World Bank-supported projects) have a need for the facilities available in a GDLN center. In discussions with several potential users of the GDLN center, several common themes were raised: there is no similar facility in Cambodia; there is a great need for connection to the region and the world; and there is a great need for training and skills enhancement. As such, the GDLN center could potentially meet a range of needs for several organizations. For these organizations, use of the GDLN center is a much cheaper option than paying airfares and related travel costs to send people to other countries for training and meetings. The final revenue projections presented in the study indicate that the Project could reach operational sustainability at the end of the fourth year of operations. Procurement The World Bank recommended that the Government procure equipment and services in accordance with a purchasing arrangement already established by the World Bank, due to the level of complexity required to program the pedagogical equipment and maintenance services needed to transform the satellite feed into interactive visual, audio and data display for instructional purposes within a GDLN center. However, the World Bank presented two options to the Government for the procurement of this component for its consideration. The first is to contract with a systems integrator that has been pre-selected by the World Bank through a competitive process. The second option is for the Government to conduct a competitive procurement in the same manner as would be conducted for any World Bank-financed project. After carefully considering these two options, the Government has chosen the first option. (See Annex 6 for details). Other Issues GDLN Center Business Plan. The business plan will need to be finalized and approved by the Government, acceptable to the World Bank by March 1, 2004. -22-  Memorandum of Understanding. The Government will enter into a MOU regarding its participation in the GDLN as a condition of effectiveness. The purpose of this agreement will be to provide a basis of understanding required to activate global accounting procedures (managed by the World Bank as a service) and to ensure an efficient level of operations between the various GDLN centers established around the world. Legal Status. The World Bank recommended that the GDLN center be operated as an autonomous legal entity with transparent and fair accounting methods. The Government will advise the World Bank of the form this entity will take as soon as it has taken a decision. Donors. As part of the World Bank's ongoing efforts to encourage donor participation in the GDLN initiative, the Task Team consulted with donors regarding their possible contributions to the GDLN center and partnership arrangements. To the extent that donor contributions are secured, the available credit could be reduced or reallocated to other components as necessary. Implementation. The preparation period for the operation of the GDLN center is expected to be about 12 months from start to finish, including the finalizing contract bids and the 4 to 5 months that is estimated for construction. Therefore, it is recommended that priority be given to civil works/facility development as soon as the Project becomes effective. Terms of Reference for GDLN Center Staff Since the GDLN center's activities are new and, from an education/learning perspective, quite innovative, particular attention should be paid to the staffing of the center. GDLN centers typically have a staff of at least three professionals-a GDLN manager; a GDLN training coordinator; and an information technology specialist. The quality of GDLN management is probably the single most important factor of success in GDLN operations. The Manager must: possess a good knowledge of distance learning and the operation of a GDLN center; be knowledgeable and have good relations with the various ministries and non-government organizations, including the corporate and donor community and; be entrepreneur with the capacity for innovation. The Government agreed to employ the GDLN Center Director with experiences and qualifications acceptable to IDA by August 1, 2003. GDLN Staff Training. The Government and the World Bank have agreed that it is essential that the core operating staff are adequately skilled to operate the GDLN center. In order to ensure that a suitable standard is set, a total of $10,000 has been allocated for training costs. A Terms of Reference for this training will be jointly developed by the World Bank and the Govermnent, as will minimum competencies of staff to attend the training. Strategic choices The current Project builds on the lessons learned from technical assistance projects in Cambodia and the region (see Section D.3 for more details): Substitution TA vs. knowledge/skills transfer TA. A key aspect of this Project is assisting the Government in an alternative approach to the highly expatriate focused technical assistance in the past. While useful in terms of maintaining and improving operations, these substitution TA projects have not led to sufficient human resource improvement in the civil service. While substitution TA can be an effective way of providing governments with specialized knowledge and support, it is an often less effective way of transferring skills and knowledge since expatriate advisors substitute for, rather than collaborating with, weak or absent counterparts. By targeting different groups and modalities in the civil -23-  service, this Project aims to address some of the shortcomings of traditional modes of technical assistance in the Cambodian context. In broadening the scope of targeted trainees to include parliamentarians, it is hoped that a common understanding of the development challenges, facing government can be generated within legislative and executive branches of government and across the political spectrum to facilitate a more constructive governance environment. Overseas training vs. in-country training. This Project will also move away from typical overseas training towards in-country training activities, particularly emphasizing the strengthening of local training institutions. This approach reflects the World Bank experience with capacity building projects, which demonstrates increasing evidence that traditional models of training public officials, such as overseas scholarships, secondments and study tours have not proven effective. By influencing only a minority, these measures have failed to stimulate changes in institutional behavior in the public sector, and have not provided an adequate public management response to the evolving global economy. ' GDLN. Learning from these lessons, the Project intends to move away from traditional modes of technical assistance practiced in the past. Instead it proposes to move towards a more innovative approach, focusing on practical training with action learning methods. The in situ training, and the Project's innovative targeting of key groups of public servants and units, will facilitate a change in institutional culture and promote the immediate application of knowledge and learned skills. Overall, the Project is intended to establish a new mode of knowledge transfer that would achieve lasting impact in Cambodia. The establishment of a GDLN center will enable the Government to pilot this new approach in Cambodia. C. Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): The Cambodia EPSCB project will comprise the following components: Component 1: Project Management A. Strengthening the capacity of the Training Coordination Office B. Strengthening the capacity of the Logistics Support Unit Component 2: Training Program Development and Implementation A. Curriculum development of AEP, MDP, and PDP B. Provision of training under AEP, MDP and PDP C. Training delivery for provincial officials D. Program evaluation and adjustment Component 3: Institutional Development A. CAR: Institutional support for the Human Resources Development Unit, including the HRMIS initiative "Governance and the Design of Technical Assistance for Institutional Development." D. Steedman. World Bank, April 1995. -24-  B. MEF: Institutional support for the Economic and Financial Policy Planning and Monitoring Unit (EFPPMU) C. RSA: Institutional support for Training Coordination Office facility D. RSA/EFI: Strengthening training capacity Component 4: Global Development Learning Network (GDLN) A. Development of GDLN Distance Learning Center facilities B. Management and operation of GDLN center C. Capacity building of GDLN center staff The project costs are summarized in the table below: Indicative Bank- % of Component Sector Costs % of financing Bank- (USSM) Total (USSM) flnancing 1. Project Management BA, BF 0.76 13.2% 0.70 91.5% 2. Training Program BI 2.25 39.1% 2.17 96.4% Development and Implementation _ 3. Institutional Development BA, BF 0.82 14.3% 0.80 97.2% 4. Global Development BI 1.92 33.4% 1.83 95.1% Learning Network Total Project Costs 5.76 100% 5.50 95.4% Total Financing Required 5.76 5.5O The amount could be reduced to the extent that donors would provide grant assistance. 2. Key policy and institutional reforms supported by the project: The proposed Project aims to support the Government's recent policy developments and reform initiatives as follows: * Recent developments of economic and social policies with a focus on poverty reduction - particularly, I-PRSP, SEDPII, and a forthcoming full PRSP; * Public finance reform: (i) implementation of the Priority Action Program (PAP) in key central ministries (particularly Health and Education) and in provincial offices; (ii) a shift toward a medium term expenditure framework (MTEF); and (iii) implementation of a Sub-Decree governing Public Procurement. * Civil service reform: (i) development and implementation of a medium-term Strategy to Reform Civil Service (SRCS), particularly the Priority Mission Group (PMG) program; (ii) development of human resource management system, following the Government's recent statement on Human Resource Development Policy; * Governance reform: (i) monitoring and coordination of the Governance Action Plan (GAP); (ii) capacity building for deconcentration and decentralization initiatives; (iii) awareness raising and prevention of corruption; and (iv) gender mainstreaming. -25-  3. Benefits and target population: The proposed Project will support the Government in delivering public services more effectively and efficiently. The ultimate beneficiaries should be the Cambodian people who would have access to improved public services. This Project will also benefit two target groups, immediately and intermediately: Immediate group. Public officials who receive training will be immediate beneficiaries of the Project. A large proportion of funding for this Project will be allocated to the capacity building of this group. The current Project will help strengthen their capability to formulate key economic and social policies with a focus on poverty and guide and implement public sector and governance reform initiatives. Staff at the training institutions will also benefit from the Project because they will develop capacity through the training of trainers component of the Project. Intermediate group. Those who are not trainees under the current Project but work with trained officials at ministries will benefit from the current Project. Officials at senior executive and management levels will be able to formulate and implement their reform agenda more effectively and efficiently with the aid of trained subordinates who will acquire relevant knowledge and skills, whereas junior officials who work for the trained officials will be able to work in the better managed and organized work environment for service delivery. 4. Institutional and implementation arrangements: Executing Agency. The Council of Administrative Reform (CAR) is the executing agency of the EPSCB project. CAR's legal description and mission statement from the official Sub-Decree No. 51 on The Creation of the Council ofAdministrative Reform: The Council of Administrative Reform is established to assist in the mission of the Supreme Council of State Reform in the field of administrative reform. The Council of Administrative Reform is located at the Cabinet of the Council of Ministers (legal description, article 1). The Council of Administrative Reform has the mission to initiate, enhance, advance, and follow-up the implementation of policies and the administrative reform program, in accordance with the direction of the Supreme Council of State Reform (mission, article 2). Project Coordinator. The Project Coordinator will be appointed within the Secretariat General of CAR, supported by the staff of the Secretariat General of CAR in adequate numbers. The Project Coordinator will be assigned with such responsibilities as shall be necessary to provide overall supervision and coordination of the Project, to monitor and evaluate project activities, and to ensure satisfactory implementation and management of the Project on behalf of the CAR. Project Manager. The role of the Project Manager, supported by staff of the Human Resources Development Unit of CAR, is to ensure sound operation of the day-to-day management of the Project. Logistics Support Unit. The role of this unit, reporting directly to the Project Coordinator, will be to ensure that satisfactory processes are followed in all accounting, procurement and disbursement matters and to ensure that disbursements and financial reports are made on a timely basis. This unit already exists and will be tasked with these additional responsibilities. The unit will be staffed with competent personnel in sufficient numbers, including, without limitation, a financial management officer, a project -26-  accountant, two assistant accountants, and a procurement officer. In addition, the unit will be assisted in the first year by a procurement advisor. Training Coordinator. A Training Coordination Office (TCO) will be established and maintained within the Secretariat General of CAR throughout the period of implementation of the Project. The TCO will be headed by a qualified and experienced Training Coordinator, and staffed with other suitably qualified and experienced personnel. The Training Coordinator will be responsible for satisfactory implementation of all training activities, including without limitation, the design of the curriculum and training programs, delivery of the training programs, and liaison with relevant training institutions. Advisory Board. The role of the Advisory Board is to provide advice to the Project Coordinator on the implementation of the Project, particularly in regard to the training delivery programs and activities, extent of participation by civil servants, new activities such as supplementary workshops, and overall progress. The Advisory Board will consist of the Council of Ministers, Council for Administrative Reform (CAR), Ministry of Economy and Finance (MEF), Ministry of Planning (MOP), Ministry of Social Affairs, Labor, Vocational Training, and Youth Rehabilitation, Civil Service Secretariat of State (CSSS), Ministry of Education, Youth and Sports (MOEYS), Royal School of Administration (RSA), Economics and Finance Institute (EFI), and Royal Academy of Cambodia (RAC). Membership will be at the senior technical level. Training Service Delivery. The Royal School of Administration (RSA) and the Economics and Finance Institute (EFI), particularly in public financial management, will host training service delivery, supported by external training institutions. GDLNV Center. The GDLN center, an integral part of the EPSCB project, will be established at RSA as a separate operational center, within the Project, and will report directly to the Project Coordinator. The Center will offer distance learning programs for the EPSCB project, but also allow open access to other key training institutions for development learning. -27-  Figure 1: Institutional Arrangements for Implementation of EPSCB project Council for Administrative Reform Executing Agency Project Coordinator Advisory Board - Project Management (Council of Ministers, CAR, - Logistics Support Unit MEF, MOP, CSSS, MoEYS, RSA, EFI, RAC, MSA) Training Coordinator Trniningr Cnordination Office GDLN Center Economics . . RSA and Finance Trammg delivery agencies Institute D. Project Rationale 1. Project alternatives considered and reasons for rejection: The following alternatives were considered for the proposed Project: * The first option was to dispatch expatriate advisors to public agencies in key reform areas. * The second option was to send public officials to overseas training. * The third option was to organize in-country training but use traditional classroom lecture type training methods. * The fourth option is the proposed Project. The first option was not considered because it has not effectively transferred skills and knowledge, has proven to be expensive (a large portion of the project budget was spent on salaries for expatriate TA personnel), and has had a limited impact on development (see Section D.3 below for more details). The second option (sending public officials overseas for training) was not considered for five reasons. First, only a small number of officials can be trained under the programs. This would be unlikely to have a visible impact on public sector reforms and service delivery since these require a larger number of civil servants to undergo capacity building. Second, sending public officials overseas is much more costly per -28-  person trained. Thirdly, only those officials who are literate in foreign language can participate in these types of training programs. This problem becomes particularly serious when provincial officials are the main target of training activities. Fourthly, the status of formal overseas qualifications increases the risk of loss of staff to the private sector. Finally, isolating officials from their work environments limits their opportunity to apply new skills and knowledge acquired under the programs to their day-to-day work. The third option (in-country training with traditional lecture type methods) could perhaps transfer knowledge to a larger number of officials, but might not be effective in professional skill building because the latter tends to require practice in work environments. Without practice, the knowledge gained through lectures is unlikely to translate into concrete actions that bring about change in service delivery. Having considered the three options above, the current Project proposes in country, in situ training programs with action learning methods. This will provide training opportunities to a large number of officials without removing them from their official functions and duties. The in situ training, and the Project's innovative targeting of key groups of public servants who play a significant role in key reforms, will facilitate a change in institutional culture and promote the immediate application of knowledge and learned skills. 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). IDA's assistance. IDA is supporting the Government's public sector reform efforts, starting with a Public Expenditure Review (PER) that, among others matters, tackled the issue of weak governance in revenue mobilization, forestry management, and expenditure management, in particular in social sectors (see table below). The ongoing Structural Adjustment Credit (SAC) is an operationalization of the PER, focusing on public resource management, public expenditure management, governance and anti- corruption. IDA also assisted the Government in conducting governance and corruption surveys and preparing a Governance and Corruption Diagnostic and assisted in the preparation of a Governance Action Plan (GAP). In addition, IDA assisted the Government with a civil service pay and employment financial modeling exercise towards the formulation and articulation of a medium-term civil service reform strategy. With funding through Public Sector Flagship Knowledge Management Funds, IDA provided assistance in developing a framework to monitor and coordinate various governance initiatives in the GAP, with a view to prioritizing and sequencing reform actions with costing. This proposed Project will work closely with IDA's other assistance, for instance, poverty reduction strategy formulation (IDF grant), public sector reform (PHRD grant), legal and judicial reform (LIL), forestry management (LIL), and education quality improvement (LIL). Other development agencies. Substantial technical assistance is underway through grant programs funded by many other donors. Over the course of preparation of the current Project, IDA has closely consulted them with a view to fully complementing their capacity building efforts. In particular, substantial efforts have been made to ensure that public financial management component under the EPSCB be complementary to IMF/ADB's TCAP program. The two programs have substantially different focuses and coverage. * TCAP is more focused on the national level, while EPSCB will include the sub-national level of financial management; -29-  * TCAP has a greater focus on specialist financial managers than does EPSCB; * Training is a partial focus of the TCAP as compared to EPSCB; * TCAP training tends to involve smaller numbers of participants. Therefore, the EPSCB will be complementary to TCAP in four important ways: * EPSCB will provide training in key elements of financial management to a broader range of managers. This will cover basic training in financial management and planning, the role of budget processes and the use of financial information and controls, including the training required for the new post audit based (e.g., PAP), performance focused, budget execution system envisaged under the TCAP program; * EPSCB will be extended to the provincial level, particularly for the sub-national level of financial management, which is a critical gap in financial management capacity building. Attempts to create budget management centers and streamlined disbursement have suffered because relevant provincial officials are not familiar with fiscal management practices. * EPSCB will provide specialized capacity building for certain functions, for example, the Economic and Financial Policy Planning and Monitoring Unit of MEF, which is not being provided by TCAP. * EPSCB's institutional arrangements that financial management components will be provided by EFI will ensure integration and complementarity. -30-  Latest Supervision Sector Issue Project (PSR) Ratings (Bank-financed projects only) Bank-financed Implementatlon Development Progress (IP) Objective (DO) - TA providing consultant services, Technical Assistance Project S s equipment materials and training in many public sector activities: budget management (MEF); civil service census and database; medium term civil service reform strategy - Public expenditure management, civil Public Expenditure Review S S service reform and governance and anticorruption - Operationalization of PER Structural Adjustment Credit S S - Governance and anticorruption survey; IDF grant s s Support to the development of GAP - Framework to plan, monitor and Public Sector Flagship s S coordinate GAP implementation Initiative - Political stakeholder analysis on civil Regional Flagship S S service reform and govemance - Support for expenditure management; PHRD s s administrative reform and civil service HRMIS - Preparation of I-PRSP IDF grant S S - Full PRSP IDF grant - Public Expenditure Review (PER) - Poverty Reduction Support Credit (PRSC) Other development agencies Treasury / budget management TCAP program (IMF, UNDP, ADB, DFID) Capacity building TA EU TA for administrative reform including UNDP PMG initiative Poverty monitoring and analysis support UNDP Budget management and audit support ADB Support for SEDPII ADB TA for CAR (govemance advisor) Canada TA for Royal School of Administration France and CAR I _I_I IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatsfactory), HU (Highly Unsatisfactory) 3. Lessons learned and reflected in the project design: Lessons from the Cambodia Technical Assistance Project. The Cambodia TA Project ($17 million, effective in March 1995, closed December 2001) provided a wide range of consultant services, equipment, material and training in the following areas: (a) revenue mobilization; (b) public expenditure control; (c) public investment management; (d) foreign debt management; (e) public sector personnel management; (f) military demobilization; (g) private sector development; (h) forestry management; and (i) Economics and Finance Institute (EFI). One of the major activities to be carried out under the TA project was training. The Government intended to recruit high caliber expertise with a commitment to training nationals and the ability to transfer -31-  economic management skills. The project intended to help the Government implement this strategy. The project design supported a major training effort to strengthen basic staff capacity as well as to provide focused knowledge transfer to enable local staff to absorb specific features of the new management system. To provide an adequate infrastructure in support of the massive upgrading of public finance management staff, the project helped finance the construction and equipment of a small training facility (the Economics and Finance Institute). The EFI was to become the main instrument to address continued training needs and ensure sustainability. IDA assistance delivered through the Technical Assistance Project, however, was not, on the whole, effective. The umbrella nature of the activities covered made the project extremely difficult to coordinate, manage, and monitor. While there was some reasonably satisfactory progress in building capacity for macroeconomic and public sector management, there continued to be a strong reliance on substitution- type advisory TA. Problems included: (i) an uncertain degree of skills transfer, making substitution TA an inefficient mode of capacity building; (ii) insufficient emphasis on training of counterparts, whether formal or on the job; (iii) insufficient monitoring and evaluation of training, in particular through EFI, making it difficult to determine its effectiveness; and (iv) in several cases, consultants had not provided the degree of training anticipated by EFI management, due to poor enforcement. Lessons from capacity building projects in other countries. A key lesson from other countries is that capacity building projects need an extended period of implementation. Success rates are in general low. For example, the World Bank's overall experience with capacity building in civil service reform is that only about one-third of efforts achieved satisfactory outcomes.2 Often this was because efforts were too short term in nature. The value of technical assistance in contributing to local capacity has been questionable in many activities. World Bank projects across all regions have been criticized for not adequately transferring skills or expertise to counterparts. Since the capacity to issue terms of reference and choose consultants is weak in the country, the World Bank often chooses technical assistance consultants, leading to the perception that technical assistance is donor and supply-driven. In many cases, these expatriate consultants implement the projects with insufficient collaboration with, and limited skills or knowledge transfer to, local counterparts. Furthermore, the large amounts of project funds used to pay foreign consultant fees, and the economically distortionary effects of dollar-denominated consultant payment, engenders a great deal of frustration among government counterparts. Technical assistance has also been criticized as poorly targeted in some instances - it is often targeted solely to top level government employees, leading to an extremely problematic skills gap between the top level and that immediately below it, even if skills transfer is successful. Well-trained administrators or managers cannot achieve reform or institutional change without bureaucrats under them capable of implementation. Therefore, governments are increasingly reluctant to borrow for long term technical assistance precisely because of poor skill transfer, high consultant fees, and low impact. 3 This is not to imply that other approaches are necessarily more successful. Enclave initiatives such as establishing Senior Executive Services can be counterproductive if suitable salaries cannot be sustained or if they become new channels of patronage. 2 "Civil Service Reform - A Review of World Bank Assistance." Operations Evaluation Departnent, World Bank, August 4, 1999 3"Assessing the Institutional Impact of IDA Lending." N. Barma, S. Dove, B. Nunberg. World Bank, forthcoming. -32-  4. Indications of borrower commitment and ownership: The Government perceives the proposed Project as a key component for vigorous implementation of public sector and governance reform initiatives, in particular the aspect of human resource development. Under the Government's human resource development strategy being developed as part of the NPAR, the proposed Project will serve as a vehicle to strengthen the capacity of public officials who are expected to lead and mange public sector reforms, and enhance the performance of service delivery. In particular, the Government envisages training the Priority Mission Groups when they are formed through PMG inception workshops under the EPSCB. Another indication of ownership is that the CAR and MEF have been actively involved in the design of the training programs over the course of two preparation missions held in November 2001 and February 2002. Regarding GDLN, a financial feasibility study of the GDLN center was conducted and the Government and the World Bank have agreed to establish a GDLN center in Cambodia. 5. Value added of Bank support in this project: The current Project builds on IDA's earlier assistance in the areas of public sector and governance reform (See Section D.2: Major related projects financed by IDA and other development agencies). This puts IDA in a unique position because it has an in-depth understanding of the capacity building needs to develop and implement those reforms. Helping Cambodia to build institutional capacity for public sector and governance reform will take many years and a series of external assistance interventions to accomplish. It will involve a coordinated effort to shift civil service incentives to a sustainable basis and to create systems of accountable and transparent governance. This Project begins this process. It will provide a jump-start to capacity building through immediate bridge support for skill enhancement in key reform areas. This small operation will emphasize behavioral and technical training and knowledge transfer along with systematic, on-the-job learning for government staff. The Project is intended as a catalyst to spur the gradual substitution of Cambodians for the expatriate advisors. The Project will pilot this approach that could be replicated and expanded in follow-on phases. E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (see Annex 4): = Cost benefit NPV=US$ million; ERR = % (see Annex 4) 3 Cost effectiveness Other (specify) The cost effectiveness analysis is based on comparing the costs of three modes of training delivery: (1) international training (outside Cambodia); (2) local training by international and/or local trainers; and (3) local training through the Global Development Learning Network (GDLN). The first has been commonly practiced for selected Cambodians with donor assistance. The second has been increasing, although not mainstreamed, as local training institutions, including universities, gained experience and built capacity gradually. The third is new to Cambodia, although there are a few precedents of long distance education in partnership with universities in developed countries (e.g., Masters Degree Program in Macro and Financial Economics at University of London in partnership with Cambodia Development Resource Institute). The unit cost of course delivery per participant per hour of instruction (or per day) is used as indicator for comparison. While this indicator reflects all measurable components, it should be noted that some important qualitative aspects are neglected, such as the value of on-the-job training and access to state of -33-  the art knowledge and information through GDLN. These qualitative benefits are difficult to measure, but would need to be taken into account in a more comprehensive cost effectiveness analysis. In the absence of reliable, comprehensive data on the training markets in Cambodia, preliminary data gathered during the preparation missions are used in the following analysis. By its nature, the indicators compared below should be interpreted as benchmark figures and are thus indicative only. The Table in Annex 4 presents a unit cost comparison between (1) the international training envisaged under the proposed TCAP Diploma Program in Public Economics (not yet in place or funded), and (2) the local training under the proposed EPSCB project. The comparison clearly indicates that unit costs of the proposed EPSCB project are significantly less costly than the proposed Diploma Program under TCAP. The third mode of training through GDLN has the potential to save the costs of full time overseas training by permitting a larger number of audiences to have access to advanced education in the country. Qualitative aspects of GDLN, such as access to state of the art development knowledge, information from different international sources, and opportunities to immediately apply learned skills in their work, would need to be taken into account for a fuller cost effectiveness assessment. 2. Financial (see Annex 4 and Annex 5): NPV=US$ million; FRR = % (see Annex 4) For financial aspects of GDLN, see Annex 12 (GDLN financial feasibility analysis). 3. Technical: Linking the GDLN center as a hub site to provinces is technically possible for the establishment of a national distance learning delivery system. The World Bank has some experience with the establishment of sub-sites in the East Asia and Pacific region. Since the project implementation period is limited to four years, the Government agreed that in order to ensure that the country gateway (GDLN center) is able to mobilize an increasing share of financing for its operating expenses and achieves self-sufficiency at the completion of the project period, the implementation of any other affiliate centers would be staged. This is to ensure that sufficient services, capacity, and the market can be properly developed. This approach would allow for central coordination, which is necessary in quality distance learning systems and will strengthen the potential impact of the center as a development tool and an effective platform for information exchange within Cambodia. Therefore, a multi-phased approach is recommended to establish -a national distance-learning network in Cambodia, i.e., each phase dependent on the success of the previous ones. The hub center in Phnom Penh should be established and made viable first, before the sub-sites can be developed in the next phases. The sub-sites could be financed either in a second project or through donor aid. For other aspects of technical issues associated with GDLN, see GDLN Section in "Sector issues to be addressed by the Project and strategic choices" above. 4. Institutional: 4.1 Executing agencies: The Council for Administrative Reform (CAR) under the Council of Ministers will be the executing agency, responsible for the design, management, and overall coordination of the EPSCB project. -34-  4.2 Project management: The CAR has some experience in managing technical assistance projects financed by IDA, such as: the Cambodia TA project (1995-2001), an IDF Grant on governance, an anti-corruption survey and the development of a Governance Action Plan (2000-2002), and a Regional Flagship on GAP implementation (2001). However, recent capacity assessments undertaken by IDA specialists pointed out the need for strengthening CAR's capacity of procurement and financial management (for details see E.4.3 and E.4.4 and Annex 6). Therefore, prior to project execution the Logistics Support Unit in CAR will initiate financial management, disbursement, and procurement training for its staff and seek to increase its capacity through technical assistance for procurement management, and through the measures stipulated in the action plan for financial management (Annex 6). For details on project management, see Section 4 "Institutional and implementation arrangements" above. 4.3 Procurement issues: Various aspects of procurement issues have been clarified and extensively discussed. In terms of the project design, there will be a substantial involvement of external providers and this will be funded by IDA credit. Selection of institutions and consultants to design and deliver major training program elements for the project must be on a competitive basis. This was agreed on between the Government and IDA. For details on procurement issues, see Annex 6. 4.4 Financial management issues: The required management of appropriate funding flows within the Project was clarified after internal IDA consultations. The funding flows and contractual relationships will be dependent on the implementation arrangements envisaged within the Project and these are described below. The Council of Administration Reform (CAR) will be the designated Executing Agency. Within CAR, there will be a Project Coordinator responsible for satisfactory implementation and overall management of the Project, a Project Manager responsible for the day-to-day operation of the Project, and a Training Coordinator to ensure the satisfactory implementation of all training activities. The Logistics Support Unit within CAR will be responsible for due process in disbursements and will be the only unit within the Project with authority to make disbursements. The key starting point in the implementation scenario is for CAR to use competitive bidding to call for bids from a select list of international civil service institutions, universities, and local institutions to become working partners in the completion of preparations (e.g. completing curriculum development) and in the subsequent delivery of training programs. CAR will be responsible for the selection of the external partners to participate in the Project. There may be 3 or 4 such partners identified. CAR will enter into contracts with these extemal partners conceming their participation in the activities necessary to complete preparations and commence the delivery of training programs. All costing arrangements and fees payable under the contracts with extemal providers will be subject to specific agreement with and approval by CAR. The contracts with the extemal providers are intended to cover 3 phases of activities- -35-  1. Final preparations in terms of curriculum development and delivery plans; 2. Participation in initial training delivery over the first 12 months; 3. Optional extension of participation in the final part of the Project (depending on satisfactory performance). In implementing the Project, CAR will establish MOUs with the Royal School of Administration (RSA) and with the Economics and Financial Institute (EFI) conceming their working relationships with the Training Coordinator and their involvement in hosting the training programs and subsequent roll-out of training delivery, in conjunction with the approved external partners. Both RSA and EFI are legally separate from CAR and hence a clear agreed working relationship is necessary. IDA has indicated that an MOU would be an appropriate instrument for this purpose. The Training Coordinator will be required to certify work undertaken and completed by the extemal providers after consultation with RSA and EFI, and after clearance and authorization the Logistics Support Unit will make payments to the extemal providers under the various contracts. To the extent that the Project requires the services of RSA and EFI, IDA will finance expenses associated with holding the training programs, and these costs can be billed to CAR under the terms of the MOUs. 5. Environmental: Environmental Category: C GDLN center will be built within an existing building. Small civil works such as classroom construction will be done on existing sites and do not warrant a stand alone EIA. All construction works will be designed by a qualified architect to ensure that building renovations meet local building codes and include appropriate water and sanitation facilities. All civil works construction contracts will include appropriate clauses requiring site clean-up following construction, appropriate noise and dust control, and worker safety measures. 5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis. Not applicable 5.2 What are the main features of the EMP and are they adequate? Not applicable 5.3 For Category A and B projects, timeline and status of EA: Date of receipt of final draft Not applicable 5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EA report on the environmental impacts and proposed environment management plan? Describe mechanisms of consultation that were used and which groups were consulted? Not applicable -36-  5.5 What mechanisms have been established to monitor and evaluate the impact of the project on the environment? Do the indicators reflect the objectives and results of the EMP? Not applicable 6. Social: 6.1 Summarize key social issues relevant to the project objectives, and specify the project's social development outcomes. The social objectives of the EPSCB project fall under the targeted areas as discussed above: poverty reduction, enhancing governance and public sector management, and mainstreaming gender concerns and analysis throughout the public sector. There is no adverse impact to be mitigated in the project design. 6.2 Participatory Approach: How are key stakeholders participating in the project? * The Government is preparing a Poverty Reduction Strategy Paper (PRSP) that envisages comprehensive participatory process involving the Parliament, donors, NGOs, civil society, and the private sector. The preparation, implementation, and monitoring and evaluation of the Project will be a part of the PRSP preparation, implementation and evaluation process. * The Government is to consult the Parliament, donors, NGOs, civil society, and the private sector in implementing and monitoring the Governance Action Plan. This Project would build on the process of implementing and monitoring the Governance Action Plan. * Consultations with donor/NGO sub-groups (fiscal, social sectors, governance, public administration) 6.3 How does the project involve consultations or collaboration with NGOs or other civil society organizations? By ensuring close links with NGOs and civil society, in particular on poverty reduction and governance. 6.4 What institutional arrangements have been provided to ensure the project achieves its social development outcomes? An Advisory Board for the current Project; consultations with key donors involving training activities in the civil service 6.5 How will the project monitor performance in terms of social development outcomes? The CAR Secretariat will monitor this performance. 7. Safeguard Policies: 7.1 Do any of the following safeguard policies apply to the project? -37-  Policy Applicability Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) No Natural Habitats (OP 4.04, BP 4.04, GP 4.04) No Forestry (OP 4.36, GP 4.36) No Pest Management (OP 4.09) No Cultural Property (OPN 11.03) No Indigenous Peoples (OD 4.20) No Involuntary Resettlement (OD 4.30) No Safety of Dams (OP 4.37, BP 4.37 No Projects in International Waters (OP 7.50, BP 7.50, GP 7.50) No Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60) No 7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies. Not applicable. The GDLN center will be built by expanding the existing building at the Royal School of Administration in Phnom Penh, and therefore, no land acquisition/resettlement will be involved. F. Sustainability and Risks 1. Sustainability: One main risk that could affect the Project's sustainability is the Government's Strategy to Reform Civil Service (SRCS), which would not provide adequate salaries for civil servants to be retained in the Government over the medium term. Without a more substantial change in incentives, trained public officials (particularly younger generation) could not be retained within the civil service, and many problems in the civil service including brain drain, absenteeism, and corruption would not cease. As indicated by experiences in other countries, capacity building interventions only have a lasting impact when they are preceded and supported by a credible, comprehensive SRCS that addresses low salary problems. While the Government has not yet committed to immediate action on this agenda, dialogue on a set of steps that would be necessary to prepare for reforms did advance in the appraisal mission. Agreement was reached with the Govemment on a robust program of analytic work, including functional analysis, labor market and pay comparator studies, development of departure and safety-net programs for employment transition, and analysis of possible financing options for civil service pay improvements as discussed above. The result will be a refined medium-term civil service reform plan that can be implemented in the post-electoral period. The Government needs to consider more substantial pay and employment reform, in the context of a forthcoming Public Expenditure Review, the Poverty Reduction Strategy Paper, and a proposed Poverty Reduction Support Credit (PRSC). In parallel, some mitigation measures can be considered. First, it is important that training performance (including retention rates of trainees) be monitored and tracked regularly as part of the Project. This will provide information to evaluate performance of the training program, and adjust and improve the programming of training activities. Under the overall supervision of CAR, TCO will be charged with this task. Second, mentoring groups for younger participants, consisting of some senior political appointees, could be formed to support their activities at work. Third, the Govermnent may consider participants being part of PMGs so that they can receive performance allowances during and after training. This, however, would be at best a temporary solution because PMGs are time bound by their very nature. Another main risk is financial viability of the GDLN center. The concern is that there would not be sufficient demand from both the public and private sectors for the Center to achieve a sustainable -38-  utilization rate. According to the feasibility study, revenue projections indicate that the Project could reach operational sustainability at the end of the fourth year of operations. The prospects for the revenue projections to materialize would depend on the following: the effective marketing and promotion of the center's services for donor community and private sector usage, government commitment to utilize the center for civil service training, and donor support for recurrent expenses. 2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1): Risk Risk Rating Mitigation measure Outputs to Outcomes _ Failure of Government to pursue more fundamental civil service reform * Failure to retain a significant portion of H Active policy dialogue in the context of PER, trained staff in government service PRSP, PRSC to address the low pay issue. * Failure of PMG initiative to promote S change as intended Sharpen the scope and nature of the PMGs Financial viability of GDLN There would not be sufficient demand from H Government commitment to extensively both public and private sectors to achieve a utilize the Center for civil service training sustainable utilization rate for the center. Donor support for recurrent expenses Good marketing and promotion of Center's services to for private sector usage. Coordination with other donors Number of donors involved in this field M Relevant donor coordinating groups would would lead to confused or uncoordinated be involved in the development and approach monitoring of the Project. Ongoing support for the CAR would improve coordination of reform implementation envisaged under the Governance Action Plan. Resource issues Government has limited capacity to S Seek Budget funding based on results and/or continue the training programs, beyond the ongoing donor support project period Provincial involvement issues Establish plan and timetable for initial Provinces feel they are left out. S delivery to provincial officials in PP and subsequent extension to provinces Assessment and appraisal issues Participation and assignments are not M Monitor and assess this activity assessed properly. From Components to Outputs Ineffective design * Inadequate curricula and delivery N Secure professional advice from experienced -39-  Risk Risk Rating Mitization measure planning adviser/provider * Lack of contact and cooperation from M Ensure liaison and partnerships with other regional universities and other bodies experienced bodies Ineffective organization and cooperation * Problems in selection and/or S Detail plan for monitoring this key performance of Training Coordinator appointments * Problems in the capabilities of RSA to S Detail plan for strengthening and monitoring deliver. of key appointments * Poor cooperation with EFI on financial M Establish protocol for cooperation as management. condition of funding. Poor selection of candidates Candidates not selected on merit and M Establish firm selection conditions, criteria potential but on the basis of position or and methodology time served. Ineffective implementation and deliverv * Poor working arrangements between S A coordinating Advisory Board chaired by key agencies. Coordination of the the Minister of State for CAR would be Project could be ineffective due to the responsible for maintaining coherent support different agendas of the main to the Project. implementing agencies. * Difficulties with interpretation and M Close monitoring and supervision of translation arrangements OVERALL RISK RATING S This Project has a substantial risk, but is essential to achieving a wide range of reforms in Cambodia. A set of mitigation measures have been prepared. Risk Ratings - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk) 3. Possible Controversial Aspects: None. G. Main Credit Conditions 1. Negotiation Conditions (the following negotiation conditions have been fulfilled prior to negotiations) * Provision of draft allocation of counterpart funding by components and expenditure categories. * Submission of draft Project Implementation Manual and draft format of Financial Monitoring Report. 2. Effectiveness Conditions * Make an initial deposit of the equivalent of $25,000 into the Project Account. -40-  * Establish an Advisory Board assigned with functions and responsibilities satisfactory to the Association. * Appoint a Project Coordinator within the Secretariat General of the CAR assigned with such responsibilities as shall be necessary to provide overall supervision and coordination of the Project, to monitor and evaluate the Project activities, and to ensure satisfactory implementation and management of the Project on behalf of CAR. * Appoint a Project Manager within the Secretariat General of the CAR supported by the staff of the Human Resources Development Unit and assigned with such responsibilities as will be necessary to be responsible for the day-to-day management of the Project. * Appoint for the Logistics Support Unit within the Secretariat General of the CAR competent personnel in sufficient numbers, including a financial management officer, a Project accountant, two assistant accountants, a procurement officer, and, in order to assist the Logistics Support Unit in the initial stage of the Project, select a procurement advisor, acceptable to the Association. * Establish a Training Coordinator Office within the Secretariat General of the CAR by a prakas or sub- decree, and either employ a training coordinator, or appoint a training coordinator and employ a training advisor. * Adopt the Project Implementation Manual and the Financial Management Manual, satisfactory to the Association * Engage consultants' services to assist in the preparation of the Financial Management Manual, to install a specialized financial management software, to establish a computerized financial management system for the Logistics Support Unit, and to provide financial management, disbursement, and procurement training for the staff of the Logistics Support Unit, satisfactory to the Association. * Establish a computerized financial management system for the Logistics Support Unit, including the installation of a specialized financial management software and initiate financial management, disbursement, and procurement training for the staff of the Logistics Support Unit. * Enter into a Memorandum of Understanding with the GDLN Services that represents a statement of intent to join GDLN and to abide by the general principles of GDLN provided therein. * Enter into a Memorandum of Understanding among CAR, the Economics and Finance Institute and the Royal School of Administration, respectively, which sets forth the rights and obligations of each party with respect to the training arrangements under the Project. 3. Disbursement Conditions * No withdrawals shall be made in respect of payments made for expenditures for Goods unless and until the Borrower has employed a procurement advisor acceptable to the Association to assist the Logistics Support Unit in the initial stage of the Project. 41-  4. Other [classify according to covenant types used in the Legal Agreements.] * GDLN Center business plan finalized and approved by the Borrower, acceptable to the Association, no later than March 1, 2004. * Employ the GDLN Center Director with experiences and qualifications acceptable to the Association not later than August 1, 2003. * Maintain an Advisory Board throughout the period of implementation of the Project. * Maintain a Logistics Support Unit throughout the period of implementation of the Project. * Maintain a Training Coordination Office throughout the period of implementation of the Project. * Implement the Project Implementation Manual. * Implement the Financial Management Manual. * Shall not modify, waive, suspend, cancel or abrogate any provisions of the Project Implementation Manual and the Financial Management Manual without the prior concurrence of IDA. * Maintain policies and procedures adequate to enable the Borrower to monitor and evaluate the carrying out of the Project on an ongoing basis and the achievement of its objectives. * Prepare and furnish on or about June 1, 2004 a report integrating the results of the monitoring and evaluation activities performed on the Project, and review the report with the Association by July 1, 2004 based on the conclusions and recommendations of the said report and the Association's views on the matter. H. Readiness for Implementation [] The engineering design documents for the first year's activities are complete and ready for the start of project implementation. 0 Not applicable. 0 The procurement documents for the first year's activities are complete and ready for the start of project implementation. 0 The Project Implementation Manual has been appraised and found to be realistic and of satisfactory quality. 2 The following items are lacking and are discussed under loan conditions (Section G): -42-  L Cmpllu- n w fth Bnk Pddls hi rot ompiwi a applicable Dk polici Ot Ulbowlns excepto a ban pollces we I for apoval. The Projc compiks with aul odwr aplca an policis K-4 o K _n C. _ _ Tmm Leade Jrdor Counby wanagwiVDlr -43-  Annex 1: Project Design Summary CAMBODIA: Economic and Public Sector Capacity Building Project W 1~~~~~~~~~~~WM Sector-related CAS Sector Indicators: Sector/ country (from Goal to Bank Goal: reports: Mission) Medium-term civil Build the foundations for service vision CAS Macroeconomic stability sustainable development articulated and poverty reduction by: PER Political commitment to * Supporting good Civil service staffing implement governance and governance and public requirements defined Full PRSP public sector reform sector reform; and agenda * Rebuilding human Public sector wage GAP and GAP capital through bill adjusted in line Progress Reports Sustained donor support to investment in skills with functional needs (CAR) the government's reform development agenda Project Development Outcome I Impact Project reports: (from Objective to Objective: Indicators: Goal) Enhanced capability of Improved Evaluations on Long-term strategic civil service to deliver key understanding of best monitoring framework for civil service public services for poverty practice in civil implementation reform. reduction service reforms and application of best Donor sub-groups on Establishment of HRD practice to improved state reforms Strategy and Master Plan service delivery in economic and social PMGs formed and programs operational to catalyze change in key sectors Management and skills for policy RCG commitment to development and upgrading of training reforms in pubic institutions finance, public administration and RCG commitment to governance establishment and use of strengthened GDLN center. Institutional, systematic provision of capacity building activities (including GDLN) strengthened and sustained Access to distance learning through GDLN center enhanced for the public and non-public sectors . -44-  Cambodian nationals strengthened, with a view to substituting Cambodian nationals for expatriate advisers in key policy formulation and implementation. Trained public Career tracking officials retained in surveys (CAR/TCO) the civil service (see Attachment I to Monitoring using Annex 1 for HRMIS (CAR HRD quantitative Unit). benchmarks) Output from each Output Indicators: Project reports: (from Outputs to Component: Objective) 1. Key Project 1.1 Training Supervision reports, CAR's leadership to management units Coordination Office mid-term review and coordinate stakeholders in established and staffed, furnished and completion reports. the government and donors strengthened equipped 1.2 LSU staff trained Quarterly Financial and adequately Monitoring Reports equipped (CAR) 2. Training curriculum 2.1 A cohort of gender Supervision reports, Retention of a large developed, training balanced senior mid-term review and portion of trained officials programs delivered in executives and completion reports. in the civil service after the AEP, MDP and POP, and parliamentarians completion of the training key officials gained strengthened their Annual independent programs relevant knowledge and leadership and evaluation report enhanced skills to lead and management skills (CAR/TCO) PMGs proceed effectively. manage public sector reforms 2.2 Groups of gender Course evaluation by balanced middle participants at the end managers enhanced of each course knowledge and skills (CAR/TCO) to implement key public sector reforms 2.3 groups of gender balanced junior professionals improved their policy development skills -45-  MM rf6 -of' r - __ 2.4 groups of Cooperation and provincial officials commitment of provincial enhanced skills in authorities to actively deconcentration, participating in the training budget management programs and procurement (See Attachment I to Annex I for detailed quantitative benchmarks related to the training programs) 3. Institutional and human 3.1. Technical Supervision reports, The Governments financial resource capacity of CAR, assistance, training mid-term review and commitment to retaining MEF, RSA and EFI and related equipment completion reports. trained trainers and enhanced. to the HRD Unit continuing the training provided, including Annual independent programs after the HRMIS developed, evaluation report completion of the Project managed, and (CAR/TCO) operationalized 3.2. EFPPMU staff improved professional skills in macromodeling and budget monitoring 3.3. RSA training facilities renovated and furnished 3.4. At RSA/EFI, trainers trained, translation facilities and resources equipped, Khmer language materials developed (See Attachment I to Annex I for detailed quantitative benchmarks) 4. GDLN center built, and 4.1 GDLN center Supervision reports, Enhancement of financial made fully operational offered development mid-term review and viability by an increased learning tools and completion reports. use of GDLN center by opportunities for other donors, NGOs and innovative capacity Annual independent the private sector, and by I building activities evaluation report cost reduction through an -46-  FIi Fir of o1rmave (CARITCO) improvement of IT 4.2 Center achieved infrastructure in Cambodia cost-recovery targets GDLN center from service provision evaluation report related to its policy (see Attachment I to and business plan Annex 1 for (CAR/GDLN center). quantitative benchmarks) Project Components I Inputs: (budget Project reports: (from Components to Sub-components: for each Outputs) component) US$M 1. Project management US$0.76 Supervision reports, Establishment of close mid-term review and partnership with 2. Training program US$2.25 completion reports. experienced training development and institutions for curriculum implementation Quarterly Financial design and training Monitoring Reports delivery 3. Institutional US$0.82 (CAR) development Commitment of CAR, RSA and EFI to establishing and 4. Global Development US$1.92 maintaining effective Learning Network organization and cooperation for quality service delivery RCG commitrnent to selecting candidates based on pre-established, transparent conditions and criteria -47-  Attachment I to Annex I Quantitative Benchmarks of Key Performance Indicators Performance Indicators Mid-Term End of Source of Review Project Data L Impact/Outcome indicators 1. Retention of trained public officials in civil service-the management development program (MDP) and the professional development program (PDP) a. The number of trained officials retained 80% 80% Career tracking in civil service after I year of training surveys as percentage of total number of trained officials 2. Extent to which acquired skills are used in the workplace (MDP, PDP and training for provincial officials) a. The number of trained officials who use 50% 800/a Career tracking acquired skills in the workplace as surveys percentage of total number of trained officials [1. Output indicators Training Program Development and Implementation 1. Total number of public officials trained under the advanced executive program (AEP), MDP and PDP a. AEP 100 300 TCO b. MDP 100 400 TCO c. PDP 25 100 TCO d. Training for senior provincial officials 50 200 TCO (under MDP; workshops held in Phnom Penh; emphasis on public financial management, and selected topics on governance and poverty reduction) . e. Training for provincial officials (under 50 400 TCO MDP; workshops held in province; public financial management) 2. The number of officials trained in Priority 500 2000 TCO Mission Group inception workshops 3. Completion rates of each program (the number of participants who passed exams and/or obtained certificates as percentage of total participants) a. MDP 70%o 80% TCO b. PDP 70%/o 80% TCO c. Training for Provincial Officials (under 70% 80% TCO MDP; including workshops in Phnom Penh and provinces) 4. The ratio of trained female officials as 30% Above 30% TCO percentage of total number of tained officials in the programs -48-  Performance Indicators Mid-Term End of Source of Review Project Data 5. Quality of training programs offered (measured by the percentage of participants who evaluated the program 'satisfactory' or better among five choices - excellent, good, satisfactory, poor, very poor) a. AEP 60% or above 80% or above Course evaluation b. MDP 60% or above 80% or above Course evaluation c. PDP 60% or above 80% or above Course evaluation d. Training for provincial officials 60% or above 80% or above Course evaluation 6. Program costs measured by unit cost per participant hour (expected to decline as local capacity develops and international involvement declines) a. AEP (baseline: US$19/participant $18 $16 TCO hour) b. MDP (baseline: US$16/participant $15 $10 TCO hour) c. PDP (baseline: US$16/participant $15 $10 TCO hour) Institutional Development 7. Extent of involvement of local trainers in training provision (participant hours taught by local trainers as percentage of participant hours taught by expatriate and local trainers, assuming that expatriate trainers carry out training initially with local trainers, and phase out as local capacity develops.) a. AEP 50% 60% TCO b. MDP 50% 80% TCO c. PDP 50% 80% TCO 8. Use of training materials translated into Khmer language (the number of modules in which course materials have been translated into Khmer as percentage of total number of modules) a. MDP (coursework) 60% 90% TCO b. PDP (coursework) 50% 90% TCO 49-  Performance Indicators Mid-Term End of Source of Review Project Data 9. Expansion of the use of HRMIS in the government a. The number of ministries/agencies 10 25 CAR which have appointed trained officials on HRMIS at their HRM Divisions. b. The number of ministries/agencies 5 20 CAR which have fully operational equipment and use HRMIS on a regular basis. 10. Capacity development at the Economic and Financial Policy Planning and Monitoring Unit (MEF) a. Macro (or financial) modeling Officials The model MEF/CAR trained and a regularly used model built for ministerial .______________ _ works b. Public expenditure monitoring Officials The MEF/CAR trained and instruments monitoring used for regular instruments monitoring .______________________________________ developed w orks Distance Learning Center (DLC) 11. Use of DLC under each program (participant hours taught by DLC as percentage of total participant hours) a. AEP 20% 200/o TCO b. MDP 5% 5% TCO c. PDP 10%/0 10%/0 TCO 12. Extent to which the DLC business plan will have achieved its targets: a. Revenues from service provisions Set as in Set as in GDLN center business plan business plan b. The ratio of annual revenues from Set as in Set as in GDLN center service provisions relative to annual business plan business plan operating costs c. Facility utilization rates Set as in Set as in GDLN center business plan business plan d. Cost per student hour Set as in Set as in GDLN center I business plan business plan -50-  Annex 2: Detailed Project Description CAMBODIA: Economic and Public Sector Capacity Building Project By Component: Project Component 1 - US$0.76 Million Project Management A. Strengthening the capacity of the Training Coordination Office The CAR Secretariat will provide overall supervision to the Project. The Training Coordinator will report to the Project Coordinator, and will be responsible for ensuring the completion of the design of the curriculum, and training activities of the Project. The Training Coordinator will be also responsible for developing partnerships with training suppliers (international and local) and will advise the Project Coordinator on options for such relationships. In addition, the Training Coordinator will be responsible for cooperative and effective working and delivery relationships with both RSA and EFI, and will engage in the transfer of skills to aid institutional strengthening and sustainability. On day-to-day matters, the Training Coordinator will liaise with the Project Manager, responsible for the day-to-day management of the Project. Since the Training Coordinator will play a central role in the Project and the facilitation of new training methods for Cambodia, his or her office will be strengthened through consultants of a high caliber with relevant experience, and who will work on the Project on a full time basis. IDA will finance expenses including consultants who will work for the TCO during the Project duration, necessary furniture, equipment, utilities, communication, and general office supplies for the TCO. B. Strengthening the capacity of the Logistics Support Unit Logistics Support Unit (LSU), which already exists within the CAR Secretariat, will be tasked with the management of procurement, disbursement, finance, and reporting. A finance manager has been designated to lead the work of the LSU for the Project, and will be supported by a Project accountant, two assistant accountants, a procurement officer at the LSU. IDA funds will finance office equipment used for the Project at the LSU. Given limited experience in IDA-funded procurement procedures, IDA funds will also finance a procurement advisor who will assist LSU staff in the first year of the Project in carrying out procurement activities. In order to ensure transparent and efficient financial and disbursement management of the Project, IDA funds will finance consultant services to assist LSU in preparing the Financial Management Manual, install a specialized financial management software, establish a computerized management system for LSU, and provide financial management, disbursement, and procurement training for the staff of LSU. Annual auditing of the Project will be also supported by IDA. Project Component 2 - US$2.25 million Training Program Development and Implementation (Annex 11 for more details) A. Curriculum development of AEP, MDP and PDP Under the lead of the Training Coordinator, international partners (training institutions and/or regional universities) and local training institutions (RSA and EFI) will jointly develop the training curricula. Specific curricula will be developed for the six categories: (1) leadership and management; (2) policy development; (3) public financial management; (4) human resource management; (5) governance and -51-  public administration; and (6) poverty reduction. IDA funds will finance consulting services for curriculum development. In collaboration with CAR, RSA, and EFI and with advice from designated international training institutions, the Training Coordinator will develop selection criteria and procedures for choosing appropriate candidates to participate in the training programs and to carry out the selection of participants (for suggestions of selection criteria, see Annex I1). These selection criteria will be heavily focused on participants from sub national levels of Government for the Management Development Program (MDP) and the Professional Development Program (PDP). B. Training provision under AEP, MDP and PDP To the extent possible and consistent with existing practice, priority should be given to local resources for program presentation. However, the nature of the new programs and teaching methods proposed under the Project will present important new challenges in this regard. International consultant services will be necessary for curriculum development, initial delivery of some courses, and the identification and development of local trainers. Internationally reputable civil service training institutions and/or regional universities will be identified as partners of the RSA and EFI. This could be described as a "setting-up" phase and might have to extend for most of the training programs' first year, with less intensive involvement thereafter. There could be less involvement of external resources in the delivery phase for the MDP than for the AEP and PDP. IDA funds will finance consulting services for training delivery. For the support of training service delivery by RSA and EFI, IDA will finance expenses incurred for the provision of training, including rent of classrooms for training delivery, office supplies and materials, and subsistence allowances (lunch, refreshments). C. Training delivery for provincial officials This sub-component aims to support the Government in launching and expanding training for provincial officials under an umbrella of the MDP. Financial and budget management, procurement, and deconcentration are identified as high priority areas for provincial training. Training in the areas of good governance and poverty reduction is also deemed important for promoting broad participation at the grassroots level and to thereby implement reforms and policies (RSA will provide this training). Workshops will first be held in Phnom Penh by inviting senior provincial officials (for instance, governors and general directors) to the capital city. After some experience is gained from workshops in Phnom Penh, training workshops will be expanded by sending teams of trainers to key provincial cities (starting at Battambang, Siem Riep, and Sihanoukville). Public officials from neighboring provinces are invited for the provincial workshops. To support training delivery, IDA funds will finance expenses incurred for the delivery of workshops, including consultants services (trainers outside the civil service), rent for hiring classrooms, subsistence allowances (lunch, refreshments), and office supplies and materials. In addition, IDA funds will finance travel costs, accommodation, and per diem when trainers or participants are required to travel. D. Program evaluation and adjustment This sub-component will support evaluating training programs and adjusting them to the need of capacity building in the Government. While there should be an initial design, programs should not be regarded as rigidly defined. They should be kept under evaluation since contents and coverage may need to be modified as reform issues arise. The balance between topics needs to be kept under notice and adjusted as -52-  necessary. IDA funds will finance consultant services to carry out annual program evaluations that would recommend options for program adjustments at subsequent phases. Project Component 3 - US$0.82 million Institutional Development A. CAR: Institutional support for Human Resource Development Unit, including ERMIS initiative This sub-component provide support for the provision of technical assistance, training, and related equipment to CAR's Human Resource Development Unit for the planning and monitoring of human resources development activities. This includes support to the HRMIS initiative by (a) training the lead information technology (IT) specialists of CAR; (b) training system support staff and programmers at CAR, Treasury, Civil Service Secretariat, and targeted line ministries; (c) providing limited and well- focused technology support to CAR and targeted ministries including the purchase of necessary equipment; and (d) providing management training in policy formulation at CAR and targeted ministries. In addition, the HRD Unit will plan, coordinate and monitor capacity building activities of the administration, including the efforts by the EPSCB project. To undertake the above activities, the HRD Unit would need support for (1) the design and implementation of IT tools (a skills database, HRD monitoring tools); (2) the acquisition of necessary equipment; (3) training for the Unit staff and their counterparts in ministries; and (4) regular workshops/seminars to monitor and coordinate capacity building activities particularly in provinces. For the activities described above, IDA funds will finance consultant services, associated equipment, training for the HRD Unit staff, and expenses associated with workshops/seminars for monitoring and coordinating capacity building activities in provinces. B. MEF: Institutional support for the Economic and Financial Policy Planning and Monitoring Unit (EFPPMU) EFPPMU is expected to serve as the center for a new strategic budget management system in the entire civil service. The tasks and responsibilities of the Unit will require highly competent staff with advanced technical skills as well as exposure to best practices in regional and developed countries in relation to (i) macroeconomic modeling and (ii) monitoring methodologies as used in World Bank's public expenditure reviews. To strengthen the Unit to develop into a well-functioning institution, IDA funds will finance TAs who will organize specialized training workshops for the Unit staff, and scholarships for selected staff to attend (short term) overseas training programs relevant for the works at the Unit. C. RSA: Support for Training Coordination Office facility The RSA will host the Training Coordination Office on its campus and deliver a large portion of training programs under the current Project. The RSA will need adequate facilities to serve this purpose. IDA funds will finance renovation (Training Coordination Office and two classrooms at RSA), equipment, and furniture that are essential for training coordination and provision. D. RSA/EFI: Strengthening training capacity (i) Training of trainers With a view to sustaining training activities, the current Project aims to enhance the knowledge and skills of trainers at the RSA and EFI. Cambodian trainers are expected to take on more responsibilities over the course of the Project, eventually taking over full responsibility for the training programn. To support this capacity building, IDA funds will finance selected trainers to -53-  participate in short-term training programs at designated overseas training institutions or universities. (ii) Development of training materials in Khmer language The Project aims to develop training materials in the Khmer language that will be used during and beyond the duration of the current Project. This, along with the training of trainers, is to ensure sustainability of training activities at RSA and EFI. IDA will finance translation services for developing Khmer training materials. (iii) Provision of interpretation services In addition, provision will need to be made for live interpretation in the classroom when expatriate presenters are involved. IDA funds will be allocated for purchasing necessary equipment (mobile simultaneous translation device - headsets, microphone, etc.). (iv) Library and information support With a view to enhancing the access to development knowledge and information, the Project will support the RSA and EFI in strengthening library and reference material collection, and professional subscriptions for renowned international associations for civil service training. The Project will also support the RSA in setting up a website for the ASEAN Resource Center as the Government envisages to participate in the ASEAN Civil Service Forum. IDA funds will support for the purchase of books and the subscription of reference materials. Project Component 4 - US$1.92 million Global Development Learning Network A. Construction of GDLN Distance Learning Center facilities The Administrative Center at the RSA was identified as the most suitable site to support the GDLN Distance Learning Center. The main advantage of this site is that the rooms can be custom-built according to the specific design requirements, and because the building is detached from the main part of the School, it will be separated from the School's main activities. Since the construction of the building is estimated to take 8 to 9 months in total, priority will be given to civil works/facility development as soon as some financing is arranged. IDA funds will finance civil works, equipment, and furniture for the GDLN center. B. Management and Operation of GDLN Center Since GDLN activities are new and innovative, particular attention will be paid to the management of the center. The GDLN center will have a team of consultants including a director, information technician, education specialist, administrative assistants, accounts assistant, and interpreter/translator. The Director at the GDLN center reports to the CAR and has the overall responsibility for administering, managing, and operating the Center so that it evolves into a self-sustaining Center within a period of four years. This individual will be responsible for providing leadership within the Center and the community in the area of distance learning and will be an agent for change. The management of the Center will be further strengthened by international consultants that have relevant experience with GDLN in other countries and can therefore advise the Center's management. -54-  With the GDLN center's goal of becoming financially sustainability, IDA funds will finance the above consultant services, marketing development (advertising, travel for promotion, and hospitality), and three years of operating costs for the Center on a declining basis. This is to ensure that the Center will have at least three years to ramp-up its service capacity and establish a cost-recovery structure for long-term sustainability. The operating costs funded by IDA include reasonable expenses including utilities, communication, general office supplies, transportation, and insurance. C. Capacity building of GDLN center staff The Project will provide training for staff at the GDLN center during the initial stage of the Project. Furthermore, the GDLN-EAPA (Global Development Learning Network, East Asia and Pacific Association) will provide training for center teams and will help to facilitate dialogue between the center managers and the content providers so that more effective and timely programming may be developed and delivered. IDA funds will provide funding for the training of center staff (2 persons for 2 weeks). -55-  Annex 3: Estimated Project Costs CAMBODIA: Economic and Public Sector Capacity Building Project Local Foreign Total Project Cost By Component US $million US $million US $million Total Baseline Cost 2.12 3.19 5.31 Physical Condngencies 0.05 0.05 0.10 Price Contingencies 0.05 0.31 0.35 Total Project Costs1 2.22 3.54 5.76 Total Financing Required 2.22 3.54 5.76 Local Foreign Total Project Cost By Category US $million US $million US $million Goods 0.01 1.42 1.43 Civil Works 0.25 0.00 0.25 Consultants Services 1.04 1.79 2.83 Training and Workshops 0.67 0.32 0.99 Operating costs 0.25 0.00 0.25 Total Project Costs1 2.22 3.54 5.76 Total Financing Required 2.22 3.54 5.76 1 Identifiable taxes and duties are 0 (US$m) and the total project cost, net of taxes, is 5.76 (US$m). Therefore, the project cost shanng ratio is 95 5% of total project cost net of taxes -56-  Annex 4: Cost-Effectiveness Analysis Summary CAMBODIA: Economic and Public Sector Capacity Building Project The cost effectiveness analysis is based on comparing the costs of three modes of training delivery: (1) international training (outside Cambodia); (2) local training by international and/or local trainers; and (3) local training through the Global Development Learning Network (GDLN). The first has been commonly practiced for selected Cambodians with donor assistance. The second has been increasing, although not mainstreamed, as local training institutions including universities gained experience and built capacity gradually. The third is new to Cambodia, although there are a few precedents of long distance education in partnership with universities in developed countries (e.g., Masters Degree Program in Macro and Financial Economics at University of London in partnership with Cambodia Development Resource Institute). The unit cost of course delivery per participant per hour of instruction (or per day) is used as an indicator for comparison. While this indicator reflects all measurable components, it should be noted that some important qualitative aspects are neglected, such as the value of on-the-job training and access to state of the art knowledge and information through GDLN. These qualitative benefits are difficult to measure, but would need to be taken into account in a more comprehensive cost effectiveness analysis. In the absence of reliable, comprehensive data on the training markets in Cambodia, preliminary data gathered during the preparation missions are used in the following analysis. By their nature, the indicators compared below should be interpreted as benchmark figures and are thus indicative only. The Table below presents a unit cost comparison between (1) the international training envisaged under the proposed TCAP Diploma Program in Public Economics (not yet in place or funded), and (2) the local training under the proposed EPSCB project. The proposed Diploma Program aims to offer two semesters of coursework for young professionals at MEF and other key ministries, involving 384 hours of instruction and some additional project work. Two options are considered under the Program: -(1) all lectures in country, and (2) half lectures in country and the remaining half overseas. The unit costs per participant per hour are US$25 and US$31, respectively. If all students were taught overseas, the unit costs would certainly go far beyond $30 per hour, taking into account travel and living costs. For a comparison, three options are considered for MDP and PDP under the EPSCB, trained by: (1) a foreign trainer, (2) a local trainer; and (3) a team of a foreign and a local trainer working together. The unit costs per participant per hour for the respective options under EPSCB amount to $10 for Option I (foreign trainer alone), $3 for Option 2 (local trainer alone), and $13 for Option 3 (team), assuming that 25 students are taught in a one week course. This is significantly less costly than the proposed Diploma Program under TCAP. Further cost savings could be made if the number of students taught could be increased by a team of trainers taking two classes simultaneously as presented in Options 4 and 5. The third mode of training - local training through GDLN - appears to be more costly than the two modes of training discussed above. According to experiences in other countries, unit costs per participant per day depend a great deal on the capacity utilization rates of the GDLN facilities. For instance, in Africa, the unit cost per participant per day is expected to decline down to near $100 or below, when the capacity utilization rate reaches 60 percent. This is not to say, however, that GDLN is the most expensive mode of training delivery. Providing scholarships for full time overseas training has been a standard practice of capacity building in the past, and this is the most expensive mode of training since the unit cost is very high and the number of participants is small. It is clear that GDLN has the potential to save the costs of this type of training by -57-  permitting a larger number of participants to have access to advanced education in country. Furthermore, qualitative aspects of GDLN such as access to state of the art development knowledge and infornation would need to be taken into account for a fuller cost effectiveness assessment. Comparison of unit costs Program Total cost Number of Unit cost Unit cost per hours per hour per day (8 participant hours) (US$) (1) Proposed Diploma Program in Public Economics (TCAP) Option 1: Full local training $9,599 384 $25 $200 Option 2: Hal local and half overseas $11,791 384 $31 $246 training (2) Proposed EPSCB (40 hour instruction per participant per week) _ _ Option 1: Foreign trainer alone $383 40 $10 $77 Option 2: Local trainer alone $130 40 $3 $26 Option 3: Together (I foreign; I local) in $513 40 $13 $103 learning mode* Option 4: Together (I foreign; I local) in $513 (for 80 $6 $51 tandem** 80 hours) Option 5: Together (I foreign; 2 local) in $643 (for 80 $8 $64 tandem** 80 hours) * working together, with the local trainer "sitting in" for learning purposes; i.e. no extra students ** working together and taking two classes simultaneously in cooperation. This effectively doubles the hours of presentation and reduces unit costs. -58-  Annex 5: Financial Summary CAMBODIA: Economic and Public Sector Capacity Building Project Year Ending on June 30, 2006 IMPLEMENTATION PERIOD I Year I ear2 Year 3 r Year 4 r Year a Year 6 I Year 7 Total Financing Required Project Costs Investment Costs 1.51 1.13 1.40 1.47 0.0 0.0 0.0 Recurrent Cost, 0.02 0.07 0.07 0.08 0.0 0.0 0.0 Total Project Costs 1.53 1.20 1.47 1.55 0.0 0.0 0.0 Financing IBRDIIDA 1.48 1.15 1.40 1.46 0.0 0.0 0.0 Govemment 0.05 0.05 0.07 0.09 0.0 0.0 0.0 Central Provincial Co-financiem User Fesslmeneficlarles Others Total Project 1.53 1.20 1.47 1.55 0.0 0.0 0.0 Financing -59-  Annex 6: Procurement and Disbursement Arrangements CAMBODIA: Economic and Public Sector Capacity Building Project Procurement PROCUREMENT GUIDELINES: The procurement of goods and works will be carried out in accordance with the World Bank's Guidelines on Procurement under IBRD Loans and IDA credits (January 1995, Revised January and August 1996, September 1997, and January 1999). Procurement of Consulting services will be done in accordance with the World Bank's Guidelines on Selection and Employment of Consultants by the World Bank Borrowers (January 1997, Revised September 1997, and January 1999). Any goods, works and services not financed in whole or in part by the World Bank will be procured in accordance with the public procurement regulations of the country. STANDARD BIDDING DOCUMENTS: IDA's standard bidding documents for goods and works, and IDA's standard evaluation reports, standard request for proposals, and standard forms of contracts for all consulting services will be used under the Project. A standard quotation solicitation form and contract form for works and goods should be developed for procurement to be carried out through shopping procedures. ADVERTISEMENT: A General Procurement Notice (GPN) will be published in the United Nations Development Business, announcing all procurement of goods, works and consulting services to be procured under the Project. Specific Procurement Notice in Development Business will also be required for all consulting assignments exceeding US$200,000 per contract. Notification and advertising will be carried out in accordance with the provisions in the Guidelines. ASSESSMENT OF AGENCY'S CAPACITY TO IMPLEMENT PROCUREMENT: The World Bank's appraisal mission carried out a capacity assessment of the Secretariat of the Council for Administrative Reformn (CAR) under the Council of Ministers (Reference Assessment Report on file). From the result of assessment, the mission found that the CAR Secretariat has limited experience with procurement under IDA financed projects. Also, there are few IDA related technical assistance projects that the CAR Secretariat has been involved in implementing. To date most IDA financed has been managed by the PMU in Ministry of Economy and Finance. Hence, the capacity of the CAR Secretariat to handle the procurement activities is weak. In order to ensure that procurement under the proposed Project will be accomplished in a transparent and timely manner and to build procurement capability, the CAR Secretariat has agreed to take a set of time- bound actions. The main actions are: (1) official appointment of a procurement officer at the LSU (effectiveness condition); (2) the selection of a procurement advisor assisting the LSU in the initial stage of the Project (effectiveness condition), and the employment of the procurement advisor as a condition of disbursement against the expenditures in Goods category (disbursement condition); (3) preparation of a Procurement Manual (within a month after appointment); and (4) initiation of training for the LSU staff by a consulting firm or individual consultant(s) ( effectiveness condition). -60-  The draft Country Procurement Assessment Report (CPAR) dated March 31, 1997, reviewed the procurement laws and regulations of the country and identified the differences between IDA policy and above mentioned sub-decree and regulations. Presently, most of the Cambodian procurement practices stated in the IRRs are consistent with international procurement practices. In accordance with the above Sub-Decree, the said Regulations permit the application of World Bank Guidelines and other loan conditions for the procurement of goods, works and consulting services in World Bank projects. In the case of International Competitive Bidding (ICB), the World Bank Guidelines and mandatory Standard Bidding Documents (SBDs) are followed by all agencies. In the case of National Competitive Bidding (NCB), the World Bank has not issued detailed procedures or SBDs. However, most of the local procurement procedures follow the World Bank Procurement Guidelines. However, there are the following exceptions: Goods and Works 1) negotiation are allowed with the lowest bidder to reduce the price when all bids exceed the cost estimates; 2) there is a requirement for the prior registration of foreign firms to be able participate in NCB procedures; 3) a merit point system is permitted for pre-qualifying firms instead of pass/fail minimum criteria for pre- qualification; 4) foreign contractors are requested to enter into a joint venture with a local firm(s); 5) different deadlines are permitted for submission of a bid and for opening the bid; 6) price adjustment provisions are not used for local bidding; 7) bidders may withdraw bids without forfeiting bid security, if they disagree with the correction of arithmetical errors in their bids. Selection of Consultants 8) No provision is made for negotiation with the second ranked firm when the negotiation with the lowest ranked firm fail. Because of the above differences between the World Bank Guidelines and the Cambodia Procurement Rules, the differences between the country's and the World Bank's procurement procedures are incorporated into the DCA as an Annex to Schedule 3 to the DCA. Based on the risk assessment and the findings of the draft Country Procurement Assessment Report (CPAR, 1997), the thresholds for prior review and supervision plan have been set and are presented in Table C. These thresholds have been reviewed during appraisal and have been found consistent with the identified risks. -61-  PROCUREMENT METHODS: Procurement of Civil Works National Competitive Bidding (NCB): Procurement of civil works for renovation building with furniture of Global Development Learning Network (GDLN) and training coordination office will be procured through NCB procedures as the relatively small value is not of interest to foreign competition. NCB procurement document will be prepared and submitted to IDA for concurrence. The aggregate amount for this procedure will be US$0.247 million. The maximum contract threshold for a contract associated with the NCB for works will be $0.200 million. Procurement of goods: National Competitive Bidding (NCB): Procurement of goods for computers, hardware & network application, office equipment and materials, furniture and mobile simultaneous translation facility for project management and institutional development components with contracts estimated to cost $25,000 or more but not more than $ 100,000 will be procured through NCB procedures, which will be reviewed and found acceptable to IDA. Local infrastructure equipment and associated services for GDLN Distance Learning Center will be also procured through the NCB procedures. The aggregate amount under this procedure will be around $ 0.233 million. National Shopping (7VS): Procurement of goods such as office equipment, computer and furniture below $25,000 per contract, will follow national shopping procedures as the relatively small value, the materials are readily available off-the-shelf goods and standard specification commodities for which more competitive methods are not justified on the basis of cost or efficiency. The contract will be awarded on the basis of quotations obtained from at least three qualified domestic suppliers. Request for quotations will include a detailed description and quantities of goods, basic specification as well as the desired delivery time and place and an acceptable form of contract. The qualified firm offering the lowest evaluated price quotation will be contracted. The aggregate amount through national shopping procedures is $ 0.133 million. Direct Contracting: Direct Contracting will be used for the library collection books, reference materials, which are proprietary and obtainable only from one source. The aggregate amount falling under this category will not exceed $0.043 million. In addition, the Government has agreed to procure GDLN equipment and associated services through the option offered by IDA of using the services of firm(s) selected by IDA. These include procurement of local connectivity equipment, global connectivity equipment, pedagogical tools and logistics, and associated services for the GDLN equipment. The aggregate amount of GDLN equipment procured through this Direct Contracting method is $1.028 million. The principal reasons in accepting that option are: a) Videoconference technology is a relatively new concept for Cambodia and the application and integration of an IP based videoconference to a global network, such as GDLN, has never been undertaken before. The integration of the interactive visual, audio, and data display for instructional purposes will require considerable skill and experience (that is not found in Cambodia) to ensure compatibility with the global network. b) In view of the fact that compliance with the World Bank's Global Communication System (GCS) Hub and the GDLN network is a prerequisite, the understanding and knowledge of the GDLN specifications is very essential to carry out the task mentioned in item a). Practically, at present, such -62-  knowledge is only possessed by the World Bank's ISG. Under this option, the additional oversight is provided by the World Bank's ISG in pre-selecting and training a qualified vendor is considered crucial in the successful implementation of this component. Under this approach, the World Bank is managing the competitive procurement process for the integration of services and pedagogical equipment, and has recently completed the "Request for Proposals" (RFP), which will be a public document made available to country institutions and organizations providing financing for GDLN centers. However, once the contractor (s) have been competitively selected, the Borrower selecting these services would be able to procure the integration of services and pedagogical equipment through its own independent contracts (as a single source selection from the point of view of the Borrower) with the selected firm. The Contractor will buy, stage, and test the Equipment. At the conclusion of the Equipment Acceptance Test and Protocol, the equipment will be shipped by the Contractor and installed by the World Bank's ISG. The justification of this single source selection is that this option is expected to offer the lowest cost to the Borrower and minimize risks to the quality of the network communication services provided by the World Bank to the GDLN. If the Borrower had not chosen this option and decided to procure this equipment through ICB, it would have been required as a condition of accessing the World Bank's Global Communication System (GCS) Hub and the GDLN network to accept in writing that the World Bank's ISG will provide final inspection and certification of network readiness for their DLC(s). Consulting services: Quality and Cost Based Selection (QCBS): The consultants' assignments for consulting firms which the estimated cost will be around $ 1.302 million for implementation of training programs for advanced executive, management development, professional development, and associated curriculum development would be procured through QCBS procedures. Selection Based on Consultants' Qualifications (SBCQ). SBCQ procedures will be used to select the consultants for the development and training of a computerized financial management system, evaluations of the programs, translation and interpretation services, and extemal audit with the contract amount below $ 100,000. The consultants with the most appropriate qualification and references may be selected from a shortlist based on requested expression of interest from qualified firms, all in accordance with paragraph 3.7 of the guidelines. The aggregate amount through SBCQ procedures is $ 0.165 million. Individual Consultants. Selection of individual consultants for assignments such as procurement advisor, local trainers to deliver training programs for advanced executive, management development, professional development, and curriculum development; GDLN management, training coordinator and development of Human Resource Management Information System (HRMIS) will be carried out in accordance with provisions of paragraphs 5.1 through 5.3 of the Consultants Guidelines. The aggregate amount would be around 1.363 million. The relatively large amount of procurement through individual consultants procedures, rather than through a single firm, is justified for the following reasons. The training programs envisaged under the Project cover diverse areas and subjects, and for this reason it is difficult to find a single firm (i.e., university or research institute) in Cambodia that could provide all local trainers (consultants) from their own resources. In addition, expertise required for GDLN management, training coordinator (under the CAR), and the development of IT system for HRMIS and HRD Unit at CAR are very different, and therefore it is highly unlikely that a single firm in Cambodia could provide all the expertise. Training and Workshops Training and Workshops covers reasonable expenditures incurred for training and workshops including office supplies, training materials, costs for translation of training materials, consumables, travel costs -63-  including per diems for provincial government officials who travel to Phnom Penh for training and for local trainers who travel to selected provinces or to Phnom Penh to provide training, and costs of renting training facilities, but excluding fees paid to trainers (which expenditures would not have been incurred absent the Project). The aggregate amount of costs under this category is estimated at around $0.993 million. Incremental Operating Costs Incremental Operating Costs cover reasonable expenditures incurred by the Borrower on account of (i) the operation of the GDLN center, including the insurance costs of the GDLN center, (ii) project administration, management and monitoring, including office supplies, utilities costs, telecommunications expenses, vehicle operation and maintenance, and bank charges (which expenditures would not have been incurred absent the project), but excluding salaries or salary supplements of officials of the civil service. The aggregate amount is estimated at around $0.251 million. Procurement of this category will follow the Government regulations in accordance with principles and procedures satisfactory to IDA. Advance Procurement In order to ensure that the procurement arrangements will be done in proper manner and project activities will be implemented in time, it is urgent that the LSU proceed with the hiring of a procurement advisor as soon as possible. If this hiring takes place before signing the credit agreement, advance procurement shall be done in accordance with the World Bank's procurement guidelines and follow the procurement procedures, including the prior reviews requirement, and will be financed by IDA funds through retroactive financing. Table A: Project Costs by Procurement Arrangements (in US$ million equivalent) Expenditure Category Procurement Methodl Total Cost ICB NCB Others2' Civil works 0.247 0.247 (0.223) (0.223) Goods 0.000 0. 233 1.205 1.438 (1.436) (0.000) (0.233) (1.203) Consulting Services 2.830 2.830 (2.688) (2.688) Training & Workshop 0.993 0.993 (0.993) (0.993) Incremental Operating 0. 251 0.251 (0.157) Cost (0. 157) Total 5.759 (5.497) "L All costs include contingencies and figures in parenthesis are the amnounts to be financed by the Credit. 2/ This column includes National Shopping (NS) and Direct Contracting (DC) for Goods, and QCBS, SBCQ, and Selection of individual consultants (per Section V of Consultant Guidelines) for Consulting Services, and Non-Bank Financing. -64-  Table B: Consultant Selection Arrangements (optional) (in US$ million equivalent) Consultant, Total Cost (includin contin gencies) Services QCBS SBCQ Other NIF Expenditure Category A. Firms 1.302 0.165 1.467 (1.393) (1.237) (0.156) B. Individuals - - 1.363 1.363 (1.295) (1.295) Total 1.302 0.165 1.363 2.830 (2.688) (1.237) (0.156) (1.295) QCBS = Quality and Cost Based Selection SBCQ = Selection Based on Consultants' Qualification Other = Selection of individual consultants (per Section V of Consultants Guidelines). -65-  PRIOR REVIEW THRESHOLDS: All contracts subject to NCB and Direct Contracting procedures will be required prior review by IDA. The first contract for goods using shopping procedures for each year will be also subject to prior review by IDA. The prior review includes: complete draft bidding document, bid evaluation report and draft contract. Consultant contracts estimated to cost $100,000 or more for firms and $50,000 or more for individuals, all TORs and methods of selection, irrespective of value, shall be subject to prior review by IDA. All other contracts and the Statement of Expenditures shall be subject to post reviews. IDA's supervision missions will review a half of the contracts that are subject to post reviews. Table C: Thresholds for Procurement Methods and Prior Review Contracts Subject to Expenditure Contract Value Procurement Prior Review/Estimated Category (Threshold) Method Total Value Subject to Prior Review (US$ thousands) (US$ millions) 1. Works 0 NCB All / 0.247 2. Goods 0 Direct Contracting AlI/ 1.071 <25 NS First contract of each year /0.003 225 NCB All/ 0.233 3. Services (Indiv.) 250 Other 0.783 (Firm) 2100 QCBS 1.302 Total value of contracts subject to prior review: 3.639 Total Value of Contracts subject to Prior Review: US$ 3.639 million which is around 63.2 percent of the combined total value of the project cost of US$ 5.759 million. Overall Procurement Risk Assessment: High, which will be mitigated by hiring regional procurement advisor in advance to provide detailed assistance during the bidding of all works, goods and services tendering process as well as evaluating and following up the procurement matters. Frequency of procurement supervision missions proposed: One supervision mission every 6 months (a procurement staff will be included in the supervision mission to carry out post-reviews). -66-  Disbursement Allocahon of Credit Proceeds (Table C) Disbursement of the proceeds of the Credit would be made against expenditure categories as shown in Table C. Table C: Allocation of Credit Proceeds Expenditure Category Amount in US$million Financing Percentage Civil Works 0.21 90% Goods 1.42 100% of foreign expenditures, 100% of local expenditures (ex- factory cost) and 85% of local expenditures for other items procured locally Consultants' services 2.64 95% Training and Workshops 0.97 100% Incremental Operating costs 0.15 (a) GDLN Operating Costs (0.05) 80% of expenditures incurred on or before April 30, 2004, 50% of expenditures incurred on or before April 30, 2005, and 20% of expenditures incurred thereafter (b) Other Incremental (0.10) 85% of expenditures incurred on Operating Costs or before April 30, 2003, 75% of expenditures incurred on or before April 30, 2004, and 65% of expenditures incurred thereafter Unallocated 0.11 Total 5.50 Use of Statement of Expenditure (SOEs): For goods, except those procured by Direct Contracting methods, estimated to cost the equivalent of US$25,000 or less, consulting firms estimated to cost the equivalent of US$100,000 or less, individual consultants' contracts estimated to cost the equivalent of US$50,000 or less, training, and incremental operating costs, withdrawal applications will be supported by Statement of Expenditures (SOEs). All civil works contracts, goods estimated to cost the equivalent of US$25,000 or more, consulting firms estimated to cost the equivalent of US$100,000 or more, and individual consultants' contracts estimated to cost the equivalent of US$50,000 or more, withdrawal applications would be supported by full documentation and signed contracts. Special Account To facilitate credit disbursement, the LSU of the Council for Administrative Reform (CAR) of the Council of Ministers (COM) shall maintain a separate dollar special deposit account in its Central Bank or -67-  a commercial bank on terms and conditions satisfactory to IDA including appropriate protection against set off, seizure and attachments. The Special Account (SA), which would cover the IDA share of eligible expenditures in all disbursement categories, would have an authorized allocation of US$200,000 with an initial withdrawal of US$40,000 equivalent to be withdrawn from the Credit Account and deposited in the SA. When the amounts withdrawn from the Credit total US$ 1 million equivalent, the initial withdrawal will be increased to the authorized allocation. Applications to replenish the Special Account should be submitted regularly, preferably monthly (but not less than quarterly) or when the amounts withdrawn equal 20 percent of the initial deposit, whichever comes first. Financial Management and Reporting Arrangements Financial Management Capacity Assessment A financial management capacity assessment was carried in accordance with Guidelines to Staff issued by the Financial Management Board dated June 30, 2001. At present, within Council of Administrative Reform (CAR), there is no financial management system (FMS) which meets IDA minimum requirements in financial management as required in OP/BP 10.02. Office of the Council of Ministers, where CAR is located, has limited experience in implementing IDA financed projects. Therefore the financial management risks of the Project are considered high. In order to minimize FM risks, it was agreed that a series of actions to design and install a financial management system should be taken including appointment and training of financial management staff. These actions would include design of a Project Financial Management Manual and a chart of accounts appropriate to the requirements of the EPSCB project as well as carrying out a training program of FM staff on accounting and IDA disbursement procedures. The Borrower agreed to hire a consulting firm(s) and/or individual consultants to undertake such actions before the effectiveness of the Project. The Project financial management arrangements agreed are described below. Project Financial Management Project Organization. The Council for Administrative Reform (CAR) will be the executing agency, responsible for management and overall coordination of the Project. The existing Logistics Support Unit (LSU) within the CAR Secretariat will be tasked to ensure satisfactory processes are followed in all accounting, procurement and disbursement matters and to ensure that disbursement and financial reports are made on a timely basis. . In addition, a Training Coordination Office (TCO) will be established for managing all training programs and activities under the Project. The main training providing agencies will be the Royal School of Administration (RSA), the Economic and Finance Institute (EFI) of MEF, and selected international training institutions and/or universities. Organizaton and Staffing of Financial Management Function. The LSU shall hire staff with qualifications and experience acceptable to IDA for financial management of the Project. The staffing shall consist of a Project Accountant, and at a minimum two Assistant Accountants to ensure adequate segregation of duties in (i) managing the SA; (ii) supervising and controlling financial activities; (iii) invoice processing at the LSU; and (iv) coordination of transaction processing and financial management with other implementation agencies. Three staff from within existing CAR staff have been assigned for Project financial management. The persons selected as the project accountant and the assistant accountant possess sufficient educational qualifications and experience in financial management and accounting. They are also familiar with IDA disbursement procedures as previous work experience included work on the Council of Ministers component for IDA funded Technical Assistance (TA) project (now closed). The accounts assistant is sufficiently experienced and trained on general accounting work. Each IA such as the Royal School of Administration (RSA) and the Economic and Finance Institute (EFI) -68-  shall assign an accounts/administration assistant within each training provider to initiate payment requests, to obtain approval at the training providers and for forwarding the documentation to the LSU for payment. Staff Training. Program of staff training to enhance the skills of the three key staff at LSU will be undertaken prior to project effectiveness. The training shall include general training on operating the computerized accounting system, training on Project Financial Management Manual and training on IDA disbursement procedures. The Project Accountant shall be responsible for training of the training providers' accounting assistants on accounting procedures. Fund Flow. IDA funds ($5.5 million) will be channeled through a Special Account to be held and managed by the LSU. Government Counterpart Funds will be channeled through a Project Bank Account assigned for the Project and managed by the LSU. Training providing agencies shall not be advanced funds from the SA and all payments from the SA shall be made directly from the LSU. Accounting Procedures. LSU would be responsible for ensuring that IDA guidelines and procedures are followed on disbursements, accounting and overall financial management. The principal responsibilities of LSU will include maintaining the Project's books of accounts, effecting payments from the Special Account and the Project Bank Account, monitoring overall project disbursements, coordinating with the Ministry of Economy and Finance (MEF) on annual counterpart fund requirements, preparation and submission of withdrawal applications to IDA, producing quarterly Financial Monitoring Reports (FMRs), the preparation of annual financial statements and having them audited, producing annual work plans and budgets in coordination with the training providers and for overall financial management of the Project. These responsibilities shall be described in detail in the Project Financial Management Manual. All expenditures eligible for IDA financing must be authorized for payment by a designated senior official of each training providing agency. The authorized payment request, including duly certified contracts/invoices from the training agencies, shall be submitted to LSU which will check documents for accuracy and completeness. The LSU will process the invoices for payment based on payment approval procedure established for the Project. The LSU will in addition process payments for centrally managed procurements and other Project expenditures initiated by the TCO or CAR. Expenditure for payments from counterpart funds will be authorized in a similar manner. The accounting staff assigned for the Project within the LSU will be responsible for ensuring that the necessary approvals are obtained prior to processing payment. Payments from the Special Account will only be in respect of expenditures actually incurred and must be supported by approved vouchers for payment. Accounting system. A computerized accounting system, with a chart of accounts which will appropriately identify project components and IDA disbursement categories will be established to facilitate financial management activities. The financial management system including detailed guidelines on payment authorization, cash management, month and year-end closing and financial reporting will be further explained in the Project Financial Management Manual to be finalized as part of the financial management system. Establishment of the financial management system for the Project and appointment of a qualified and trained Project Accountant and at least two assistant accountants at the LSU and an assistant accountant at each training agency will be a condition of effectiveness. Retroactive Financing The Government has requested retroactive financing for expenditures to purchase equipment (computer, printer, etc.) for the training of LSU staff and to finance a procurement advisor. The amount of retroactive financing will be up to $30,000 equivalent subject to IDA's standard procurement guidelines. -69-  Disbursement Arrangements The LSU shall prepare Withdrawal Applications to be submitted to IDA Signatories on IDA Withdrawal Applications will be designated by the Borrower after signing the credit agreement. Financial Monitoring Reports (FMRs) The Project shall provide IDA with regular reports on fiduciary aspects of project implementation, to a standard acceptable to IDA. These reports shall include a Statement of Source and Application of funds, a Balance Sheet and a report on physical progress. The above reports shall emphasize linkages between expenditures and physical progress as an important aspect of overall project monitoring and the formats for these have been agreed at negotiation. The chart of accounts and the reporting module of the accounting package will be customized appropriately to facilitate the reporting needs. The LSU will be responsible for submitting the FMiRs to IDA within 45 days of the quarter end starting the first quarter following Project's first disbursement. Additional output monitoring reports will be developed, if appropriate, during implementation. Audit CAR will be responsible for ensuring that the annual project financial statements are audited and for forwarding these to IDA. The audit should be carried out by an independent auditor appointed under terms of reference satisfactory to IDA. The auditor shall be required to express opinions on: (i) The project financial statements; (ii) whether the Special Account funds have been correctly accounted for and used in accordance with the Credit agreement; and (iii) the adequacy of supporting documents and controls surrounding the use of the Statements of Expenditures as a basis for disbursements. The audited financial statements will be submitted to IDA within six months of the year-end. Supervision Plan As the project staff and the financial management system is newly established for the Project, an initial supervision prior to effectiveness is recommended. This supervision mission will test the FM system, its functionality and the understanding of FM procedures by staff. Thereafter, FM supervision shall take place at six monthly intervals during project implementation. -70-  Strengthening of Financial Management It has been agreed that CAR shall carry out a time-bound action plan as stated below for to ensure that an adequate financial management system is in place before credit effectiveness: Action Item ResponsibDlity Action Date Formally appoint the CAR Before the following nominated effectiveness staff at pre-existing LSU. (a) Project Accountant (b) Assistant Accountants (Two) Finalize the Project LSU Before the Financial Management effectiveness Manual Design chart of LSU/MEF Before the accounts, install effectiveness software, and initiate staff training. _ Prepare first set of LSU End of quarter FMRs. following Credit first disbursement -71-  Annex 7: Project Processing Schedule CAMBODIA: Economic and Public Sector Capacity Building Project Project Schedule Planned Actual (at final PCD stage) Time taken to prepare the project (months) 7 18 First Bank mission (identification) 10/9/2000 10/9/2000 Appraisal mission departure 4/30/2001 4/1/2002 Negotiations 5/7/2001 5/16/2002 Planned Date of Effectiveness 6/15/2001 8/1/2002 Prepared by: Council for Administrative Reform, The Council of Ministers Preparation assistance: Australia CTF. Bank staff who worked on the project included: Name Specialty Su-Yong Song Senior Economist, Task Manager, EASPR Barbara Nunberg Lead Specialist, Advisor, EASPR Toshiyasu Kato Consultant, EASPR Denis Ives Consultant, EASPR Geoff Dixon Senior Public Sector Specialist, EASPR Ana Frischtak Junior Associate, EASPR Sonya Woo EAP GDLN Associate Coordinator, EASHD Robert McGough Consultant, EAPVP Vidoje Brajovic Lead Information Officer, ISGGC Mary O'Kane Senior Advisor, AUSAID Lawry Trevor-Deutsch Consultant Chinnakorn Chantra Procurement Officer, EACTF Wijaya Wickrema Senior Financial Management Specialist, EAPCO Preethi Wijeratne Financial Management Specialist, EAPCO Karin Nordlander Lead Counsel, LEGEA Mei Wang Counsel, LEGEA Omowunmi Ladipo Senior Financial Management Specialist, LOAG3 Nancy Mensah Program Assistant, EASPR -72-  Annex 8: Documents in the Project File* CAMBODIA: Economic and Public Sector Capacity Building Project A. Project Implementation Plan Being prepared by the Government B. Bank Staff Assessments * Pre-appraisal mission Aide-Memoire: March 2001 * Training needs and design assessment mission note: November 2001 * Project design mission Aide-Memoire: February 2002 * GDLN Mission Aide- Memoire: January 2002. * Appraisal Mission Aide-Memoire: April 2002 * GDLN Component Appraisal Aide-Memoire: April 2002 * GDLN Financial Feasibility Study: April 2002 C. Other *Including electronic files -73-  Annex 9: Statement of Loans and Credits CAMBODIA: Economic and Public Sector Capacity Building Project 01-Mar-2002 Dfference bhween Orginal Amount In USS Millons and actual dlsbumfementse Project ID FY Pupose IMRD IDA GEF Cancel. Undisb. Oria Frm ReVd P071445 2002 KH - Demobilization and Reintegmtion 0.00 18.40 0.00 0.00 18.60 0.00 0.00 P073394 2001 KH-Flood Emergency Rehabilitation Proj 0.00 35.00 0.00 0.00 31.62 -2.13 0.00 P059971 2000 KH-EDUCATIONQUALITYMPROVEMENT 0.00 5.00 0.00 0.00 2.35 0.68 0.00 P060003 2000 KH-Forest Concession Mgt & Control Pilot 0.00 4.82 0.00 0.00 4.18 40.30 0.00 P065798 2000 KH-BIO & PROTEC AREAS M 0.00 1.91 0.00 0.00 1.52 0.66 0.00 P058544 2000 KH - Cambodia SAC 0.00 30.00 0.00 0.00 13.72 20.04 0.00 P052006 2000 KHBIO&PROTAREAM 0.00 0.00 2.75 0.00 2.12 3.29 0.00 P058841 1999 KH-NORTHEAST VILLAGE 0.00 5.00 0.00 0.00 3.17 3.46 0.00 P050601 1999 KH-SOCIAL FUND U 0.00 25.00 0.00 0.00 9.89 -1.32 0.00 P004030 1999 KH-Road Rehab. 0.00 45.31 0.00 0.00 36.30 30.26 0.00 P045629 1998 KH-URBAN WATER SUPPLY PROJECT 0.00 30.96 0.00 0.00 10.93 12.79 5.52 P004034 1997 KH-DISEASE CONTROL & HEAL 0.00 30.40 0.00 0.00 5.28 8.55 0.00 P004033 1997 KH-AGRICULTURAL PRODUCTIVITY 0.00 27.00 0.00 0.00 16.20 18.53 10.72 IMPROVEMENT Total: 000 25860 275 000 15686 9450 16.24 -74-  CAMBODIA STATEMENT OF IFC's Held and Disbursed Portfolio Jan - 2002 In Millions US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 2000 SEF ACLEDA Bank 0.00 0.49 0.00 0.00 0.00 0.49 0.00 0.00 Total Portfolio: 0.00 0.49 0.00 0.00 0.00 0.49 0.00 0.00 Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic 2000 SEF ACLEDA Bank 1.00 0.00 0.00 0.00 Total Pending Commitment: 1.00 0.00 0.00 0.00 -75-  Annex 10: Country at a Glance CAMBODIA: Economic and Public Sector Capacity Building Project Cambodia at a glance East POVERTY and SOCIAL Asia & Low- Cambodia Pacwt Income Dewlopment diamond' 2000 Population, mid-year (milions) 12 0 1.853 2,459 Lile expectancy GNI per capita (Ades method. US$) 260 1,060 420 GNI (Alias method, USS bitlons) 31 1,964 1,030 Average annual growth, 1t9440 Population (%) 2 5 11 1.9 Laborforce() 2 7 14 2 4 GNI Gross per primary Most recent estimate flatest year available, 1914-00) capita enrollment Poverty (% o1population below national poverty ine) 36 Urban population (% ortoeal population) 16 35 32 Ltfe expectancy at birth (years) 54 69 59 Infant mortality (per 1,000 live births) 100 35 77 Child malnutrition (X of children under 5) 47 13 Access to Improved water source Access to an improved water soun e (of population) 30 75 76 Illiteracy (X of population age 15+) 60 14 38 Grossprimaryenrollment (%of school-agepopulation) 113 119 96 - Cambodla Male 123 121 102 Low-4ncome group Female 104 121 86 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1980 1990 1900 2000 EconomIk ratias GDP (USS billions) 1 1 3 0 3 2 r Gross domeatic InvestmanenUGDP 8 2 15 8 Is 0 1 rd Exports of goods and sarvicasiGDP 6 1 37 2 40 1 Gross domestic savings/GDP I16 3 9 5 3 | Gross national savings/GDP 5 6 3 7 5 0 1 Current account balance/GDP -4 5 9 4 -10 4 DomesUc Investment Interestpayments/GDP 28 04 05 savings Total debVGDP 166 4 75 1 74 0 s Total debt service/exports 34 1 2 9 10 I Present value of dabt/GDP 62 1 Present value of debUexports 183 0 Indebtedness 1050-90 1990-0 11"1 2000 200044 (average annual growth) GDP 4.8 50 50 60 -Cambodia GDP per capita 20 27 27 40 Low-income group Exports ofgoods and services 151 191 50 50 STRUCTURE of the ECONOMY (% ofIGDP) 1980 1900 1999 2000 Growth of Investment and GDP (%) 140 Agriculture 55 6 39 6 371 T Industry 112 188 205 Manufacturing 52 2 Services 33 2 416 42.4 '`* Private consumption 91.2 898 j so 07 sas as Do General govemment consumption 7.2 63 Imports of goods and services 12 8 49 1 469 _i9 1980-90 199040 1999 2000 IGrowth of exports and Imports (%) (average annual growth) Agriculture 19 1.1 10 75 Industry 8 3 7 5 4 7 50- Manufacturing 82 2 Services 6.9 81 9 3 2 Private consumptlon 1.5 1 7 Gs General govemment consumpion -0 8 9 9 - - r Gross domestic Investment 13 4 16 7 .Expoft : Impons Imports of goods and services 10 3 22.6 5.0 Note 2000 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, tha diamond will be Incomplete. -76-  Camboda PRiCESard GOVERNMENT RNANCE low 1890 1999 2rioo ioftbnw% Domntse vdeen (% cherige) z Corusus er pre es 4 0 4.8 s tnplIdGDP delBar 145B 16 1.5 10 Govnmenatfinanac 5- - -55 (X of GDP, incAues cwTo,tgraants) Current roverme .. 6B 14.6 15.6 Cufnwt budgetbakrce -04 1 8 1 5 OPddlator - CFR Overaflrl surolus/deficit . -1 B -4 4 -5.5 tRADE 1_80 1i90 199O 2000 bportandlmpaotleveis(USSmIl.l. (USS mixons) Totd exortS (bb) .. 86 971 1396 zou Rubber 17 111 49 Loasandsomntimber 8 37 11 IAU Manutrcttres * Tdal kl parts (c) . 164 1.337 1 885 1 |0) Food .. .. .. S Ruel and energy Caorial oods 0 1.3 o 0 Ir i.iir w i iwo iwo lags Cwrutacca~~~~~0 95saiboGByP(a%) Exportoricendex1 0995=10. . inportprbce ndex(19 I010) 1Expor4s 7d1mo,s Terms d trade (0 -78 -1 00) BALANCE of PAYttENiTS 1eb90 19e0 1928 -030 Currenta countbalactoGD(%) (USn ml4ons) Exports or goords and servies so 1.131 1 600 o . knparts of goods and services 183 1,407 1,9- 9* * * * * * - Resrm balancee. -95 -276 -319 Nesthcome 0 -76 -8_ _ _ Noatcur rrant tnsters 45 70 7 0 I40 Current account balance 40 -282 43 0 s Rrenairhg Kom a(n et) 3 77 392 Ch auries I net reserves .. -95 -82 4 mm o: Restw lntidrin gold (USS miIans) 422 484 Cowrisan rob (DEC. bcsiAJSS) . 537D 3.807.8 3.840 8 EXTERNAL DEBT and RESOURCE FLOWS 11 9i0 low9 1999 200 (USS milon.) CodbLpdCo tlotn d 2000 ddbt (USSrIL) Tdal debt u Ataneig and dbed 1.854 Z262 Z357 IBRD 0 0 0 01082 IDA .. 0 180 207 I 0 Ct73 Tetd debt srvice . 30 33 1 6 IBRD 0 0 0 D 174 IDA . 0 1 1 Composlion dnetreasoutrcefws| OfHial granrs 23 220 271 Officl credlars .. 0 38 78 Privatecr dkors 0 -3 0 Foren drectInvsestment .. . 146 110 Partbioe8jtv .. 0E 18 Waoid Bank pogran Commimenb 0 80 37 A- IBrD E-U,aUrrI Disbusement .. 0 27 37 B- DA 0-Otherumwl8aer9l F. prbate Pthripalrepaymenb 0 0 0 C-tIF 0-SSWIoeMil Net low . 0 27 37 Iriterest peymerts 0 1 1 Net tnstrsf 0 26 35 Devebpmnert EcanamicsiEASPR 9R170 -77-  Annex 11: Detailed Description of Capacity Building Programs Training Needs Six categories of overall training needs have been identified. These categories, with subsidiary details, are- * Leadership and management practice o leadership concepts and issues o strategic planning and policy development o results-based management o key management practices in core corporate processes o project management o change management * Policy development and implementation o policy analysis o policy formulation o policy approval process o policy implementation o monitoring and evaluation * Public financial management o budget planning and implementation issues o financial accounting, controls and accountability o public procurement (practices and standards) o use of information technology in financial management o identification of program impact against Government objectives. * Human resource management o strategic human resource management practices and issues o managing performance, working relationships and teams o selection, appointment and development policies o back office employment relations practices o personal efficiency issues o use of information technology (HRMIS) * Governance and public administration o good governance o decentralization and deconcentration o communications and participation methods o compliance with civil service legislation and standards o ethics and anti-corruption * Poverty reduction o understanding concepts of poverty reduction o analysis and planning o project implementation The relationship between the three programs and the six categories of training needs, in terms of Key Target Areas and Secondary Target Areas is set out in Table A 11.1. and elaborated in more detail relevant to training needs in Table Al 1.2. -78-  Target Agencies Public officials for the three Programs will be selected from the following three sub-groups of public institutions, with an appropriate degree of participation of female civil servants, targeting specific units and functions that are expected to play a critical role in key reform programs: * policy coordination ministries (Council for Administrative Reform, Economy and Finance, Planning, Council for Development of Cambodia, and Reform Councils); * social ministries (Health, Education, Social Affairs, and Women's and Veterans Affairs); and * economic line ministries (Agriculture, Rural Development, Transport, and Commerce). * Agencies at the sub national level (provincial departments and operational districts). * Members of the National Assembly and their staffers concerned with parallel substantive issues Once the Government's priority mission groups (PMGs) are formed with clearly defined missions and work schedules, the Project aims to provide training for the PMGs to the extent possible within the scope and focus of this operation. This includes Inception Workshops. Mode of Training The mode of training envisaged under the EPSCB project is a selective combination of designated coursework and supplementary and specialized workshops. The coursework is intended to provide structured learning opportunities for a large number of officials and can be delivered effectively over the period of the proposed assistance. However, it is intended to go beyond classical classroom type training courses. A key theme is to match the training being provided with the changing demands being placed on key officials and managers at the relevant levels of government. Emphasis would be given to action learning, involving on-the-job activities and improvement in workplace competencies through assignments and projects directly related to current work priorities. This would be particularly relevant to any participants who are also PMG members. The application of this approach would be developed through careful design of the proposed programs, based on an assessment of training needs, "learning and development plans" for individual participants, and monitored through mentoring and supervisory approaches. A major advantage of action-oriented, self-learning methods is that these methods enable the program to use the most valuable ability possessed by the candidates, namely their knowledge and experience of the civil service system in which they operate, and even their frustrations and concerns about current practices. In this latter context, the approach has to recognize that existing experience is usually inadequate and due attention has to be given to change by focusing on best practice being adopted elsewhere. The training process would include structured group training in Cambodia in core skills, seminars and workshops, limited short-term overseas training (higher level officials), study tours and conferences in the region, and rotations within Ministries to undertake challenging reform tasks. Modular design and the use of core and supplementary units for enhanced specialist requirements will be adopted in this part of the program. -79-  Program dimensions The shape of the AEP, in terms of participants and time involved, would be along the following lines- * senior executives and selective Parliamentarians would be covered by this Program and not all would participate at the same time * because of demands on these officials, this program would not be based on regular coursework but on flexible short-term activities * seminars for (say) 30-40 officials at a time would be offered by invitation and there would be about 4 such seminars per year; these seminars would be up to one day in length * seminars using GDLN could be used as appropriate (numbers would be related to the capacity of the facility); these could be replicated to cover larger numbers of executives * there would also be short-term programs or courses (such as a 2 day program on leadership concepts and issues, or governance issues), with high-level intemational providers * there would be provision for a small number of fellowships for participation in study tours and programs in the region (proposals would be subject to consideration and approval on a merit basis) * over the period of the Program, all senior executives should participate in these activities The shape of the MDP, in terms of participants and time commitments, would desirably be of the following order- * up to 400 participants; * training to be provided to "teams" of about 20 participants at a time (up to 20 teams in total) * the coursework would aim at delivering 80 hours of instructional training for each participant. The attendance time would include presentations and discussion sessions. In addition there would be some time required for assignments related to workplace issues. * for each team, coursework would be arranged conveniently, say one week's attendance (about 35- 40 hours) at a time and then return to the workplace, with a second week's attendance after 2-3 weeks in the workplace. An altemative might be say 8 hours per week (1 day) for 10 weeks, making a total of about 80 hours over the period of the program. The first alternative might make programming easier and produce "graduates" earlier (after about 6 weeks). * as well as the proposed course work, there would be provision for a program of supplementary workshops on relevant specific issues, or for specific groups of officials. These workshops would relate either to current reform developments (such as further aspects of financial management) or to practical issues (such as project report writing). The shape of the PDP, in terms of participants and time commitments, would desirably be of the following order- * up to 100 participants in total, made up of groups of about 15-20; * this is proposed to be a more intensive program, in terms of time commitment, because of the need to develop policy skills as a high priority amongst those younger officials with initial experience in government and potential for career advancement * the coursework would aim at delivering 160 hours of instructional training. * 4 periods of weekly attendance (about 35-40 hours each) or 8 hours per week attendance over 20 weeks, making a total of 160 hours over the period of the program. The attendance time would include presentations and discussion sessions. In addition there would be time required for assignments and reports related to policy and reform issues. -80-  * as well as the proposed course work, there would be provision for a program of supplementary workshops on relevant specific issues, or for specific groups of policy-oriented officials. These workshops would relate either to current and prospective policy developments, financial and HRM issues, or new initiatives in governance, public administration and poverty reduction. There may be potential time conflicts with other reform activities in the workplace, and the availability of staff to meet the training objectives over an extended period may present some difficulties. There are also ancillary time demands, such as those involved in "training the (future) trainers". All of these demands need to be appreciated from the outset. These programming aspects would need to be addressed as more detailed planning occurs. The relative size and scope of these programs is shown in Table Al 1.3. Contents of Training Programs A. Advanced Executive Program The Key Target Areas (KTAs) for this high level group are leadership and management, governance and public administration and poverty reduction (see Table Al 1.1). The other three areas are regarded as Secondary Target Areas (STAs). The KTAs are discussed below. (a) Leadership and Management Practices Leadership and management skills for this program are concerned with the topics of personal and organizational leadership skills, strategic planning, results-based management, organizational reform and development, and the concepts of modern management. Change management concepts and practices would need to be included as these are important in implementing reforms. (b) Governance and Public Administration In terms of governance and public administration, there is a need for this program to build a greater awareness of the policy implications of the Governance Action Plan (GAP) and civil service legislation and principles and actions on ethics and anti-corruption. Although the Government made important steps toward GAP implementation, the current monitoring system needs to be strengthened toward a more rigorous mechanism. For instance, the development of benchmarks and indicators would help the Government and stakeholders evaluate the progress and impact of reform actions more objectively and systematically. (c) Poverty Reduction Poverty related issues include improving the understanding of poverty frameworks and poverty-focused policy formulation, implementation, and monitoring (including gender equity). Concepts of improved service delivery would be addressed under this topic. Poverty aspects at this level would include developing strategic abilities in the design and improvement of government programs, appropriate implementation of poverty-oriented reforms and the efficient use of funds within programs. Poverty-focused content would include analyzing poverty reduction objectives, identifying cross-sectoral linkages and their tradeoffs in the context of poverty reduction, financing and designing service delivery options for reaching. -81-  B. Management Development Program The key areas for this large middle-ranking group are leadership and management, particularly management practices, financial management, and HRM, particularly personal efficiency and teamwork. (a) Leadership and Management Practices Leadership and management skills for this program are concerned with the topics of personal leadership and supervisory skills, results-based management and the practices of modern management. In management, the coverage would tend more to fields such as organizational structures and methods, work organization, and project management. Practical issues of work allocation and programming, delegations of responsibility and task management would be covered. These are essential for the application of management-oriented ways of working and achieving results at this level. Project management is also an important area, given the project-oriented nature of future reform plans. The issues of work allocation, delegations of responsibility, spans of control, task management and accountability would need to be covered. Change management concepts and practices would need to be included since these are important in implementing reforms. An early contribution in this area might be to provide Inception Workshops on the role of PMGs and issues in their establishment and commencement. This would be in the character of an orientation or induction workshop, which could be repeated as necessary whenever new PMGs are established in order to ensure a consistent approach at the outset. (b) Financial Management Two levels of need have been identified for implementation of better public financial management. The first is general training in the existing budget execution systems. The second level of need is to provide the training required for the new post audit based, performance focused, budget execution system envisaged under the TCAP program. This requires capability building in budget management centers in pilot line ministries (and eventually all ministries), both at the national and sub national level. This should include the 'new' areas of output measurement, performance indicators and the role of internal audit. Training in the specialized area of fiscal management practices is already being developed and provided by the Economic Financial Institute (EFI) with ADB assistance, mainly to staff of MEF but also to some other officials. This training is not intended to be duplicated under the EPSCB. However, within EPSCB there is a need to provide participants in the implementation program with basic training in financial management and planning, the role of Budget processes and the use of financial information and controls. This will help extend knowledge and awareness of financial management issues to many officials in PMGs, beyond the specialized fiscal management group in MEF and other Ministries. Any identified needs for more specialized fiscal training will be handled by reference to EFI or through supplementary workshops, which the EFI will be asked to provide. Moreover, it is intended to request the EFI, as part of its participation in EPSCB, to be the provider of all units dealing with financial management. There exist acute training gaps in fiscal management at the sub-national level. Attempts to create budget management centres and streamlined disbursement have suffered because relevant officials are not familiar with * identification of the results of program activity in relation to Government objectives. * how to prepare budgets for their spending units -82-  * the costing of their activities for the purpose of requesting funds from higher levels * financial control procedures * preparation of accounting records and reports * the nature of their accountability when they exercise new flexibility in making spending decisions. In provinces and districts there is little understanding of prioritizing the use of budget funds, and funds are not allocated to operational units on the basis of program activity levels. Instead a variety of informal allocation processes prevail. Even in this case, managers of operational units often seem reluctant to claim available funds due to uncertainty about the nature of their ex post accountability for the use of the funds. While care will need to be taken to ensure that the training is coordinated with that provided by other donors, discussions indicate that this is unlikely to be a problem since the activities of EFI and other donors focuses on more specialized and intensive fiscal management training, which goes beyond what is intended to be covered under the EPSCB. In this context, the EPSCB will be compatible and not conflicting. The Government's ongoing reformn toward a more deconcentrated and decentralized public finance system points to the need for better procurement skills based on understanding of current legislation and reform initiatives; and skills suitable for a more decentralized procurement system. Capacity building needs in this regard would apply to the Department of Public Procurement at MEF and selected line ministries, and at all levels of the administrations, including the central, provincial, and district offices. There is also a critical need for training in managing procurement, especially with the introduction and extension of the PAP. The development of procurement skills within donor projects provides a source of good practice methodologies and standards. Another critical area in public financial management is public procurement. Training programs would involve some key elements such as: (a) best practices in procurement legislation, administration and management in the region and the world; (b) lessons from experience in procurement reform in other countries; (c) formulating policies toward procurement reform in Cambodia. Other important aspects of procurement to be covered would be best practice in procurement within donor projects, as a basis for extending good practice. (c) Human Resource Management In HRM matters the focus would be specific and practical. Some exposure to the more strategic issues of HRM would be provided, but this training would be more concerned on the performance of human resources in the workplace through better work allocation, team work and motivation and engagement of junior staff. More specifically it would include coverage of: * managing personal efficiency, effectiveness and work priorities * providing leadership in the workplace by influencing others positively * establishing effective workplace relationships * facilitating work teams and their activities * working to achieve results through work programming and monitoring of progress * monitoring performance and implementing specific work process improvements * managing difficulties and resolving conflicts * sharing workplace information through good communications * building and maintaining networks of colleagues -83-  * maintaining an effective workplace environment * encouraging development of staff * facilitating change in service delivery C Professional Development Program The key target areas for the younger professionals are policy development, financial management and HRM. Secondary areas for this group are leadership and management, governance and public administration, and poverty reduction, all of which will also be covered in this more intensive program. (a) Policy development and implementation This area will include a carefully designed focus on policy analysis, formulation, the policy approval process, policy implementation and monitoring and evaluation activities needed to review progress and results. Case studies will ensure a practical focus. Particular attention will be given to policy in poverty reduction. (b) Financial management Results-based management referred to above is closely linked with public financial management, which focuses on resource management generally, budget planning and management, financial control and accounts management in order to use internal budget planning to replace external financial controls, training in the financial costing of programs and project activities; training in the identification of outputs, and cost-benefit analysis of projects; and training in the identification and reporting of program and project performance indicators. Participants will learn to understand the relevance and importance of- * identification of the results of program activities in relation to Government objectives. * general Budget preparation issues * budgets for their spending units * the costing of their activities * financial control procedures * the use of accounting records and reports * the nature of their accountability when they exercise new flexibility in making spending decisions. The training goal in this area is not to provide extensive specialized training in fiscal practices and execution but to inculcate an understanding of the relevance of modern public sector financial management highlighting differences from existing intemational practice in Cambodia. This will draw on international best practice that could be relevant to Cambodia. (c) Human Resource Management Many of the comments made above about gaps in financial management capabilities apply equally to HRM matters. There are many aspects about strategic use of HRM as well as specifics such as appointments, transfers, motivation and performance, supervision and guidance that need to be addressed by training (as well as by specific reform of such practices). Experience from other countries indicates that HRM needs to encompass: -84-  * HR Planning and use of structures (largely depending on HRNIS analysis) * Understanding and applying staffing practices (in appointments, transfers, mobility and dealing with absenteeism) * Remuneration and related conditions, including allowances * Performance management (including perfornance appraisal concepts, accountability issues and dealing with poor performers) * HRD and HRD Plans (ranging from entry level training to continuing learning models) * Concepts of cooperation and team work in the workplace (including delegation of work and concepts of teams and task forces, work programming and time-tabling) The program would include coverage of all of the above, through core subject coverage and with additional material for those with specialist requirements. Secondary Target Areas Other areas described as secondary target areas for the two areas of coursework are nevertheless important in their own right and further comments are provided below. (a) Governance and Public Administration Public administration and governance includes understanding the obligations and duties of civil servants as set out in CS legislation, decentralization and the improvement of service delivery to community level, and govemance and anti-corruption issues such as Govemance Action Plan implementation and monitoring. Regarding governance, candidates in this program need to gain broad knowledge and deep understanding of govemance issues, with a view to formulating and designing future governance policies and reforms in Cambodia. There are already some leaming programs specifically designed for policy makers in developing countries. For instance, this program could draw on appropriate material from selected courses among World Bank Institute's action-oriented governance program for policy makers: (a) national and sub-national governance and anti-corruption diagnostics and action programs; (b) effective use of public resources (with special focus on utilizing resources to reduce poverty); (c) legal and judicial reform; (d) media development and accountability; (e) parliamentary strengthening; and private-public sector link for improved governance. General learning programs from international sources would be combined with policy dialogues and discussions among participants and resource persons conceming ongoing reforms in Cambodia, with a view to envisioning governance reform agenda and strategies in the future. (b) Poverty reduction Poverty related issues include improving capacity and understanding of poverty frameworks and poverty- focused policy formulation, implementation, and monitoring (including gender equity). Concepts of improved service delivery would be addressed under this topic. Poverty aspects would include developing strategic abilities in the design and improvement of government programs, appropriate implementation of poverty-oriented reforms and the efficient use of funds within programs. Poverty-focused content would include analyzing poverty reduction objectives, identifying cross-sectoral linkages and their tradeoffs in the context of poverty reduction, financing and -85-  designing service delivery options for reaching the poor, and managing the decentralized delivery of services, monitoring and evaluation. Participants from reform agencies would receive specialized, intensive training programs in project management for governance projects. This training program would develop the capacity of implementation groups to work with key donors in designing and formulating the implementation of reform actions, including the development of work plans, monitoring benchmarks and indicators and costing. This would collectively permit reform agencies to prioritize and sequence reform actions in the framework of the GAP. It would be also desirable for participants to gain skills to monitor and evaluate the value and relevance of donor-funded projects in general. Curriculum Preparation Specific curricula for these programs would need to be developed based on the recent training needs assessment, and related to the overall needs of public management, policy and social development objectives. The objective would be to create curricula (and learning materials) which would encourage participants to learn and apply their new training to on-the-job issues. This is a significant work component and would need to be done as one of the first components of the Project after approval. External advisory services would be required for curriculum design and preparation of initial learning materials. The curricula would set out more specifically the detailed content of the programs to be delivered, covering the principal topics-leadership and management, policy development and implementation, public financial management, human resource management, public administration and enhancing governance; and their strategic linkages with poverty reduction. Training needs to be covered by curriculum development are identified in some detail in Table Al 1.1. The curricula in turn will be the bases for the development of learning materials and presentations for delivery within the designed programs. The curricula would need to be differentiated between the coursework programs although there would be inter-linkage and some common areas of coverage. The curricula for the PDP would have more of a learning and education character while the MDP would be more practical and applied in nature. Costs of curriculum development would be minimized by recognition of the similarities in topics to be covered, but differentiation in degree would have to be recognized as well. The programs for delivery of the coursework would be generic in nature and related to the major training needs identified. They should not just be limited to current areas of specialist experience or interest. However, the programs would be modular in structure and allow those with specialist requirements to undertake more intensive training in those areas through the use of additional workshop units. For example, additional workshops could be provided in public financial management and in HRM to assist with more training in these areas. In addition, there would be scope for some more specialized workshops if other specific gaps in capabilities were identified. For the higher-level AEP, there are numerous good examples of executive development seminars from international sources that could be taken into account and modified to accord with Cambodian requirements. -86-  Selection Criteria It will be important that participants in these programs are selected transparently, against stated criteria, linked with reform objectives, agency requirements and individual personal qualities. For AEP, the following is suggested- This group is charged with strategic guidance and providing leadership to achieve results. All officials in this group should participate over the period of the Program and the only issue in selection would be in terms of priorities for attendance at particular seminars. Nominations should relate to relevance of the seminar topic, personal involvement and agency needs and availability at the given time. For MDP, the following is suggested- Selection for participation should be based on clear linkages with personal involvement in management issues concerned with practical reforn activities, needs to improve personal management and efficiency skills (see below), and endorsement of suitability and availability at the agency executive level. Particular areas of relevant training needs in this context which candidates may identify with on a personal basis are- * involvement in planning and supervising resource usage, including Budget preparation; carriage of implementation activities; setting work objectives and monitoring progress; organizing timetables and programs; balancing conflicting demands in the workplace; managing staff and workplace issues; resolving conflict in the workplace; organizing team activities; communicating with staff; representation and reporting responsibilities; monitoring and evaluation activities. Participants in PMG activities should be given a high priority for participation in MDP. For PDP, the following is suggested- Selection should be based on clear linkages with policy development needs at the agency and personal levels, as this is a primary focus of this program. A sound basis of personal participation in structured studies, and professional experience in Government service, will be desirable, along with personal qualities indicating scope for potential advancement in the Cambodian Civil Service. It is expected that participants in this program will be younger professionals with some current experience of employment in government. Graduates of recent ERA and EFI programs and graduates of overseas graduate schools (e.g. Master's program) may more readily meet these criteria and should be given preference ahead of other applicants without this established personal background. Mentoring For the PDP (about 100), it is proposed there would be a small mentor group at Secretary General/Deputy Secretary General level (e.g. one each from policy coordination ministries) to provide guidance and support to participants as necessary. -87-  Qualifications It would be desirable to provide an officially recognized Certificate for the coursework programs. This should be explored by Cambodian authorities as the Project proceeds. Provincial program delivery The programs will be delivered in Phnom Penh and the provinces.. However, some experience may be gained by training workshops in Phnom Penh, attended by invited groups of provincial officials. These workshops would be for a short period, say 2-3 days. Aspects of financial and Budget management, procurement, and deconcentration have been identified as potentially of high priority in this regard. Partnership arrangements The nature of the new programs and the teaching methods proposed under the Project will present important new challenges. External advisory services will be necessary for curriculum development, initial delivery of some courses and the identification and development of local trainers. A partnership model would have value and more than one partner could be involved, because a diversity of expertise is likely to be needed. Internationally reputable civil service training institutions and/or regional universities will be identified as partners of the RSA and EFI. This could be seen as a "setting-up" phase and might have to extend for much of the first year of the training programs, with less intensive support after that. Trainers It will probably be necessary to use a range of international providers in the first year. However, the concept is to "train the trainers" and use local trainers and consultants. Flexibility and Adjustment Programs should not be regarded as defined rigidly. There should be an initial design and it should be kept under evaluation. Content and coverage may need to be modified as reform issues arise. The balance between topics needs to be kept under notice, and adjusted as necessary. The supplementary workshops provide a means of raising and testing new topics. Table Al1.l. Relative mapping of streams and programs Streams and Programs Executives Management Professionals Institutional development Leadership and KTA KTA STA management _ ___ Policy development STA STA KTA Financial management STA KTA KTA KTA (MEF/EFI) fiRM STA KTA KTA KTA (CAR) Governance and public KTA STA STA administration Poverty reduction KTA STA STA Note: KTA: Key Target Area; STA: Secondary Target Area -88-  Table Al 1.2. Indicative list of topics identified by training needs assessment for subsequent inclusion in curriculum development Topic AEP MDP PDP 1(a). Leadership & Management foundations Context of reform (NPAR, CAR, PAP, PSRP etc) f / Leadership Change management f f Strategic planning / / Results based management / / Risk management f 1(b). Management practices and techniques General management ___________ f Supervisory skills f_f Project management / f / Organisational arrangements and structures f / / Role of PMGs f f f Work arrangements and teamwork / / Team management f / / Records management Monitoring and reporting (MIS) VI V/ 2. Policy Development and implementation Policy analysis / Policy formulation _/ Policy approval processes Policy implementation 1' / f Monitoring and evaluation ' 3. Public financial -management. Financial management f Budget management issues f_ f_f Deconcentration and decentralization V / I Auditing I/ / Procurement / / 4. Human resource management HRM planning f f HRMIS VI 7 _ -89-  Topic AEP MDP PDP Managing staff _ _ 1 HRD / _ X Performance management 7 / Gender VI/ / 5. Governance and public administration _- Good governance / Principles of CS administration / / / CS legislation and concepts / Anti-corruption and ethics _ / International experience in PS reform _ / Case studies _ / 6. Poverty reduction Poverty strategies _ _ / Implementing poverty reduction / / projects _ _ Service delivery issues Role of PMGs in service / delivery Role of donor assistance / / Working with donors _ _ Case studies _ _ _ -90-  Table A11.3. Proposed relative pattern of Programs for Executives, Management and Professionals (Indicative only) Streams, Programs Overall Overall Executives Management (coursework) Professionals (coursework) and Modules $m. No. of hours No. of hours % modules modules Leadership and 0.339 21 30 4 16 20 5 20 12.5 management Policy development 0.195 12 10 2 8 10 8 32 20 Financial 0.326 20 10 5 20 25 8 32 20 management HRM 0.326 20 10 5 20 25 8 32 20 Governance and 0.219 14 20 2 8 10 6 24 15 public administration _ Poverty reduction 0.211 13 20 2 8 10 5 20 12.5 Total (baseline)* 1.618 100 100 20 80 100 40 160 100 Note 1. Total amount is the baseline cost and excludes curriculum development, training for provincial officials, and program evaluation. Note 2: Executives undertake seminars and short programs. Management and Professionals undertake structured coursework, based on curriculum modules. Management-20 modules of 4 hours each; Professionals-40 modules of 4 hours each.  Annex 12: GDLN Feasibility Study 1. Introduction This report presents the outcomes of an independent review examining the feasibility of establishing and operating a GDLN (Global Development Learning Network) center in Cambodia as part of the EPSCB project. In this study, cost estimates are based on the results of a World Bank Technical Mission in January 2002, other costs determined by the appraisal mission, and data obtained from the operation of other GDLN sites. Revenue estimates are based on interviews with donor country representatives, government departments and national organizations, international organizations, NGOs, and incorporating the experience of other GDLN sites. The study concludes that if the GDLN center is established within an appropriately self-contained administrative structure, is well managed, and enthusiastically marketed, it can be operationally sustainable. 2. Costs The details of the establishment costs for the GDLN and those for first five years of operation are presented below. Table 2.1 - Cambodia GDLN Technical Costs Full DLC One-Time Costs Annual Technical Operational Costs LOCAL NFRASTRUCTURE EQUIPMENT $88,850 $12,000 LOCAL CONNECTIVITY EQUIPMENT $25,400 $2,500 GLOBAL CONNECTIVITY EQUIPMENT $95,000 S 144,000 PEDAGOGICAL TOOLS $232,750 S25,000 LOGISTICS $87,500 $0 CIVIL Works $157,500 $0 FURNITURE S35,000 $0 CONTINGENCY $20,000 $0 2-STAFF, 2-WEEK TRAINING $10,000 $0 ~ ____ _ 1 5 Table 2.2 contains a summary of GDLN operating costs. All projections are based on the assumption that the DLC would be ready to operate within 12 months and therefore calendar years are shown. -92-  Table 2.2 - Cambodian DLC -5 Year Operating Costs BEpenses: 2003 2004 200S 2006 2007 Recurring Bipeness Human Resources - Administraton Dlrector $ 40,000 38,000 36,000 36,000 36,000 Technicsan $ 18,000 18,000 18,000 18,000 18,000 Eduatlon Speclaist $ 16,000 18,000 18,000 18,000 18,000 Adnin Support/Recepothn S 4,500 4,500 4,500 4,500 4,500 Booldeepoig $ 1,125 1,125 1,485 1,800 2,250 Support- Other $ 1,125 1,125 2,250 2.250 4,500 SecurHy S 9,000 9,000 9,000 9,000 9,000 Iterpretaton (non course) S 12,00 12,000 12,000 12.000 12,000 Total HR - Admlnlstration S 103,750 $ 99,750 $ 101,235 S 101,580 $ 104,250 Marketing/Development _ _ Adverftsingfrom S S 6,000 $ 6,000 S 6,000 S 6,000 S 6.000 Travel S S 9,949 S 9,949 S 9,949 $ 9,949 $ 9,949 Hosptalty/Pepresentation S S 1,500 S 1,500 $ 1,500 S 1,500 S 1,500 Totas MarkeUng S 17.449 $ 17,449 S 17,449 S 17,449 S 17,449 Overhead Rent (In S_ __ Maintenance S 2,400 S 2,400 S 2,400 S 2,400 S 2,400 Office BEpenses - General S S 2,400 S 2,400 S 2,400 S 2,400 $ 2,400 Telephonelmynnuniton S $ 1,200 S 1,200 S 1,200 $ 1,200 S 1,200 Spares S S 60o $ 600 S S0 S 600 S 600 hsurance (cost unverifed) $ 9,000 5 9,000 S 9.000 9,000 S 9,000 Car/Diver S S 4,800 S 4,800 S 4,800 S 4,800 S 4,800 Bectriciky S S 12,000 S 12,000 S 12.000 $ 12,000 S 12,000 Fuel (generator) S S 600 S 600 S 600 S 600 S 600 Total Overhead S 33,000 S 33,000 S 33,000 S 33,000 S 33,000 Equlpment Operations I Satelte-Annual S S 144,000 S 144,000 S 144,000 S 144,000 S 144,000 MWVntenance - Annual S $ 39,501 S 39,502 S 39,503 S 39,504 $ 39,505 Total Equipment Operations S 183,501 $ 183,502 S 183,503 S 183,504 S 183,605 Other Expenses Consultants - Technki Assistance Total HR- Consultants S 20,000 S 10,000 S 10,000 S 10,000 S 10,000 Content Docurantalton Center S S 20,000 S 5,Wo S 5,000 $ 5,000 S 5,000 Onine Subscriptbns S $ 5,000 $ 5,000 S 5,000 S 5,000 S 5,000 Total Content S 25,000 S 10,000 S 10,000 $ 10,000 $ 10,000 Cost Summary Total Admin and Overhead 154,199 150,199 151,684 151,999 154,699 Total Connectivity 183,501 183,502 183,503 183,504 183,505 Total Other Bkpenses 45,000 20,000 20,000 20,000 20,000 Contingency 3% 11,481 10,611 10,656 10,665 10,748 Total Cost 394,181 364,312 365,843 366.168 368,950 provisIon for Inflatlon 2% 7,884 14,718 22,392 30,184 38,401 Total Cost wih Inflation 40Z065 379,030 388,235 396,352 407,351 * Director Salary in 2003 includes 3 months prior to opening to market the center -93-  8I 8 '1H ' IiigS_____ X Q