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World Bank Document Documentof The World Bank Public Disclosure Authorized Report No. 14977-RU STAFF APPRAISAL REPORT Public Disclosure Authorized RUSSIAN FEDERATION CONMUNITY SOCIAL INFRASTRUCTURE PROJECT Public Disclosure Authorized APRIL 2, 1996 Public Disclosure Authorized buman Resources Division Country Department III Europe and Central Asia Region CURRENCY EOUIVALENTS (as of March 6, 1996) C'urrency Unit = Ruble Rb I million US$207.4 US$1 = Rb 4824 WEIGHTS AND MEASURES Metric System ACRONYMS AND ABBREVIATIONS AGETIP - Agence d'Execution de Travaux d'Infrastructure Publiques BSEP - Black Sea Environmental Program CAS - Country Assistance Strategy CIS - Commonwealth of Independent States CPAR - Country Procurement Assessment Report CPIU - Central Project Implementation Unit CPPR - Country Portfolio Performance Review DRD - Decentralization and Regional Development Loan (Mexico) GDP - Gross Domestic Product GNP - Gross National Product GPN - General Procurement Notice IBRD - International Bank for Reconstruction and Development ICB - International Competitive Bidding IMF - International Monetary Fund MINNAT - Ministry of Nationalities and Federal Affairs MIS - Management Information System MOE - Ministry of Education MOF - Ministry of Finance MOH - Ministry of Health NAB - Novosibirsk Advisory Board NBF - Parts of the Project with no financing from the World Bank NCB - National Competitive Bidding NPV - Net Present Value NS - National Shopping Oblast - Region OECD - Organization for Economic Cooperation and Development PB - Project Bureau PCU - Project Coordination Unit PlJ - Project Implementation Unit PPF - Project Preparation Facility Raion - Sub-division of a region Rb - Ruble SA - Special Account SEDESOL - Mexico National Solidarity Program SOE - Statement of Expenditure TCHIF - Territorial Compulsory Health Insurance Fund TOR - Terms of Reference VAT - Value Added Tax Vodokanal - Water Company WBF - Parts of the Project with financing from the World Bank RUSSIAN FEDERATION-FISCALYEAR January I - December 31 STAFF APPRAISAL REPORT RUSSIAN FEDERATION COMMUNITY SOCIAL INFRASTRUCTURE PROJECT TABLE OF CONTENTS 1. INTRODUCTION ....... ......................................... I A. Economic and Sectoral Background ............................... I The Soviet Legacy ........................................ 2 Sectoral Situation in Novosibirsk and Rostov Oblasts ................... 4 B. The Government's Reform Strategy ................................ 6 Economic and Budgetary Reforms .............................. 6 Sectoral Reforms ......................................... 7 C. The Bank's Assistance Strategy .................................. 8 HI. LESSONS FROM EXPERIENCE ................ ..................... 10 A. Lessons from other projects in Russia ............................. 10 B. Lessons from Other Countries .................................. 11 III. THE PROJECT ............................................. ... 13 A. Project Evolution .......................................... 13 B. Government Commitment and Beneficiary Participation ................... 13 C. Project Objectives ....................................... ... 14 D. Project Description ................ ................ 15 1. Education Component ................................... 16 2. Health Component .................................... 19 3. Water Supply and Sanitation Component ....................... 25 4. Budget and Expenditure Management Component ................. 29 5. Monitoring and Evaluation Component ....... ................. 31 6. Preparation of Future Projects .............................. 32 IV. PROJECT ADMINISTRATION AND IMPLEMENTATION ...... .. ........... 33 A. Project Administration at the Federal Level .......................... 33 B. Project Administration at the Oblast Level ........................... 34 'Ihe report is based on the findings of an appraisal mission in lune-July 1995. Tbe team comprised: Timothy King (task manager and mission leader), David 0. Davies (education), Howard Carter (water and sanitation), Dov Chernichovsky, Elena Potapchik (health), Mahesh Reddy (finance), Hugues Casting (contract management), Maria Van Beek (procurement), Ezedine Hadj-Mabrouk (enviromnent specialist), Joele La Vourch (disbursement and accounting), Eugene Finkel (participation specialist), Joy de Beyer (operational manual), Maria Gracheva (operations assistant), and John Pickard (Project Coordinator, Moscow). loe Scearce (implementation and procurement) also contributed to the Report. Peer reviewers are: William Dillinger (LAIEU), M. Louise Fox (EC4HR), Christine Kessides (TWUDR), and Leslie Pean (AF51N). Staff assistance was provided by Arlene Pastor. Robert Liebenthal and Yukon Huang are the managing Division Chief and Department Director, reapectively, for the operation. V. PROJECT COSTS, FINANCING, PROCUREMENTAND DISBURSEMENT ....... 39 A. Project Costs . ............................................. 39 B. Project Financing .......................................... 41 C. Procurement.............................................. 43 D. Disbursement. ............................................. 49 E. Reporting ............................................... 51 VI. PROJECTJUSTIFICATION AND RISKS ............................... 53 VII. AGREEMENTSREACHED AND RECOMMENDATIONS................... 59 ANNEXES 1.1 EconomicSituation in Novosibirsk and Rostov Oblasts 1.2 The Structure and Capacity of ConstructionEnterprises in Novosibirsk and Rostov 1.3 Fiscal and Budgetary Systems in Novosibirsk and Rostov Oblasts 3.1 SelectionCriteria and Model Appraisal for Education Subprojects 3.2 EducationFacilities Managementand SupportingManagement Information System (NovosibirskMunicipality) 3.3 SelectionCriteria and Model Appraisal for Health Subprojects 3.4 Proposed Pilot Reforms in Health Financing 3.5 SelectionCriteria and Model Appraisal for Water Supply and SanitationSubprojects 3.6 Budget and Expenditure ManagementComponent: ConsultantTerms of Referenceand Hardware Specifications 3.7 PerformanceMonitoring Indicators 4.1 Project ImplementationSchedule 4.2 Project SupervisionPlan 5.1 Project Cost Estimates 5.2 Flow of Funds for Implementationof the Project 5.3 Detailed Procurement Arrangements 5.4 Technical Assistanceand Training: Terms of Reference 6.1 InstitutionalStrengthening Program: EnvironmentalIssues 7.1 Selected DocumentsAvailable in the Project File (to be prepared) MAPS Russian Federation IBRD No. 27262 NovosibirskOblast IBRD No. 27263 Rostov Oblast IBRD No. 27264 PROJECT ID Number: RUPA35761 TABLES IN TEXT 3.1 Education Component: Schedule of Proposed Program of Disbursements (Identified Subprojects) ............... 17 3.2 Health Component: Schedule of Proposed Program of Disbursements (Identified Subprojects)........................ 22 3.3 Water Supply and Sanitation Component: Schedule of Proposed Program of Disbursements (Identified Subprojects).......................................... 26 5.1 Components Project Cost Summary.................................. 39 5.2 Summary of Project Cost by Expenditure Category ........................ 40 5.3 Financing Plan ....................................... 42 5.4 Summary of Proposed Procurement Arrangements ........................ 44 5.5 Summary of Estimated Disbursements of IBRD Loan ....................... 50 5.6 Estimated Schedule of Loan Disbursements ............................. 50 I RUSSIANFEDERATION COMMUNIfY SOCIALINFRASTRUCTURE PROJECT LOAN AND PROJECT SUMMARY Borrower: Russian Federation Benericiaries: Ministryof Nationalitiesand Federal Affairs, Novosibirskand RostovOblast Administrations,and suboblastadministrations in these oblasts. Amount: US$200million Terns: Payable in seventeen years, including five years of grace, at the standard variable interest rate for LIBOR-baseddollar single-currencyloans. On-lendingterns: The two participatingoblasts would receive$194 million, half on a grant basis and half as a loan at a variable rate of interest of up to 2.5 percent above the World Bank's lending rate, payable in twelve years, includingthree years of grace. Repaymentobligations of raions and other local beneficiarieswill be determinedby their revenue capacities, but should not be smaller than 10% of their share of the loan. Project Objectives: This is intendedas a replicabledemonstration project, designed to: (i) reduce the present deteriorationof education,health, and water supply and sanitation facilities in Novosibirsk and Rostov oblasts; (ii) improve the efficiency of managing public resources; (iii) foster private sector development; (iv) promote broad participation, including non-governmentalparticipation, in decision-making; and (v) monitor and evaluate the effectiveness of new financial, procurementand participatorypractices and disseminatethe reults in order to improve such practices elsewhere in the Russian Federation. ProjectDescription: The proposed Loan would financesmall-scale investments in selected types of education, health and water supply and sanitation infrastructure and would introducenew mechanismsfor appraisingand implementingsuch subprojects. (i) The Education Component would finance the rehabilitation of schools providing general education (including an expansion of capacity in a small number of schools, and two to three new schools). (ii) The Health Component would include the rehabilitation and upgrading of the core functions of selectedmunicipal and emergencyhospitals and polyclinics. (iii) The Water Supply and Sanitation Component would include small-scale investments
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