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Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: PAD1424 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT PROJECT APPRAISAL DOCUMENT ON A Public Disclosure Authorized PROPOSED LOAN IN THE AMOUNT OF US$55 MILLION TO THE REPUBLIC OF ARMENIA FOR A LOCAL ECONOMY AND INFRASTRUCTURE DEVELOPMENT PROJECT Public Disclosure Authorized December 1, 2015 Social, Urban, Rural and Resilience Global Practice EUROPE AND CENTRAL ASIA This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without Public Disclosure Authorized World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective November 23, 2015) Currency Unit = AMD ADM 475 = US$1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank M&E Monitoring and Evaluation ADS Armenia Development Strategy MIS Management Information System ASA Air Service Agreements MNA Middle East and North Africa ASIF Armenia Social Investment Fund MoC Ministry of Culture ATDF Armenian Territorial Development Fund MoE Ministry of Economy B&B Bread and Breakfast MoNP Ministry of Nature Protection Ministry of Territorial Administration BP Bank Policy MoTA&ES and Emergency Situations MOUD Ministry of Urban Development CBA Cost Benefit Analysis NCB National Competitive Bidding National Competitiveness Foundation CER Contingent Emergency Response NCFA of Armenia CIS Commonwealth of Independent States CNF Caucasus Nature Fund NGO Non-Governmental Organizations Country Procurement Assessment CPAR NPV Net Present Value Review CQS Consultants’ Qualifications Selection OM Operations Manual CSO Civil Society Organizations OP Operational Policy DA Designated Account PDO The Project Development Objective DC Direct Contracting PFM Public Financial Management DFA Development Foundation of Armenia POM Project Operations Manual DMO Destination Management Organizations PPI Public Private Investment DPS Designated Procurement Specialist PPP Public Private Partnership EAP East Asia and Pacific PSC Project Steering Committee ECA Europe and Central Asia QBS Quality Based Selection ECAA European Common Aviation Area QCBS Quality and Cost-Based Selection Europe and Central Asia Capacity ECAPDEV RAP Resettlement Action Plans Development Enterprise Development and Market EDMC RDP Regional Development Project Competitiveness EIB European Investment Bank RPF Resettlement Policy Framework EIRR Economic Internal Rate of Return SAR Subproject Appraisal Report Environmental and Social Impact Strategic Environmental, Social, and ESIA SESCHA Assessment Cultural Heritage Assessment Environmental and Social Management ESMF SH Shopping Framework Environmental and Social Management Social Investment and Local ESMP SILD Plans Development ESR Environmental and Social Reviews SME Small and Medium-sized Enterprises Small and Medium Entrepreneurship ESW Economic Sector Work SMEDNC Development National Center EU European Union SNCO State Non-Commercial Organization FIRR Financial Internal Rate of Return SOE Statement of Expense FM Financial Management SPN Specific Procurement Notices FMM Financial Management Manual SPN Specific Procurement Notices GDP Gross Domestic Product SSR Subproject Summary Report GIZ Deutsche Zusammenarbeit SSS Single Source Selection GNI Gross National Income SDC Swiss Development Cooperation GoA Government of Armenia ToR Terms of Reference GoG Government of Georgia TTL Task Team Leader GPN General Procurement Notice UNDB United Nations Development Business United Nations Educational, Scientific GRS Grievance Redress Service UNESCO and Cultural Organization Historical and Culture Heritage HCHPA US$ United States Dollar Protection Agency United States Agency for International HQ Headquarters USAID Development International Auditing and Assurance IAASB VAT Value Added Tax Standards Board International Bank for Reconstruction IBRD VFF Visit family or friends and Development IC Individual Consultants WB World Bank ICB International Competitive Bidding WDR World Development Report WG Working Group IFAC International Federation of Accountants WTO World Trade Organization IFR Interim Financial Report WTTC World Travel and Tourism Council ISA International Standards on Auditing WWF World Wide Fund for Nature LA Legal Agreement YR Year LAC Latin America countries LCS Least Cost Selection Local Economy and Infrastructure LEIDP Development Project LSG Local Self-Government Regional Vice President: Cyril Muller Country Director: Mercy Miyang Tembon Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager: David. N. Sislen Task Team Leaders: Ahmed A. R. Eiweida, Zaruhi Tokhmakhian ARMENIA LOCAL ECONOMY AND INFRASTRUCTURE DEVELOPMENT PROJECT TABLE OF CONTENTS Page I. STRATEGIC CONTEXT .................................................................................................1 A. Country Context ............................................................................................................ 1 B. Sectoral and Institutional Context ................................................................................. 2 C. Higher Level Objectives to which the Project Contributes .......................................... 5 Rationale for Bank involvement ......................................................................................... 5 II. PROJECT DEVELOPMENT OBJECTIVES ................................................................6 A. PDO............................................................................................................................... 6 Project Beneficiaries ........................................................................................................... 6 PDO Level Results Indicators ............................................................................................. 6 III. PROJECT DESCRIPTION ..............................................................................................7 A. Project Components ...................................................................................................... 7 B. Project Financing .......................................................................................................... 8 Project Cost and Financing ................................................................................................. 8 C. Lessons Learned and Reflected in the Project Design .................................................. 9 IV. IMPLEMENTATION .....................................................................................................10 A. Institutional and Implementation Arrangements ........................................................ 10 B. Results Monitoring and Evaluation ............................................................................ 11 C. Sustainability............................................................................................................... 11 V. KEY RISKS ......................................................................................................................12 A. Overall Risk Rating and Explanation of Key Risks .................................................... 12 VI. APPRAISAL SUMMARY ..............................................................................................13 A. Economic and Financial Analysis ............................................................................... 13 B. Technical ..................................................................................................................... 15 C. Financial Management ................................................................................................ 17 D. Procurement ................................................................................................................ 18 E. Social (including Safeguards) ..................................................................................... 19 F. Environment (including Safeguards) .......................................................................... 21 G. Other Safeguards Policies Triggered .......................................................................... 22 H. Grievance Redress ...................................................................................................... 22 Annex 1: Results Framework and Monitoring .........................................................................24 Annex 2: Detailed Project Description .......................................................................................31 Annex 4: Implementation Support Plan ....................................................................................69 Annex 5: Economic and Financial Assessment .........................................................................72 Annex 6: ARMENIA: Local Economy and Infrastructure Development Project Map ........83 . PAD DATA SHEET Armenia Local Economy and Infrastructure Development Project (P150327) PROJECT APPRAISAL DOCUMENT . EUROPE AND CENTRAL ASIA Report No.: PAD1424 . Basic Information Project ID EA Category Team Leader(s) P150327 B - Partial Assessment Ahmed A. R. Eiweida, Zaruhi Tokhmakhyan Lending Instrument Fragile and/or Capacity Constraints [ ] Investment Project Financing Financial Intermediaries [ ] Series of Projects [ ] Project Implementation Start Date Project Implementation End Date 29-Dec-2015 30-April-2021 Expected Effectiveness Date Expected Closing Date 09-May-2016 30-Apr-2021 Joint IFC No Practice Senior Global Practice