Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 38354 - AL

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN

IN THE AMOUNT OF EUR 15.2 MILLION Public Disclosure Authorized (US$19.96 MILLION EQUIVALENT)

AND A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 10 MILLION (US$15 MILLION EQUIVALENT)

TO

ALBANIA Public Disclosure Authorized FOR A

LAND ADMINISTRATION AND MANAGEMENT PROJECT

January 3,2007

Environmentally & Socially Sustainable Development Sector Unit Europe and Central Asia

Public Disclosure Authorized 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 World Bank authorization. CURRENCY EQUIVALENTS

(Exchange Rate Effective December 5,2006)

Currency Unit = Albanian Lek (ALL) ALL93.48 = US$1 US$O.Ol = ALL 1 1 Euro = 1.3137 US$ 1 SDR = 1.50435 US$

FISCAL YEAR January 1 - December 31

ABBREVIATIONS AND ACRONYMS

CAS Country Assistance Strategy CDS City Development Strategy EMP Environmental Management Plan EPF Environmental Policy Framework ERR Economic Rate ofReturn EU European Union FY Fiscal Year IBRD International Bank for Reconstruction and Development IDA International Development Agency ILO International Labor Organization IPRO Immovable Property Registration Office LAMP Land Administration and Management Project MoI Ministry of Interior MPWTT Ministry ofPublic Works, Transport and Telecommunication M&E Monitoring and Evaluation NGO Non-governmental Organization OSCE Organization for Security and Co-operation in Europe PAD Project Appraisal Document PHRD Policy and Human Resources Development RPF Resettlement Policy Framework SIDA Swedish International Development Agency SIL Specific Investment Loan UNDP United Nations Development Program USAID United States Agency for International Development

~ Vice President: Shigeo Katsu Country Director: Orsalia Kalantzopoulos Sector Manager: Marjory-Anne Bromhead Task Team Leader: Wael Zakout FOR OFFICIAL USE ONLY ALBANIA Land Administration and Management Project

CONTENTS

Page

A . STRATEGIC CONTEXT AND RATIONALE ...... 1 1. Country and sector issues...... 1 2 . Rationale for Bank involvement ...... 2 3 . Higher level objectives to which the project contributes ...... 3

B. PROJECT DESClUPTION ...... 3 1. Lending instrument ...... 3 2 . Program objective and Phases ...... 4 3 . Project development objective and key indicators ...... 4 4 . Project components ...... 4 5 . Lessons learned and reflected in the project design...... 7 6 . Alternatives considered and reasons for rejection ...... 8

C . IMPLEMENTATION ...... 9 1. Partnership arrangements ...... 9 2 . Institutional and implementation arrangements ...... 10 3 . Monitoring and evaluation ofoutcomes/results ...... 11 ... 4 . Sustainability...... 11 5 . Critical risks and possible controversial aspects ...... 12 6 . Loadcredit conditions and covenants ...... 13 D. APPRAISAL, SUMMARY ...... 14 1. Economic and financial analyses ...... 14 2 . Technical ...... 14 3 . Fiduciary ...... 15 4 . Social...... 16 5 . Environment...... 18 6 . Safeguard policies ...... 19 7 . Policy Exceptions and Readiness...... 20

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization . Annex 1: Country and Sector or Program Background ...... 21 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ...... 27 Annex 3: Results Framework and Monitoring...... 28 Annex 4: Detailed Project Description...... 33 Annex 5: Project Costs ...... 44 Annex 6: Implementation Arrangements ...... 46 Annex 7: Financial Management and Disbursement Arrangements ...... 48 Annex 8: Procurement Arrangements ...... 59 Annex 9: Economic and Financial Analysis ...... 66 Annex 10: Safeguards Policy Issues ...... 74 Annex 11: Project Preparation and Supervision ...... 80 Annex 12: Documents in the Project File ...... 82 Annex 14: Country at a Glance ...... 84 Annex 15: Maps .IBRD 35268...... 86 Annex 16: Governance Strategy ...... 87 ALBANIA

LAND ADMINISTRATION AND MANAGEMENT PROJECT (LAMP)

PROJECT APPRAISAL DOCUMENT

EUROPE AND CENTRAL ASIA

ECSSD

Date: January 3,2007 Team Leader: Wael Zakout Country Director: Orsalia Kalantzopoulos Sectors: Central government administration Sector ManagedDirector: Marjory-Anne (40%); Sub-national government Bromhead administration (40%); law and justice (20%) Themes: Land administration and management (P); Decentralization (S) Project ID: PO96263 Environmental screening category: Financial Intermediary Assessment Lending Instrument: Specific Investment Loan Project Financing Data [XI Loan [XI Credit [ 3 Grant [ 3 Guarantee [ ] Other:

For Loans/Credits/Others: Total Bank financing (US$m.): 34.96 Proposed terms: Loan Terms: denominated in Euro, VSL annuity based over 17 years maturity including 4 years grace; Credit Terms: hardened terms of 20 years including 10 years grace. Financing Plan fUS$m> Source Local Foreign Total BORROWER/RECIPIENT 6.00 0.00 6.00 INTERNATIONAL BANK FOR 13.20 6.76 19.96 RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT 12.00 3.00 15.00 ASSOCIATION JAPAN: MINISTRY OF FINANCE - 0.20 1.34 1.54 PHRD GRANTS MUNICIPALITIES OF BORROWING 9.00 0.00 9.00 COUNTRY SWEDEN: SWEDISH INTL. DEV. 1SO 3.00 4.50 COOPERATION AGENCY (SIDA) Total: 41.90 14.10 56.00

Borrower: Albania

Responsible Agency: Ministry ofInterior Albania Immovable Property Registration Office, Ministry of Justice Albania Ministry ofPublic Works, Transport and Tourism Albania

FY 7 8 9 10 11 120 0 0 0 Annual 0.50 4.00 8.00 8.00 8.00 6.46 0.00 0.00 0.00 Cumulative1 0.50 I 4.50 1 12.50 I 20.50 I 28.50 I 34.96 I 0.00 I 0.00 I 0.00 Project implementation period: Start April 15,2007 End: December 3 1,201 1 Expected effectiveness date: April 15,2007 Expected closing date: December 3 1,20 11 Does the project depart from the CAS in content or other significant respects? [ ]Yes [XINO Re$ PAD A.3 Does the project require any exceptions from Bank policies? Re$ PAD D. 7 [ ]Yes [XINO Have these been approved by Bank management? [ ]Yes [ IN0 Is approval for any policy exception sought from the Board? [ ]Yes [ IN0 Does the project include any critical risks rated “substantial” or “high”? [XIYes [ ]No Ref: PAD C.5 Does the project meet the Regional criteria for readiness for implementation? [XIYes [ ]No Re$ PAD D. 7 Project development objective Re$ PAD B.2, Technical Annex 3 The overall goal ofthe long term land administration and management program is to facilitate the development ofan efficient land and property markets through enhancing tenure security and improving land administration and management services. The long term program is expected to be implemented through 3 phases of4 year each. The proposed LAMP project is the first phase of such a program. The specific objective ofthe project is to improve the efficiency and effectiveness ofland administration and urban management through enhancing tenure security, improving urban planning, land management and development control, supporting property valuation and taxation, and financing investments in urban infrastructure and services.

Project description [one-sentence summary of each component] Re$ PAD B.3.a, Technical Annex 4

Component A: Security of Tenure and Registration of Immovable Property Rights The objective ofcomponent A is to improve service delivery, efficiency and transparency of PRO and complete most ofthe first registration ofimmovable property rights. The component will cover the entire country but initially, will concentrate on urban and peri-urban areas.

Component B: Urban Land Management The objective ofthis component is to strengthen the capacity ofmunicipalities in urban land management through the support to: (1) establishing a market-responsive, participatory urban planning and development control system via technical assistance to revisions in urban planning law and development ofregulatory plans for participating cities; and (2) mobilizing municipal revenues and correcting property market distortions through property valuation and taxation.

Component C: Municipal Infrastructure The objective ofthis component is enabling proactive urban growth management and enhancing urban land market efficiency by prioritizing and implementing selected infrastructure investments and services, in accordance with strategic investment plans. The component will also support the implementation ofthe address system.

Which safeguard policies are triggered, if any? Re$ PAD 0.6, Technical Annex 10 0 Environmental Assessment Cultural Property Involuntary Resettlement

0 Projects in International Waterways

Significant, non-standard conditions, if any, for: Re$ PAD C.7 Board presentation:

0 None

Loadcredit effectiveness: 0 Signing the legal agreements regarding the SIDA and PHRD grants. 0 Finalization of the Project Operational Manual and the Financial Management Manual that is acceptable to the Bank. 0 Condition ofcross-effectiveness ofthe Loan and Financing Agreements.

Covenants applicable to project implementation: 0 The Government will submit a revised urban law to parliament no later than September 30, 2007. 0 The Government will submit to the Parliament a draft law on property valuation by May 15,2008. 0 The Immovable Property Registration Office (PRO) will be transformed by January 1, 2009 into an autonomous and self financing office, with the Chief Registrar reporting to the Board ofDirectors representing the government and the user groups. 0 The government will develop policy and take regulatory and other actions to protect the registered property rights by December 3 1,2008. 0 The Government will submit progress reports outlining achievements, issues and proposed actions, by September 30 and March 31 of each year, starting from March 31, 2007. 0 The Government will prepare a mid-term review report, outlining achievements, issues, and proposed adjustment to the project no later than March 3 1,2009. 0 The Borrower, through the three implementing agencies, will maintain financial management systems acceptable to the Bank. The project financial statements, (including interim un-audited financial reports (IFR) and Designated Accounts) will be audited by independent auditors acceptable to the Bank and on terms of reference acceptable to the Bank. The annual audited statements and audit report will be provided to the Bank within six months ofthe end ofeach fiscal year. The Government, through the MOI, will carry out operational reviews of the municipal investments under component C. The operational audit to be carried out by an auditor acceptable to the Bank, will review the internal control framework and procedures including procurement procedures and compliance with the signed implementation protocol, and will be carried out after the first and second phases ofinvestments in each participating municipality. A. STRATEGIC CONTEXT AND RATIONALE 1. Country and sector issues

1. Albania has carried out land and property administration reforms since 1991 and substantial progress has been made in ownership transfer and recognition of property rights. Land privatization, registration of ownership rights, and land use planning has been incrementally addressed by the government.

2. The Government created in 1993 the Immovable Property Registration. Office (IPRO), currently subordinated to the Ministry of Justice, with a network of 36 district offices. The agency has a mandate to register land ownership rights and property transactions. The government with support from donors (especially, the USAID, the EU and OSCE) undertook a major program in registering property rights (so called, first registration), where most of agriculture land were registered, but limited registration was done in urban areas. Furthermore, the government has started the process of restitution of properties to owners whose land was confiscated prior to 1945. The process to regularize informal settlements was also initiated with support from the UNDP and the OSCE.

3. In regard to the urban land, the government has devolved the responsibility of land use planning and development control and property taxation functions to local government. Furthermore, it has initiated the process to transfer the management of state land to local authorities.

4. Despite this progress, land management in Albania continues to face significant challenges. Firstly, land and property rights are not fully secure. As of today, there are still about 600,000 urban and around 300,000 rural parcels not yet registered. The registration process has been particularly slow in valuable urban and coastal areas.

5. Secondly, the PRO has been criticized in the past for lack ofefficiency and transparency, and the process of registering property transaction is often very time-consuming and expensive because of the high informal payments. The new leadership of the IPRO is determined to improve the quality of services provided to public, reduce the time, and eliminate the informal payments. The process of reform has started, but, it will take a few years to fully transform the IPRO into an efficient, transparent and effective organization.

6. Thirdly, the slow pace of resolution of restitution and compensation claims have undermined the security of property rights and slowed down the registration of property rights, especially in the high value coastal areas. The government has enacted several laws and established the compensatiordrestitution commission to deal with this complex issue. However, the compensation formula provided by the law is beyond the means of government budget. As a result, little progress was made so far.

7. Forthly, large numbers of illegal land subdivisions and construction projects have taken place, primarily on peri-urban areas and in tourism zones. Significant urbanization occurred since the demise ofthe socialist regime in 1991 when the restrictions on internal migration have been removed. Most of this development took place in peri-urban areas, often with no property

1 rights, nor adequate zoning or building permit procedures. The rapid urbanization in absence of sound policy and enforcement of laws is recognized as a major threat to sustainable urban development in Albania.

8. Fifthly, while the government has devolved many functions ofurban land management to local governments through the decentralization process, local authorities often do not have the capacity or the financial resources to undertake these functions effectively. Still, most of them do not have an approved regulatory plan. Therefore, the ability to enforce land use plans is inhibited. This is especially true for the peri-urban areas, located outside the jurisdiction of city boundaries, which makes it almost impossible for local authorities to regulate development in these areas.

9. Sixthly, in the absence ofthe proper urban regulatory plan, most ofdevelopment is being undertaken without any consideration for pressures on' the existing infrastructure networks and environmental damages, waste water and solid waste, etc. While speed of informal settlement growth has slowed down, informal settlements continue without adequate access to the essential infrastructure or social services. While the municipalities are fully aware of the acute needs to improve infrastructure, in the absence of the property tax, which links the population increase and the financial basis, many municipalities do not have adequate fiscal resources to cope with these phenomena.

2. Rationale for Bank involvement

10. Secure property rights along with an efficient and transparent land management regime are fundamental for creating well functioning land and property markets in Albania. These in turn, provide incentives for local and international businesses, households and individuals to invest in land and properties. Land titles are often used to access cheaper, affordable credit. For most of the poor, land is the primary means for generating livelihood and the main vehicle for investing, accumulating wealth and transferring it between generations. Furthermore, secure property rights, proper land management and development control system are enabling factors in improving investment climate, urban management, natural resources management, and in promoting good governance.

11. Well established land records and ownership rights constitute sine qua nun conditions for fiscal decentralization and municipal autonomy deriving from property tax revenues. This revenue basis plays a crucial role in local governments' ability to provide essential public services and infrastructure, necessary also for enabling business environment. Therefore, the project will focus on three main areas necessary to promote the development ofan efficient land and property markets: (i)improving the security of tenure; (ii)strengthening local government capacity to develop and enforce land use plans; and (iii)supporting the development ofproperty taxation function.

12. The proposed project will assist the government in addressing these three key areas, with component A focusing on the security ofproperty rights and component B concentrating on the development of land use plans, and implementation of property taxation system. The support to infrastructure under component C would be provided as an incentive to local governments to

2 implement the reform agenda, especially with respect to the preparation and enforcement of land use plans and the collection of property taxes based on market values. The project design is built on the foundations established in the last 15 years and supported by various donors active in this area.

3. Higher level objectives to which the project contributes

13. The proposed project will specifically contribute to pillar I of Country Assistance Strategy (CAS) covering the period of next four years (FY 06-09), Le., continued economic growth through improving security oftenure and establishing a functioning land market.

14. In addition to unclear land tenure, the CAS also identifies the uncontrolled urban growth, inadequate public infrastructure, weak governance and public service delivery among the key threats to sustainable development of Albania. The proposed project aims at addressing these problems in a comprehensive manner through an operation tackling land management issues, both at the central and local levels. The reform agenda introduced in this project will complement and build on the reforms introduced by the Development Policy Loan, which includes a set of policy reforms aimed at promoting the development of land and property markets.

15. Moreover, the project will contribute to improvements in governance which is the main cross-cutting objective and thematic focus of the entire Bank support program in Albania, by applying the key principles including: (i)setting up clear and monitorable service standards for both land registration and issuance of building permits; (ii)seeking greater transparency in the use of public resources at the local government level through stakeholder participation; (iii) developing capacity to enable local governments to effectively take on the decentralized urban land management responsibilities; and (iv) increasing involvement of citizens to encourage improved urban management, including preparation and enforcement of urban planning, and performance ofpublic service delivery.

B. PROJECT DESCRIPTION 1. Lending instrument

16. The Specific Investment Loan (SIL) was selected as the most suitable lending instrument for the project to be implemented over the period of 4 years. However, this project should be seen as a first phase of a long-term program which will probably take between 10 and 15 years to be completed. Further Bank support will be determined in light of the performance ofthis phase and achievements ofits objectives.

17. The total project cost is estimated at about €42.0 million (US$56 million equivalent), of which the IBRD loan would finance €15.20 million (US$19.96 million equivalent) and IDA credit another SDR 10.00 million (US$15 million equivalent). The Swedish government through SPA has allocated about US$4.5 million to co-finance the project and another US$0.5 million to finance supervision and monitoring that will be administered by the WB). The national government will contribute €4.5 million (US$6 million equivalent) and the local governments will finance €6.8 million (US$9 million equivalent) of the investment costs of municipal

3 infrastructure (component C). Another US$1.537 million was approved by the Japanese Government through PHRD grant, mainly to co-finance sub-component B (Urban Land Management).

2. Program objective and Phases

18. Not applicable.

3. Project development objective and key indicators

19. The overall goal of the long term land administration and management program is to facilitate the development of an efficient land and property markets through enhancing tenure security and improving land administration and management services. The long term program is expected to be implemented through 3 phases of4 year each.

20. The proposed LAMP project is the first phase of such a program. The specific objective of the project is to improve the efficiency and effectiveness of land administration and urban management through enhancing tenure security, improving urban planning, land management and development control, supporting property valuation and taxation, and financing investments in urban infrastructure and services.

21. Key indicators to measure project results include:

Reducing the average time to register property transaction from 47 to 10 days;

0 Reducing the average time to issue building permit from 6 to 3 months;

0 Increasing the annual property tax collection participating municipalities by 1O%, starting in the second year ofthe project; and

0 Increased level of confidence in security of property rights as measured by customer surveys.

4. Project components

Component A: Security of Tenure and Registration of Immovable Property Rights (US19.42 million equivalent)

22. The objective ofcomponent A is to improve service delivery, efficiency and transparency of IPRO and complete most of the first registration of immovable property rights. The component will cover the entire country but initially, will concentrate on urban and peri-urban areas. The component will include the following sub-components:

Sub-Component A.1: Improvement in Service Delivery of IPRO 23. The sub-component will support the improvement of service delivery of IPRO in registration of property transactions and will include: re-engineering of office functions, introduction of information technology and improvement of the accuracy and completeness of

4 the existing information in the registry, training and capacity building, internal and external monitoring of service standards, data access and sharing protocols, and improvement of facilities, provision ofequipment and furniture.

Sub-Component A.2: Completion of First Registration of Immovable Property 24. The sub-component would support the completion of first registration of about 500,000, mainly urban and peri-urban properties. It will include the following activities: public awareness and customer outreach, mapping and adjudication for first registration, and quality control and finalization ofthe first registration.

Sub-component A.3: Further Development of Regulatory Framework 25. The sub-component will finance the development or revisions of critical laws and regulations, which would support the completion of first registration, improve IPRO services, and enhance tenure security. These would include the regulations concerning protection of registered rights, data access and sharing protocols, fee and finance structure ofregistration, etc.

Sub-component A.4: Training and Study Tours 26. The sub-component will support the development of a training needs assessment and the provision of training to management and staff of IPRO, including management training, technical subjects, quality control in support of first registration, and training for IPRO staff in new office procedures. The project will also finance the establishment of a training center in IPRO central office. The sub-component will also finance several study tours and training of trainers.

Sub-component A.5: Administrative and Management Support to IPRO 27. The sub-component will finance the incremental operating costs and other expense needed to manage the project including the costs of component management. Furthermore, the project will provide support to IPRO to strengthen its administrative and management functions, including in such areas as: (i)strategic planning and change management; (ii)human resource development planning; and (iii)monitoring, reporting and evaluation.

Component B: Urban Land Management (US$5.10 million equivalent)

28. The objective of this component is to strengthen the capacity of municipalities in urban land management through the support to: (1) establishing a market-responsive, participatory urban planning and development control system via technical assistance to revisions in urban planning law and development of regulatory plans for participating cities; and (2) mobilizing municipal revenues and correcting property market distortions through property valuation and taxation. The component will consist ofthe following sub-components:

Sub-component B.1: Municipal Land Management 29. The sub-component will support eligible municipalities in urban land management, including the development of regulatory plans (City Development Strategies, Infrastructure Investment Plans, and Regulatory Plans) in the largest 10 municipalities in Albania and municipalities ofcultural significance.

5 30. Eligibility. The support under this component would be extended to municipalities that are in need for timely intervention to ensure their orderly development. Key criteria include: (a) cities facing demographic pressure (with the population size above 50,000); and (b) cities with a substantial cultural significance, facing sizable development pressure. As a result, the following cities are eligible for component B: Tirana, Durres, Elbasan, Shkodra, Fier, Vlore, Berat, Korca, Lushnje, Kamez, and Gjirokaster.

3 1. While meeting the aforementioned criteria, Tirana, Elbasan, and Fier are not included in the support for the development ofregulatory plans, as they already either completed or secured funding for preparation of regulatory plans. However, these municipalities will be eligible for the property valuation and taxation sub-component. Fier and Elbasan municipalities will also be eligible for the address system and municipal investment under Component C. As for Tirana, it was excluded because of its size as well as the large needs which could not be met under this project.

Sub-component B.2: Property Valuation and Taxation. 32. The sub-component will support the preparation of property valuation law and the introduction of market value-based property taxation in the participating municipalities. The component will also provide the support to the equipment and training ofmunicipal staff in mass appraisal techniques.

Sub-component B.3: Formulation of Urban Land Management Regulations 33. The sub-component will finance the preparation, through consultative processes and public hearings, of the urban law and the key implementing regulations, including a condominium law, public land management policy, etc.

Sub-component B.4: Training 34. The sub-component will provide training to the municipal staff in land use planning and development control, and cover costs ofstudy tours.

Sub-component B.5: Support to the Ministry of Public Works, Transport and Telecommunication 35. The project will support the Ministry of Public Works, Transportation and Telecommunication to coordinate component B activities. The financing will be also provided to: (i)capacity building in monitoring of compliance with regulatory plans; and (ii)incremental operating cost ofproject coordination team, including contractors' costs.

Component C: Municipal Infrastructure (US$31.48 million equivalent)

36. The objective of this component is to enable proactive urban growth management and enhancing urban land market efficiency by prioritizing and implementing selected infrastructure investments and services, in accordance with strategic investment plans'. The component will also support the implementation ofthe address system.

1 Due to its size and the substantial need for the investments, Tirana is not included in the funding under component C.

6 Sub-component C. I: Municipal Investments 37. The sub-component will help eligible municipalities to implement city investment plans and carry out improvement works to municipal infrastructure and services. Municipalities will receive support for investments in two phases:

0 Phase I in the maximum amount US$400,000 from the loan (which will enable municipalities to implement projects with a total cost of up to US$800,000) after their regulatory plans are approved at the municipal level and the household property tax collection rate reaches 50% (of the total number ofhouseholds);

0 Phase I1 of a maximum US$800,000 from the loan (which will enable municipalities to implement projects with a total cost of up to US$1,600,000) will be available once the respective municipality's regulatory plan received final approval; the municipality initiated establishment of the property tax system based on market value and collected taxes from 75% of households; developed strategic investment plan; finalized investments in Phase I;and certified, by the operational review, a full compliance with the implementation protocol and the governance filters. Municipalities will have 2 years from project effectiveness date to access the second phase for investment fin'ancing. During project mid-tern review, any uncommitted funds will be reallocated to the best performing municipalities.

38. Financing ofinvestment sub-projects under phase Iand I1will be on a cost-sharing basis, with the Bank loadcredit financing 50%, and the remaining part to be financed by the municipalities (30%) and national government in an amount equal to the value-added tax (20%).

Sub-component C.2: Implementation of Address System 39. The sub-component will finance the implementation ofthe address system in the eligible municipalities. Financing will include the system and database to maintain the address system as well as financing the public infrastructure, such as street signs and poles.

Sub-component C.3: Procurement and Financial Management Trainingfor Municipal Staff 40. To ensure good practice in implementing infrastructure investments, this sub-component will support training for municipalities on fiduciary aspects, including procurement and financial management.

Sub-component C.4: Component Management 41. The sub-component will finance the management costs of the Ministry of Interior and Local Government to manage this component, including incremental operating costs, office equipment, and short term international and national consultants.

5. Lessons learned and reflected in the project design

42. Investment projects as incentives for reforms. The project design is based on the premise that the capacity building efforts will be more effective when combined with more

7 tangible, physical investments. For example, component C (Municipal Investments) includes the support for public investments but only after a local government seeking project assistance, commits itself and carries out the reform agenda, fundamental for enhancement of land and urban management functions of the municipality. This is based on the experience from previous Bank projects which were not able to effectively strengthen the local governments' ability to improve their regulatory functions and service delivery, as originally envisaged.

43. Involvement and commitment of stakeholders. One ofkey factors contributing to the achievement of project objectives is stakeholders involvement in project design and deriving from it commitment to its goals and elements to achieve them. The proposed project is being prepared in a participatory manner, through, among others, carrying out workshops to discuss project framework, components and expected outcomes. Such workshops were carried out with the participation of IPRO management and its Task Force created to advice on the agency transformation program; with MPWTT; MOI; and with representatives of municipalities, potential candidates to participate in the project. At the municipal level, the participatory budgetary and investment planning, communication with served communities, and feedback from citizens are elements profoundly incorporated in the project design.

44. Coordination with other donors. The activities foreseen in the project base on the foundations created with support of other donors, and experience accumulated over nearly 15 years, e.g. first registration process supported by USADand the EU. The project preparation has been coordinated with the donors active in the area of land management, some ofwhich will co- finance Bank operation (e.g., SIDA) and others will complement it (e.g., OSCE in land restitutiodcompensation aspects).

45. Implementation through existing structures. One of OED and CAS Completion Report findings was that implementation of projects through separate Implementation Units (PIUS), created and supported by projects, have reduced potential for institutional development impact and sustainability. The LAMP project implementation would be carried out through the existing structures, such as IPRO, MPWTT, MOI and local governments, with an additional support to strengthen their mandatory functions as well as to ensure efficient and effective project execution.

6. Alternatives considered and reasons for rejection

46. One ofthe key alternatives considered during project preparation was whether to provide the needed support through separate operations, one for land registration, and another for urban land management and infrastructure, or to take a comprehensive approach to land management through a single project. The latter alternative was selected due to the fact that the development of land and property markets is influenced by three main areas: (i)security of property rights; (ii)land use planning and development control regime; and (iii)property taxes. Therefore, the design of the project will address (i)through component A of the project and (ii)and (iii) through component B ofthe project.

47. Other strategic choice made in the project design was selection of municipalities to receive support from the project. The option of a competitive selection of municipalities based

8 on their performance and quality ofproposals was rejected as it would favor those municipalities which were already relatively advanced and most likely have been supported by donors’ programs. Therefore, it was decided together with the government to extend the support to municipalities which are in need for timely intervention to ensure their orderly development; Le., cities facing demographic pressure (with population size above 50,000) and cities with substantial cultural significance. While these municipalities will be eligible for the technical assistance support, accessing investment funding will be based on a competition, and only those municipalities who are successful in implementing the reform will be eligible for the investment funding.

48. Another important choice for the project design was definition of tvpes of infrastructure to be supported. The two basic alternatives were either to limit the financing to less costly public investments in improvement of urban centers, parks, promenades, lighting, etc., or open it to all investments, including major ones, such as water supply, sewage, roads, solid waste collection, etc. Eventually, the latter option was selected owing to the fact that the needs for the public infrastructure are great in Albania, to a large degree due to unregulated growth, and the informal settlements in urban and peri-urban areas. The risk of excessive investments in few costly projects is relatively low since all of the municipal investments will have to be part of the regulatory plans approved by municipal councils, following public debates, therefore reflect the key needs ofthe municipality. All ofthem will be supported based on the cost-sharing principle, and each municipality will have a total limit of $2.5 million equivalent in two phases of investments (50% ofwhich could be financed by the project). The selection and approval process imbedded in the project design will allow for equitable support to municipalities which commit themselves to reforms.

C. IMPLEMENTATION 1. Partnership arrangements

49. The project is being prepared in close coordination and cooperation with other donors, with whom an agreement was reached that all donors’ support for the first registration of property rights should use the same institutional arrangements and manual on the first registration as well as the same first registration contract (so called “global contract”). Also, all activities funded by the donors in the area of land registration will be coordinated with the Planning and Monitoring Department of PRO, serving as and implementation unit for component A.

50. On the bilateral level, the Government of Sweden has approved, through SIDA to co- finance the project, particularly, the Technical Assistance, training and project management activities, as well as to contribute to Bank technical supervision and monitoring, in the total amount ofUS$5 million equivalent. Additional funding of US$1.537 has been approved by the Government of Japan, mainly to co-finance sub-component B (Urban Land Management). The OSCE also agreed to continue its efforts and assistance to the government in regard to the restitutiodcompensation and legalization of informal settlements. The UNDP is supporting the government in analysis ofthe causes ofinformality including the informal settlements.

9 2. Institutional and implementation arrangements

5 1. Project implementation will be streamlined within the existing structures of the relevant government agencies. The Immovable Project Registration Office (IPRO), under the Ministry of Justice, will be responsible for implementing component A, the MPWTT, through the Department of Urban Planning, will coordinate the implementation of component B, and the Ministry of Interior, through the Department of Local Government Finance will coordinate the implementation ofComponent C.

52. The IPRO will coordinate the project through the Planning and Monitoring Department, which will be responsible for planning, procurement, financial management and monitoring and evaluation. The Department Director will report to the Deputy Chief Registrar for Technical Affairs, who will play the Project Coordinator’s role and ensure full coordination among the various department ofIPRO in project implementation. The Chief Registrar ofPRO will act as a Project Director. Actual implementation of the various activities under component A will be carried out through the existing structure ofthe IPRO.

53. The Urban Planning Department of the MPWTT will be responsible for coordinating all activities under component B, including procurement, financial management, and monitoring and evaluation. The Department Director will act as Component B Director. Procurement and financial management contractors will be hired to assist the Director in managing the project. Several of the existing staff of the Department will work full time for the project. The department will be assisted by international and national advisors.

54. Component C will be coordinated by the Department of Local Government Finance of the General Directorate of Local Government in the Ministry of Interior and Local Government. The Department Director will act as the Director of Component C. The Director will be assisted by a component coordinator, monitoring and evaluation (M&E) officer, procurement and financial management staff.

55. The participating municipalities would be responsible for implementing the investment activities under component Cy including procurement, and payment of contracts. The municipalities will also carry out economic, financial, social and environmental assessments for all investment sub-projects. An Implementation Protocol will be signed between the municipalities and the Project Director of Component B and Cyto ensure that parties adhere to all legal obligations (as stated in the financing agreement, environmental and social guidelines, and the governance strategy). Municipalities will be required to receive no-objection from the Department of Local Government Finance before they issue bidding documents and sign contracts. Detailed procedures and responsibilities of the municipalities and of the Local Government Finance Department have been outlined in the project Operations Manual.

56. Operational Audit will be conducted by an independent auditor for all participating municipalities, to ensure the municipalities comply with the signed protocol agreements. The Operational Audits will be carried out after completion of the first and the second phases of investments.

10 57. A Steering Committee will be established to ensure an adequate coordination between project components. The Steering Committee will be chaired by the Minister of Justice (or his designee) and include the Ministries of Finance, MPWTT, MOI, PRO and the Executive Director of the Municipalities’ Association. The Steering Committee will be responsible for monitoring project activities, ensuring coordination among project activities and providing a strategic guidance. As the chair of the Steering Committee, the MoJ will be the lead agency in the project and will also serve as the Secretariat ofthe Steering Committee.

58. Approval ofinvestment grants under component C will be vested with the existing Small Grants Committee, chaired by the Ministry of Interior. This Committee will be expanded to include representatives of the MPWTT, Ministry of Finance, Ministry of Justice, and the Association ofMunicipalities.

3. Monitoring and evaluation of outcomes/results

59. Monitoring and evaluation ofresults is ofkey importance to the LAMP project outcomes, and has been profoundly incorporated in the project activities. For example, Component A which provides support, inter alia, to improve PRO services, includes establishment of internal and external monitoring system of the agency. The output indicators identified in the result framework (see Annex 2), such as the number of first registration will be measured through the six monthly progress reports. Improvement in the customer satisfaction and reduction in the number of days to register property transactions will be measured through annual customer surveys in selected offices. The first annual survey will be undertaken in the first year of the project. This survey will establish the base line.

60. The number of days to issue a building permit as well as the compliance with the urban plans will be monitored by customer surveys in the municipalities. These surveys will be undertaken in the first year (which will establish the based line) and the fourth year ofthe project implementation. Output indicators, such as the number of regulatory plans completed, the number of municipalities accessing the investments, and the amount of property tax collected will be measured through the project progress report.

4. Sustainability

61. Sustainabilitv of investments in IPRO can be ascertained by the importance of the land tenure and management issues in the government agenda, and the agency’s management commitment to turn the agency around, improve its services and general image. The Chief Registrar established a special Task Force to identify the strategic direction and reform process, submitted to the government and received its approval for a revised structure of the agency, replaced the second level ofmanagement, including the registrar ofTirana office, and eliminated a backlog in the Tirana office operations. It is also proposed to include as a legal covenant to the Loan a requirement for the government to designate IPRO as a self-financed and managerially autonomous institution, reporting to a Board representing government and users. This will enable IPRO to attract good quality staff and finance the maintenance and requirements ofthe upgraded computer systems beyond the project life.

11 62. Sustainabilitv of municipal infrastructure should be ensured through the investment selection mechanism designed for the project. The proposals for eligible investments will derive from the urban development plans prepared by the municipalities themselves. All submitted proposals and feasibility studies will be carefully screened by experts. The evaluation process of the submitted proposals will be based on the criteria, which include assurance ofthe coverage of maintenance costs once the investment is completed. Moreover, the requirement for co-financing of physical investments by municipalities will contribute to the prudent decisions by the local government regarding investments and their future sustainability.

5. Critical risks and possible controversial aspects

63. There are few critical risks to achieve the above objectives. These include:

64. Weak governance. According to the recent report on the status of corruption in ECA countries2, the corruption in Albania remains a serious and widespread problem, and the associated risk is considered substantial. Therefore, adequate mitigation measures are incorporated in the project, and Bank staff will closely monitor performance during implementation. The mitigation actions can be summarized as follows: (a) appropriate complaints handling mechanism, (b) the size of procurement packages and the frequency of the Bank's prior review will allow for an appropriate level of control while attempting to avoid unnecessary reviews which could cause delays; (c) enhanced disclosure and transparency of project-related information; (d) enhanced use of financial reporting, internal and external audit; (e) operational audit; and (0 fiduciary capacity building. More detailed description of the governance risk mitigation framework is included in Annex 16 (Governance Strategy) as well as in Annexes 7 (Financial Management) and Annex 8 (Procurement Arrangements).

65. Restitution/Compensation to former land owners. It is critical to resolve the claims by former owners in order to have secure ownership rights, especially in coastal zones. While this aspect is not supported under the project, failure of the government to address this issue in the medium to long term, will have negative effect on the security of property rights, especially in areas still claimed by former land owners.

66. Coordination among government agencies in regularization of informal settlements. The government has initiated a process to legalize informal settlements through the establishment of a new agency (called ALUIZNI) responsible for coordinating the legalization processes and issuance of certification of ownership. There is a need, however, that this agency coordinates its efforts with the IPRO; otherwise, certificate of ownerships issued by the new agency may not meet the technical and legal requirements established in the IPRO to register the titles. This could undermine tenure security in the long run in the country.

67. Local governments are not ready for serious reforms. While discussions with some city mayors are encouraging, the successful implementation of the reform require more than the commitment. It also requires the institutional capacity of the municipality to implement a series

2 James Anderson and Cheryl Gray (2006). Anticorruption in Transition 3: Who is Succeeding, and Why? Washington DC: The World Bank.

12 of reforms, as identified above. Therefore, the project will provide grants to those local governments to implement the property tax regime, prepare regulatory plans and investment plans, and carry out annual client surveys, etc. To ensure the reform is completed, a score card system will be developed, and only those local governments that are successful in implementing the reforms will access funds for infrastructure investments.

6. Loadcredit conditions and covenants

Effectiveness:

Signing the legal agreements regarding the SIDA and PHRD grants. Finalization of the Project Operational Manual and the Financial Management Manual that are acceptable to the Bank; and Condition ofcross-effectiveness ofthe Loan and Financing Agreements.

Other Covenants

The Government will submit a revised urban law to parliament no later than September 30, 2007. The Government will submit to the Parliament a draft law on property valuation by May 15, 2008. The Immovable Property Registration Office (IPRO) will be transformed by January 1, 2009 into an autonomous and self financing office, with the Chief Registrar reporting to the Board ofDirectors representing the government and the user groups. The government will develop policy and take regulatory and other actions to protect the registered property rights by December 3 1, 2008. The Government will submit progress reports outlining achievements, issues and proposed actions, by September 30 and March 31 of each year, starting from March 31, 2007. The Government will prepare a mid-term review report, outlining achievements, issues, and proposed adjustment to the project no later than March 3 1, 2009. The Borrower, through the three implementing agencies, will maintain financial management systems acceptable to the Bank. The project financial statements, (including interim unaudited financial reports (IFR) and Designated Accounts) will be audited by independent auditors acceptable to the Bank and on terms of reference acceptable to the Bank. The annual audited statements and audit report will be provided to the Bank within six months ofthe end ofeach fiscal year. The Government, through the MOI, will carry out operational reviews of the municipal investments under component C. The operational review to be carried out by an auditor acceptable to the Bank, will review the internal control framework and procedures including procurement procedures and compliance with the signed implementation protocol, and will be carried out after the first and second phases of investments in each participating municipality.

13 D. APPRAISAL SUMMARY 1. Economic and financial analyses

68. The financial and economic analyses of the project were carried out separately for project components (see Annex 9). Below table summarizes how major benefits were identified and quantified as well as their linkages to the project objectives.

Objective Component Quantitative Impact (Benefits) 1. Improve service delivery Component A Reduced costs to register property by IPRO transaction; Save time to citizens receiving service. Increase number oftransactions registered in the IPRO; Improve access to ownership information. 0 2. Complete first registration Component A Appreciation in property values (called the of500,000 properties in registration or tenure security premium) urban and peri-urban areas Strengthen IPRO’s financial position. 3. Improve capacities of Component B Appreciation in property values. selected municipalities in Orderly development ofcities. urban land management Reduced costs ofprovision ofmunicipal services. 4. Improve revenue Component B (some Increased property tax and transaction tax generation through support to overlap with collections by municipalities and reduced property valuation functions Component A) dependence on central government. 5. Improving priority urban Component C Almost all investment areas suggest high infrastructure for rates ofreturn in physical infrastructural participating municipalities improvement.

69. The economic analysis for component A makes use ofthe concept ofincremental market growth which would occur due the project. The incremental market growth is the difference between the transaction value of all properties as they would be observed with and without project conditions. Transaction value has been based on the total value of properties which would involve change in ownership excluding inheritance and gifts.

70. The expected ERR from the investment of about US$ 19.4 million (from WB, IDA and SIDA combined) at PRO is about 23%. The actual rate ofreturn would most likely exceed this threshold.

71. Based on a limited investigation of city roads, which were taken as a proxy to represent an average case in an open menu project, an indicative analysis reveals that the project’s rate of return on the municipal investments would be around 20%.

2. Technical

72. The design of the computerized land registration system under component A will benefit from the wide experience the Bank has gained through other cadastre and registration projects

14 around the world. The overall goal ofthe automation of the IPRO functions is to improve service delivery, accuracy of data and enhance transparency and access to public records. The design will be based on the automation strategy for the IPRO which was prepared during project preparation. The Tirana IPRO office will be the pilot site for new automation initiatives and as such will be used to comprehensively test new approaches and applications before their implementation in the district offices. The project will also finance data conversion and the creation of digital archives of key property records for selected priority cadastral zones and districts.

73. The technical aspects of physical investments to be carried out in project municipalities under component C are not known yet. The municipalities themselves will submit proposals of priority investments which will be part of their regulatory plans. Based on the initial proposals made by the eligible municipalities, the investments may include such items as: restitution of river embankments, repair and upgrading of roads with rehabilitation of the affiliated drainage systems or buried pipes, rehabilitation of water supply distribution network and sanitation systems, creatiodimprovement of parks and recreational green areas, restoration of building facades, improvement of traffic management including proper signs and lights, installation of street lightening system, renovation of promenades, etc. The feasibility studies and designs for these and other works will be developed by the Municipalities during project implementation.

3. Fiduciary

74. Financial Management. Assessments of the financial management arrangements of the three implementing agencies (IPRO, MPWTT, and MOI) were undertaken. The financial management arrangements for the project in the three implementing agencies are acceptable to the Bank. The overall FM risk for the project is substantial.

75. At this point, the PRO and MOI do not have any overdue audit. The annual audited LAMP project financial statements will be provided to the Bank within six months ofthe end of each fiscal year and at the closing ofthe project.

76. The latest Country Fiduciary Assessment (CFA of August 2006), draft Public Expenditure and Institutional Review (PER of July 2006) and Public Expenditure and Financial Accountability Report (PEFA of July 2006) confirm that improvement is required to increase efficiency and accountability in public spending by further enhancing the planning, budgeting, and execution of public investment projects; strengthening lines of accountability, including enabling better access to information by all stakeholders; building stronger monitoring and evaluation systems; and establishing competitive and transparent frameworks for government purchases (procurement).

77. The assessment of the country financial management arrangements concluded that the public financial management has improved significantly during the last few years in areas such as budgeting, internal control, internal and external audit, though from a relatively weak base. The fiduciary area will benefit from the ongoing improvements of the treasury system (especially, an improved financial reporting enabling follow-up of programmatic budgeting as well as giving more analytical information down to the level of individual service units) through

15 the implementation of a new computerized treasury information system which is expected to be ready by January 2007. The proposed project will utilize these improvements by using the treasury system for the payment and reporting functions. Internal audit is currently being fully developed to strengthen the government’s internal control environment and the internal audit should also be utilized to monitor the implementation of the project. A Public Internal Financial Control framework based on EU principles is being implemented and the supreme audit institution is being strengthened through EU support.

78. Procurement. A procurement capacity assessment for IPRO, MPWTT and MOI (as well as a sample municipality of Elbasan) was undertaken during project pre-appraisal and appraisal to determine whether the capacities of the implementing agencies are satisfactory and whether the existing procurement arrangements for the project are acceptable to the Bank. It was concluded that the implementing agencies have very limited staff and resources to address the needs of the implementation of the Bank-financed project. In addition, the current procurement staff is not familiar with Bank procurement procedures. Therefore, it is recommended that in IPRO and MPWTT procurement experts are hired to assist them in the implementation of procurement activities. At the same time, MOI needs to assign procurement staff responsible for the procurement activities. This procurement expert along with the existing staff in the Local Government Finance Department in MOI will also be responsible for providing guidance and hands-on training to the municipalities as well as for reviewing their procurement processes, in order to make sure that the Bank’s procurement procedures are properly implemented. A plan for building capacity in implementing agencies and the municipalities is described in Annex 8 ofthe PAD.

4. Social

79. The project addresses a long-standing critical social issue in Albania, Le., the confusion and disorder over land tenure especially in urban areas and coastal zones. Significant social development benefits including improving access to property rights for the poor can accrue from activities under component A (completing the registration of property rights). The key modernization initiatives including improved property registration procedures, clearly defined quality standards, the implementation of a computerized property registration system and the associated data capture are expected to result in a comprehensive and accurate statement of all land and property ownership and interests and updated registration index maps in Albania.

80. As background to the modernization of the PRO under the project, an institutional assessment and a customer satisfaction survey evaluating the quality, efficiency and effectiveness ofproperty administration services rendered by the PRO offices were carried As expected, customers reported major inadequacies concerning,the services provided by the IPRO. The slow service, the long lines, burdensome informal payments that are necessary to speed up service, the tedious paper work and the lack of information were cited as the problems in dealing with the PRO offices. In addition to improved efficiency, the draft IPRO Business Plan has identified improved levels ofservice delivery as a key area to address and has proposed new performance standards that are in line with international norms for property registration

3 The study was carried out by the Center for Rural Studies and Sustainable Development, Albania, in September 2005

16 agencies. A base-line (from a survey of stakeholders) on the quality, efficiency, and effectiveness of property administration services currently provided by the IPRO) has been undertaken in 2005, and on-going monitoring of the improvement in the service standards through stakeholder consultations and other means will be carried out periodically to assess improvements over time.

81. While there is no explicit gender bias in real property ownership in Albania, it is likely that cultural and social norms at all levels could contribute to the exclusion ofwomen as property owners. While it is clear from world-wide experience that gender bias is not so easily eliminated, the project will work towards eliminating gender as a determinant of land rights. In order to ensure that women are included as beneficiaries in the project, the project will undertake public awareness campaigns to facilitate women’s participation in the project where patriarchal attitudes regarding women and property rights, rather than formal legal recourse deny daughters and wives their legal inheritance rights. Specifically, the purpose of the communication and training activities in the project will be to ensure that women make informed decisions and can help enforce transparency of the project. Additionally, training of the project implementers for communication with beneficiaries to cover issues relating to the legal rights ofwomen, solutions to special problems encountered by women with respect to documentation and location of registration offices etc., will be key to ensuring gender equity in the project. Efforts will also be made to encourage registering titles in the names ofboth husband and wife

82. It is unlikely the project activities will result in any significant adverse social impacts, including the physical relocation of people or the acquisition of privately owned land. But a potential for displacements exists in activities under Component C (municipal investments), and to a limited extent, in component A (construction ofnew IPRO local offices), triggering World Bank policy on Involuntary Resettlement. Similarly, to safeguard against displacement as part of the completion of registration rights, no titling would take place where property rights are disputed between private parties or where the government expects to retain title to land where the land is already occupied by private parties. Therefore, as a condition ofproject appraisal, a set of social guidelines in the form of a Resettlement Policy Framework (RPF), has been developed. The document not only describes the procedures and measures to be taken in case of land acquisition, but it also specifies the circumstances when land titling cannot be supported by the project.

83. Component C includes interventions in specific municipalities to help finance infrastructure priorities identified through participatory planning processes. The project will facilitate citizen engagement in participatory land use planning at the municipal level through supporting the development of the regulatory plan and the city development plan under component B. By focusing on municipal governance and civil society development, this will help to strengthen accountability through improved dialogue and the clarification of roles and responsibilities. Local mechanisms of accountability through increased involvement of citizens and non-governmental stakeholders will be strengthened to encourage improved performance of local public service delivery and policy-making bodies.

17 5. Environment

84. Overall, the project is expected to have important and positive environmental impacts on the project area that will lead to: (i)reducing or eliminating unsanitary living conditions and negative environmental impacts of specific deteriorated urban infrastructure; (ii)enhancing economic productivity of affected urban residents; and (iii)increasing the life standards of the citizens in the project area by reducing their exposure to air, land and water-based pollution generated by depreciated infrastructure, which currently j eopardize their health.

85. Based on the initial discussions with the municipalities, the range ofphysical investments that will be financed under the project will likely include: (i)repair and upgrade of urban and non-urban roads with rehabilitation of the affiliated drainage systems or buried pipes, (ii) rehabilitation ofwater supply distribution network and sanitation systems, (iii)restitution ofriver embankments, and (iv) enhancement of parks and recreational green areas, etc. These are just examples of the possible investments and the eventual list of municipal infrastructure to be financed under the project will be determined during implementation phase, based on the priorities set up by municipalities themselves.

86. The minor environmental impacts expected from the project investments are predictable, temporary, localized and can be mitigated through the application of standard measures in engineering design, procurement construction, operation and maintenance. The preliminary list of investments proposed by selected municipalities for project execution will be analyzed to ensure environmental viability. Approval criteria for investment projects will include environmental appraisal criteria to ensure their environmental sustainability.

87. An Environmental Policy Framework (EPF) has been prepared for the entire project, discussed with the local public and will be included in the draft project Operational Manual. The EPF will ensure that the proposed investments under the project comply with the existing Albanian environmental laws and regulations as well as with the Bank’s Operation Policy on Environmental Assessment (OP/BP 4.01) and Cultural Property (OPN 11.03). The EPF will be implemented by municipalities and monitored by the MOIfor component C and by the IPRO for component A. Investments that could classify as an environmental category “A” (e.g., landfill/wastewater plant construction) are not envisaged under this project. Furthermore, the EPF also outlines the procedures for public consultation and information disclosure on environmental matters. A summary ofthe EPF is presented in Annex 10.

88. The municipalities or IPRO (for the case of new office buildings constructions) will prepare the Environmental Management Plans (EMPs) or Environmental Assessments (EAs), depending on the type of investment, and the MOI will submit the necessary information to the Bank seeking financing approval for the proposed investments. The no-objection from the Bank will be required for first three EMPs/EAs from the municipality.

18 6. Safeguard policies

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/B P/GP 4.0 1) [XI Natural Habitats (OPIBP 4.04) [I Pest Management (OP 4.09) [I Cultural Property (OPN 11.03, being revised as OP 4.11) [XI Involuntary Resettlement (OP/BP 4.12) [XI Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I Forests (OP/BP 4.36) [I Safety ofDams (OP/BP 4.37) [I Projects in Disputed Areas (OP/BP/GP 7.60)* [I Projects on International Waterways (OP/BP/GP 7.50) [XI

89. The Project triggers the following safeguards policies: OP/BPs 4.01 on Environmental Assessment, OP/BP 4.12 on Involuntary Resettlement, OPN 11.03 on Cultural Property, and OP/BP/GP 7.50 on Projects on International Waterways.

90. The project has been proposed as an environmental category financial intermediary (FI) since the specific investments under the municipal infrastructure sub-component (part of Component C) as well as some proposed under the project’s component A will not be known at the time of project appraisal. These investments will mostly be developed in the second phase of the project (possibly during the second year of project implementation) once the selected municipalities have adequately completed the requirements ofcomponent B.

91. The draft Environmental Policy Framework and the draft Resettlement Policy Framework have been disclosed and discussed during the two public consultation meetings organized by MPWTT on July 25 and July 27, 2006 respectively, in Fieri and Elbasan. Comments received during these two meetings have been incorporated in the final policy framework documents, which have been posted on the MPWTT and PRO websites (in Albanian language) as well as in the World Bank’s Infoshop.

92. Although some of the project locations are at the Adriatic and/or Ionic Sea, the specific urban infrastructure investments proposed under the project are only for the rehabilitation and improvements of existing drainage schemes, water supply distribution network and sanitation systems, which are not expected to change the quality or quantity of water in these waterways. Consequently, the project falls within the exception set forth in paragraph 7 (a) of OP 7.50 as: (a) it will not adversely affect the quality or quantity ofwater flows to the other riparians; and (b) it will not be adversely affected by other riparians’ water use. Therefore, given the rehabilitation nature of the activities under the project, it has been decided that notification to other riparian states is not required under the Bank policy.

By supporting the proposed project, the Bank does not intend to prejudice the final determination ofthe parties’ claims on the disputed areas

19 7. Policy Exceptions and Readiness

The project does not require any exceptions from Bank policies and it meets criteria ofreadiness for implementation.

20 Annex 1: Country and Sector or Program Background ALBANIA: Land Administration and Management Project

Land and Property Reforms

1. Albania has carried out land and property administration reforms since 1991 and substantial progress has been made in ownership transfer and recognition of property rights. Land privatization, registration ofownership rights and land use planning has been incrementally addressed by the government. The main elements ofthe reform included:

rn revival ofcivil law principles and institutes, and their application to immovable property; authorization ofmarket relations in land and immovable objects; rn transfer to citizens and juridical persons of rights of ownership in agricultural land, housing, and other commercial and industrial land and properties; rn initiation ofrestitution ofproperty rights to families, whose rights were confiscated after 1945, and compensation when restitution has not been possible; creation of an Immovable Property Registry Office (IPRO) and other administrative mechanisms, supporting civil law and market relations; and rn devolving the responsibility for land management and property taxation to local government.

2. During the last 15 years, substantial progress has been made in carrying forward the civil law reforms and the programs ofownership transfer. The government has successfully privatized and issued property rights to most rural properties and about 25% or urban properties. Transfer of state land to municipality control has already started, and the process of compensation and restitution was initiated. The government also started the process of regularization of informal settlements and illegally constructed buildings.

3. The reform programs, creating private property rights, the state property inventories and the illegal actions of citizens dividing and building on land without legal authorization, have sub- divided Albania into 4.5 million land parcels and separately-owned immovable property units. The categories and volume ofproperties are shown in the below table.

Table 1. Status of Land and Property Holdings by Category, 20054

Category of Properties I Est. Number of Units I Comments

Total Units of all Tvpesd1 I,, 4.500.000 , Rural properties 3,300,000 579,000 hectares -- Agricultural- fields 1,900,000 568,000 hectares given to 420,000 households under-law 7501 -- Village plots and houses 400,000 Owned prior to 1990 as "personal property" -- State-owned forest, pasture and 1,000,000 Subject to inventory and division protected lands with communes

21 Institutional Responsibility

3. The Government created in 1993 the Immovable Property Registration Office (PRO) through Law no. 7843 of 1994. IPRO is currently subordinated to the Ministry ofJustice and has a network of 36 district offices. The agency has a mandate to register land ownership and property transactions. The government, through the Project Management Unit (PMU) under the Ministry of Agriculture and with support from donors (especially the USAID, the E.U. and the OSCE), initiated in early 90’s a major program in registering property rights (called first registration), where most of agriculture land were registered, but a only limited registration was completed in urban areas. Recently, an agreement was reached to transfer the PMU from the Ministry ofAgriculture to IPRO.

4. With regard to the urban land management, the government has devolved the responsibility of land use planning and development control and property taxation to local governments. Unfortunately, many local governments do not have the capacity or the resources to undertake these functions effectively. In fact, most municipalities in Albania do not have an approved regulatory plan (which defines zoning regulations). As a result, most of developments do not follow any zoning regulations. Local authorities have started the collection of property tax, but because oflack ofinformation about property ownership, as most ofurban properties are not registered, some local governments apply a flat tax (of about ALL 500) for each propertyhousehold, which called occupation tax.

Restitution Issues

5. The unresolved issue ofrestitutiodcompensation has been the major obstacle, preventing completion of tenure reform and first registration. The debate over the restitution of agricultural land began in 1993 when the original law no. 7698, On Restitution of Property to Former Owners, exempted this category. The law provided that the former owners, whose granted land was not equal to their ancestral property rights, could gain compensation either by an alternative grant of land or a financial entitlement. However, after the adoption of law no. 7698, the form and value of this compensation was not agreed upon and the compensation program was not implemented. The dissatisfied, former owners challenged the law on legal and constitutional grounds. In 1997-98, they had a prominent voice in the debate over the national Constitution and

22 they succeeded in gaining a provision, which required the government to draft and obtain approval of legislation resolving the restitution issues by November 2001. The deadline passed and it was not until July 2004 that the parliament acted.

6. The revised law On Restitution and Compensation of Property addresses several problems of the 1993 version. It has kept the primary principle, allowing the restitution or compensation of immovable property expropriated, nationalized, or confiscated after November 1944. It allows for a wider range of claims and claimants than the earlier law, but continues to exempt the agricultural lands. Thus, the associations of former owners and other groups remain unsatisfied and have continued their legal and constitutional challenges. Continued disagreement on the methodology for determination of property values, the compensation level of property values and sources of funds for compensation has slowed down the implementation of the restitution.

Informal Settlements

7. Many areas around the major cities in Albania are occupied by informal settlements. These areas are categorized into two main categories: (i)land occupied illegally (both state- owned land and privately held land); or (ii)land is occupied legally, but, construction was carried out without a proper building permit. The government recently initiated a program to address the problem through approving a Law on Legalization and Urban Planning of Informal Zones (no. 9304 of 29 October 20041, which sets the following goals: . re-planning ofeach informal zone to insure its proper functioning as an urban district and reserving the areas needed for infrastructure, street access and public spaces; . bringing the existing buildings into compliance with construction and land use standards and legalizing them under the administrative law; and settling the ownership or lease rights ofthe persons occupying the land and buildings.

8. The law outlines a procedure, at the start of which, the citizedoccupants must file a declaration of their intent to legalize. In accordance with the deadline date of 24 March 2005, citizens have filed 54,000 self-declaration applications, asserting the location, size and boundaries of their land parcels and buildings. These applications constitute 60 to 70% of the estimated 90,000 eligible properties. Professional teams have begun the technical tasks of reviewing the self-declaration forms and preparing the zone documentation and urban studies.

State Land Management

9. The process of determining state owned land and property holdings and their division between state agencies and municipalities has started in 2001 and is behind schedule. The process involves an initial stage, in which the commune or city administration must inventory the state land and immovable objects within its temtory and designate those, for which it seeks transfer. The list then circulates among the state agencies. When agreement is reached, it is adopted by the Council ofMinisters in a preliminary form and put on public display for 90 days. After display and any corrections, the Council of Ministers gives final approval ofthe transfers to the municipality and the assignment of properties to state agencies. The final stage is registration in the PRO.

23 10. By April 2005 work is underway in 353 communes and cities and 64 of them have achieved preliminary approval oftheir property lists. In eight ofthese, the work has been carried through the stage ofdivision ofproperties and they are ready for public display.

Urbanization Dynamics and Land Management

11. Since transition began in the early 1990s, Albanian cities have witnessed an unprecedented demographic, economic, and spatial transformation. The largely unplanned process by which cities absorbed new residents and firms, formally and informally, led to dramatic increase in dwelling space and created patterns of densification that are more in line with efficient market-based cities.

12. Urbanization in Albania has gone through three distinct phases since the fall of communism. The first phase was dominated by the informal sector. The second phase saw the consolidation of the informal and the emergence of a formal sector. The third and current phase consists offurther establishing the formal sector and regularizing the informal development. The main government objective during this third phase would be to formalize and integrate the urban land and property market.

13. According to a recent Albania Urban Sector Review prepared by the World Bank, urbanization in Albania will follow a steady trend although at a slightly slower pace over the next 20-30 years. Albanian cities may need to accommodate 400,000-700,000 new residents over the next generation if it reaches demographic pattern typical of the rest of Europe. The urbanization pattern is likely to continue and may become even more pronounce in the central- coastal region, and especially in a few cities in the greater capital area.

14. These developments underscore the need for much better urban management, including facilitating the development of efficient land and property markets through enhancing tenure security, improving urban planning, land management and development control, as well as strengthening the local revenue mobilization and financing investment in urban infrastructure and services.

Urban Land Use Planning and Management

15. Regulatory Mechanisms. To date, the law On Urban Planning, both in its 1994 and 1998 versions, has largely preserved central planning style of the past. In the communist regime, due to public ownership of land and property, streets, public spaces and footprint ofbuildings could be superimposed on any landscape by means ofGeneral Plans and/or subsidiary "urban studies." These plans now have become technically irrelevant and weak in de facto legal status, due to fragmentation ofland and property ownership structure (a mixture ofprivate, state and municipal ownerships), as well as an unbalanced notion of individual property rights and individual and social obligations.

16. Absence ofa recent, applicable regulatory plan, the primary planning activities have been the preparation of small-scale urban studies (paid for by developers) and to a much lesser extent,

24 infrastructure improvements. As a result, urban planning and development have taken place on an ad hoc, site-by-site basis, involving "negotiation," rather than the application of pre-defined rules and standards. Moreover, with a penchant for physical design, city-sponsored programs of enforcement (removing illegal buildings) has become major intervention in municipal planning and development control, causing increased cost of living and doing business. Evidently, the current planning and its enforcement have left much room for rent seeking in urban land management. The focus of enforcement has been on demolition, obviously an extreme and costly solution to problems ofurban development that are better addressed through:

regulatory planning and zoning that better serves the dynamic ofthe market; public participation and publicity of the plans and regulations, to ensure general support and transparency ofthe process; and more streamlined permitting process that encourages builders to obtain appropriate approvals with minimal transactions costs and discourages corrupt behavior ofofficials.

17. Some initiatives are already underway in strategic planning incorporating participatory approaches, in which citizens, enterprises and NGO's have participated as "stakeholders" with the pertinent state and municipal agencies in creating the plans.5

18. Non-renulatow Mechanisms. In addition to the regulatory plans and permits, governments have at their disposal two other instruments for influencing urban land use: (i) development of primary and secondary infrastructure, whether through direct investment or through public-private partnership; and (ii)taxation and fees, both as a means to finance infrastructure and to affect incentives for private land use.

19. To date, infrastructure investments have not been utilized as a way of proactive land management. According to a recent Bank urban sector review, improvement in infrastructure was commonly found to be a key factor where the business climate had improved across surveyed cities. The major responsibilities for managing and maintaining local physical infrastructure have been decentralized over the last years. Nevertheless, cities are currently lacking the resources and finances to sufficiently fulfill their infrastructure and service provision role.

Property Taxation

20. While the municipalities are fully aware of the acute needs to improve infrastructure, in the absence ofthe property tax, which links the population increase and the financial basis, many municipalities do not have adequate fiscal resources to cope with development pressures. Land and property taxation has been envisioned as a potentially significant source ofrevenue for local self-government, but is not yet playing an important role. Law No. 7805 of 1994 authorized

5 These include the City Development Strategies conducted by CoPLAN in Elbasan and Fier. The United Nations Development Programme has used similar public participation planning methods in creating its Millenium Development Goals plans for several regions, including Elbasan, Korce and Kukes. 6 According to the World Bank's most recent Albania Urban Sector Review (2006), in most ofthe seven secondary cities that have produced local economic development strategies, infrastructure deficiencies come in for strong criticism-particularly roads, water supply and wastewater among the sectors provided at local level.

25 taxation of land and buildings on the basis of a fixed rate per square meter of building, and per hectare of land depending on use category. However, taxation of land on the basis of this law was later exempted.’ Similarly, a law on taxation of agricultural land was authorized and then suspended. Law No. 8982 of 2002, On the System of Local Taxes, re-defined the authority of local governments to levy taxes on land and buildings, including on agricultural land. Also subject to local taxation is the transfer of the right of ownership in immovable property and the hookup of a new building to infrastructure. The law On the Value Added Tax was amended to provide that, after December 3 1, 2005, commercial and industrial buildings (not housing) will be subject to VAT when they are sold.’

21. ‘Implementation of these taxes by local departments of finance has been slow and unevenly applied. Some municipalities have started the collection ofthe property tax. A number of municipalities established a flat tax per property. It is considered a good start but at the same time it is rather regressive in that a family that has a flat of 65 m2 pays the same amount as a family that has a villa.

22. In sum, fifteen years into the market economy and facing a future of greater integration into European practice, the challenge facing cities in Albania is to reestablish a new practice of land management that strengthen the government role in providing tenure security, light-handed regulatory and spatial guidance, mobilizing local revenues through adequate property valuation and taxation, and the much needed infrastructure and local services.

Law No. 7805 of 16 March 1994, modified by Law No. 8344 of 13 May 1998. * Law No. 8982 of 12 December 2002, On the System ojLocal Taxes. 9 Law no. 7982 of 27 April 1995, On the Value Added Tax, Article 20.

26 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ALBANIA: Land Administration and Management Project

Bank-Financed Projects

1. Integrated Coastal Zone Management and Clean-up Proiect - APL-1 (P086807) [Active; PDO - Satisfactory; IP - Satisfactory]. The development objective ofthe Integrated Coastal Zone Management and Clean-up Project is to set-up and initiate an integrated coastal zone management approach to reduce coastal degradation. 2. Agriculture Services Project (P054736) [Active; PDO - Satisfactory; IP - Satisfactory]. The project aims to create and environment conducive for rural growth by addressing key constraints faced by small-holder farmers in agricultural production, trade, and the functioning of land markets. 3. Urban Land Development Project (P040975) [Closed; OED Rating: Satisfactory] The primary objectives ofthe proposed project are to provide essential infrastructure to unserviced or neglected areas in participating municipalities, including the Municipality of Tirana and the District ofTirana, and to strengthen the institutions responsible for the delivery of urban services at the national and local levels.

4. Community Works Proiect (P077297) [Active; PDO - Satisfactory; IP - Satisfactory]. The development objective of the Second Community Works Project (CWP 11) is to alleviate local bottlenecks hindering development (including infrastructure and services) through processes ofparticipatory local development as a result of (a) improving access to quality social and economic infrastructure and social services through sustainable micro-projects, and (b) promoting institutional development at the local level.

Projects of Other Donors

USAID Land Registration Proiect - financed the first registration program between 1994 and 2004. 0 OSCE Immovable Property Program - TA to support IPRO and land restitutiodcompensation process.

0 EU PHARE Support to IPRO - fkded strengthening ofIPRO mapping capacity and the first registration in rural zones, between 1994 and 2001. 0 USAID Local Government Assistance - supports local budget and finance functions and property inventory.

27 Annex 3: Results Framework and Monitoring ALBANIA: Land Administration and Management Project

Results Framework Project Development Outcome Indicators Use of Outcome Obiective Information

Improve the efficiency and Reduction in time to register To monitor impact and effectiveness ofland property transaction effectiveness ofproject administration and urban components and activities. management through enhancing Reduction in time to receive tenure security, improving urban building permit To determine at the mid-term planning, land management and review whether the project needs development control, supporting to be adjusted or restructured. property valuation and taxation, Increased the number of and financing investment in urban buildings in compliance with Outcomes will feed into central infrastructure and services. building permit. government relevant policies and decisions, as well as local Increased property tax collection. government strategies and actions. Customer satisfaction is improved (on a scale from “Very Poor, Poor, Average, Good, Very Good and Excellent”) to the level of“Very Good”.

Increased level ofconfidence in security ofproperty rights as measured by customer surveys.

Intermediate Results Results Indicators for Use of Results Monitoring One per Component Each Component ComDonent A:

A. 1 Enhanced service delivery of 90% ofall IPRO transactions are A basis for determination if the the IPRO. processed within the approved services provided by IPRO have service standards. improved. Performance may inform further decisions regarding institutional changes.

A.2 Completion of first Issuance of500,000 land titles. Basis for determination whether registration ofimmovable the registration ofthe immovable property rights. property rights in Albania have been completed. A.3 Key regulations for first Adoption of a regulatory Evaluation ofadequacy oflegal registration and protection of framework to Protect the framework for the first

28 property rights are formulated. registered property rights. registration.

Tax and fee structure on property policy study.

A.4 Capacity in land 3 study tours completed. administration improved. Determination if the education Staff of 8 local offices is trained. system in land management serves country needs.

Results may feed into further I enhancements in the land management education programs. I Intermediate Results Results Indicators for Use of Results Monitoring One per Component Each ComDonent Component B:

B. 1 Enhanced capacity of Land use plans (regulatory plans) Assessment ofimprovements in selected secondary cities in urban developed for eight" capacities of local governments to land management. municipalities. manage urban land in transparent and efficient manner.

10 municipalities' urban planning Results may inform municipal staff is trained. government strategies and actions regarding land use and management. B.2. Property tax based on Property tax system which is The implementation ofthe new property value is introduced in based on market value is property tax system will serve as Albania. implemented in 10" an example to follow by other municipalities. municipalities and help shape I country's fiscal policies. B.3. Development ofkey laws Draft Urban Law is prepared. and regulations to related to urban Draft condominiudapartment management. regulatory framework is prepared.

Public land management policy is developed.

B.4. Improved knowledge base of Formal and on-job training is urban planners in MPWTT and provided to the municipal staff of municipalities 10 cities and ofurban planning specialists in MPWTT. B.5. Improved capacity of Three rounds of monitoring Results may feed into further MPWTT in support and reports completed. government policy and regulatory monitoring the performance of actions. local governments in urban land management. ComDonent C: MuniciDal Investments

loTwo municipalities (Elbassan and Fier) already have regulatory plans. 11 Tirana will also benefit from the support to the Property Taxation under component B.

29 C. 1. Investment in priority 8 municipalities complete the Evaluation ofimprovements in infrastructure and services interim set ofreform and gained municipal public infrastructure in completed. access to investments ofphase I. the participating cities, and their impact on economic and social 5 municipalities complete the profiles of participating cities. interim set ofreform and gained access to investments ofphase 11.

C.2. New address system in Implementation ofaddress Assessment ofthe adequacy of selected municipalities is system completed in 10 the address system to be completed. municipalities. implemented by the local governments in the remaining municipalities. C.3 Improved capacity oflocal Staff in 10 municipal offices government in carrying out trained in the procurement and fiduciary aspects ofmunicipal financial management. investments.

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* m 5 Lo e,0 Annex 4: Detailed Project Description ALBANIA: Land Administration and Management Project

Component A: Security of Tenure and Registration of Immovable Property Rights (US$19.42 million equivalent)

1. Since 1991 Albania has carried out land and property administration reforms that have encompassed the revival of market activities and civil law as well as the modernization of state administrative regulation and management of land. The Immovable Property Registration Office (PRO), created in 1993, with a network of 36 district offices is currently subordinated to the Ministry of Justice and has a mandate to register land ownership and record property transactions.

2. While the government, with support ofinternational donors, such as USAID, the EU and OSCE, has successfully privatized and issued property rights to most rural properties and about 25% or urban properties, there are still about 600,000 urban and 300,000 urban parcels not yet registered and even registered ownership rights are not fully secure. The PRO has been criticized for lack of efficiency and transparency and the process of registering property transaction is often very slow and expensive because ofthe high informal payments.

3. The objective of component A of the project is to improve service delivery and transparency of the Immovable Property Registration Office (IPRO) and complete the first registration of most of the remaining rural and urban properties in Albania. The component will cover the entire country, but will initially concentrate on those offices and areas that have the highest value properties and are most economically active, including urban, peri-urban, and coastal zone areas. The component will include five sub-components:

4. Sub-component A.l: Improvement in Service Delivery of IPRO (US$7.49 million equivalent) This sub-component will support the improvement of service delivery of the IPRO in the registration of land and property transactions through the re-engineering of office functions, quality improvement of critical kartela and cadastral map information, introduction of information technology to improve information management and support re-engineered workflows, and monitoring of performance and service standards. The component will provide funding for office construction, renovation, or extensions, and the provision of furniture and equipment. The component will also provide resources for training and capacity building for IPRO staff. Finally, it will support the implementation of a public relations and information program to disseminate information about services standards and customer bill of rights. It will also include resources for regular customer surveys to measure compliance with service standards and a consumer hotline to report corruption cases and non-compliance with service standards.

33 5. The sub-component will consist ofthe following activities:

A.l.l: Re-engineering of Office Functions and Quality Improvement This sub-component will provide support to the IPRO in enhancing their management effectiveness, improving human resources policies, and also improving its service delivery and transparency.

The sub-component will support the re-engineering of the workflow in IPRO, which will include the re-design ofbusiness processes to improve access to and the flow of information through the introduction of more rigorous systems of case management and quality control, development of procedures manuals, and the development of standards of communication and reporting between the central office ofthe IPRO and district offices.

This sub-component will also support the remedial work required to bring existing kartela and cadastral map information up to the prescribed standards. A prerequisite will be to identify the areas where there are widespread significant deficiencies in critical elements of this information. Where practical this identification and remedial work will be out-sourced.

Furthermore, this sub-component will support the development of a business continuity plan for IPRO to minimize disruptions in service following a disaster; the development of services to meet the particular needs of institutional and special categories of clients such as banks and notaries and investigations into how PRO can provide decentralized services.

In the area ofhuman resources policies, the project will support the development of a human resources management plan.

A.1.2: Information Technology Development. The sub-component will support the further implementation of automated systems to support the re-engineered workflow and the PRO Registration Automation Strategy12. The Tirana IPRO office will continue to be the pilot site for new automation initiatives and as such will be used to comprehensively test new approaches and applications before their implementation in the district offices. The implementation focus will be on the larger urban district offices. The project will also finance data conversion, data improvement and the creation of digital archives of key property records.

A.1.3: Internal and External Monitoring. The project will support internal monitoring through the development of control procedures for processing applications and transactions, standards for quality control, and strategy to monitor performance. The project will also support the establishment of a hotline to respond to consumer questions and complaints concerning non-compliance with service standards and corruption. The project will also undertake an annual customer survey/external monitoring that will include the development of survey instruments and undertaking of regular customer surveys to monitor the provision ofservices to the public.

I2 To be developed prior to project implementation

34 A.1.4: Public Relations and Data Access Protocols. The project will support the development and implementation of a public information campaign, including the development of information materials (brochures, posters, etc.) and information flows to the media, (newspapers, radio, television programs). Public relations activities will also be extended to other key government and private sector entities that are concerned with immovable property rights. Furthermore, the activity will support the establishment of linkages to other government agencies for data coordination, including the development of procedures and standards for the sharing of property information with banks, builders, notaries, courts, etc.

A.1.5: Improvement of Facilities. This sub-component will support office renovation, extension, or construction of new offices. The sub-component will also finance furniture and equipment. The focus ofthis effort will be on larger urban district offices.

Sub-component A.2: Completion of First Registration of Immovable Property Rights (US$10.53 million equivalent) 7. This sub-component will support the first registration of most of at least 500,000 urban properties. The sub-component will finance surveying and mapping ofproperty boundaries, legal search adjudication and recording of property rights, and quality control. The first registration will use the first registration manual, quality control manual and the global contract developed for previous first registration work funded by USAID, the European Commission and OSCE. The sub-component will include the following activities:

A.2.1: Public Relations and Customer Outreach. The support will be provided for a public campaign and public outreach before and after the first registration process. The campaign will explain the law, the citizens rights, procedures, documentation to be submitted. Special attention will be paid to reach out to women, minorities, and disadvantaged groups. The funding will also be provided for the broader outreach to explain the rationale for the registration process, benefits and obligations ofthe citizens.

A.2.2: Surveying and Adjudication to Support First Registration. This is by far, the largest activity under this component. The first step is to prepare detailed inventory of the un- registered properties by cadastre zone and develop a prioritization strategy including the requirements ofComponent B activities. The activity will finance: mapping to support first registration; 0 any surveying required to define property boundaries and improve the geodetic network supporting first registration surveying and mapping; 0 acquisition of maps developed under other projects and conversion of map information to scales and standards required for property registration; cadastral mapping; 0 recording of property rights information, including privatization documents, hipoteka documents, restitution commission decisions, etc.; and public display processes to ensure the accuracy ofthe collected information.

35 All cadastral mapping and adjudication activities will be undertaken using the Global Contract (developed by the OSCE project) and will follow the adjudication manual, also developed under the OSCE project.

A.2.3: Quality Control. The activity will finance the establishment of quality control process for all cadastral mapping and adjudication documents (produced under A.2.2) before entry into the land registry. This is to ensure that all the work meets the quality standards specified in the first registration manual and the global contract, and that all rights and boundaries are recorded accurately. The quality control process will include an in depth technical audit of a sample ofall first registration documentation.

Sub-component A.3: Further Development of Regulatory Framework (US$0.25 million equivalent)

8. This sub-component will provide support to further development of the regulatory framework. There are several key land policies which need to be addressed in order to complete the registration process, while others relate to broader land policy questions that the government will need to address. The sub-component will support the development of legislation and regulatory framework necessary to facilitate the evolution of an efficient and transparent land and property market. Those policies that need to be completed for the purpose ofregistration of property rights will be developed with leadership from PRO. These areas include, inter alia, the security of registered rights, definition of agriculture family, minor corrections in the registry book.

Sub-component A.4: Training and Capacity Building (US$0.55 million equivalent)

9. This sub-component will support the establishment of training center including the provision of facilities and equipment for the training of PRO staff. The component will also support undertaking training needs assessment to identify the current capacity and training needs for PRO staff. The sub-component will support the provision of management and technical training, including regular on-going training programs of new legislation, regulations, and procedures, quality control, customer satisfaction, and integrity in work place.

Sub-component AS: Administrative and Management Support to IPRO (US$0.60 million equivalent)

10. Component A. Management and Coordination will be carried out through the existing structure of IPRO. Therefore, the sub-component will finance the incremental operating costs of management and coordination and some office equipment to enhance IPRO project. Furthermore, the project will provide support to PRO to strengthen its administrative and management functions, including in such areas as: strategic planning 0 human resource development planning

0 financial management

0 monitoring, reporting and evaluation

36 11. In parallel to project activities, the Swedish International Development Agency (Sida) may facilitate and support a twinning arrangement between PRO and the National Land Survey of Sweden (the Swedish cadastral agency) which will encourage the exchange of expertise between the two organizations at both management and technical levels.

Component B: Urban Land Management (US$5.10 million equivalent) 12. The main objective of this component is to strengthen the capacity of municipalities in urban land management by (1) establishing a market-responsive, participatory urban planning and development control system through technical assistance to urban planning law revision and development of regulatory plans for participating cities; and (2) mobilizing municipal revenues and correcting property market distortions through property valuation and taxation.

13. Eligibility. The support under Component B and Component C would be extended to municipalities that are in need for timely intervention to ensure their orderly development. Key criteria include: (a) cities facing demographic pressure (with population size above 50,000); (ii) cities with substantial cultural ~ignificance'~and facing sizable development pressure; and (iii) cities did not secure funding for the development of regulatory plans. As a result, eleven cities are eligible for 'Component B and these are: Durres, Elbasan, Shkodra, Fier Vlore, Berat, Korca, Lushnje, Kamez, and Gjirokaster. The ultimate participation in the project depends on the municipalities' clear commitment to the project objectives and those of component B in particular. Tirana has secured funding for the development of regulatory plan, but, will receive support in property valuation and taxation.

14. Through Component B, all eligible m~nicipalities'~will receive capacity building support in form ofgrants. However before receiving the support, municipalities will be required to:

a. Sign the draft implementation protocol;

b. appoint designated municipal staff; and

c. commit adequate resources including logistics and counterpart funds as specified in the implementation protocol.

15. Implementation protocol. Within the framework of the project, the participating municipalities would enter into the Implementation Protocol with the MOI and MPWTT. The agreement will indicate the obligations and responsibilities of the Ministries and the municipalities with respect to project fimding, implementation plan, supervision, monitoring and evaluation, compliance with the environmental and social safeguard policies and the governance strategy. The Protocol will be ratified by the concerned Municipal Council in order to become effective. Draft sample Implementation Protocol will be included in the project Operational Manual. l3Classified by UNESCO as the World Heritage City. . 14 While meeting the aforementioned criteria, Tirana, Elbasan, and Fier are not included for the development of regulatory plans, as they either already developed or secured funding for the development of regulatory plans. However, these municipalities will be eligible for the property valuation and taxation sub-component.

37 Component B includes the following four sub-components and corresponding activities:

B.1: Municipal Land Management /US$3.36 million equivalent) 16. The sub-component will support eligible municipalities in urban land management, including the development of regulatory plans (including City Development Strategies, Infrastructure Investment Plans, and Regulatory Plans) in the largest 10 municipalities in Albania and municipalities ofcultural significance.

17. Efficient urban land management warrants sound urban planning to guide the public and private sector development. Technical support would be provided to develop a demand responsive urban Regulatory Plan through the following activities:

Preparation of City Inventory. The participating municipalities would receive the assistance for: (a) updating aerial photographs and city maps (if needed); (b) developing inventory (land use, infrastructure, and cultural heritage, environmentally protected areas, etc.); (c) updating social and economic data (residents, business information, social service delivery, vulnerable groups, etc.). The information would be incorporated into GIS system to facilitate planning processes.

Vision and Regulations for Urban Development. During this step, the project would support the participating municipalities to develop the key vision and strategies to guide the city development, including the following:

(a) City Development Strategy (CDS) - a guiding document analyzing the city’s strengths, weakness, opportunities, and threats (SWOT), defining the city’s long term vision, highlighting critical issues and identifying policy directions and spatial framework for development.

(b) Strategic Infrastructure Investment Plans should be developed to guide future urban growth. It shall involve public participation, reflect citizens’ views, and propose actions to influence development towards the defined objectives. *

(c) Regulatory Plan - legally binding land use plan which includes zoning and subdivision regulations. Zoning regulations stipulate target land use, densities and sometime height restrictions; define the present and future right of way (roads, water mains, sewers, power lines, etc.), and other public functions (public parks, schools, and hospitals). Subdivision regulations govern the development of land for its zoned purpose by defining standards for layout and lot sizes, infrastructure and service provisions.

15 Note that a few eligible cities have carried out CDS or Local Economic Development (LED) type ofactivities in recent years, including Durres, Shkoder and Berat.

38 These activities - City Development Strategies, Infrastructure Investment Plans, Regulatory Plans would be carried out in consultation with citizens through workshops, and Regulatory Plans would have to be approved by the relevant body(ies) in accordance with the urban planning law.

The CDS documents, Strategic Infrastructure Investment Plans, Regulatory Plans and subsequent building permits to be issued according to the plans should be made publicly available.

The sub-component will finance consultants’ services (including on-the-job training of municipal planners), aerial photos, maps, computers and the GIS sofhvare system.

B.2: Property Valuation and Taxation JUS$0.64 million equivalent) 18. The sub-component will support the preparation of property valuation law and the introduction of market value-based property taxation in the participating municipalities. The component will also provide financing to the equipment and training of municipal staff in mass appraisal techniques.

19. The introduction of market value-based property tax is essential to ensure equity, and promote economic allocation of the scarce urban land, prevent speculation, and link population base to the municipalities’ resources. In addition to business taxes, municipalities have already started to collect taxes from residents, in order to develop a fiscal basis for urban management. While the current law stipulates that the municipalities should charge property tax based on the market value, municipalities are currently charging a flat tax per family due to the lack of information about property values. The municipalities are keen to transform the existing flat tax into a more equitable, value-based property tax.

20. The sub-component will support the participating municipalities to establish a computerized property valuation and taxation system (using simple mass appraisal techniques). The component would finance technical assistance, equipment and software, and mapping requirements. Local governments will contribute through assigning staff and collecting properties related data needed to make the system operational.

21. The project will also facilitate the exchange of land and property information among the municipalities and the PRO.

B.3: Formulation of Key Urban Land Management Regulations and Policies JUS$O.38 million equivalent)

22. The development of efficient land and property markets will require the government to address broader urban land policies which would.address distortions to the property markets. The sub-component will finance the preparation, through consultative processes and public hearings, of the urban law and the key implementing regulations. Furthermore, the sub- component will finance the formulation of key policies and the preparation of the regulatory

39 framework, including: draft condominium16 regulatory framework, policy study on public land management and others as may be determined by the Bank and government as priority policies during the course ofproject implementation. 17

l6 Condominium, a legal term used in the United States (and in most provinces ofCanada), is referred to a type of joint ownership ofreal property where each unit is individually owned and the common areas are jointly owned. ” Other potential research areas related to urban land management are international practices on agriculture land conversion, building code, professional licensing.

40 B.4: Training JUS$0.22 million equivalent)

23. In addition to on-the-job training provided by each activity area, this sub-component will support training needs assessment to evaluate current capacity and identify knowledge and skill gaps for planners and relevant and staff in the Department ofUrban Planning of the Ministry of Public Works, Transport and Telecommunication as well as the municipalities.

24. The sub-component will support provision of both management, technical, and regular training programs on land management, urban planning, development control, etc. Short courses and study tours.

B.5: Support to the Department of the Urban Planning of the Ministry of Public Works, Transport and Telecommunication JUS$O.SO million equivalent1

25. The project will support the Ministry of Public Works, Transportation and Telecommunication to coordinate component B activities. The financing will be also provided to: (i)capacity building in monitoring of compliance with regulatory plans; and (ii)incremental operating cost of project coordination team, including contractors’ costs. Under this sub- component, regular customer surveys of the participating municipalities will be undertaken and the compliance with the results framework will be assessment. .

Component C: Municipal Investments (US$31.48 million equivalent) 26. This component aims to enable proactive urban growth management and enhance urban land market efficiency by supporting municipalities to prioritize and implement selected infrastructure investments and services, in accordance with strategic investment plans. The component will also support the implementation ofthe street address system. Four sub-components and corresponding activities are detailed below:

C.1: Municipal Infrastructure lUS$30.00 million equivalent) 27. This component will help the eligible municipalities implement priority municipal infrastructure to address key deficiencies and provide better built environment to attract private investments, as well as proactively guide the direction ofland development. The financing would be provided for priority infrastructure identified by the investment plans, particularly benefiting poor and under-serviced areas, as selected by the municipalities themselves.

28. Investment financing is proposed on a cost-sharing basis, with the project contribution of 50%, and the remaining part to be financed by the municipalities (30%) and national government in an amount equal to the value-added tax (20%). Municipalities will receive financing for investments in two following phases:

29. Phase I in the maximum amount of US$400,000 from the loan (which will enable municipalities to implement projects with a total cost of up to US$ 800,000). Conditions for accessing Phase Ifunding include:

41 Regulatory plan is approved by the relevant body at the local level’’ according to the urban planning law; 0 Property tax (called occupational tax) collection rate reaches 50% of total households ofthe municipality; 0 Municipal planning office fully staffed according to the requirements of the urban planning law; and Full compliance with the governance filter as stated in the implementation protocol.

30. Phase I1 of a maximum US$800,000 from the loan (which will enable municipalities to implement projects with a total cost ofup to US$1,600,000) will be available after: 0 Regulatory plan is approved by the relevant central body” according to the urban planning law; 0 Approval of the Strategic Infrastructure Investment Plan by the Municipal Council; 0 Completion ofall activities in Phase I. 0 Completion of implementation ofthe property tax system based on market value and reaching 75% oftotal households ofthe municipality; and 0 Full compliance with the governance filter as assessed by the operational audit.

3 1. Municipalities will have 2 years from project effectiveness date to access the investments funding in Phase 11. During project mid-term review, any uncommitted funds will be reallocated to the best performing municipalities.

32. In principle, all priority investments identified in the strategic investment plans by the municipalities will be eligible for financing under this component, provided that the municipalities meet the criteria detailed in project Operational Manual, and subject to “no- objection” from the World Bank.*’ Approval of the grants will be done through the competitive grant committee, which is chaired by the Ministry of Interior and Local Government. This committee will be expanded to include the MoPWTT. The project Operational Manual will provide detailed guidance to municipalities on the application process and project execution procedures.

33. This sub-component will finance consultant services for design, supervision, and investment works.

C.2: Implementation of Address System {US$l.OS million equivalent) 34. Many municipalities have not updated the address system for more than 15 years, which resulted in the situation where most of the new developments (including new roads and new settlements) do not have a proper address reference. The project would support completion of all l8According to the existing regulations, the regulatory plans are firstly approved by the Local Council for Territorial Adjustments. 19 Currently, the approval of the municipal regulatory plans is vested with the National Council for Territorial Adjustment. 20 For detailed arrangement, see Annex 8 “Procurement Arrangements”.

42 street records, assigning numbers to each building, and developing an address database. In addition, the sub-component will finance the purchase and installation of street signs and poles as well as numbers for private buildings. The project will finance either 100% of the street signs and poles, or 50% ofthe total costs ofthe entire system, including the cost ofhousehold signs.

C.3: Procurement and Financial Management Training for the Municipalities {US$0.12 million equivalent) 35. To ensure good practice in implementing infrastructure investments, this sub-component will finance training for municipal staff on fiduciary aspects, including procurement and financial management.

C.4: Component Management fUS$0.31 million equivalent) 36. The sub-component will finance the management costs of the Ministry of Interior to manage this component, including the costs of the contract staff, incremental operating costs, office equipment, and short term international and national consultants.

43 Annex 5: Project Costs ALBANIA: Land Administration and Management Project

Local Foreign Total us us us $million $million $million Project Cost By Component and/or Activity equivalent equivalent equivalent

Component A: Security ofTenure and Registration 16.36 3.07 19.42 ofImmovable Property Rights 1. Improvement in Service Delivery ofIPRO 5.06 2.43 7.49 2. Completion ofFirst Registration of Immovable 10.45 0.08 10.53 Property 3. Further Development of Regulatory Framework 0.09 0.16 0.25 4. Training and Capacity Building 0.34 0.21 0.55 5. Administrative and Management Support to IPRA 0.42 0.19 0.60

Component B: Urban Land Management 1.96 3.14 5.10 1. Urban Development Planning 1.01 2.35 3.36 2. Property Valuation and Taxation 0.3 1 0.34 0.64 3. Urban Land Management Regulations 0.14 0.24 0.38 4. Training 0.20 0.02 0.22 5. Support to MPWTT 0.3 1 0.19 0.50

Component C: Municipal Infrastructure 23.55 7.93 31.48 1. Municipal Investments 22.50 7.50 30.00 2. Address System 0.75 0.30 1.05 3. Procurement and Financial Management Training 0.12 0.00 0.12 4. Component Management 0.18 0.13 0.3 1

Total Baseline Cost 41.87 14.13 56.00

Total Project Costs 41.87 14.13 56.00

Front-end Fee 0.00 0.00 0.00 Total Financing Required 41.87 14.13 56.00

44 Project Costs and Financing Arrangements

GOA Components IBRDDDA SIDA~' PHRD Total National Municipalities

Component A: Security of Property Rights 0.00 0.00 16.10 3.33 0.00 19.42

Component B: Urban Land Management 0.00 0.00 2.72 0.96 1.42 5.10

Component C. Municipal Infrastructure 6.00 9.00 16.15 0.21 0.12 31.48

PPF (already included in IDA hnds under components) 0.30 0.30 Front End Fee 0.00 0.00

4.50 1.54

2' SIDA funding for 2009 and 2010 has been committed, but will be contracted through a separate Administration Agreement and Grant Agreement.

45 Annex 6: Implementation Arrangements ALBANIA: Land Administration and Management Project

1. Project implementation will be streamlined within the existing structures of the relevant government agencies. The Immovable Project Registration Office (IPRO), under the Ministry of Justice, will be responsible for implementing component A, the MPWTT, through the Department of Urban Planning, will coordinate the implementation of component B, and the Ministry ofInterior will coordinate the implementation of Component C.

2. The IPRO will coordinate the project through the Planning and Monitoring Department, which will be responsible for planning, procurement, financial management and monitoring and evaluation. The Department Director will report to the Deputy Chief Registrar for Technical Affairs, who will play the Project Coordinator’s role and ensure full coordination among the various department ofIPRO in project implementation. The Chief Registrar of IPRO will act as a Project Director. Actual implementation of the various activities under component A will be carried out through the existing structure of the IPRO.

3. The Urban Planning Department of the MPWTT will be responsible for coordinating all activities under component B, including procurement, financial management, and monitoring and evaluation. The Department Director will act as Component B Director. Procurement and financial management contractors will be hired to assist the Director in managing the project. Several of the existing staff of the Department will work full time for the project. The department will be assisted by international and national advisors.

4. Component C will be coordinated by the Department of Local Government Finance of the General Directorate of Local Government in the Ministry of Interior. The Department Director will act as the Director of Component C. The Director will be assisted by a component coordinator, monitoring and evaluation (M&E) officer, procurement and financial management staff.

5. The participating municipalities would be responsible for implementing the investment activities under component C of the project. The municipalities will also carry out economic, financial, social and environmental assessments for all investment sub-projects. An Implementation Protocol will be signed between the municipalities and the Project Director of Component B and C, to ensure that parties adhere to all legal obligations (as stated in the financing agreement, environmental and social guidelines, and the governance strategy). Municipalities will be required to receive no-obj ection from the Department of Local Government Finance before they issue bidding documents and sign contracts. Responsibilities of the municipalities as well as the local government finance department will be outlined in the project Operations Manual.

6. Operational Audit will be conducted by an independent auditor for all participating municipalities, to ensure the municipalities comply with the signed protocol agreements. The Operational Audits will be carried out after completion of the first and the second phases of investments.

46 7. A Steering Committee will be established to ensure an adequate coordination between project components. The Steering Committee will be chaired by the Minister of Justice (or his designee) and include the Ministries of Finance, MPWTT, MOI, IPRO and the Executive Secretary of the Municipalities’ Association. The Steering Committee will be responsible for monitoring project activities, ensuring coordination among project activities and providing a strategic guidance. As the chair of the steering committee, the MoJ will be the lead agency and will serve as the Secretariat ofthe Steering Committee.

8. Approval of investment grants under component C will be vested with the existing Small Grants Committee, chaired by the Ministry of Interior and Local Government. This Committee will be expanded to include representatives of the MPWTT, Ministry of Finance, Ministry of Justice, and the Association of Municipalities.

9. The implementation arrangements for the project are presented in the diagram below.

I Project Steering Committee 1 I I I I 1I I I I I t’ I I I I Small Grants I , I I Committee I I I I I Comp. C I , I I I , , I , I , I , \ I , , I I I I , I I I I I Comp. B Comp. A Comp. C I I I I I I MPWTT I PRO Mol I I I I Dept. of Local I I I I Government and I I Dept. of Urban Planning Dept. of Planning I I 1 1 I I and Monitoring Finance I I I I I I I I

47 Annex 7: Financial Management and Disbursement Arrangements ALBANIA: Land Administration and Management Project

Country Issues

1. The latest Country Fiduciary Assessment (CFA-August 2006); Public Expenditure and Institutional Review (PEIR - July 2006) and Public Expenditure and Financial Accountability Report (PEFA - July 2006) confirm that improvement is required to increase efficiency and accountability in public spending by improving the planning, budgeting, and execution ofpublic investment projects; strengthening lines of accountability, including enabling better access to information by all stakeholders; building stronger monitoring and evaluation systems; and establishing competitive and transparent frameworks for government purchases. Improvements were also needed in the public procurement law and implementation regulations to improve transparency, economy and efficiency aspects of the procurement process. The Procurement Agency supported by EU technical assistance is amending the laws and regulations.

2. The assessment of the country financial management arrangements concluded that the public financial management has improved significantly during the last few years in areas such as budgeting, internal control, internal and external audit, though from a relatively weak base. The fiduciary area will benefit from the ongoing improvements ofthe treasury system (especially an improved financial reporting enabling follow-up ofprogrammatic budgeting as well as giving more analytical information down to the level of individual service units) through the implementation of a expanded computerized treasury information system which is expected to be ready by January 2007. The proposed project will utilize these improvements by using the treasury system for the payment and reporting functions. Internal audit is currently being fully developed to improve the government’s internal control environment and the internal audit should also be utilized to monitor the implementation ofthe project. A Public Internal Financial Control framework based on EU principles is being implemented. The supreme audit institution is also being strengthened through EU support.

Risk Analysis and Conditions

3. The overall financial management risk for the project is substantial. Although the project will be implemented in an environment of high perceived corruption, adequate mitigation measures are in place to ensure that the residual risk is acceptable. Table below summarizes the financial management assessment and risk ratings ofthis project:

Conditions of Risk FM Risk Mitigating Measures Residual Board or Risk Risk Effectiveness INHERENT RISKS

Country level. High corruption H IPRO, MPWTT and MOI are to rely on S No risk, though public financial the improved treasury system for management are improving. payments, use ofprivate auditors for the

48 Conditions of Risk FM Risk Mitigating Measures Residual Board or Risk Risk Effectiveness ~ Weak institutions (additional financial audits, operational reviews with information are included in the lstreview at each municipality after country issues) the first tranche has been disbursed and disbursement of2nd phase would only occur if there are clear operational review or acceptable action plan in place where there are issues identified, and use of - Central Bank for ‘designated’ accounts Entity Level. Risk ofpolitical S Any changes to the structure and key M No interference in entity’s staffing in the implementing agencies will management. Multiple require agreement with the Bank implementing agencies. Project Level. Project is medium S Implementation arrangements acceptable No sized, 3 implementing agencies which would allow close monitoring of and funds are channeled to activities at the municipal level, and also municipalities - Dlease see below OVERALL INHERENTRISK -S No

CONTROL RISKS

Budget. Using government The implementing agencies confirmed M No budgetary system that appropriate budget for the project have been submitted to the MOF for CY07 Recruit new FM staff or consultants to M No staff and use of localized supplement existing staff. The project treasury system. will use the expanded computerized treasury system to be ready in January 2007 for payments and reporting. Internal Controls. Internal Acceptable project financial manuals for M No controls ofthe existing treasury all implementing agencies are to be system are acceptable; project completed by negotiation. specific controls would be incorporated in the project financial manual to be finalized Funds flow. Four designated Treasury will through accounting entries M No accounts would be opened in the keep track of the funding going to this Bank ofAlbania for each project enabling a separate reporting on implementing agency from the sources and uses of the project funds which the funds will be and the remaining balance of the funding transferred to the Single from IDA, IBRD, SIDA and PHRD for Treasury Account (STA) in local the three parts ofthe project. All funds to currency, but “earmarked” for be disbursed and used for the the agreed project. municipalities would be centrally managed by the MOI according to its normal practices.. Financial Reporting. Current M No I Treasury system being developed with

49 Conditions of Risk FM I Risk Mitigating-- Measures 1 Residual Board or Risk I I Risk Effectiveness manual treasury system is unable 1 WB assistance. The reporting part of the 1 to generate financial reports system will be assessed in -December automatically. 2006. Currently, the treasury uses a manual system for its accounting books and records. The manual treasury system is also used for monthly and annual reports on cash expenditures, which are compared with the annual budgets approved by parliament.

Auditing. Past global audit S The audit will be carried out by M No reports (including 2005 audits) independent auditors acceptable to the were not received on time Bank. The global audit arrangements would be streamlined to ensure timely appointment ofauditors. S M OVERALL CONTROL RISK

RESIDUAL RISK RA TING

Strengths

4. The strengths that provide a basis ofreliance on the project financial management system include the assessed strengths ofthe financial management of GOA in the control of spending of budget entities as well as the well-functioning treasury system for payments and reporting.

Weaknesses and Action Plan

5. IPRO and MOI have not previously implemented Bank financed projects. Accordingly, an action has been agreed with implementing entities to strengthen their financial management capacities.

Actions Responsibility Deadline Reporting from new computerized treasury Before relying on system: Assess the reporting for the agreed MPWTT/IPRO/MOI reports from the project from the new computerized treasury treasurylWB computerized system, system planned to start 2007

Implementing Entity

6. The proposed project implementation will be streamlined within the existing structures of the relevant government agencies. The IPRO will be responsible for implementation of

50 component A, the MPWTT the implementation of component B, and MOI will coordinate the implementation of Component C.

7. The IPRO will coordinate the project through the Planning and Monitoring Department, which will be responsible for planning, procurement, financial management and monitoring and evaluation. The Department Director will report to the Deputy Chief Registrar for Technical Affairs, who will play the Project Coordinator’s role and ensure full coordination among the various department ofIPRO in project implementation. The Chief Registrar ofIPRO will act as a Project Director. Actual implementation of the various activities under component A will be carried out through the existing structure ofthe IPRO.

8. The implementation of component B will be carried out by the Urban Planning Department (UPD) within MPWTT. The Department Director that will act as Component B director will be engaged with the day-to-day project management and coordination, including financial management.

9. The coordination of implementation of Component C will be carried out by the Local Government Finance Department (LGFD) within the MOI. While the LGFD will be responsible for coordinating Component C activities, dissemination of project implementation manual and monitoring, the actual implementation of this component will be carried out by the regular structures of participating local governments. The participating municipalities would be responsible for implementing component C.1 Municipal Investments ofthe project, including the hiring ofconsultants to prepare engineering design, supervision ofcivil works, procurement, and payments The payment of the contracts will be made following the procedures described in the “Organic Budget Law” and the instructions issued by the MoF that regulates the relationship between the local and central government. For more details, see internal controls below. An implementation protocol will be prepared between the municipalities and MOI to ensure that parties adhere to all legal obligations, including monthly reports for all the payments made to the contractors, obtaining the no-objection by DLGF and/or the World Bank as described in the PAD Annex 8 etc.

A Steering Committee will be established to ensure an adequate coordination among the various project components. The Steering Committee will be chaired by the Deputy Minister ofMPWTT and include Ministries ofFinance, Public Works, Justice, Interior, PRO and a representative of participating municipalities.

Budgeting 10. All implementing entities, MPWTT, MOI and PRO will be responsible for the preparation of annual project budgets (to be included in its departmental budgets) based on their respective procurement plans. The three implementing agencies have confirmed that their CY2007 departmental budget submission include budget proposals for this project. For municipalities who will implement Component C 1 Municipality Investments, the procedures for the preparation of the budget start only after the State Budget has been approved by the Parliament. Therefore, the municipalities will reflect in their budget the proposal for this project afterwards. These budgets will form the basis for allocating funds to project activities and for requesting funds from the government for counterpart contribution and for payments via Treasury system as appropriate.

51 11. The risk associated with planning and budgeting is assessed as moderate.

Accounting a 12. The IPRO’s finance and budget department has a staff of three people. One additional staff or consultant was assigned (before negotiation) to be responsible for financial management issues of the project, including also the preparation of withdrawal applications. The project director of this component will perfonn the authorization and the control of payments. In addition, the project director will work closely with the finance staff and MoF to ensure that quarterly interim un-audited financial reports (previously called Financial Monitoring Reports, FMRs), annual financial statements and other progress reports are submitted timely to the Bank reflecting the implementation status ofthe Component A.

13. The MPWTT’s finance and budget department has a staff of five people. One additional staff or consultant was assigned (before negotiation) to be responsible for financial management issues of the Component B. The Urban Planning Department Director will act as Component B director. He will perfonn the authorization and the control of payments for all activities of this component. In addition, the Component B Director will work closely with the finance staff and MoF to ensure that quarterly interim un-audited financial reports (IFR), annual financial statements and other progress reports are submitted timely to the Bank reflecting the implementation status ofthe Component B. 14. The MOI’s Department of Local Government Finance has a staff of 6 people. One additional staff was assigned (before negotiation) to be responsible for financial management issues of the Component C. Component C will be coordinated by the Department of Local Government Finance ofthe General Directorate of Local Government in the Ministry of Interior and Local Government. The department director will be the director ofComponent C. 15. The risk associated with staffing is assessed as substantial.

Information systems

16. Currently, the treasury uses a manual system for its accounting books and records, which are done on a cash basis. The manual treasury system is also used for monthly and annual reports on cash expenditures, which are compared with the annual budgets approved by parliament. The assessment concluded that the current manual system will be able to report according to the agreed formats, although the ongoing computerization will result in fewer resources put into producing these reports for the project most probably from 2007.

17. As mentioned above the project will utilize the reporting generated by the new computerized treasury system currently being implemented in all treasury offices. The Bank will review the reporting generated by the new treasury system prior to shifting from the manual system to ensure that the new system has the capability ofgenerating the agreed reporting. 18. The risk associated with information systems is considered as substantial.

52 Accounting Policies and Procedures

19. The accounting books and records are maintained on a cash basis and project financial statements will be presented in Albanian Lek. The project will follow the GOA’S policies and procedures (treasury) for the processing ofpayments. 20. Additional accounting policies to be applied on the project (besides standard accounting policies used for Budget agencies) will include the following major assumptions: .cash accounting as the basis for recording transactions; and .all counterpart funds should be reflected in the financial reports.

21. The risk associated with accounting policies and procedures is considered as substantial.

Internal Controls and Internal Auditing

22. General government regulations for processing transactions and approving contracts exist but written guidelines, including detailed job descriptions, are generally lacking in the budget institutions. At the level of the treasury, procedures for controls and release of all types of non- salary expenditure do exist and are followed. compliance with rules is fairly high, but simplified procedures are used occasionally without adequate justification. Commitment controls appear also to be effective. 23. All the implementing entities will document in their Financial Management Manuals the internal control mechanisms to be followed in the application and use of funds and the implementation ofthe project, including the conditional municipal grants. 24. The Financial Management Manuals reflects the structure of the entities, administrative arrangements, internal control procedures, including procedures for authorization of expenditures, maintenance ofrecords, safeguard of assets (including cash), segregation of duties to avoid conflict of interest, regular reconciliation of bank account statements, bank signing mandate for the designated accounts (to include at least two signatories), regular reporting from the treasury to ensure close monitoring of project activities, as well as the flow of funds to support project activities. 25. The municipality investments (Component Cl) will be given in the form of conditional grants to municipalities. Regarding the internal controls in place for this component (Cl), the assessment concluded that in the Organic Budget Law and various instructions issued by the MoF, the controls governing the conditional grants are well defined. Based on these rules, the DLGF monitors and approves the procurement process for the investments in the municipalities. For each municipal, the municipal investment plan, all procurements and all contracts will be subject to prior review or approval by the DLGF. As soon as the contract is awarded by each municipality, a request will be sent from the Component C Director to the Treasury at the MoF to allocate funds to the sub account of the municipalities, specifying also the name of the object to be built. Payments to contractors would be made by treasury based on the invoices approved by each municipality. Additional measures on municipal investment will be applied. A physical inspection is performed by the investment sector within the DLGF at the completion of the investment (civil work). In addition, the investment sector also follows closely the whole

53 investment process. On monthly basis, the sector receives a progress report on each conditional grant given to municipalities which is reconciled with the monthly expenditures reports produced by treasury and if discrepancies are found they are duly followed up. 26. All internal audit units of the three implementing agencies would audit the project activities as a normal part of their work. As the capacity of the internal audit is generally still low, no specific reliance on the internal audit is planned for this project. 27. The risk associated with internal controls and internal audit is considered as moderate.

28. Retroactive Financing. To help facilitate early project start up, retroactive financing for eligible expenditures for “Technical Services, Consultants Services, Training and Incremental Operations Costs” for Parts A, B and C ofthe Project incurred after January 1, 2007 may be required. Retroactive financing will be limited to Euro 100,000 under the IBRD loan (for Part C), and XDR 400,000 under the IDA Credit (for Parts A and B).

Financial Reporting

29. The CFA-July 2006 indicates that the publicly available budget execution and fiscal reports appear to be reliable and frequently updated. All payments are made through the treasury system for all budget entities, including the implementing entities for this project. Currently, the treasury uses a manual system for its accounting books and records and on a cash basis. The manual treasury system is also used for monthly and annual reports on cash expenditures, which are compared with the annual budgets approved by parliament. 30. The system will also enable the continued tracking of the project and is expected to be able to provide reliable reporting for the funding suggested for the project. Contract management reports can be provided by the system as well. Some ofthe reports, such as Summary of Sources, Components as per cost categories and Cost categories as per institutions will be directly generated by the treasury, and the remaining will be produced in Excel by the implementing entities based on the information received from treasury. 31. All implementing entities (PRO, MOI and MPWTT) will each prepare interim un- audited financial reports (IFRs) (previously known as Financial Monitoring Reports (FMRs)) for project monitoring, disbursement and supervision. Draft formats of these IFRs were agreed during the negotiations and prior to Board presentation. The implementing entities will produce a full set of IFRs every three months throughout the life of the project. The IFRs include the following tables: (a) Summary of Sources; (b) Project Sources and Uses of Funds; (c) Components as per cost categories; and (d) Procurement process monitoring. 32. The Component C Director will work closely with the finance staff and MoF to ensure that quarterly interim un-audited financial reports (IFR), annual financial statements and other progress reports are submitted timely to the Bank reflecting the implementation status of the Component C. 33. The risk associated with financial reporting is assessed as substantial.

54 External Auditing

34. As ofthe date ofthis report, the IPRO, MOI and MPWTT do not have any overdue audit. The auditor will be appointed by the Ministry of Finance as part of an overall agreement for the audit of the non-revenue earning Bank-financed portfolio in Albania. However, the previous global audit reports (including 2005 audits) were not received timely due to late appointment of auditors. The global audit arrangements should be streamlined to ensure timely appointment of auditors. Specific terms ofreference are used for the projects covered by this agreement. Despite the MOF's arrangements, all implementing entities, IPRO, MOI and MPWTT are responsible for delivering to the Bank, within six months of the closing of each fiscal year, the audited financial statements. The annual cost of the audits will be covered by the GOA as part of the portfolio audit. 35. In addition, to provide additional assurance of the proper use of project funds at the municipalities, operational reviews will be carried out by independent auditors and under TORS acceptable to IDA. The 1'' review at each municipality will be carried out after the first tranche has been disbursed because the disbursement of additional grant (2nd phase) would only occur if there are clear operational review or acceptable action plan in place where there are issues identified, and the 2ndoperational review will be carried out after the second tranche has been disbursed. The cost ofthese operational reviews will be eligible for financing under the Loan. 36. The following chart identifies the audit reports that will be required to be submitted by the project implementation agencies together with the due date for submission.

Audit Report Due Date Entity financial statements N/A Project financial statements (PFS) for each Within six months of the end of each fiscal year and implementing agency, including SOEs and also at the closing of the project designated accounts. The PFS include sources and uses of funds by category, by components and by financing source; SOEs, Statement of designated account, notes to financial statements, and reconciliation statement. Operational reviews on the internal controls of the The 1st review at each municipality will be done after municipal investment component the first tranche has been disbursed but before the disbursement of the 2nd tranche, and the 2nd operational review will be carried out after the second tranche has been disbursed.

37. In addition the country's supreme audit institution performs ad hoc external audits ofthe implementing entities. The risk associated with external audit is considered substantial.

Flow of Funds and Disbursement Arrangements

38. The project funds will flow from the IDA, IBRD, SIDA and PHRD via four foreign currency-denominated designated accounts (DAs) for each component (A, B and C) in Bank of Albania (BOA) from which the funds will be immediately transferred to the Single Treasury

55 Account (STA) in local currency, but “earmarked” for the agreed project. Treasury will through accounting entries keep track ofthe funding going to this project enabling a separate reporting on the sources and uses of the project funds and the remaining balance of the funding from IDA, IBRD, SIDA and PHRD for each component. Counterpart funds are transferred through the Treasury system directly to the suppliers. 39. Payments to be made to the municipalities under component C1, will follow the same procedures as those governing the conditional grants. As soon as the contract will be finalized and signed for each municipality, a request will be send from the Component C’ Director to the Treasury at the MoF to allocate funds to the sub account of the municipalities, specifying also the name ofthe object to be constructed. Project funds will flow from: (i)the Bank, either via a single Designated Account which will be replenished on the basis of SoEs or by direct payment on the basis of direct payment withdrawal applications if a special need arises; or (ii)the Government, via the Treasury at the Ministry ofFinance (MOF) on the basis ofpayment requests approved by the Treasury Department of the MOF directly to the local supplier for VAT and other taxes.

40. Applications for replenishment of the Designated Accounts will be submitted on quarterly basis or when one-third of the amount has been withdrawn, whichever occurs earlier. Documentation requirements for replenishment would follow standard Bank procedures as described in the Disbursement Handbook. Monthly bank statements ofthe Designated Accounts, which have been reconciled, would accompany all replenishment requests. 41. The project will report every three months on its use of the funds in accordance with normal budget reporting procedures, see above. 42. Counterpart-funding will be executed through treasury accounts. 43. The risk associated with funds flow and disbursement is considered as substantial.

Summary of key financial management arrangements for Municipal Investment Grants (Component C1)

44. The participating municipalities would be responsible for implementing Municipal Investments component of the project, including the hiring of consultants to prepare engineering design and supervision ofcivil works and procurement. 45. The payment to the municipalities will follow the same procedures as those governing the conditional grants - the Organic Budget Law and other instructions issued by the MoF cover the policies and procedures regulating the relationship between the local and central government. The Bank concluded that the controls governing the conditional grants are well defined as the DLGF will monitor and approve the procurement process for the investments in the municipalities. For each municipality, the municipal investment plan, procurements and all contracts will be subject to prior review or approval by the DLGF. As soon as the contract is signed by the municipalities, a request will be sent from the Component C Director to the Treasury at the MoF to allocate funds to the sub account of the municipalities, specifying also the name of the object to be constructed. A physical inspection is performed by the investment sector within the DLGF at the completion of the investment (civil work). In addition, the

56 investment sector also follows closely the whole investment process. On monthly basis, the investment sector receives a progress report on each conditional grant given to municipalities, which is reconciled with the monthly expenditures reports produced by treasury and if discrepancies are found they are duly followed up. 46. The Component C Director will work closely with the finance staff and MoF to ensure that quarterly interim un-audited financial reports (IFR), annual financial statements and other progress reports are submitted timely to the Bank reflecting the implementation status of the Component C. 47. In addition, to provide additional assurance of the proper use of project funds at the municipalities, operational reviews will be carried out by independent auditors and under TORS acceptable to IDA. The 1'' review at each municipality will be carried out after the first tranche has been disbursed because the disbursement of additional grant (2ndphase) would only occur if there are clear operational review or acceptable action plan in place where there are issues identified, and the 2"d operational review will be carried out after the second tranche has been disbursed. The cost ofthese operational reviews will be eligible for financing under the Loan.

48. Accordingly, the financial management arrangements for the municipal investments component is consider appropriate and acceptable to the Bank. While the fiduciary arrangements are acceptable, the MOI would also assist during 2007 the municipalities in building the procurement and financial management capacities. The capacity building is meant to further increase the efficiency of the financial management work in support of the management of the municipalities and making the financial management staff able to provide assistance in the change to a more programmatic approach in the budgeting and utilization ofthe scarce resources.

Supervision Plan

44. The participating municipalities would be responsible for implementing Municipal Investments component ofthe project, including the hiring of consultants to prepare engineering design and supervision ofcivil works and procurement. 45. The payment to the municipalities will follow the same procedures as those governing the conditional grants - the Organic Budget Law and other instructions issued by the MoF cover the policies and procedures regulating the relationship between the local and central government. The Bank concluded that the controls governing the conditional grants are well defined as the DLGF will monitor and approve the procurement process for the investments in the municipalities. For each municipal, the municipal investment plan, all procurements and all contracts will be subject to prior review or approval by the DLGF. As soon as the contract is awarded for each municipality, a request will be sent from the Component C Director to the Treasury at the MoF to allocate funds to the sub account of the municipalities, specifying also the name of the object to be built. A physical inspection is performed by the investment sector within the DLGF at the completion of the investment (civil work). In addition, the investment sector also follows closely the whole investment process. On monthly basis, the investment sector receives a progress report on each conditional grant given to municipalities, which is reconciled with the monthly expenditures reports produced by treasury and if discrepancies are found they are duly followed up.

57 46. The Component C Director will work closely with the finance staff and MoF to ensure that quarterly interim un-audited financial reports (IFR), annual financial statements and other progress reports are submitted timely to the Bank reflecting the implementation status of the Component C. 47. In addition, to provide additional assurance of the proper use of project funds at the municipalities, operational reviews will be carried out by independent auditors and under TORS acceptable to IDA. The 1'' review at each municipality will be carried out after the first tranche has been disbursed because the disbursement of additional grant (2nd phase) would only occur if there are clear operational review or acceptable action plan in place where there are issues identified, and the 2"d operational review will be carried out after the second tranche has been disbursed. The cost ofthese operational reviews will be eligible for financing under the Loan. Accordingly, the financial management arrangements for the municipal investments component is consider appropriate and acceptable to the Bank. While the fiduciary arrangements are acceptable, the MOI would also assist during 2007 the municipalities in building the procurement and financial management capacities. The capacity building is meant to further increase the efficiency of the financial management work in support of the management of the municipalities and making the financial management staff able to provide assistance in the change to a more programmatic approach in the budgeting and utilization ofthe scarce resources.

Supervision Plan

49. During project implementation, the Bank will allocate up to 3 staff weeks for the financial management supervision. The Bank supervise the project's financial management arrangements in two main ways: (i)review the project's the quarterly interim un-audited financial reports as well as the project's annual audited financial statements and auditor's management letter; and (ii)during the Bank's supervision missions, review the project's financial management and disbursement arrangements (including interim reports (IFR) and movements on the Designated Account) to ensure compliance with the Bank's minimum requirements. As required, a Bank-accredited Financial Management Specialist will assist in the supervision process.

Re-assessment of Treasury System

50. The Bank will re-assess the expanded computerized treasury system before the project can rely on the expanded modernized treasury system for payments and reporting.

58 Annex 8: Procurement Arrangements ALBANIA: Land Administration and Management Project

A. General

1. Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Financing Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loan and Credit, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

2. Procurement of Goods: Goods estimated to cost US$500,000 equivalent or more will be procured through ICB. Goods estimated to cost less than US$500,000 will be procured through National Competitive Bidding (NCB). Off-the-shelf goods estimated to cost less than US$lOO,OOO each will be procured through Shopping on the basis of at least three written quotations obtained from qualified suppliers.

3. Procurement of Works: Works, estimated to cost US$2,000,000 and more will be procured through International Competitive Bidding (ICB). Works estimated to cost less than US$2,000,000 and more than US$lOO,OOO will be procured through National Competitive Bidding (NCB). Smaller works estimated to cost less than US$lOO,OOO each will be procured through Shopping procedures on the basis of three written quotations obtained from three qualified contractors.

4. National procurement procedures may be used, which as a minimum will comply with the conditions listed below (these apply to procurement ofgoods under NCB as well):

"Open Tendering" procedures as defined in Public Procurement Law ofAlbania shall apply to all contracts; Foreign bidders shall not be precluded from bidding and no preference of any kind shall be given to national bidders in the bidding process. Government-owned enterprises in Albania shall be permitted to bid only if they can establish that they are legally, managerially and financially autonomous, operate under commercial law of the Borrower and are not dependent agencies ofthe Borrower or sub-Borrower; Procuring entities shall use sample bidding documents approved by the Bank; In case of higher bid prices compared to the official estimate, all bids shall not be rejected without the prior concurrence ofthe Bank; A single-envelope procedure shall be used for the submission ofbids; Post-qualification shall be conducted only on the lowest evaluated bidder; no bid shall be rejected at the time ofbid opening on qualification grounds; Bidders who contract as a joint venture shall be held jointly and severally liable;

59 (viii) Contracts shall be awarded to the lowest evaluated, substantially responsive bidder who is determined to be qualified to perform in accordance with pre-defined and pre- disclosed evaluation criteria; (ix) Post-bidding negotiations shall not be allowed with the lowest evaluated or any other bidders; and (x) Contracts of long duration (more than 18 months) shall contain appropriate price adjustment provisions.

5. Procurement of non-consulting services: Non-consulting technical services such as surveying, mapping, first registration, data conversion and improvement or similar services as the need could arise during project implementation will be procured in accordance with the above spelled procedures for procurement of civil works and will follow same procurement and prior review thresholds.

6. Selection of Consultants: Short lists of consultants for services estimated to cost less than US$100,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Consultancy services to be provided by consultancy firms estimated to cost US$200,000 or more will be procured through Quality and Cost Based Selection (QCBS) method. Consultancy services to be provided by consultancy firms estimated to cost less than US$ 200,000 may be procured through Consultants’ Qualifications (CQ) method. The consultant firm for design and implementation of public awareness campaign will be selected through Fixed Budget Selection (FBS). Individual Consultants will be selected in accordance with Section V ofthe Consultant Guidelines.

7. Operating Costs: The operating costs for project implementing agencies covering office supplies, operating and maintenance expenditures of office equipment on the account ofproject implementation would be disbursed on the basis of annual budgets to be prepared by each implementing agency and agreed with the World Bank.

8. Training: Training ofIPRO, MPWTT, MOIwould be conducted in accordance with the annual training program that would be submitted to the Bank for its agreement before implementation.

B. Assessment of the agency’s capacity to implement procurement

9. Given the complexity of the project and multitude of the implementing agencies, an enhanced capacity assessment ofthe assigned implementing entities is conducted specifically for IPRO, MPWTT and MOI and for one of the beneficiary municipalities. The principal findings are the following:

10. Component A: this component will be implemented by Immovable Property Registration Office (IPRO). The capacity assessment of this agency shows that they lack knowledge in Bank procurement procedures and guidelines; they have a limited capacity of staff to conduct large procurements. Furthermore, as of to-date the Department of Planning and Monitoring who will have the responsibility for implementing this component has no procurement staff in its structure. Under these conditions, a local procurement consultant will be

60 hired to assist the Department in the implementation of the component A. In addition to the procurement specialist, IPRO will hire a financial management specialist and monitoring and evaluation expert to ensure proper implementation ofthe project.

11. Component B: This specific component will be implemented by the MPWTT through the Department of Urban Planning Policy. The assessment found that this department does not carry out any procurement at all and basically transfers majority of its funds directly to the municipalities; therefore the department has no procurement expertise. The Director of the Department will act as Project Coordinator and will directly report to Deputy Minister of MPWTT. Given the lack of experience in World Bank procurement, a procurement consultant will be hired to carry out procurement activities under this component. In addition, a financial management specialist will be employed to carry on financial management tasks.

12. Component C: this last component will be implemented by MOI through the General Department of Local Finances. This department has two staff with some experience in Bank procurement specifically in civil works contracts. However the component includes also procurement of consulting services, including but not limited to design and supervision of the infrastructure projects for the Municipal Investments. It is agreed that the Ministry will assign one staff to conduct the procurement in accordance with the Bank procurement guidelines. Bank team assessed also the capacity of one of the beneficiary municipalities, Elbasan and found that the capacity is low, lack ofknowledge in Bank procurement and the internal control systems are not adequate. This brings the need for oversight, which will be taken over by the Department of Local Government Finance (DLGF). While local government will conduct procurement process itself, the DLGF andor the World Bank (if the contract is above the prior review threshold) will review and provide clearance before issuing bidding documents and signing any contract.

The key issues and risks concerning procurement for implementation of the project have been identified and include the following:

- Bank carried out an assessment of the Albanian procurement system initially in January 2001 (CPAR) and recently in August 2006 CFA (Country Fiduciary Assessment). The recent CFA (2006) ranked Albania in terms ofrisks associated with public procurement as “Significant”. The project therefore will be implemented in an environment of highly perceived corruption and the public procurement system does not ensure transparent and effective use ofthe public funds.

- Multitude ofimplementing agencies in implementing the project, and lack ofprocurement staff to carry out the procurement activities under the project.

- Inadequate capacity and lack ofknowledge ofBank’s Procurement Guidelines and procedures;

The corrective measures which have been agreed are as follows:

- The Procurement staff will attend training on Bank procedures organized in the region by ECA Regional Procurement Manager’s office and particularly keep close contact with the procurement staff based in Country Office.

61 - The procurement file containing up to date procurement documents (guidelines, manuals, templates of procurement notices, standard bidding documents for procurement of goods and works, standard request for proposal documents for consultant services, evaluation report formats, regional and simplified procurement documents etc.) shall be prepared by the Bank and provided to all implementing agencies the time of Project Launch Workshop. DLGF in MOI shall distribute copies of these documents to all selected municipalities before they start the implementation of their investments. The agencies should frequently visit the Bank’s web-site to ensure using the most updated procurement documents

- As for the capacity building for the municipal infrastructure subcomponent (C.3), it is planned to finance training activities and capacity building in procurement and financial management for the beneficiary municipalities. This TA will be financed by an implementation PHRD grant, and will be contracted upon the project effectiveness.

- The staff of DLGF shall provide hands-on training and guidance to the municipalities in the procurement of infrastructure sub-projects. The procurements conducted by the municipalities will be subject to prior review by the DLGF to make sure that the Bank’s procurement procedures are followed at each step ofthe procurement process. Before signing any contract, the participating municipalities will obtain no-objection from this department and World Bank if this is the case.

- Operational review will be conducted by an independent auditor for all participating municipalities, to ensure the municipalities comply with the signed protocol agreements. The Operational Audits will be carried out after completion of the first and the second phases of investments.

- The Procurement Accredited Staff assigned to the project shall participate in supervision missions at least twice per year and provide training to the Borrower as part of supervision mission;

- Given the complexity of the project and different implementing agencies, during the Project Launch Workshop will have a one-day training session on Procurement for all project staff and related government staff who will get involved in the project procurement activities.

- Preparation of Project Operational Manual which would clearly spell out the procurement procedures to be followed under the project.

The overall project risk for procurement is “high”

C. Procurement Plan

13. The Borrower developed a procurement plan for project implementation which provides the basis for the procurement methods. This plan has been agreed between borrower and the task team during appraisal. The procurement plan is available in the project’s database and in the Bank’s external website. The Procurement Plan will be updated in agreement with the task team

62 annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

D. Frequency of Procurement Supervision

14. The capacity assessment of the Implementing Agencies has recommended every six months supervision missions to carry out post review ofprocurement actions.

E. Details of the Procurement Arrangements Involving International Competition

1. Goods, Works, and Non Consulting Services

(a) List of contract packages to be procured following ICB and direct contracting:

7 8 9

Contract Review Expected Comments (Description) cost (‘000) Preference by Bank Bid- Method (yesho) (Prior / Post) Opening Date Component A Computerized 1,500 ICB Prior December Property Registration System hardware and vendor off- the shelf software Component B GIS package 400 ICB Property Valuation ICB computer and 400 software package 1 1 Purchase of 1,000 ICB street signs Banner with pole and building number plates

(b) All ICB works and goods contracts, first two NCB contract for works irrespective of the value as well as all NCB works contracts estimated to cost above US$l,OOO,OOO per contract and first two NCB contracts for goods as well as all NCB goods contracts estimated to cost above US$200,000 per contract, all direct contracting (if any during implementation) as well as first two shopping contracts for goods and works will be subject to prior review by the Bank.

63 The same thresholds for civil works will apply also for the “non-consulting services.” In addition, given the diverse nature of activities under each component, the prior review thresholds are applicable for each component separately.

2. Consulting Services

(a) List ofconsulting assignments with short-list of international firms.

~ 2 3 A 5 6 7

Description of Estimated Number Selection Review Expected Assignment cost of Method by Bank Proposals (US$ ‘000) Contracts (Prior / Post) Submission Date Component A Design and implement public 250 1 FBS Prior 2008 information initiatives Consultancy to $ 500,000 1 QCBS Prior April 2007 design, build and support a Computerized Property Registration Component B Preparation of development plan in 8 municipalities, provide on-the- job training for 2,360 2 QCBS Prior July 2007 these municipalities on the development of regulatory plans Component C Design and supervise the investment projects (will be 1,800 Multiple QCBS 2007-2010 split according to Prior the subprojects geographical location) Training of 120,000 1 CQ Prior Mar 2007 local government in procurement and financial management

64 (b) Consultancy services estimated to cost above US$lOO,OOO per contract, all single source selection ofconsultants (firms), first CQ contract of each year of each component ofthe project as well as all contracts with individual consultants estimated to cost more than US$ 50,000 and all contracts with project staff irrespective ofthe value will be subject to prior review by the Bank.

(c) Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than US$lOO,OOO equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

65 Annex 9: Economic and Financial Analysis ALBANIA: Land Administration and Management Project

1. Introduction: In most cadastre and land registration projects, data availability and overall quality are the frequently encountered problems when undertaking financial and economic analysis. Albania LAMP has been no exception to this general statement. As a consequence, the results derived from the economic analysis of these projects are generally influenced by a variety ofassumptions which must be adopted during the analytical work. Under these circumstances, rates of return on the investment for these projects may be highly speculative. Therefore, due to lack of data and difficulties in quantifying key variables, efficiency parameters for the proposed Albania LAMP, particularly the ERR estimates provided below should be viewed as indicative to the benefits that such a project can offer. The main reason for computing an indicative ERR is to highlight the fact that very limited impact on real estate markets need to be generated to recover the investment costs and justify the project in economic terms. The same applies to municipal investments.

2. Basic Economic Rationale: The World Bank is funding land administration and management projects in various parts ofthe world because it has been clearly shown that secure tenure and trustworthy registration systems allowing rapid and secure transactions are essential for economic prosperity. Sample projects around South America, the Caribbean and SE Asia have demonstrated that a secure title can add more than 20% to property value and multiply by several-fold the income generated through registration fees, sales taxes and property taxes.

Economic Analysis

3. The project encompasses major investments which have already been identified and designed in detail. This fits within the realm of a blueprint type project according to Bank classification of investment projects. In essence, the project aims at alleviating constraints to the development of effective land markets in Albania, as well as provides assistance for the management ofurban land. The analysis ofthe economic soundness ofthe project, subject to the caveats stated above in the introduction, were studied on the basis of the results of a limited and indicative cost-benefit analysis since the project will generate benefits that could be measured in monetary terms. A cost-effectiveness analysis was not performed.

4. The Albanian Land Market: The land market has been very vibrant in the last three years, particularly in the capital city ofTirana, as well as in Durres and Serenda. Property prices, which are quoted in Euro terms per square meter of floor space, have reportedly appreciated by about 20% per annum during the same period. For the time being real estate stands for sound investment in Albania.

5. There are many real estate agencies in Tirana which also handle property outside of Tirana. There are three publications that advertise real estate on a daily or weekly basis, reflecting the healthy state of affairs in the real estate market. However, many sale transactions occur in an informal manner without being recorded in the land registration system at PRO.

66 Also, market related statistics are very scarce and there is a lack for centralized information on the real estate market.

6. Below is a summary of property price ranges for a 1 bedroom (abbreviated as 1-BR) apartment in Tirana and Elbasan (subjective estimates from a local agency). A 1-BR apartment measures anywhere from 55 m2 to 80 m2. The below prices may well rival those observed on many well established European property markets.

Location of Property Tirana Price Elbasan Price (€/m2) (€/m2) Low-end 400 200 (acceptable) Regular 750 300 (borderline) High-end 1400 + 400 to 450 (prime location)

7. Real estate agencies play a key role in locating and facilitating property related transactions. They charge 3% commission based on the property value. The 3% is apportioned as buyer contribution of 1%, and seller contribution of2%. On high priced property the commission becomes a negotiable item. For a US$50,000 property, transaction expenses may come very close to US$3,000, or amount to some 6% ofthe property value.

8. Project Benefits and Overall Analytical Framework: The financial and economic analyses of the project are being carried out separately for the components. Also indicative quantitative analyses are being offered for Components A and C. Below is a scheme for the identification and quantification of major project benefits as well as their linkages to the project objectives.

Links between Project Objectives and Benefits

Objective Component Quantitative Impact (Benefits) 1. Improve service delivery Component A Reduced costs to register property by IPRO transaction;

2. Complete first Component A Appreciation in property values (called registration of 500,000 the registration or tenure security properties in urban and premium) peri-urban areas Strengthen IPRO’s financial position. 3. Improve capacities of Component B Appreciation in property values. selected municipalities in Orderly development of cities. urban land management Reduced costs of provision of municipal services. 4. Improve revenue I Component B (some I Increased property tax and transaction

67 generation through support overlap with tax collections by municipalities and to property valuation Component A) reduced dependence on central functions government. 5. Improving priority urban Component C Almost all investment areas suggest high infrastructure for rates of return in physical infrastructural participating municipalities improvement.

9. Analysis for Component A: The economic analysis for Component A makes use of the concept of incremental market growth (IMG) which would occur due the project. The IMG is the difference between the transaction value of all properties as they would be observed with and without project. Transaction value will be based on the total value of properties which would involve change in ownership excluding inheritance and gifts.

10. Implementation ofthe proposed project will result in benefits to both individuals and the Albanian society. Improving IPRO registration services will alleviate two of the major constraints towards the development of land markets in Albania, namely, the title insecurity and insufficient quality of service delivered. This will bring forth: (a) facilitated real estate transactions consisting of property sales and leases; (b) accelerated access to building land and land acquisitions for builders and developers, and (c) revamped mortgage markets. Basically the most significant project benefits will be manifest as: (a) increased volume of transactions, and (b) higher property values (i.e., registration premium) imparted by the secure titles. Another distinct facet of the project is the anticipated reduction in service delivery costs (cost effectiveness) to the clients ofIPRO.

11. It should be noted that that the underlying benefits from first time registration and improvement in efficiency of land office transactions are tied to improved tenure security and transferability of land, both of which result in increased investments and economic growth. The project benefits (for component A) are in the way of a future income stream from these incremental investments and growth which are approximated by appreciating property values. It is not the appreciating land values and land transactions per se that represent the project benefits but the future stream of income they help generate. The adopted assumptions on how much property values would appreciate are backed up by empirical evidence in Albania and counties of similar conditions in the Balkans.

12. Analysis for Component B and C: Analysis of Components B and C involve regulatory plans, the value-based property tax system and municipal investments. The largest part of the funding is destined to support municipal investments for US$30 million equivalent.

13. Regulatory Plans (Comp. B): The adoption of regulatory plans by municipalities would yield multiple benefits. Regulatory plans would lay the appropriate rights ofway by defining and delineating divisions, roads and barriers in the urban areas. As such, they would be instrumental in avoiding huge future costs of reconstructions, diversions and rerouting efforts that often emerge during the building of infrastructural projects where such rights have not been secured. Avoided future costs are savings and constitute genuine project benefits which will be manifest over time. Due to clarity and transparence in the city plans, supplementary cost savings would

68 occur with the issuance ofbuilding permits while additional fee revenues would be facilitated for the municipalities.

14. Moreover, regulatory plans are the best tools for preserving the coastal areas, historical heritage sites and other structures of national architectural endowment for posterity in cities like Durres and Vlore.

15. Also, it is expected that the strategic plans of cities - which will follow the regulatory plans - would be developed in a participatory manner and with due consideration among competing investment alternatives which would take into account qualitative tradeoffs. This has already been taking place in some municipalities, such as Elbasan and Fier where the current investment plans are based upon investment choices reflecting the societies’ preferences and priorities. This imparts efficiency to the proposed menu of investments and qualifies them as potentially high return interventions.

16. Property Values (Comp. B): The benefits accruing from the value based property tax sub-component will be enhanced through both appreciated property values and strengthened ownership security provided under Component A. It is expected that the value of property and land will increase where the municipal infrastructure will be upgraded. The appreciation in property values will be significant and will certainly be reflected in the incremental property tax revenues that the participating municipalities will collect from the project assisted areas.

17. Municipal Investments (Comp. C): The municipal infrastructural investments would have sizable economic impact. These investments can mostly be characterized as wide-menu investments. An examination of the existing short-list of such projects from Elbasan, Fier and Shokodra shows that they are quite diverse, consisting of city roads, street signs, river training, street reconstruction, restoration of selected historical sites, building front facades of buildings, improving or building recreational facilities such as parks, renovation of squares, preparation of environmental management plans, electricity supply and provision ofpublic library services.

18. Indicative Economic Rate of Return (ERR) for Component A: The indicative economic analysis is based on estimating the expected impact on the overall land markets resulting from improving the public services provided by PRO. Improved title security and efficiency gained in market transactions are the principal benefits from the project. These improvements would be reflected in future number of transactions as well as average property prices, the product of which would determine the total market value. In this context, the average property price is some kind of a weighted measure for a property pool .consisting of houses, apartments and business premises. From the “with” and “without project” computations, incremental market growth was estimated.

19. The incremental market growth figure is of great significance because it allows for the creation of economic value added for the benefit of the transacting parties, and helps generate income which can be immediately accessed or consumed if desired. However, the incremental market growth, measured in monetary terms, represents some sort of gross earnings from which some allowances must be made. Therefore, this estimate was subjected to downward adjustments to arrive at net incremental benefits from which an ERR could be inferred. The planning horizon

69 was assumed to be 20 years. As distinct from mere appreciations ofproperty stock values, which do not constitute legitimate project benefits which can be accessed or consumed, transactions are ' the only means ofunleashing the value added (capital gains or other profits) implicit in the value ofproperty. The below table contains the critical parameters, base data and assumptions leading toward the economic analysis.

Albania LAMP: Key Parameters Deriving the Analysis

20. For simplicity, only sales have been considered in performing the analysis. Gifts, inheritance, mortgages and other means ofconveyance have been ignored. It is estimated that the project will help provide for the first registration of some 500,000 existing properties. These 500,000 property units, each valued at an average of US$24,000, together with the incremental number of transactions and value appreciations over the planning horizon, constitute the basic building blocks ofthe economic analysis. The project benefits accrue to the Albanian society as a whole, but focusing mainly on the urban and peri-urban areas, over the 20-year horizon, which comprises both the implementation (4 years) and operational (16 years) periods of the project. It is expected that over the 20-year horizon about 300,000 sales transactions would occur (or 300,000 properties would change owners) without the project, and 360,000 sales transactions would occur with the project. Actual figures may be much higher. The principal source ofproject benefits is the increased market activity, that is to say some 60,000 additional transactions taking place due to the project, as highlighted by the comparison of these two key figures, and the resulting incremental income that accrues to the transacting parties. The partial land market (which the project will assist) involving the 500,000 property units is estimated at about US$360 million in 2006, but in 4 years the market will rise to about US$390 million, and in year 20, it will exceed US$500 million. These figures are very conservative, as are the base assumptions. Yet, the expected ERR from the investment ofabout US$20 million (from IBRD, IDA and SIDA combined) at IPRO turns out to be about 23%, which is an acceptable level. The actual rate of return would most likely exceed this threshold. Details of the analysis are shown in the below table.

70 Albania - Land Administration and Management Project

With and Without Project Comparisons Using Projections for Property Markets Operational Period Year 10 Year 15 Year 20 Without Project Unregistered Property Stock unit 500,000 500,000 500,000 in Active Land Market (*) Average Property Price (") US$ 24,000 24,000 24,000 Market Turnover (in percent) % 30% 30% 30% Number of Transactions Number 15,000 15,000 15,000 Market Turnover (in US$) US$ Million 360 360 360

With Project Program Coverage % Cumulative Prog Coverage % 100% 100% 100% New Properties Registered at IPRO Number 500,000 500,000 500,000 Properties not yet in IPRO Number

Computabon For Properties (or Market Segment) Registered at /PRO Market Premium on the Value of Registered Properties Percent 300% 300% 300% Average Property Price US$ 24,720 24,720 24,720 Annual Market Growth with Project Percent PA 20% 20% 20% Market Turnover with IPRO Percent 355% 392% 433% Number of Transactions for Properties in IPRO Number 17,751 19,599 21,638 Market Segment Turnover (Size) for Properties in IPRO US$ Million 439 484 535

Computabon for Propert/es (Market Segment) Not Number of Transactions Number Market Size US$ Million 0 0 0

Total of /PRO and Non-PRO Market Segments Number of Transactions Number 17,751 19,599 21,638 Market Turnover (Size) US$ Million 439 484 535

Results of Analysis

Value of Incremental Market Turnover US$ Million 78.81 124.48 Capital Gains in Transactions Percent 6% 6% 6% Incremental Net Benefits to Transacting Parties from Capital Gains US$ Million 4.73 7.47 10.49

Registration Cost per Property US$ Total Registration Cost US$ Million Cash Flow US$ Million 4.73 7.47 10.49

(*) These are higher value urban and peri-urban properties for which the project will provide first registration at IPRO (**) On average properties are valued at US$400/m2 for a typical 2-BR apartment of 60 m2

Indicative Economic Rate ofReturn (ERR) for Component C

2 1. Due to the wide-menu nature ofthe planned infrastructural investments, it is not possible to offer an all encompassing analysis for such a diverse set of interventions at this stage. However, results and methodology from the Strategic Plan for Greater Tirana funded developed under the Bank funded Albania Urban Land Management Project can be used to offer a partial and indicative analysis.

71 22. Among a series of sub-projects within the city, it appears that city roads generally represent average return cases. The below analysis is based upon a what-if scenario by seeking to answer the question of “what would be the minimum traffic required to yield a rate of return of about 20%, if one were to spend all ofthe municipal investment funds of US$30 million for city road improvements.” For the record, the ERRS from Tirana on comparable infrastructural projects ranged from 15% to 140 % on roads, 2% on sewerage, 23% to 65% on electric power supply, and 19% on telecommunications.

23. There are some 200,000 cars registered to traffic in Albania. About half of these are registered in cities outside of Tirana, and a fifth of them would belong to the citizens in participating municipalities. Hence the number of cars circulating in traffic is estimated at about 20,000 vehicles for the participating municipalities. Using the data from Tirana, and carrying out an analysis based on savings from vehicle operating costs alone (abbreviated as VOCs), it is estimated that some 8600 vehicles - or less than half of those already in operation - would suffice to yield an ERR of20% on the overall investment. This analysis is shown below. Despite the partial and indicative assessment of the overall rate of return, this result would still suggest that the proposed wide-menu investments may be considered worthwhile.

Financial Analysis of IPRO’s Operations

24. IPRO’s revenues come from three sources: (a) government subsidies to cover salaries and social charges, (b) 90% offirst registration revenue, and (c) 60% ofregular transactions revenue. IPRO both earns for and surrenders funds to the government. IPRO supports the central government budget in three ways: (a) via the transfer of 10% ofits first registration revenue, (b) via the transfer of40% on regular transactions, and (c) via the transfer any surpluses of revenue over expenses at year end. All profits (surplus) must be returned to the government because IPRO is a public agency which cannot maintain and carry over funds from one year to another. Every year is subject to a new budget law.

72 Source: Mission estimates using IPRO data.

25. In 2005, IPRO received some Lek 96 million from the government, transferred its percentage shares on regular transactions and first registrations for Lek 158 million, and at year end added another Lek 32.7 million in surplus earnings, resulting in a net transfer of Lek 95 million to the government. This situation paints an encouraging picture, highlighting IPRO’s healthy state of finances which would qualify it for becoming an executive agency.

IPRO Contributions to the Government (Million Lek) Description 2003 2004 2005 Contribution to Govt. From Fees 32.6 48.9 158.5 Contribution to Govt. From Profits 26.4 35.9 32.7 Contribution from Govt. to IPRO 85.0 90.0 96.0

26. Examining the revenue and expenditure figures for the last five years, it is noticed that some field offices lose money while others make money. Hence, within the year, IPRO relies on some kind of a cross-subsidization scheme which is an acceptable practice. Eventually, consistently loss making offices will have to come under close scrutiny and be assessed whether they should be maintained or closed down.

27. From 2001 through 2005, for three years, the ratio ofloss making offices to profit making ones was about 3 against 2. But, for the remaining two years, this ratio was reversed to 2 against 3, displaying a rather inconsistent pattern which needs to be studied in depth. In 2005, with Lek 50 million in profits, the most successful office was Tirana and it exceeded the next runner up, Dunes, which had earned 26 million, by a wide margin. The greatest loss leader which had incurred some Lek 61 million was the central office (Zyra Qendrore), simply because it earned no profits while incurring significant capital investment (buildings) costs.

73 Annex 10: Safeguards Policy Issues

ALBANIA: Land Administration and Management Project

Environmental Aspects

1. The proposed LAMP project will support the Government of Albania efforts to improve land management and develop efficient land and property markets through enhancing tenure security and improving the services ofthe Immovable Property Registration Office (IPRO). The project will also strengthen the capacity of selected municipalities in urban land management practices and carrying out critical improvements to municipal infrastructure and services identified in the urban development plans developed through participatory approaches in the eligible municipalities. Investment sub-proj ects supported under the two project components, including rehabilitation works to priority municipal infrastructure are not expected to have any major negative environmental impact. It may however involve minor environmental effects, possible land acquisition and involuntary resettlement, and may impact the physical cultural resources. The proposed project classified as an FI22 environmental assessment category in accordance with the Bank’s Operation Policies. The project is not expected to trigger World Bank Safeguard Policies related to Natural Habitats, Pest Management, Indigenous People, Forests, Safety of Dams, Projects in Disputed Areas or Projects on International Waterways (including aquifers).

2. In order to deal with the potential adverse impacts related to investments proposed under Components A and C, the government of Albania has prepared an Environmental Policy Framework (EPF) and a Land Acquisition and Resettlement Policy Framework (RPF). These frameworks describe the principle, objective and approach to be followed to minimize and mitigate the adverse environmental and social impacts ofthe various activities ofthe project. The frameworks were discussed at two public meetings organized by the Government in two municipalities: Fieri on July 25, 2006 and Elbasan on July 27, 2006. The two frameworks were also posted on MPWTT and PRO websites in Albanian language and disclosed at the Bank’s Infoshop in Washington, DCon September 1, 2006.

Environmental Policy Framework (EPF)

3. The EPF represents a tool to ensure that the proposed investments implemented through the Project comply with the existing Albanian laws and regulations as well as with the Bank’s Operation Policies on Environmental Assessment (OPBP 4.01) and Cultural Property (OPN 1 1.03). Furthermore, the intent of the framework is to ensure that the supported investments will not have a lasting adverse impact on the country’s population, the natural environment or assets of particular cultural heritage value. Specifically, the EPF includes the following: (i)a brief synopsis of selected Albanian environmental laws, regulations and notifications as well as Bank’s requirements related to the design and implementation of the project; (ii)the overall

22 Project Environmental Assessment Category is determined as FI since the specific investments likely to be supported under the municipal infrastructure sub-component will not be known by the time ofproject appraisal.

74 environmental framework management including roles and responsibilities for the EPF implementation as agreed with the GOA; (iii)guidelines for the environmental subproject screening and mitigation process (subproject selection, monitoring and evaluation) that will be employed as well as the institutional responsibilities for conducting this process; (iv) description of specific subproject environmental management plan including description of envisaged activities, related environmental issues and their mitigation; and (v) requirements of EPF public consultation and disclosure, including minutes of the two public meetings in Fieri and Elbasani. The EPF is included in the draft project Operational Manual (OM) which outlines detailed procedures and criteria for sub-projects identification, preparation, and selection (along with World Bank reviews and clearances); procurement; disbursement and financial management; and specific procedures, roles and responsibilities for project implementation.

4. Environmental Assessment. Civil works including new construction and rehabilitation activities financed under the project could result in some adverse environmental impacts, unless appropriate design, construction and operational practices are followed. Potential environmental impacts are expected to be local and occur during the implementatiodconstruction only. The screening process is the first step in the EPF process and will identify those subprojects which have little or no environmental issues so that they can move to implementation in accordance with pre-approved standards, code of practice and environmental guidelines; therefore, the results of the screening process will determine the precise environmental safeguard processes that will be required for each activity supported by the project.

5. The selected municipality that is also the project beneficiary for the infrastructure investments under Component C is responsible for submitting the application for environmental approval (of the proposed investment) to the REA (Regional Environmental Agency) of that region in which the selected investment is implemented. The municipality is therefore responsible for the initial screening of the proposed investments following the EA screening process developed and agreed in the EPF.

6. Preparation of the EIA report (or EMP for those investments that are not required to develop an EIA based on the Albanian law) is the municipality responsibility. Any EIA report required (based on MOE’s decision) will be prepared by an expert certified by the MoE for developing such reports and for environmental auditing. The municipality is responsible to develop the TORfor the EA process and hire an EIA expert.

7. At the local level, REA decides whether the sub-project will require an EIA, and whether it should undergo a Summary EIA or a Profound EIA based on Albanian law, and advise the sub-project beneficiary accordingly. Also, REA is responsible to prepare a recommended decision in favor of approval or refusal of the sub-project, with justification, which is further forward to the MOE for final decision.

8. Monitoring the compliance of the implementation of the EIA is the responsibility of the selected municipality and MOI in coordination with the local environmental authorities (Regional inspectorate, local environmental protection agency).

75 9. At the national level the MoE is the legal competent authority for requesting, reviewing and approving EIA documentation. The REA also approves the implementation and operation of small projects with no significant environmental impacts. In other cases it is responsible for reviewing documentation and forwarding to the MoE for processing, with recommendations for approval, rejection or enhancement.

10. The Regional Environmental Inspectorate (REI) is responsible for monitoring of the compliance with EPF inspecting observance of the EMPs/EAs and other conditions specified in the environmental approval, performing regular evaluation and monitoring of subprojects. Also, municipalities and local associations are responsible for monitoring a subproject’s performance during operation based on the description ofactions developed in the EPF.

11. IPRO is responsible for submitting the application for environmental approval to the REA and MoE for those investments related to Component A. Furthermore, IPRO is responsible to implement and monitor the mitigation and monitoring plan proposed in the EMPs/EAs.

12. The sustainability of the environmental aspects of the proposed investments will be achieved through implementation of environmental management plans (EMPs) affiliated with each proposed investment that include a set of specific environmental mitigation and monitoring requirements to be taken by the municipality during implementation and operation. This set of requirements meant to eliminate adverse environmental and social impacts should also be included in the sub-proj ect contractors’ terms of reference. Monitoring will focus on measuring compliance with pollution standards and requirement of related permits (wastewater discharges, air quality, construction permit, water permit, etc.) while mitigation measures will include actions to prevent environmental hazards such as health and safety for the construction workers and the public; noise disturbance; restrictions to access; dust - leading to adverse air quality; soil and/or water pollution from fuel and oil, excavation of materials and disposal of surplus soil/earth and other materials, degradation of historical and cultural sites, etc. Special attention will be paid during construction works to chance finds of objects of archaeological or cultural value; as stated in the Law on Cultural Heritage, works will be suspended immediately if cultural objects are found and the Contractor in cooperation with the municipality/IPRO will inform the relevant authorities ofthese find(s).

13. To support timely and effective implementation of environmental project components and mitigation measures the EMPs also identify the role and capability of environmental units on site or of the responsible ministry (MOI). Therefore, the EMP recommends capacity development and staff training through expansion of such units if necessary, strengthen of environmental management capabilities in the agencies responsible for implementation (e.g., PRO) through technical assistance programs and procurement ofequipment and supplies.

Cultural Property

14. Based on the project design, the project is not expected to affect any known physical cultural sites. However, the EPF will outline the process to screen all investments to ensure that they are not affecting negatively cultural sites. In case the project may affect the cultural sensitive areas the policy framework identifies a clear process which is consistent with the local

76 regulations. The policy framework also defines a clear process in case cultural sites were found during construction. The EPF notes that archaeological chance-finds should be covered by a chance-finds procedures clause in the contractors’ agreements.

15. Projects on International Waterways. Some of the project locations (e.g., Vlora and Saranda municipalities) are located at the Adriatic Sea. However, infrastructure investments proposed under the project in these municipalities (those with a population of over 50,000) would consist of priority investments included in the municipalities regulatory plans such as rehabilitation of drainage systems or buried pipes affiliated with upgraded andor repaired roads, rehabilitation of water supply distribution network and sanitation systems, restitution of river embankments, of building facades, etc. As such, the project would not have any impact on the. quantity or quality ofwater flowing into these waterways, and thus have no adverse effect on the rights ofthe other riparian states. Therefore, given the rehabilitation nature ofthe activities under the project, it has been decided that the notification to other riparian countries is not required under the Bank policy.

Social Analysis

16. The project addresses a long-standing critical social issue in Albania, Le., the confusion and disorder over land tenure especially in urban areas and coastal zones. Since 1991, Albania has pursued a process of land and property administration reform, which has encompassed the revival of civil law and market activities and the modernization of state administrative regulation and management of land. Subsequent to this, almost all families have received documentation that confer ownership rights in land and housing units, and most families and enterprises occupy and use their land and premises. However, major problems remain in that there are unresolved conflicting claims to land and properties between former owners and current occupants; there are large numbers of illegal land settlements and construction projects without adequate infrastructure or legal protection; and there is high degree of fragmentation of land holdings in both rural and urban areas. The delays in creating effective administration and their complexity discourage citizens from using the new systems and complying with rules and standards. This project will therefore address the next stage of reform by dealing with completing the institutional systems and creating routine procedures and standards at a detailed level.

17. Social Development BeneJts. Significant social development benefits including improving access to property rights for the poor can accrue from activities under Component A (completing the registration ofproperty rights). As background to the modernization ofthe PRO under the project, an institutional assessment and a customer satisfaction survey evaluating the quality, efficiency and effectiveness of property administration services rendered by the PRO offices were camed out. As expected, customers reported major inadequacies concerning the services provided by the IPRO. The slow service, the long lines, burdensome informal payments that are necessary to speed up service, the tedious paper work and the lack of information were cited as the problems in dealing with the IPRO offices. The key modernization initiatives including revised property registration procedures, clearly defined quality standards, the implementation of a computerized property registration system and the associated data capture are expected to result in a comprehensive and accurate statement of all land and property ownership and interests and updated registration index maps in Albania. In addition to improved

77 efficiency, the IPRO draft Business Plan has identified improved levels of service delivery as a key area to address and has proposed new performance standards that are in line with international norms for property registration agencies. A base-line (from a survey of stakeholders) on the quality, efficiency, and effectiveness of property administration services currently provided by the PRO, is already available, and on-going monitoring of the improvement in the service standards through stakeholder consultations and other means will be carried out periodically to assess improvements over time.

18. Gender Issues. A fundamental criticism oftitlingl registration programs and formal/legal property rights institutions is that they tend to grant the title to just one person in the family/household, usually the male head ofhousehold. It is also the case that titling programs do not have explicit gender requirements or exclusions; however, in their implementation, they result in being gender-biased because they do not take into account constraints that women face in accessing these programs. Some of the reasons why titling programs do not target women in their design and implementation are that the legal framework governing formal adjudication and/or registration of property rights are often silent with regard to gender, and often laws relating to property ownership and management such as inheritance and contract or tenancy laws sometimes explicitly favor men. Apart from legal issues, the agencies and processes associated with implementation are more difficult for women to negotiate than for men who may lack the skills and confidence to approach these male-dominated institutions.

19. The tendency not to title women as property holders is a problem for both equity and efficiency reasons. Women’s fundamental human rights to equality and freedom from discrimination are recognized when they are granted title as property owners. The right to own property and to legal title can increase their access to their effectiveness as producers and as economic actors and will improve women’s sense of security given their responsibility for the household food security.

20. While this gender bias is not explicit in the property rights legislation in Albania, it is likely that cultural and social norms at all levels contribute to the exclusion of women as property owners. The starting point for the project therefore is to work towards eliminating gender as a determinant of land rights. However, it is clear from world-wide experience that gender bias is not so easily eliminated. In order to ensure that women are included as beneficiaries in the project, the project will undertake public awareness/information campaigns to raise women awareness of their rights and facilitate women’s participation in the project where patriarchal attitudes regarding women and property rights, rather than formal legal recourse deny daughters and wives their legal inheritance rights. Specifically, the purpose ofthe public information campaign activities in the project will be to ensure that women (and other disadvantaged groups) make informed decisions and can help enforce transparency of the project. Additionally, training ofthe project implementers for communication with beneficiaries to cover issues relating to the legal rights of women, solutions to special problems encountered by women with respect to documentation and location of registration offices etc., are key to ensuring gender equity in the project. Every effort will also be made to encourage registering titles in the names ofboth husband and wife.

78 21. Participation in the Development of Land Policies. The development ofthe land policy framework, revisions of the urban law, and the development of broader policy to promote the development of land and property markets will be done through consultative processes and public hearings. This will ensure that the voices of the disadvantaged groups are considered in the policy making process.

Social Safeguard (Land Acquisition) Issues

22. It is unlikely the project activities will result in any significant adverse social impacts, including the physical relocation of people or the acquisition of privately owned land. But a potential for displacements exists in activities under component C, and to a limited extent, in component A, triggering World Bank policy on Involuntary Resettlement. Therefore, as a condition of project appraisal, a set of social guidelines in the form of a Resettlement Policy Framework (RPF), has been developed and agreed that the involuntary taking of land, caused by project activities, will be carried out following Albanian laws and procedures relating to land expropriation and World Bank Operational Policy (OP) 4.12 on Involuntary Resettlement. The propose of the framework is to ensure that where land acquisition is unavoidable, all project affected persons will be consulted with and be compensated for their lost assets at replacement costs, and in the event of resettlement be provided with assistance to help them improve, or at least restore, their livelihoods and standards of living to pre-displacement levels. The framework covers the loss ofland and other assets and perhaps the loss of shelter or sources ofincome. And all those project affected people who have formal legal rights to land and those who do not have formal or recognizable legal rights to land they are occupying will be eligible for coverage. The project will follow existing legislation and cash compensation will be offered at levels that will be sufficient to replace the lost land and other assets.

79 Annex 11: Project Preparation and Supervision ALBANIA: Land Administration and Management Project

Planned Actual PCN review 11/29/2005 Initial PID to PIC 12/05/2005 Initial ISDS to PIC 12/05/2005 Appraisal 09/22/2006 Negotiations 12/14/2006 BoardRVP approval 02/22/2007 Planned date of effectiveness 04/15/2007 Planned date ofmid-term review 03/3 1/2009 Planned closing date 12/31/2011

Key institutions responsible for preparation of the project: Ministry of Public Works, Transport and Telecommunication (MPWTT), Ministry of Interior and Local Government (MOI) and Immovable Property Registration Office (PRO).

Bank staff and consultants who worked on the project included:

Name Title Unit Wael Zakout Task Team Leader ECSSD Yan Zhang Urban Economist ECSSD Ibrahim Hackaj Sr. Operations Officer ECSSD Jolanta Kryspin-Watson Operations Analyst ECSSD Tom Konishi Sr. Economist EASRD Belita Manka Procurement Analyst ECSPS Radhika Srinivasan Sr. Social Scientist ECSSD Kirsten Burghardt Propst Lawyer LEGEC Elona Gjika Financial Management Analyst ECSPS Elmas Arisoy Sr. Procurement Spec. EAPCO Ruxandra Floroiu Environmental Spec. ECSSD Nicholay Chistyakov Sr. Finance Officer LOAGl Alia Moubayed Country Economist ECSPE Olav Christensen Sr. Financial Management Spec. ECSPS Suha Satana Economist Consultant Koshi Michel Program Assistant ECSSD Denisa Bilali Team Assistant ECCAL

Bank funds expended to date on project preparation: 1. Bank resources: $297,064 2. Trust funds: 3. Total: $222,355

80 Estimated Approval and Supervision costs: 1. Remaining costs to approval: $30,000 2. Estimated annual supervision cost: $120,000

81 Annex 12: Documents in the Project File ALBANIA: Land Administration and Management Project

Status of Land Reform and Real Property Markets in Albania; World Bank; 2005

Resettlement Policy Framework (RPF); 2006

Environmental Policy Framework (EPF); 2006

Economic Analysis of LAMP Project; consultant report; 2006

Capacity Assessment ofImplementing Agencies to Conduct Procurement under LAMP Project; 2006

Address System Implementation. OSCE; 2005

Property Valuation and Taxation Assessment; consultant report; July 2006

Assessment ofMunicipal Fiscal Performance and Budgeting Process in Elbasan, Shkoder and Fier; consultant report; 2006

Albania Urban Sector Review; World Bank; July 2006

82 Annex 13: Statement of Loans and Credits ALBANIA: Land Administration and Management Project

Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd P100273 2006 AVIAN FLU - AL 0.00 5.00 0.00 0.00 0.00 5.14 0.00 0.00 PO82814 2006 HEALTH SYST MOD 0.00 15.40 0.00 0.00 0.00 15.97 0.10 0.00 PO78933 2006 EDUC EXCEL & EQUITY 0.00 15.00 0.00 0.00 0.00 15.42 0.00 0.00 PO90656 2005 ECSEE APL2 (ALBANIA) 0.00 27.00 0.00 0.00 0.00 25.92 0.06 0.00 PO89061 2005 NATURAL RES DEVT (GEF) 0.00 0.00 0.00 5.00 0.00 4.50 0.00 0.00 PO86807 2005 COASTAL ZONE MGMT (APL #I) 0.00 17.50 0.00 0.95 0.00 15.91 2.34 0.00 PO82375 2005 NATURAL RES DEVT 0.00 7.00 0.00 0.00 0.00 5.86 0.88 0.00 PO82128 2004 WATER RES MGMT 0.00 15.00 0.00 0.00 0.00 12.46 0.43 0.00 PO75156 2004 INTGD WATEWECOSYS MGMT (GEF) 0.00 0.00 0.00 4.87 0.00 4.72 4.22 0.00 PO77526 2004 POWER SECTOR GENER & RESTRCT'G 0.00 25.00 0.00 0.00 0.00 24.38 12.73 0.00 PO77297 2003 COM WRKS 2 0.00 15.00 0.00 0.00 0.00 5.72 0.76 -0.00 PO41442 2003 MUN WATEWWW 0.00 15.00 0.00 0.00 0.00 9.48 2.34 0.00 PO74905 2002 PWR SECT REHABIRESTRCT'G 0.00 29.90 0.00 0.00 0.00 14.35 8.74 0.00 PO69479 2002 FISHERY DEVT 0.00 5.60 0.00 0.00 0.00 1.44 -0.05 0.00 PO66260 2002 ROAD MAINT 0.00 17.00 0.00 0.00 0.00 4.96 -12.03 -0.15 PO55383 2001 SOC SERV DEVT 0.00 10.00 0.00 0.00 0.00 9 21 4.26 0.32 PO54736 2001 AG SERVICES 0.00 9.90 0.00 0.00 0.00 3.05 0.60 0.00 PO69939 2000 PUB ADM REF 0.00 8.50 0.00 0.00 0.00 2.78 2.09 2.09 Total: 0.00 237.80 0.00 10.82 0.00 181.27 27.47 2.26

ALBANIA STATEMENT OF IFC's Held and Disbursed Portfolio In Millions of US Dollars

Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2005 Fushe Kruje 30.00 0.00 0.00 0.00 30.00 0.00 0.00 0.00 2002 INSIG 0.00 0.00 6.23 0.00 0.00 0.00 6.22 0.00 2000 NCBank 0.00 2.00 0.00 0.00 0.00 2.00 0.00 0.00 1999 Procredit ALB 0.00 0.98 0.00 0.00 0.00 0.98 0.00 0.00 2003 Vodafone Albania 17.83 0.00 0.00 3.70 17.83 0.00 0.00 3.70 Total portfolio: 47.83 2.98 6.23 3.70 47.83 2.98 6.22 3.70

Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic 2002 Savings Bank 0.00 0.02 0.00 0.00 Total pending commitment: 0.00 0.02 0.00 0.00

83 Annex 14: Country at a Glance ALBANIA: Land Administration and Management Project Europe & Lower- POVERTY and SOCIAL Central middle- D eve lo pment dlamo nd' Albania Asia Income 2005 Population mid-year (millions) 31 473 2 475 Life expectancy GNIpercapita (Atlasmethod US$) 2 580 4,113 198 GNI (Alias method US$ billfons) 81 1,945 4 747 Average annual growth, 1999.05 Population (%j 04 00 10 GN I Gross Laborforce (%) 00 06 14 per + primary Most recent estimate (latest year available, 1999-05) capita enrollment Poverty (% of populatio n belo wnalionalpo vertyline) 25 Urban population (%of totalpopulation) 45 64 49 1 Life expectancyat birth (years) 74 69 70 - Infant mortality (per 10OOlive bidhsj 7 28 33 i Childmalnutntion (%ofchildrenunder5) 14 5 a 1 Accessto improvedwatersource Access to an improvedwatersource (%ofpopulation) 96 92 82 Literacy (%ofpopulation age 159 99 97 89

Gross primaryenrollment (%of school-agepopulation) 134 134 114 ~ -Albania Male 135 135 115 '1- Lo wr-middle-income group Female 1)4 132 m KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1985 1995 2004 2005 IEconomic ratios' GDP (US$ billions) 20 24 75 84 1 Gross capital formationiGDP 328 80 24 1 25 1 Trade Exports of goods and services1GDP 82 P5 218 23 5 i Gross domestic savings1GDP 305 -40 20 24 Gross national savingsiGDP 306 81 182 82 Current account balance1GDP -0 5 -7 3 -62 Domestic ~ Capital Interest paymentslGDP 02 03 savings formation Total debtlGDP 88 20 8 Total debt serviceiexports 12 29 Present value of debtiGDP 142 Present value of debtiexports 413 Indebtedness 1985-95 1995-05 2004 2005 2005-09 (average annualgrolulh) GDP -33 58 59 55 65 -Albania GDP percapita -38 57 53 49 53 LO wr-middle-income group Exports of goods and services 215 85 193 117

STRUCTURE of the ECONOMY 1985 1995 2004 2005 Growth of capital and GDP (Oh) (%of GDP) Agnculture 346 558 25 2 I100

Industry 433 225 195 I 50 M anufactunng Services 221 217 55 3 0 1 00 01 02 03 04 05 Household final consumption expenditure 602 904 88 5 88 4 -50 General gov t final consumption expenditure 93 06 95 92 -GCF -GDP Imports of goods and services 84 345 43 9 46 2

1985-95 1995-05 2004 2005 Growth of exports and Imports (Oh) (average annualgmMh) Agnculture 31 26 35 100 T I Industry -114 94 43 Manufactunng 130 Services -29 76 77 Household final consumption expenditure 19 75 71 P4 General gov't final consumption expenditure -78 37 29 22 00 01 02 03 04 Gross capital formation 05 P4 30 97 -Exports --o--lnpoils Imports of goods and services 77 137 22 1 O5 I

Note 2005data arepreliminaryestimates This tablewas producedfrom the Development Economics LDB database 'Thediamonds showfourkeyindicators in thecountry(in bold) comparedmthits income-groupaverage If dataare missing thediamondmll be incomplete

84 Albania

PRICES andGOVERNMENT FINANCE 1985 l9Q5 2004 2005 ~ Inflation (%) Domestic prices 10 - (wchangej I Consumer prices 78 23 24 Implicit GDP deflator 04 98 60 35

Government finance (%ofGDP, includes current grantsj I Current revenue 50 6 22 5 25 2 24 9 00 OI 02 03 04 05 Current budget balance 24 4 -2 2 11 12 1 -----GDPdeflator -CPI Overall surplusldeficit -9 0 -5 6 -4 1 - 1 TRADE ~- 1985 1995 2004 2005 (US$ millionsj Totalexports (fob) 205 567 652 Agnculture 35 Mineral products 24 I Manufactures 92 Total imports (cif) 679 2.189 2,397 Food 732 Fuel and energy 80 Capital goods 30 88 W 01 02 03 04 05 Export price index (2000-aOj 120 121 Import pnce index (2000-00) I7 16 1 Bkports g~nports Terms of trade (2000=WOj 03 04 I

BALANCE of PAYMENTS lgE5lQS5 2004 Furrent account balance to GDP (Oh) (US$ millions) 1 Exports of goods and sewices 319 304 1364 1501 Imports of goods and sewices 362 836 3082 3358 \ Resource balance -44 -533 -1718 -1857 51 Net income 1 44 u4 68 Net current transfers 477 1.028 I72

Current account balance -12 -547 -577 10 Financing items (net) 32 681 620 Changes in net reserves 18 -21 -04 -03 Memo I Reserves including gold (US$ millions) 265 168 1263 Conversion rate (DEC, local/US$j 86 928 028 999

EXTERNAL DEBT and RESOURCE FLOWS lgg5 lgg5 2005 Composition of 2004debc(fi$ kill.) (US$ millions) Total debt outstanding and disbursed 456 1549 IBRD 0 0 0 IDA 09 677 655 I Totaldebt service 0 74 IBRD 0 0 0 IDA 1 8 0 Composition of net resource flow Official grants 77 1x) Official creditors 70 It3 Pnvate creditors 0 30 Foreign direct investment (net inflow) 70 426 Portfolio equity(net inflows) 0 0 World Bank program Commitments 36 50 A-IBRD E- Bilaferzi Disbursements 43 67 34 E - IDA D - other rmltiiam F - Private Pnncipal repayments 0 3 Net flows 43 84 30 Interest payments 1 5 Net transfers 43 59 24

Note This table was producedfrom the Development Economics LDB database 8/12/06

85 Annex 15: Maps - IBRD 35268 ALBANIA: Land Administration and Management Project

Sea

ALBANIA ,AN D A DM I NI S T RAT IO N AND MANAGEMENT PROJECT PROJIECT COMPONENT A 1 PKOJECT COM”1ENTS B AND C CITIES o SEIECTED CITIES AhD TOWNS m DISTRICT CAPITALS 0 NATIONAL CAPITAL RIVERS MAIN ROADS kAlkROADS DISXICT BOUNDARIFS -- INTERNATIONAL BOUNDARIES

86 Annex 16: Governance Strategy ALBANIA: Land Administration and Management Project

1. Introduction

1. The centrepiece of the World Bank Country Assistance Strategy (CAS) for Albania is an innovative attempt to tackle governance challenges in the country through the introduction of a ‘Governance Filters’ to guide Bank interventions in Albania.

2. The Government of Albania is prepared to make significant steps towards its goal of European integration, attainment of MDGs and poverty reduction. However, governance challenges continue to negatively affect Albania’s recent achievements and the prospects of sustained economic growth, creation of conducive business and investment environment and improved public service delivery. Recent governance data collected from various sources show that state capture, pervasive corruption, weak enforcement ofthe rule oflaw, limited government effectiveness and inadequate regulatory quality are the main factors inhibiting private sector development, effective service delivery and overall development. 3. A consensus has been built among the Government, World Bank and other development partners that the control of corruption is the most pressing governance challenge for Albania. The Government has made it a top priority of its program to address governance challenges. Externally, Government performance on combating corruption and crime has become a yardstick by which Albania’s readiness to progress towards EU accession will be measured. 4. The current CAS seeks to support Albania’s efforts in improving the governance. It recognizes that more coherent efforts need to be made to address this challenge and therefore, introduces a ‘Governance Filter’ comprising of the following four core principles which are to be used to ensure that governance considerations are mainstreamed into all of the activities supported by the World Bank:

A. Seek greater transparency in the use ofpublic resources. B. Support increased autonomy and de-politicization of key public sector counterpart organizations. C. Analyze the formal (and likely future) roles oflocal governments, and develop capacity - and local mechanism of accountability - to enable local governments to effectively take these roles. D. Strengthen mechanisms for advocacy and increased involvement of citizens (including non-governmental stakeholders) to encourage improved performance of public service delivery and policy-making bodies. 5. This Governance Strategy summarizes the integration of these four principles (or the ‘Governance Filters’) into the project design. After having analyzed the overall situation in the country concerning land administration and management, the two main relevant public institutions (PRO and municipalities) have been assessed. Their weaknesses are briefly summarized in section 2. Section 3 includes the specific measures incorporated in project activities to mitigate present shortfalls and to ensure better governance in Albania’s land administration and management.

87 2. Institutional assessment of IPRO and municipalities from governance perspective 2.1 Assessment of IPRO 6. According to a customer survey23evaluating the quality, efficiency and effectiveness of property administration services by the IPRO offices done by the Center for Rural Studies and Sustainable Development in September 2005 with financing from the World Bank Agriculture Services Project, there are still major short-comings concerning the services provided to the clients, both with respect to the transparency (corruption) and the time and cost involved when using the system. 7. The most common types of services provided to the customers at PRO offices are: i) obtaining property certificates; ii) registering the property in a hipoteka; iii) register new immovable properties; (iv) registering transfer or mortgage ofthe property. 8. The majority ofthe respondents are not satisfied with the quality of services provided by the IPRO offices. The slow procedures, the long time needed to spend in lines at the IPRO offices to receive the services, and the high level of corruption are the major complaints of interviewed customers, especially in Vlore, Tirana and Durres PRO offices. The PRO office in Lushnje appears to be performing significantly better, mainly as a result of a better organization and management of the work and higher professional skills and responsibility of the PRO officials.

9. The majority ofthe respondents were at the PRO more than one time in order to obtain the services. About two fifth ofall interviewed customers have been at the IPRO offices from 2- 4 times, more than one third of them have been there from 5-10 times for same service, while about 17% have been there from 11-20 times. The usual time spent in a normal day by the customers at the PRO offices varies from around 30 minutes up to about 5 hours with the longest time in Durres, followed by Tirana and Vlore. The majority of respondents judge services provided by the PRO as slow or extremely slow, while only about 3% consider them quick or very quick. The majority of interviewed customers are willing to pay more than what they pay now at the IPRO in order to receive faster services. Most ofthem accept to pay from 2 to 3 times more than at IPRO. 10. Based on the respondents’ opinions about the importance of informal payments at different public offices, the PRO is ranked in the third place, after health system and courts. In most of the cases the extra payments are related to: (i)initial registration of properties and getting property certificates; (ii)registration of properties in the hipoteka; (iii)clarification of property boundaries, and: (iv) issuing of positive and negative certifications. The main reasons for making the extra payment are to: (i)speed up the service; (ii)ensure getting the documents, and; (iii)avoid standing in lines. 11. In regard to the level of satisfaction with services provided by PRO office about three fourth of respondents declare to be unsatisfied or very unsatisfied, while only a limited number

23 Source: Center for Rural Studies & Sustainable Development: Customer Survey for the Immovable Property Registration System (IPRS). Albania, September 2005.

88 of respondents seem to be very satisfied. The main reasons for being unsatisfied are: (i)high cost ofthe service; (ii)too many visits needed to IPRO offices; (iii)high level ofcorruption; (iv) lines are too long; (v) too much paperwork to fill; and (vi) not enough information available; etc.

12. Most of the respondents think that the main reason of this difficulty is the capacity and the accountability ofthe IPRO staff. 2.2 Assessment of Municipalities 13. Recent decentralization efforts devolved crucial functions to local governments such as, among others, land use planning and development control, issuance of building permits and the collection ofproperty tax. Municipalities do lack, however, the human and financial capacities as well as general regulations and standards to efficiently take over theses tasks. 14. In addition to theses institutional weaknesses due to the recently acquired functions, there is a lack of transparency in public disclosure and little feedback on service quality in quite a number of municipalities. There is, therefore, a need for better internal as well as external monitoring. 15. Recently, some municipalities gained first experience with the participatory planning methods, mainly through donor supported projects. Participatory practice is, however, still limited to the selected cities, including Elbasan, Fier, Korca and Kukes, and is not part ofgeneral practice. So far, people’s participation in land-use planning has not been incorporated in any general regulations or guidelines and is not considered to be an obligatory requirement for the regulatory planning.

3. Project Measures and Indicators 16. Based on the institutional analysis summarized above specific measures have been identified and included in all components ofthe project. Measures within project components are presented below according to the four key guiding principles.

A. Transparency in the Use of Public Resources 17. Transparency in the use of public resources is a crucial issue for IPRO, the MPWTT, MOI and the municipalities. The anticipated outcome of the project is that all relevant public institutions (which are mainly IPRO, MPWTT, MOI, and the eligible municipalities) make available all relevant information to those who want to follow up wrong doings.

Thefollowing measures will be incorporated in the project: 0 Make publicly available the project financial audit reports on the websites as well as the audit report ofthe government audit ofthe budgets; 0 With respect to procurement, make publicly available the following information:

o Procurement plan o Procurement notices o Short lists or the names ofthe parties who submitted proposals o Winning firm and amount o All procurement done using direct contract and justification

89 0 In compliance with the existing regulations, seek the Public Procurement Agency clearance of any direct contracting above US$3000 equivalent.

Make publicly available lists of all contractors awarded contracts since January 1, 2007, including name ofcontractor, phone number, purpose and price; Proposed performance indicators: 0 All relevant documents such as procurement plans, and contract awards are published on the websites ofIPRO, MPWTT, MOIand the municipalities (if available). 0 IPRO, MPWTT, MOI and eligible municipalities provide information about the project (within the limitation of the laws) to all interested users such as (potential contractors, bidders, media, NGO etc.) with nominal charge (if any). [to be assessed through a survey]. 0 Less evidence of corruption, clientelism, nepotism [to be assessed through close monitoring].

B. Increased Autonomy and De-politicization of the Public Administration 18. De-politicization of the public administration still requires substantial improvement. The anticipated project outcomes are therefore, a strong PRO and strengthened municipalities that take transparent and politically independent decisions on structure and staff based on criteria such as efficiency, equity, sustainability, transparency and accountability. Thefollowing measures are proposed to be incorporated under the project:

0 Streamline the implementation of the project into the existing administrative structures ofIPRO, MPWTT, MOI and the municipalities. 0 Support the administrative and financial autonomy of the IPRO to enable it to set its own administrative structure and salary structure and de-politicize staff appointment (under component A). 0 No firing ofcivil servants without due process; All jobs should be advertised. Proposed performance indicators: 0 IPRO is a self financing and managerially autonomous entity by year three of the project. The head of the IPRO will be reporting to a board of directors that represent government and the users group.

C. Supporting Decentralization 19. So far, local governments and local administration lack capacity to conduct sustainable land management and urban development. The anticipated outcome of the project therefore includes qualified municipalities and local PRO office to have sufficient knowledge and decision-making authority to efficiently carry out their responsibilities.

20. Decentralization by itself, however, does not necessary decreaseddiminishes corruption. Thus, an important contribution to the governance in the context of the decentralized land management is the introduction and application of service standards and the oversight of their

90 application, Additional anticipated outcomes would be standardized procedures that can easily monitored by the national level to guarantee higher transparency and better quality of services. Thefollowing measures are proposed to be incorporated within the project: 0 All infrastructure investments financed by the project, will be selected, procured, and supervised by the municipalities.

Capacity building will be provided to the participation municipalities in procurement, financial management and project management.

Operational review of the participating municipalities will be undertaken annually to ensure compliance with the governance filter as well as other aspects of the implementation protocol.

Proposed performance indicators for component A: 0 Capacity oflocal government to implement programs at the local level is increased.

D. Strengthening Mechanisms of Advocacy and Citizen Participation 21. Quality and transparency of public sector performance and especially of public service delivery depends strongly on the public involvement. The anticipated outcome of the project is well institutionalized civil society oversight and feedback as well as functioning complaints handling mechanisms. Thefollowing measures are proposed under the project: Policy formulation, including drafting laws and regulations will be done through participatory processes and public hearings; The development of regulatory plans will also be done through participatory processes; Establishment of hot line in IPRO for customer complaints of misconduct and delayed service delivery; Raise / support public awareness on IPRO’s tasks, service obligations, service standards, complaints mechanism etc.; and Undertake regular customer surveys in IPRO to measure compliance with service standards and satisfaction ofclients.

Proposed performance Indicators: 0 PRO clients’ overall satisfaction with PRO’S services increased to “Good”, on a scale from “Very Poor, Poor, Average, Good, Very Good to Excellent” (as compared to baseline study in Sep. 2005); 0 Level ofsatisfaction ofcommunity in land use planning is high.

91

MAP SECTION

IBRD 33359R 19°E MONTENEGRO 20°E21°E

SERBIA Maja Jezercë (2693 m) ValbonVValbonaalbona

MALSIMALSI E Alps th Albanian ALBANIA Nor TROPOJËT R O P O J Ë To MADHEMADHE Podgorica BajramBajram HanHan i HotiHoti CurriCurri

KoplikKoplik Drin FierzëFierzë HASH A S To Lake SHKODËRS H K O D Ë R Prizren Scutari KrumëKrumë PUKËP U K Ë ShkodërShkodër (Scutari)(Scutari) KomanKoman PukëPukë FushFush KukësKukës ArrëzArrëz KalimashKalimash ° 42 N 42°N KUKËSK U K Ë S

Bunë LEZHËL E Z H Ë MIRDITËM I R D I T Ë Zall-RecZall-Rec ShëngjinShëngjin

i RubikRubik Z Drinit Bay KurbneshiKurbneshi i

n LezhëLezhë i

RrëshenRrëshen r D Lake PeshkopiPeshkopi ShkopetShkopet Ulzës FushëFushë KugeKuge LaçLaç UlëzUlëz Rodonit Bay BurrelBurrel LAÇLAÇ DIBRAD I B R A MamurasiMamurasi MATM AT KrujëKrujë Lalëzit Adriatic Bay KRUJËK R U J Ë FYR FushëFushë BulquizëBulquizë DURRËSDURRËS KrujëKrujë BULQIZËBULQIZË MACEDONIA Sea VorëVoVorërë TIRANËTIRANË DurrësDurrës ShijakShijak (TIRANA)(TIRANA) Durrësit TIRANËT I R A N Ë Bay IbëIbë LibrazhdLibrazhd To KavajëKavajë KrrabëKrrabë Struga LIBRAZHDLIBRAZHD KAVAJËKAVAJË ElbasanElbasan PEQINPEQIN Lake VidhësVidVidhëshës PerrenjasPerrenjas ° PeqinPeqin Ohrid 41 N ELBASANE L B A S A N 41°N Karavastasë LUSHNJËLUSHNJË CërrikCërrik Bay LushnjëLushnjë POGRADECPOGRADEC Lake KajanKajan GramshGramsh PogradecPogradec Prespa

KUÇOVËKUÇOVË GRAMSHG R A M S H FIERF I E R KuçovëKuçovë Little FierFier Lake Prespa MarinzëMarinzë BeratBerat PatosPatos MaliqMaliq DEVOLLDEVOLL BERATB E R AT KORÇËK O R Ç Ë KafarajKafaraj BallshBallsh KorçëKorçë Vjosë BilishtBilisht MALLA-MALLA- 010203040 Kilometers SKRAPARSKRAPAR KASTERKASTER ÇorovodëÇorovodë SeleniceSelenice 0 10 20 30 Miles Vlorës VlorëVlorë Bay TEPELENËTEPELENË ErsekëErsekë ° KrahësKrahës 19 E MavrovëMavrovë PËRMETP Ë R M E T VLORËV L O R Ë KOLONJËKOLONJË TepelenëTepelenë KelcyrëKelcyrë PërmetPërmet P Vjosë i n GREECE ALBANIA d GJIROKASTËRGJIROKASTËR u s SELECTED CITIES AND TOWNS GjirokastërGjirokastër M DISTRICT CAPITALS 40°N DELVINËDELVINË o 40°N u NATIONAL CAPITAL DelvinëDelvinë n To t RIVERS Ioánina a SarandëSarandë i MAIN ROADS KakavijaKakavija n s

RAILROADS GREECE SARANDËSARANDË This map was produced by the Map Design Unit of The World Bank. DISTRICT BOUNDARIES The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any INTERNATIONAL BOUNDARIES endorsement or acceptance of such boundaries. 20°E21°E

JULY 2006