Document of The World Bank FOR OFFICIAL USE ONLY

Public Disclosure Authorized Report No: ICR00004817

IMPLEMENTATION COMPLETION AND RESULTS REPORT TF0A3230

ON A

Public Disclosure Authorized SMALL GRANT

IN THE AMOUNT OF US$2,428,300

TO THE

REPUBLIC OF ARMENIA Public Disclosure Authorized FOR

SOCIAL INVESTMENT AND LOCAL DEVELOPMENT TRUST FUND (P156378) September 23, 2019

Public Disclosure Authorized Social Protection and Jobs Global Practice Europe And Central Asia Region

CURRENCY EQUIVALENTS (Exchange Rate Effective September 6, 2019)

Currency Unit = Armenian Dram (AMD) AMD 477 = US$1 US$1 = SDR 0.730350

Republic of Armenia GOVERNMENT FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

ASIF Armenian Social Investment Fund ATDF Armenian Territorial Development Fund CPS Country Partnership Strategy ESMP Environmental and Social Management Plan FM Financial Management ICR Implementation Completion and Results Report GOA Government of Armenia GRM Grievance Redress Mechanism LSG Local Self-governance M&E Monitoring and Evaluation MIS Management Information System MTAD Ministry of Territorial Administration and Development O&M Operation and Maintenance PDO Project Development Objective SDC Swiss Agency for Development and Cooperation SILD Social Investment and Local Development TA Technical Assistance TARA Territorial and Administrative Reform of Armenia TF Trust Fund UNDP United Nations Development Programme VCMI Value Chain Multiplier Index USAID U.S. Agency for International Development

Regional Vice President: Cyril E Muller Country Director: Sebastian Molineus Senior Global Practice Director: Michal J. Rutkowski Practice Manager: Cem Mete Task Team Leader(s): Ivan Drabek ICR Main Contributor: Peter Ivanov Pojarski

TABLE OF CONTENTS

DATA SHEET ...... ERROR! BOOKMARK NOT DEFINED. I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ...... 4 II. OUTCOME ...... 7 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ...... 12 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 13 V. LESSONS LEARNED AND RECOMMENDATIONS ...... 15 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ...... 17 ANNEX 2. PROJECT COST BY COMPONENT ...... 23 ANNEX 3. RECIPIENT COMMENTS ...... 24 ANNEX 4. SUMMARY OF THE END LINE BENEFICIARY ASSESSMENT ...... 36

The World Bank Social Investment and Local Development Trust Fund (P156378)

DATA SHEET

BASIC INFORMATION

Product Information Project ID Project Name

P156378 Social Investment and Local Development Trust Fund

Country Financing Instrument

Armenia Investment Project Financing

Original EA Category Revised EA Category

Partial Assessment (B)

Organizations

Borrower Implementing Agency

Ministry of Territorial Administration and Development, MINISTRY OF FINANCE Armenia Territorial Development Fund (ATDF)

Project Development Objective (PDO)

Original PDO Improve capacities of municipalities in Southern Armenia to provide public infrastructure and services to their citizens.

PDO as stated in Legal Agreement (if different from Project Paper) To improve capacities of municipalities in Southern Armenia to provide sustainable public infrastructure and services to their citizens.

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The World Bank Social Investment and Local Development Trust Fund (P156378)

FINANCING

FINANCE_TBL Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) Donor Financing TF-A3230 2,428,300 2,428,300 2,428,300 Total 2,428,300 2,428,300 2,428,300

Total Project Cost 2,428,300 2,428,300 2,428,300

KEY DATES

Approval Effectiveness Original Closing Actual Closing 09-Aug-2016 02-Feb-2017 31-Dec-2018 01-Apr-2019

RESTRUCTURING AND/OR ADDITIONAL FINANCING

Date(s) Amount Disbursed (US$M) Key Revisions 08-Mar-2019 2.43 Change in Loan Closing Date(s)

KEY RATINGS

Outcome Bank Performance M&E Quality Satisfactory Satisfactory Substantial

RATINGS OF PROJECT PERFORMANCE IN ISRs

Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 07-Jun-2017 Satisfactory Moderately Satisfactory 0.30

02 20-Dec-2017 Satisfactory Moderately Satisfactory 0.31

03 18-Jul-2018 Satisfactory Satisfactory 1.22

04 28-Dec-2018 Satisfactory Satisfactory 2.43

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ADM STAFF

Role At Approval At ICR

Regional Vice President: Cyril E Muller Cyril E Muller

Country Director: Mercy Miyang Tembon Sebastian-A Molineus

Director: Fadia M. Saadah

Practice Manager: Andrew D. Mason Cem Mete

Task Team Leader(s): Briana N. Wilson Ivan Drabek

ICR Contributing Author: Peter Ivanov Pojarski

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I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES

Context

Country Context at Appraisal

1. Armenia experienced strong economic growth before the global economic crisis; since then, recovery has been slow. Economic growth resumed after 2011 and real gross domestic product growth increased to 7 percent in 2012 before slowing to 3.5 percent in 2013 and 3.4 percent in 2014. With a per capita gross national income of US$4,020 in 2014, Armenia was a lower-middle-income country.

2. Armenia is undergoing several reforms related to a need to create a well-functioning market- oriented economy and improve the existing system of governance toward meaningful decentralization. The country is characterized by significant territorial disparities. Economic activity is largely concentrated in the capital Yerevan, which accounts for about one-third of the country’s population, about a quarter of the nation’s poor, and more than half of the national gross domestic product. Territorial disparities lead to migration from depressed and remote areas to Yerevan and underutilization of the economic potential of lagging territories hampers economic development and job creation and reduces the efficiency of public policy.

3. The availability, accessibility, and quality of economic and social infrastructure and of social services provided at the community level were still very low, especially outside Yerevan. Small cities accounted for the majority of the poverty in Armenia, but rural areas also had disparities.

Sectoral and Institutional Context

4. The governance system in Armenia is highly centralized, with the Central Government being responsible for capital investment and key areas of public service provision, including health care, education, and social protection. The regional marz1 authorities represent the Central Government in the field and oversee implementation of its policies. Communities are governed by elected community councils and heads of the community (local government level). In contrast to marz authorities, local governments have their own budgets. Local governments are primarily responsible for administrative functions and operation and maintenance (O&M) of existing local-level infrastructure. Armenia’s 896 communities, of which 847 are rural and 49 are urban, differed greatly in size and development levels. Nearly half of them had fewer than 1,000 inhabitants (data from the time of appraisal). This fragmentation was exacerbated by insufficient budgets and was leading to inefficiencies and the inability of local governments to effectively deliver services to their constituencies. The large number of extremely small local government jurisdictions was also hampering efforts to promote economies of scale and efficiently develop local economies.

5. The Government of Armenia (GOA) recognized that a highly centralized governance system and high concentration of wealth in Yerevan were not conducive to sustainable economic and social development of the country and exacerbated high and persistent territorial disparities. The Armenia

1 Armenia is divided into ten marzes (provinces, singular ‘marz’), with the city of Yerevan having special administrative status as the country’s capital.

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Development Strategy for 2014–2025, therefore, aimed to overcome territorial development disparities, ensure uniform territorial development, and implement targeted territorial development policies as mid- term and long-term priorities. The objective of targeted territorial development programs is to ensure accelerated economic development for the most depressed territories and enable them to approach the average economic development level of the country.

6. At the time of appraisal, the Ministry of Territorial Administration and Development (MTAD) had prioritized overcoming territorial disparities (2011 Concept for Territorial Development). This concept emphasized the creation, rehabilitation, and development of economic infrastructure and an increase in the quality and accessibility of public social services (such as educational, health, cultural, and environmental) at the territorial or community level. Armenia was committed to reforming its local self- governance (LSG) system in line with the European Charter of Local Self-Government, which the country ratified in 2002. Before the reforms, the functioning of the LSG system was regulated by the Law on Local Self-Government adopted in 2002, which did not provide sufficient basis for LSG development.

7. For almost 20 years, the GOA had addressed territorial imbalances by implementing small-size investment projects, known as microprojects, to support social infrastructure at the community level through the Armenian Territorial Development Fund (ATDF). The ATDF (formerly known as the Armenian Social Investment Fund [ASIF]) was created in 1996 as an autonomous public organization accountable to its board, chaired by the prime minister of the Republic of Armenia. It was created with the World Bank’s technical and financial assistance, to provide immediate support to the rehabilitation of local infrastructure and enhance the living conditions of the poorest using a demand-driven approach and direct community involvement. The ATDF’s interventions before that had focused on (a) rehabilitating and improving local community infrastructure and services with the aim to reduce vulnerability, satisfy basic socioeconomic needs, and generate employment at the local level and (b) providing training and technical assistance (TA) to local authorities to support decentralization reforms and local institutional capacity building. An estimated 53,377 people in Armenia have benefitted from the ATDF-supported investments to date.

8. In 2014, the GOA approved the ATDF’s Evolution Strategy, which envisages an evolution of the ATDF to support the Armenia Development Strategy objectives and address the growing territorial disparities. It involved the ATDF transitioning from implementing mostly social infrastructure microprojects to also focusing on territorial development projects; it also will promote diversification of the funding sources of the ATDF’s operations. This transition was seen to require an enhancement of the ATDF’s staffing, functions, operational procedures, and capacity. The territorial development projects delivered by the ATDF were also adjusted to support a new territorial development strategy that was being prepared by the GOA at the time. Between 2017 and 2019 the Government continued the administrative and territorial reforms, including the process of community consolidation. To address the challenges of territorial disparities with limited decentralization level the Government launched a Territorial and Administrative Reform of Armenia (TARA) to decrease the number of initial 915 communities to 250. It was started in three pilot clusters (Dilijan, Tumanyan, and Tatev) in 2015–2016. In 2016, with the consolidation of the additional 15 pilot clusters, the total 18 new enlarged municipalities were formed in Armenia with 140 former municipalities. During the second stage of TARA and as of 2017, there were 34 additional consolidated communities formed (with 325 municipalities) to reach the total number of clusters to 52 (with 465 municipalities out of the initial 915 agglomerated).

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9. Currently, in preparation of the rolling-out of the third stage of TARA implementation across the country (expected in the last quarter of 2019) the MTAD is actively conducting a series of public consultations with LSG bodies, experts, and wider public.

10. The ATDF’s transition and new mandate were supported by a US$30 million loan from the World Bank,2 as well as a US$303,000 grant from the Swiss Agency for Development and Cooperation (SDC). This financing was used to enhance the ATDF’s existing structure; functions; operational procedures; and capacity (such as staffing, training, and facilities). In parallel to the World Bank-supported investment lending operation, the Social Investment and Local Development (SILD) Project, the SDC implemented the ‘Improvement of the Local Self-Governance System in Armenia’ Program. In addition, the Federal Ministry for Economic Cooperation and Development of Germany/German Agency for International Cooperation (Deutsche Gesellschaft für Internationale Zusammenarbeit), the U.S. Agency for International Development (USAID), the Council of Europe, the European Union, and the United Nations Development Programme (UNDP)were providing a mix of TA and grant support to the ATDF to support their evolution. The program was launched by the SDC in 2014 under a programmatic approach elaborated in close cooperation with the MTAD. The program aims at strengthening accountability, effectiveness, and efficiency of the LSG system in Armenia through (a) supporting LSG consolidation reform in ‘pilot’ communities and (b) working with a wider number of municipalities and communities on improving processes and instruments of local governance, efficient service provision, and effective economic development. This grant was aligned with this ongoing program.

Project Development Objectives (PDOs)

11. The PDO is to improve capacities of municipalities in Southern Armenia to provide sustainable public infrastructure and services to their citizens.3

Key Expected Outcomes and Outcome Indicators

12. The PDO-level results indicators are the following:

• Number of supported subprojects in merged or new municipalities from the list of basic infrastructure identified through participatory decision making

• Increase in level of beneficiary4 satisfaction with public services and infrastructure in targeted areas related to supported subprojects, including among women

• Number of temporary and permanent jobs created

2 The Armenia Social Investment and Local Development Project (P148836) (further referred to as ‘the main SILD’) 3 This is the PDO statement according to the Grant Agreement. In the Project Paper data sheet, the PDO statement is “to improve capacities of municipalities in Southern Armenia to provide public infrastructure and services to their citizens.” In the Project Paper main text, the PDO is slightly different from the Grant Agreement and the Data Sheet: “to improve capacities of selected municipalities in Southern Armenia to provide public infrastructure and services to their citizens.” 4 The Project Paper text uses the wording “beneficiary satisfaction”, while later in the Results Framework section the Project Paper uses the term “citizen satisfaction”. This ICR assumes equivalence between the terms, as the indicator specifies the targeted areas.

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Components

13. The project had one component: Component 1, Capital Investments for Local Development and Public Service Provision and Capacity Building (US$2.4 million). This component of the project facilitated tangible improvements in local development and sustainable public service provision through the implementation of subprojects at the intercommunity level. The activities under the project’s main component mirrored Component 2 of the World Bank-financed main SILD Project, approved on March 13, 2015.

14. This project came as a complement to Component 2 of the main SILD Project and provided additional resources for piloting new innovative intercommunity projects in two regions targeted by the main program of the project donor—SDC. The project followed the operational procedures, specifically the Project Operations Manual and safeguards, financial management (FM), and procurement procedures developed for the World Bank-financed main SILD Project.

II. OUTCOME

Assessment of Achievement of Each Objective/Outcome

15. This Implementation Completion and Results Report (ICR) reviews the PDO as a single objective.

Relevance of the PDO

16. The PDO at closing remains highly relevant to the World Bank Country Partnership Strategy (CPS) and the country’s priorities. The project objective is highly relevant to the new Country Partnership Framework for Armenia for FY19–FY23,5 which was approved by the World Bank Board of Executive Directors on March 28, 2019. The project remains highly relevant, through the CPF’s Focus Area 2 ‘Human Capital Development and Equity’, where Objective 7 is “Improved access to social protection services and economic opportunities for poor and vulnerable populations.” At the time of appraisal, the grant also linked strongly to the previous CPS6 for 2014–2017 (November 7, 2013) in its aim to reduce poverty and improve access to quality social services. The PDO also supplements the objective of the linked larger SILD Project, which is to improve the quality and use of, and access to, community and intercommunity infrastructure. Finally, the project was aligned with the World Bank’s twin goals, supporting elements of the Armenia Development Strategy that focused on eliminating extreme poverty, mitigating poverty of the poorest 40 percent of the population, boosting their prosperity, and reducing territorial development disparities. This included the rehabilitation and creation of social infrastructure aimed at improving social welfare in poor and vulnerable communities, mitigating territorial disparities through the implementation of projects in these vulnerable communities and areas, and strengthening efficiency in community governance.

5 World Bank Report No. 123902-AM. International Bank for Reconstruction and Development, International Finance Corporation, Multilateral Investment Guarantee Agency Country Partnership Framework for the Republic of Armenia for the Period FY19–FY23. 6 At the time of appraisal, the project linked to the CPS from October 9, 2013 (Report No. 81647-AM), which was updated through a Performance and Learning Review on April 15, 2016 (Report No. 98735-AM).

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17. Small but well-focused and supplementing other larger efforts, the project has a PDO that was realistic for an 18-month operation. The simplified one-component design and the clear Results Framework contributed to the realism and relevance of the PDO.

Efficacy

18. Project efficacy was Substantial in relation to the stated objective. The project has a single objective that is evaluated on the basis of the set of outcome indicators. The municipalities in southern Armenia were selected as a pilot because they had particularly low access to infrastructure and services and were among the first to agglomerate. Given the short-term nature of the operation, capacity building was selected as the most achievable outcome. The evidence that the municipalities’ capacity to provide infrastructure and services was measured by three PDO indicators to measure the number of supported subprojects in merged or new municipalities; the increase in level of beneficiary satisfaction with public services and infrastructure in targeted areas; and the number of temporary and permanent jobs created.

19. The project fully achieved or surpassed all its PDO and intermediate outcome indicators. The PDO indicator for number of supported subprojects has been fully achieved, with five subprojects financed. Close to 3,500 temporary and 59 permanent jobs were created. The entire population of the participating communities was 32,000, so in fact the project reached 84 percent of the population in target areas. Of all beneficiaries, 13,088 were women, surpassing the original target of 13,000 by a small margin. Beneficiary satisfaction has also increased in all the surveyed communities and for all types of services. The Project Paper used a summary value for baseline and target for this indicator, which was based on historical experience from other types of services under other ATDF/ASIF activities but not based on the baseline beneficiary assessment for this project. Once the baseline beneficiary assessment was completed, the target should have been updated. Thus, the baseline and targets do not match the actual detailed survey results of the baseline and end line beneficiary assessments.

20. Therefore, the ICR chose to use the satisfaction baselines from the conducted baseline beneficiary assessment and compare with the end line assessment’s data7 in a more detailed set of values provided in a separate table. Table 1 provides a summary of the status of outcome indicators. Table 2 and figure 1 demonstrate the improvements in citizen satisfaction and provide a fuller and better picture of the developments. According to the end line assessment, the citizen satisfaction level with all services has registered a value of 52.7 percent, which is a 23 percent improvement over the baseline assessment value of 43 percent. The satisfaction rate among women has also grown to 51.6 percent, from a baseline of 32 percent. Although no control group was included in this study, it is reasonable to attribute these changes to this project, as there were little or no other public service improvement interventions in these areas between the baseline and end line assessments.

Table 1. Summary of Outcome Indicators Status Outcome Indicator Baseline Target Actual Value at Closing Number of supported subprojects in merged/new 0 5 5 municipalities identified through participatory decision making Number of temporary and permanent jobs created 0 50 Temporary - 3,470 man-days

7 See annex 4.

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Outcome Indicator Baseline Target Actual Value at Closing Permanent - 59 jobs Level of citizen satisfaction with public services in 438 43 52.7 targeted areas related to supported subprojects, See table 2 with details. including among women (in %) Table 2. Comparison of Citizen Satisfaction with Public Services before and after the Project Type of Service Baseline/End Line All Jermuk Zaritap Meghri Gorayk Tegh Average of all services Baseline (%) 43 (32)* 41.5 29.0 75.2 26.1 11.1 52.7 51.4 37.0 78.8 26.1 37.5 End line (%) (51.6)* Source: UNDP Armenia, 2019. End Line Assessment of Citizen Satisfaction with Public Services and Infrastructure in Five Consolidated Communities of Armenia. Note: *Value in brackets is the satisfaction rate among women only. Figure 1. Level of Citizen Satisfaction with Public Services by Community (baseline and end line assessment)

Change in Citizen Satisfaction by Community (sum of responses for positive satisfaction, %) 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Jermuk Zaritap Meghri Gorayk Tegh

Baseline Endline

Source: UNDP Armenia, 2019. End Line Assessment of Citizen Satisfaction with Public Services and Infrastructure in Five Consolidated Communities of Armenia.

Efficiency

21. Project efficiency is assessed as Substantial.

22. Implementation efficiency was likely better than the average for similar programs in Armenia and internationally. The administrative costs of the project overall seem in line with the costs of other

8 The Project Paper has 80 percent baseline and 80 percent target, which were tentatively assumed before the baseline beneficiary assessment was conducted. The ICR uses the baseline from the assessment conducted specifically for this project after the Project Paper was drafted.

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projects that the ATDF manages in Armenia. Table 3 shows the operating costs of several projects and compares them to the costs of the SILD SDC Trust Fund (TF).

Table 3. Operating Costsa of SILD SDC TF Compared to Other Projects Project Total Operating Planned 2018 Actual Actual Actual Project Costs Operating Project Spending Operating Operating Costs Spending Allocation Costs as % of (US$, thousands) Costs 2018 as % of Actual (US$, (US$, Planned (US$, Project thousands) thousands) Spending thousands) Spending SDC 2,428 128 5.3 2,310 81 3.5 Grant Main 42,851 4,200 9.8 7,175 567 7.9 SILD LEIDb 63,018 1,125 1.8 1,988 49 2.5 SSIP 102,100 2,880 2.8 4,139 163 3.9 (ADB)c LGRA 9,386 225 2.4 1,566 45 2.9 (USAID)d Total/Av 219,783 8,558 3.9 17,178 905 5.3 erage Note: a. Data used for the comparison are from 2018. b. Local Economy and Infrastructure Development Project (World Bank, P150327). c. Seismic Safety Improvement Program (Asian Development Bank). d. Local Governance Reform Activity (USAID).

23. However, although this project had its own allocation for operating costs, it was implemented as part and parcel of the main SILD operation and piggybacked on the management structure and expenses of the main SILD Project. The extent of this cost sharing cannot be exactly calculated. The main SILD Project has an administrative cost of around 7.9 percent. This TF-funded project, however, had a separate administrative budget, which was 3.5 percent of its own funding. This ICR assumes that the actual administrative costs for this project, including its own administrative budget plus the cost sharing by the main SILD Project is, therefore, estimated to be around or slightly below the average of 5.3 percent for the cohort of compared projects. The project also had one retroactive extension because of delayed implementation and procurements, which cast a shadow on the implementation efficiency performance.

24. The economic efficiency aspects of the project are closely related to the logic of Component 2 of the main SILD Project. Evidence from earlier interventions in Armenia comparing the construction of comparable microprojects in ASIF and in other public and donor agencies9 suggests that the SILD Project, as many other CDD projects, is a cost-effective mechanism to deliver social infrastructure investments. Focusing on specific target areas with the additional grant financing ensured that these areas catch up with the rest of the country in developing sustainable financing of infrastructure and services that are inclusive of poor and other marginalized groups. The success of this approach derives from the convergence of several mutually reinforcing factors: (a) deliberate responsiveness to local needs and priorities; (b) local institutional capacity building (including on efficient and effective infrastructure and services O&M and infrastructure in support of local economic growth) complementing the GOA’s new

9 Gyozalyan, 2010. Civil Works Cost Effectiveness Assessment.

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local governance reform policy; (c) innovations in poverty targeting, promotion, and community outreach; and (d) systematic and continuous monitoring and evaluation (M&E). The project also prioritized capacity building aimed at improving the ability of community groups, including women, the poor, and other vulnerable groups. The support aimed at enabling these groups to actively participate in subprojects and project M&E and progressively enhance their roles as active agents in their communities with a greater sense of commitment, ownership, and accountability in service delivery on a sustainable basis.

25. All the selected subprojects were subject to efficiency assessments before they were approved, which resulted in the selection of cost-efficient subprojects. Although the actual end efficiency outcomes cannot be exactly calculated, the available data can point to an estimated result. Elements that were assessed were expected costs of operation, costs and benefits, efficiency improvements, and income- generation potential (how much communities generate from the equipment purchase; or how much they save; or, for example, how much local farmers benefit from renting that equipment and so on). The appraisal reports for all subprojects included indexes on the potential for community growth, economic efficiency of the project for households, and benefit-cost analysis. All approved subprojects had a benefit- cost discussion, and for three of them a benefit-cost ratio was calculated based on the project activities and investments, which established that their total discounted10 benefits were higher than the discounted costs. For cost data and project typology reasons, cost-benefits ratios were calculated for three subprojects and were as follows: Jermuk - 1.39; Gorayk - 1.25; and Tegh - 1.37.

26. In addition to that, the project assessment applied a methodology developed for the main SILD Project and was outlined in a report entitled “Formulation of local (municipal/regional) social and development projects and design of assessment methodology of their economic efficiency.” To assess the efficiency of impact on household incomes, the report developed the value chain multiplier index (VCMI), which assesses the impact of investments on the level of incomes of households by differentiating the significance (or the targeting of the investments) of the investments for social groups. The VCMI was based on the comparison between the ‘with program’ and ‘without program’ scenarios. This comparison discloses the generated additional income increments for both direct and indirect incomes of the households. The VCMI was applied to all five subprojects, and the results were all very encouraging. The VCMI had values higher than 1 for all but one of the subprojects: Zaritap - 3.78; Jermuk - 1.12; Gorayk - 1.93; Tegh - 1.19; and Meghri - 0.87.

Overall Outcome Rating Rating: Satisfactory

27. The project objectives remained highly relevant throughout the life of the project. Efficacy was Substantial, with all outcome and intermediate outcome indicators fully achieved or surpassed. Although there were some implementation glitches, the overall efficiency is also rated Substantial, with administration largely within the norms, and expected economic efficiency also positive. The overall outcome rating is therefore Satisfactory.

Other Outcomes and Impacts

10 ‘Discounting’ here refers to the analytical process of putting all present and future costs and benefits in a common metric, representative of their present value.

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28. The project included activities that supported longer-term sustainability of the products and processes financed by the subprojects. The sustainability of investments was supported through establishing organizational structures at the local level (multifunctional utility enterprises) and assisting with their legal, social, and organizational aspects. For this purpose, a methodological manual was developed and provided to the communities. A new management system was also introduced that makes the planning and provision of services more efficient. This system is now available to all communities and not only to the five communities participating in this project. The capacity building provided to communities is also considered an important outcome that supports sustainability and future investments in the participating communities. The establishment of the multifunctional utility enterprises is embedded in the local government structures and sets knowledge, experience, and capacity that can be used in the future for various development activities.

29. Possible effects of the project on the private sector. The community subprojects in a number of the locations included the purchase of equipment and machinery for agriculture or waste management. The agriculture machinery was then used to provide services to the local population at lower-than-market prices. The other equipment was used to provide services (like garbage collection and snow cleaning) which could also theoretically be picked up by private contractors. Anecdotal evidence indicates that the market may be unable (because of high demand) or unwilling (because of inability of the small farmers to pay market rates) to provide these services. In the future, a deeper analysis may be needed of the possible effects of the project investments on the development of the private sector or as potential triggers for market distortion.

30. As described in the efficiency analysis, the project may have some poverty-alleviation and income-generation impacts, as it seems that the subsidized services provision went mainly to small farmers who could not afford to own equipment or rent from the market. Larger and more affluent farmers mostly seem to own equipment. This hypothesis, however, needs to be confirmed as there was no special targeting mechanism except self-selection.

III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME

Key Factors during Preparation

31. The project—being a small grant—set for itself realistic and concrete objectives with visible outcomes focused on outputs. The design was simple, with only one component and clear operational rules, supported by other larger operations. The Results Framework was also clear and simple, measurable, and with relevant targets. The monitoring plan was appropriate, with a beneficiary assessment done at the onset and a follow-up end line assessment done at the end. The beneficiaries were clearly identified, and the project’s readiness for implementation was guaranteed by its links to the larger SILD Project and the advance preparation of operational manuals and other needed documentation. Critical support was also provided by other development agencies, like the financier SDC, as well as UNDP and USAID.

Key Factors during Implementation

Factors Subject to Government and Implementing Agency Control

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32. Implementation was overall successful, with all the five subprojects implemented in beneficiary cluster communities from Vayots Dzor (Zaritap and Jermuk) and Syunik marzes (Gorayk, Tegh, and Meghry). The procured machinery, vehicles, and equipment were supplied to the beneficiary communities. Road rehabilitation (paving 850 m road) and construction of parking sites and garages were completed in Gorayk, Tegh, and Meghry. In Zaritap and Jermuk, the municipalities themselves constructed the needed parking sites using their own contributions. In addition, 11 bus stops were completed in Meghry under the project. Some savings were realized after the initial procurement and contracting, and the ATDF, in consultation with the SDC and the World Bank, prepared a list of activities and equipment/machinery, agreed with the beneficiary communities/MTAD, which were subjected to additional procurement. The respective procurement procedures were conducted, contracts were signed, and equipment was delivered, with the exception of two packages (two vans and agricultural equipment), which were delayed for objective reasons (weather and transport difficulties). To complete these deliveries, a retroactive extension of the grant (project) until April 1, 2019, was required.

IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME

Quality of Monitoring and Evaluation (M&E) Rating: Substantial

33. The process of M&E of project outcomes and results was synchronized with the M&E arrangements of the larger SILD Project and the ATDF management information system (MIS). M&E was carried out continuously and systematically by the ATDF’s M&E Unit during project implementation. As part of project monitoring, the key results indicators were used to monitor outcomes under the project. Targets of these indicators were derived in consultation with the ATDF and SDC and based on the SILD Project targets, which were, in turn, based on the ASIF Evolution Strategy targets; historical results from the ATDF or ASIF’s MIS, beneficiary surveys, and quality assessments; and the ATDF’s self-defined targets where no strategy targets or historical data exist. The ATDF’s M&E Unit was responsible for reporting on these indicators as part of the SILD Project reporting through the preparation of semiannual (midterm and annual) progress reports, which were subject to review and approval by the ATDF Board. The ATDF’s MIS also tracked safeguards activities. The donor-supported (SDC and UNDP) beneficiary assessments were also conducted at baseline and end line, to help assess the effects of the project and rates of satisfaction of the participating communities.

Bank Performance Rating: Satisfactory

34. At the time of preparation, the World Bank team collected necessary additional information and actively cooperated with the donor partner, SDC. The World Bank’s implementation assistance remained responsive to the needs, and the operation remained important to achieving country, World Bank, and global development objectives. There were no significant changes to the objective-setting circumstances during implementation, and no major changes were required in the project implementation modality to retain relevance of the objectives and design. The World Bank team provided continuous on-the-ground support (handing over the project to a task team leader with substantial experience working in Armenia and with the ATDF) and remained vigilant in continuously reviewing the

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overall environment in which the project functioned and was responsive to the everyday implementation challenges, especially during the initial and the closing periods.

Compliance (Fiduciary, Safeguards)

35. Fiduciary compliance. FM and procurement for the project were carried out by the ATDF. On the FM side—including planning and budgeting, accounting, financial reporting, funds flow, internal controls and external auditing—work under the project was satisfactory and acceptable to the World Bank. Procurement activities were carried out by the procurement division of the ATDF staffed with full-time procurement specialists. However, workload of that division was high and, while procurement was overall within the satisfactory range, some issues occurred at times. For example, the contract for the supply of two minivans for selected communities, initiated at the end of the project, was delayed and necessitated an extension of the project.

36. Environmental and social safeguards compliance. Compliance with environmental and social safeguards was satisfactory throughout the project life. Environmental and social screening of subprojects was performed on a regular basis. The quality of the screening reports and Environmental and Social Management Plans (ESMPs) was adequate, and public consultations on draft ESMPs have been duly conducted and recorded on time. No measurable damage to the environment has been caused by the project implementation, and some identified small waste management and work-site safety issues have been kept under control. The five completed intercommunity subprojects in the Gorayk, Zaritap, Jermuk, Meghri, and Tegh pilot municipalities had no impact on private land or private property.

37. A grievance redress mechanism (GRM) was in place during the entire project implementation. The GRM focal points at the local level were selected in the communities during the first consultation meeting and the selection was communicated to the community members during the next consultation meeting and through posting of corresponding announcement on the information desk at the community administrative office. The ATDF billboards and booklets, including hot line number, e-mail address, and web page, were delivered to all the settlements and posted in visible public places. No grievances from the communities were registered during project implementation.

Risk to Development Outcome

38. The risk to sustaining the development outcomes of the project is moderate. The project design is suitable to the operating environment and replication will continue under the main SILD Project, which will continue beyond the life of this project. Being part of the main SILD Project Component 2 and its monitoring mechanisms, the risks that the project outcomes will not be sustained are low. The main outcomes of this project have largely materialized and the ICR review found evidence that local authorities have willingness and basic capacity to ensure their sustainability.

39. Other general risks are mirrored by the main SILD Project and relate to the implementing agency’s evolution strategy, progress with the overall territorial development reform, and political uncertainties. The ATDF’s Evolution Strategy (from ASIF, still ongoing) envisions significant increase in the number and complexity of activities, is more demanding, and requires more coordinated efforts and capacity building to be implemented successfully. The overall territorial development reform is also still ongoing, with some delays in implementation and does not yet have a full evidence base for the results.

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It is possible that if some of these risks materialize, the pilot learning from this project may remain limited to its own scope and would not continue to develop.

V. LESSONS LEARNED AND RECOMMENDATIONS

Policy Lessons

40. The project is considered a successful pilot, which demonstrates that working with consolidated communities is beneficial in creating services and structures for larger groups of the population. The pilot has informed the SILD Project Component 2 that scales up the subprojects piloted under the grant. Most of the subprojects that are being selected at the moment under Component 2 of the SILD Project intend to address socioeconomic issues faced by enlarged communities by means of procuring utility and agricultural equipment. The projects are indeed relevant for the communities and meet the requirements set forth for the subprojects under Component 2 (as they target issues that are common for all villages comprising enlarged communities and support income generation) and are relatively easy to replicate (that is, of model nature). In addition, the projects enjoy solid support from local administrations because they help reduce the budget pressure related to the discharge of their direct responsibilities. Subsequently, the project design can be confirmed as overall relevant and logical and is picked to be scaled up in the main SILD Project Component 2.

41. However, there may be a need to introduce mechanisms promoting the diversification of subproject types. The lessons from the SILD TF point to the need to expand the typology of subprojects through stronger outreach by the ATDF. Unless the ‘rules of the game’ under Component 2 of the main SILD Project are adjusted, it can be expected that subprojects that procure utility and agricultural equipment will continue to be the most attractive for municipalities that participate in the project for the first time. In this connection a special focus should be on efficiency and sustainability, in particular, the safekeeping of the equipment owned by communities and its efficient management. This could be assisted by large-scale implementation of an efficient management system for the operators of equipment (municipal, not-for-profit organizations/cooperatives) that is already being used in the five enlarged communities supported by the TF.

42. Strengthening the tangible and measurable involvement of all local residents in the decision- making processes in their communities can further increase project impact. Related to the previous lesson (see paragraph 41), communities need to be involved in the decision making to make the projects useful and relevant. Diverse representation from communities should be ensured so that the decision on subprojects would not be taken by the administrative power. The choice of interventions is a main task for the community participation. Evaluation work showed that the implemented projects largely corresponded to the needs of the communities. However, the findings revealed new problems, urgent concerns, which also required attention. Future intervention should not solely rely on the community council members to identify problems in the entire consolidated community (which may leave out some existing serious concerns) but should ensure that representative surveys, discussions, and participatory research approaches are conducted/applied to involve as many residents as possible.

Technical Lessons

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43. The pilot’s focus on the purchase of equipment for providing services in agriculture or communal services may show that there is a need to identify and fill in gaps in the private sector side. On many occasions, the project supported communities (municipalities) to purchase equipment for agriculture or communal activities. In some cases (for example, agriculture), equipment was rented out at subsidized prices to small farmers. In other cases (for example, waste collection, street repair, or snow cleaning), the community administrations used the equipment to directly provide a needed service. This may be an indication that there is no viable mechanism in Armenia to support the private sector, which could partially or in full provide such services. The current approach may not be sustainable in the long term, and ways should be sought to develop these capacities in the private sector. The municipality can remain a holder of some equipment and capacity to support specific vulnerable groups, with proper targeting.

44. In some case, communities received equipment that did not fit their needs—this was usually because of improperly done or vague technical specifications (for example, purchase of a garbage truck that was not compatible with the garbage bins that were used in the community). In the future, communities should receive some level of technical advice either from the implementing agency, or from private consultants, when putting together the technical specifications. Involving implementing agency and World Bank procurement specialists at an early stage is also important. . .

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ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS

A. RESULTS INDICATORS

A.1 PDO Indicators

Objective/Outcome: To improve capacities of municipalities in Southern Armenia to provide sustainable public infrastructure and services to their citizens. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Number of supported Number 0.00 5.00 5.00 5.00 subprojects in merged/new municipalities identified 01-Jun-2016 31-Dec-2018 01-Apr-2019 19-Dec-2018 through participatory decision- making.

Comments (achievements against targets): Fully achieved.

Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion

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Number of temporary and Number 0.00 50.00 50.00 59.00 permanent jobs created. 01-Jun-2016 31-Dec-2018 01-Apr-2019 19-Dec-2018

Comments (achievements against targets): Fully achieved/surpassed. Temporary jobs – 3,470 man-days; permanent jobs – 59.

Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Level of citizen satisfaction with Percentage 43.00 43.00 43.00 52.70 public services in targeted areas related to supported 06-Oct-2017 31-Dec-2018 01-Apr-2019 26-Apr-2019 subprojects, including among women.

Level of citizen satisfaction Percentage 32.00 32.00 32.00 51.60 with public services in targeted areas related to 06-Oct-2017 31-Dec-2018 01-Apr-2019 26-Apr-2019 supported subprojects among women

Comments (achievements against targets): Surpassed. The Project Paper shows an 80% baseline and 80% target, which were tentatively put before the conducting of the Baseline beneficiary assessment. The ICR uses the baseline specifically developed for this project by the Baseline assessment, after the Project Paper had been drafted. The ICR preserves the logic of "target sustains the baseline", used by the Project Paper.

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A.2 Intermediate Results Indicators

Component: Component 1, Capital Investments for Local Development and Public Service Provision and Capacity Building (US$2.4 million)

Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Increase in volume of capital Amount(USD) 0.00 2000000.00 2000000.00 2507705.00 investments into improvement of municipal services in 01-Jun-2016 31-Dec-2018 01-Apr-2019 19-Dec-2018 targeted municipalities

Comments (achievements against targets): USD2,427,990 of final amount were grant proceeds.

Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Number of Marz authorities Number 0.00 5.00 5.00 5.00 trained 01-Jun-2016 31-Dec-2018 01-Apr-2019 19-Dec-2018

Comments (achievements against targets): Fully achieved.

Indicator Name Unit of Baseline Original Target Formally Revised Actual Achieved at

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Measure Target Completion Number of experts working Number 0.00 5.00 5.00 8.00 with communities 01-Jun-2016 31-Dec-2018 01-Apr-2019 19-Dec-2018

Comments (achievements against targets): Surpassed.

Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Number of subproject Number 0.00 7.00 5.00 5.00 proposals received 01-Jun-2016 31-Dec-2018 01-Apr-2019 19-Dec-2018

Comments (achievements against targets): Achieved.

Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Percentage of community Percentage 0.00 5.00 5.00 5.90 funding mobilized 01-Jun-2016 31-Dec-2018 01-Apr-2019 31-Dec-2018

Comments (achievements against targets):

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Fully achieved. Calculated as average of the separate percentage contributions by each participating community.

Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Direct project beneficiaries Number 0.00 30000.00 30000.00 27015.00

01-Jun-2016 31-Dec-2018 01-Apr-2019 31-Dec-2018

Female beneficiaries Number 0.00 13000.00 13000.00 13088.00

01-Jun-2016 31-Dec-2018 01-Apr-2019 31-Dec-2018

Comments (achievements against targets): Substantially achieved (total population of all communities is 32,232 people).

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A. ORGANIZATION OF THE ASSESSMENT OF THE PDO

Objective/Outcome 1: to improve capacities of municipalities in Southern Armenia to provide sustainable public infrastructure and services to their citizens 1. Number of supported subprojects in merged or new municipalities from the list of basic infrastructure identified through participatory decision making Outcome Indicators 2. Increase in level of beneficiary satisfaction with public services and infrastructure in targeted areas related to supported subprojects, including among women 3. Number of temporary and permanent jobs created 1. Increase in volume of capital investments into improvement of municipal services in targeted municipalities 2. Number of Marz authorities trained 3. Number of experts working with communities Intermediate Results Indicators 4. Number of subproject proposals received 5. Percentage of community funding mobilized 6. Direct project beneficiaries 7. Female beneficiaries 1. Subproject ‘Formation of supporting environment for farms/households and expansion of service delivery system on Meghri enlarged community’ 2. Subproject ‘Organization of road maintenance service, waste management, intra-community transportation, and maintenance of agricultural machinery and establishment of new service delivery system in Tegh enlarged community, Syunik Marz’ Key Outputs by Component 3. Subproject ‘Acquisition of grain combine harvesters for the Gorayk enlarged community in (linked to the achievement of the Syunik Region’ Objective/Outcome 1) 4. Subproject ‘Maintenance intra-community roads, improvement of municipal services quality, technical upgrade of transportation system and supporting of agricultural sector in Zaritap enlarged community, Vayots Dzor Marz’ 5. Subproject ‘Technical equipping of utility services and agricultural sector support for enlarged community of Jermuk, Vayots Dzor’

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. ANNEX 2. PROJECT COST BY COMPONENT

Components Amount at Approval Actual at Project Percentage of (US$, millions) Closing (US$, Approval millions) Component 1. Capital Investments for Local 2.43 2.43 100 Development and Public Service Provision and Capacity Building Total 2.43 2.43 100

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ANNEX 3. RECIPIENT COMMENTS

IMPLEMENTATION COMPLETION REPORT ON THE GRANT PROVIDED by SWISS AGENCY FOR DEVELOPMENT AND COOPERATION IN THE AMOUNT OF US$2.43 MILLION EQUIVALENT TO THE REPUBLIC OF ARMENIA FOR A

SOCIAL INVESTMENT AND LOCAL DEVELOPMENT TRUST FUND

Borrower’s Contribution to ICR December 2018 I. Introduction

The Armenia Development Strategy for 2014–2025 aims to overcome territorial development disparities mainly, ensure uniform territorial development, and implement targeted territorial development policies as midterm and long-term priorities. The objective of targeted territorial development programs is to ensure accelerated economic development for the most lagged behind and enable them to approach the average economic development level of the country.

The Ministry of Territorial Administration and Development (MTAD) has also prioritized overcoming territorial disparities in its 2011 Concept for Territorial Development. This concept emphasizes the creation, rehabilitation, and development of economic infrastructure and an increase in the quality and accessibility of public social services (such as educational, health, cultural, and environmental) at the territorial or community level.

For almost 20 years, the GOA has addressed territorial inequalities by implementing small-size investment projects, known as microprojects, to support social infrastructure at the community level through the Armenian Territorial Development Fund (ATDF). The ATDF (formerly known as the Armenian Social Investment Fund [ASIF]) was created in 1996 with the World Bank’s technical and financial assistance, to provide immediate support to the rehabilitation of local infrastructure and to enhance the living conditions of the poorest using a demand-driven approach and direct community involvement.

In 2014, the GOA approved the ATDF’s Evolution Strategy, which envisages an evolution of the ATDF to support the Armenia Development Strategy objectives and address the growing territorial disparities. As the result, due to the grant provided by the Swiss Agency for Development and Cooperation (SDC) the ATDF made a transition from the organization implementing mostly social infrastructure microprojects to the one involved in the implementation of the on territorial development projects in consolidated communities (multi-residential settlements). Besides, activity directions and financial resources of the ATDF’s were diversified. Instead of only one WB financed project, currently there are few projects under Fund’s implementation: two projects under WB loan, one project under Asian Development Bank’s loan, two projects under USAID and SDC grants, two projects under State Budget financing, and one project is expected under European Bank of Reconstruction and Development.

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A grant from the SDC provided additional resources equal to US$2.43 million to complement the Social Investment and Local Development (SILD) Project by piloting new innovative intercommunity projects in two regions (namely Syunik and Vayots Dzor) targeted by the SDC’s larger “Improvement of the Local Self- Governance System in Armenia” Program. It is being processed as a separate project, rather than as an additional financing, as it is the part of the donor’s (SDC’s) larger engagement in Armenia aimed at strengthening accountability, effectiveness, and efficiency of the local self-government system and thus has objectives specifically aligned to the SDC’s parent program. This SILD TF Project has one Component:

Component 1: Capital Investments for Local Development and Public Service Provision and Capacity Building (US$2.4 million). This component of the project has facilitated tangible improvements in local development and sustainable public service provision through the implementation of subprojects at the intercommunity level.

The SDC Grant Program started in the beginning of 2017, the main stage will be completed on December 31, 2018.

A brief description of the projects implemented in the enlarged communities of Syunik and Vayots Dzor marzes is provided below.

1. Subproject S-01 "Agricultural Development and Infrastructure Improvement in Gorayk Community, Syunik Region".

The total cost of the subproject is 84,509,610 AMD, of which 16,648,708 AMD is the community's monetary contribution (or 19.7% of the subproject cost).

The components of the subproject are:

• Component 1. Increase of efficiency of agricultural works;

• Component 2. Ensuring infrastructure for technical maintenance.

The following settlements are included into Gorayk consolidated community: Gorayk, Tsghuk, Sarnakunq, and Spandaryan villages. Total population of the Gorayk enlarged community is 1,882, of which 878 (or 46.6%) are women. The proposal was suggested during the community general meeting with participation of 64 members (or 11.4% of total population), of which 21 (or 32.8%) were women.

Gorayk is a small, high mountainous, agricultural community whose needs and development potential are linked to the agriculture development. The subproject is cost-effective (1.25), providing household income growth (VCMI = 1.93). Experts’ commission rated this subproject positively.

Due to the agricultural machinery provided under the subproject, cultivation of cereals has been promoted in rural areas, and the cultivated areas have been expanded. The machinery provided is managed by the cooperative which made additional out-of-budget allocation into the community’s budget. new job places have been created. The promotion of agriculture has led to the growth of the population's income and the improvement of the socio-economic situation of the community.

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As a result of the project, 4 permanent jobs and 320 temporary men*days jobs were created as a result of the project implementation. Four permanent jobs included։ Component 1 - 3 employees (1 combine operator, 1 tractor operator and 1 mechanic-locksmith); and 1 guard for Component 2, all for men. As for 320 temporary men*days, it related to the construction works for infrastructure of technical maintenance11.

Supply of machinery and equipment: Table below summarizes the data on machinery provided to the Gorayk as of Dec 13, 2018 (item in red isn’t provided yet).

S-01- Gorayk consolidated community Item N Cost, USD paid Delivery Date nitrogen plough 1 $ 4,555 18-Jun-18 combine 1 $ 61,173 27-Jun-18 harrow Ducat-4 DL-4 1 $ 11,235 18-Jul-18 wheel tractor 1 $ 49,103 18-Jul -18 attachment grass clamp- bundle maker * 1 $ 8,722

2. Subproject S-02 "Infrastructure Development in Meghri Community, Syunik Region".

The total cost of the subproject is 384,823,649 AMD, of which 9,479,149 AMD is the community's monetary contribution (or 2.46% of the subproject cost).

The components of the subproject are:

• Component 1. Introduction of public transport service system in Meghri community;

• Component 2. Introduction of inter-community road cleaning system;

• Component 3. Improvement of garbage collection system services in Meghri community and involvement of 11 rural communities into it;

• Component 4. Asphalting of an alternative road to Meghri city.

The settlements of Meghri enlarged community are: Meghri and Agarak cities, and villages of Alvank, Lehvaz, Karchevan, Litchq, Gudemnis, Kuris, Nrnadzor, Shvanidzor, Vahravar, Vardanidzor and Tashtun. Total population of the Meghri enlarged community is 11,604, of which 5,833 (or 50.3%) are women. The proposal was suggested in 10 community general meetings with participation of 1,955 members (or 18.6% of total population), of which 1,029 (or 52.6%) were women.

Meghri enlarged community is distinguished by the fact that though only 2 out of 13 settlements are urban, in all settlements the way of life is urban. It is a well-developed horticultural community. Residents need good intra-community roads to go to their gardens and get back to their home that prevents

11 This indicator is a rough estimate for job creation within the framework of the program. It relies on the cost of a construction, the average share of monthly salary in the contract, and the average daily "net" salary in construction. The average monthly salary of ASIF contracts is 22 percent. According to the Ministry of Urban Development, the average daily salary (including social, income taxes, etc.) is currently 8500 AMD.

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migration of their families from villages to Meghri or Agarak. The subproject addressed the problem of community garbage collection, road improvement issues, establishment of the public transport system and the service issue. The subproject provided household income growth (VCMI = 0.87); it has a positive impact on Meghri development potential. It was assessed positively by the Experts’ Commission.

As a result of the subproject implementation, a steady passenger transportation system has been established in Meghri, as well as a system of inter-community road maintenance. Improvement of the garbage disposal system's work has positively affected the community's sanitary and hygienic conditions. The community has 850m-long asphalt-paved road section of economic significance, which bypasses the highway and makes connections easier.

Also 16 permanent jobs (9 drivers, 6 workers and 1 technician, all for men) and 2,250 temporary men*days jobs were created due to subproject.

Supply of machinery and equipment: Table below summarizes the data on machinery provided to the Meghri as of Dec 13, 2018 (items in red aren’t provided yet).

S-02- Meghri consolidated community Item N Cost, USD Paid Delivery Date minibus 3 $ 114,200 24-Sep-18 multifunctional excavator 2 $ 152,413 5-Nov-18 Truck dumper machine 1 $ 43,966 9-Nov-18 garbage truck 2 $ 77,099 12-Nov-18 garbage truck 1 $ 44,943 26-Nov-18 Garbage bin plastic 160 $ 8,575 28-Nov-18 Garbage bin metallic * 148 minibus 12-seat * 1

3. Subproject S-03 “Technical re-equipment of the utility services and support to agriculture of Jermuk enlarged community, Vayots Dzor Marz”,

The total cost of the subproject is 304,275,000 AMD, of which 7,606,875 AMD is the community's monetary contribution (or 2.5% of the subproject cost).

The components of the subproject are:

• Improvement of garbage collection, sanitary cleaning and utility services of the Jermuk enlarged community through technical upgrading;

• Improvement of inter-community road maintenance quality and provision of inter- community transport connection;

• Promoting horticulture in the community.

The settlements of Jermuk enlarged community are: Jermuk city, and villages of Kechut, Gndevaz, Herher and Karmrashen. Total population of the Jermuk enlarged community is 9,700, of which 4,760 (or 49.1%)

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are women. The proposal was suggested in 5 community general meetings with participation of 416 members (or 6% of total population), of which 188 (or 45.2%) were women.

Jermuk is a resort town and attractive for tourists. It is very important for them to have good roads, possibility to communicate with nearby settlements and proper garbage disposal. The subproject stems from their needs and development opportunities. It is cost-effective (with coefficient 1.28), provides household income growth (VCMI = 1.18), and has a positive impact on development potential. It was assessed positively by the Experts’ Commission.

As a result of the project, the community has clean and well-maintained streets, organized waste disposal, as a result of which a number of environmental issues have been solved. Intra-community roads are being improved and maintained, as well as inter-city transport connection problems have been solved thanks to operation of the machinery provided. Taking into account the severe climatic conditions of Jermuk community, provision of snow removal equipment was crucial. Provided agricultural technique has contributed to the development of horticulture in rural communities and the expansion of cultivated lands. The Jermuk community budget has been supplemented with additional source of income, new jobs have been created, and agriculture and horticulture development have contributed to the growth of the population's income, which has improved the socio-economic situation of the community.

There are 10 permanent jobs (10 drivers, all for men) created as a result of the project implementation.

Supply of machinery and equipment: Table below summarizes the data on machinery provided to the Jermuk as of Dec 13, 2018 (items in red aren’t provided yet).

S-03- Jermuk consolidated community Item N Cost, USD Paid Delivery Date self-propelled grass 1 $ 65,482 2-Feb-18 dump truck 1 $ 45,787 2-Feb-18 snow-clearing self-propelled 1 $ 14,535 2-Feb-18 multifunctional excavator 1 $ 78,122 14-Feb-18 attachment grass clamp-bundle maker 1 $ 10,511 27-Feb-18 auto grade 1 $ 56,826 7-Mar-18 garbage truck 1 $ 45,911 12-Mar-18 caterpillar tractor rotor snowflakes 1 $ 67,676 30-Mar-18 crawler tractor 1 $ 54,115 30-Mar-18 garbage truck 1 $ 37,203 23-Apr-18 grassy finger-segment 1 $ 1,284 15-Jun-18 wheel tractor D (one is a compact burst) 2 $ 66,665 15-Jun-18 suspended sprayer 2 $ 7,039 15-Jun-18 moto block grassy 2 $ 12,718 14-Sep-18 garbage bin plastic 400 $ 21,438 28-Nov-18 minibus 12-seat 1 attachment grass clamp- bundle maker 1

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4. Subproject S-04 "Road Maintenance and Agricultural Work’s Support, Road Network Development Project for the Zaritap Community, Vayots Dzor”

The total cost of the subproject is 135,520,000 AMD, of which 3,388,000 AMD is the community's monetary contribution (or 2.5% of the subproject cost).

The components of the subproject are:

• Intra-community roads maintenance and agricultural support,

• Development of intra-community transport network.

The settlements of Zaritap enlarged community are: Zaritap, Gomk, Artavan, Saravan, Martiros, Sers, Bardzuni, Khndzorut, and Nor-Aznaberd villages.

Total population of the Zaritap enlarged community is 4,350, of which 1,700 (or 39.1%) are women. The proposal was suggested in 9 community general meetings with participation of 471 members (or 14.5% of total population), of which 132 (or 28%) were women.

Zaritap is an agricultural community, a sprawling community, with 58 km of border with Nakhijevan (Azerbaijan). It has a large network of intercommunity roads and the subproject is connected with the needs of the community. The perspective of community development is seen in the agriculture development. The subproject is cost-effective (with coefficient 1), providing household income growth (VCMI = 3.78). Experts’ commission rated this subproject positively.

With the use of machinery provided in frames of the project, the intercommunity roads have been improved and maintained, transportation problems have been solved. Provided agricultural technique has contributed to the development of horticulture in rural communities and the expansion of cultivated lands. The community budget has been supplemented with additional sources of income, new jobs have been created, and the promotion of agriculture and horticulture has contributed to the growth of the population's income, improving the socio-economic situation of the community.

As a result of the project implementation 7 permanent jobs (6 drivers and 1 technician, all for men) were created.

Supply of machinery and equipment: Table below summarizes the data on machinery provided to the Zaritap as of Dec 13, 2018.

S-04- Zaritap consolidated community Item N Cost, USD Paid Delivery Date grain combine 1 $ 61,276 21-Dec-17 wheel tractor C compartment, Belarus -422.1 2 $ 27,834 21-Dec-17 nitrogen plough 1 $ 4,557 19-Jan-18 minibus-2 1 $ 18,100 19-Jan-18 tractor hanging rake 2 $ 4,561 2-Feb-18 wheel tractor with a snapping snowfall 2 $ 38,147 2-Feb-18 wheel tractor B compartment 2 $ 23,220 2-Feb-18

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Item N Cost, USD Paid Delivery Date multifunctional excavator 1 $ 78,062 14-Feb-18 attachment grass clamp- bundle maker 1 $ 10,511 27-Feb-18 attachment grass 2 $ 2,076 18-Sep-18

5. Subproject S-05 “Social-Economic Development of Tegh enlarged community, Syunik Marz, through improvement of Communal Services, Creating Transportation System and Creation of the Agricultural Machinery Service System"

The total cost of the subproject is 271,886,954 AMD, of which the community's monetary contribution is 6,772,424 drams (or 2.49% of the subproject cost).

The components of the subproject are:

• Component 1. Road Maintenance,

• Component 2. Organization of Garbage Disposal,

• Component 3. Organization of intra-community transport communication,

• Component 4. Maintenance of agricultural machinery,

• Component 5. Creating a new service delivery system, creating a CNCO.

The settlements of Tegh enlarged community are: Tegh, Aravus, Kornidzor, Karashen, Khnatsakh, Vaghatur and Khoznavar villages.

Total population of the Tegh enlarged community is 5,715, of which 2,820 (or 49.3%) are women. The proposal was suggested in 7 community general meetings with participation of 660 members (or 11.5% of total population), of which 185 (or 28%) were women.

Tegh is a farming community. The perspective of community development is related to agriculture development. It has a network of inter-community roads. The subproject stems from the needs of the community. Besides, instead of agricultural equipment the community would like to have its service point. It allows to organize the repair of the equipment in the area instead of reaching the outskirts of Yerevan. The program is cost-effective (with coefficient 1.37), providing household income growth (VCMI = 1.19). It has a positive impact on development potential. It was assessed positively by the Experts’ Commission.

As a result of the subproject implementation several systems have been established in the community, such as roads’ cleaning, garbage disposal, sustainable passenger transportation, and agricultural machinery maintenance. A new service provision system has been established in the community- CNCO (Community non-commercial organization) equipped with qualified staff which will organize maintenance and operation of the equipment provided. The project contributed to the creation of new jobs, regulation of agricultural activities, rapid and high-quality maintenance of agricultural machinery, increased budget revenues and income of community members, as well as improvement of the socio-economic situation of the community.

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As a result of the project implementation 18 permanent jobs and 900 temporary men*days jobs were created. Permanent jobs are: 9 drivers, 2 technicians, 1 worker, director of CNCO, accountant, cleaner, storage manager, technician, and guard).

Supply of machinery and equipment: Table below summarizes the data on machinery provided to the Tegh as of Dec 13, 2018 (items in red aren’t provided yet).

S-05- Tegh consolidated community Item N Cost, USD Delivery Paid Date auto grade GS-10-07 1 $ 57,305 14-Jun-18 self-propelled hammer 1 $ 65,876 14-Jun-18 minibus 1 $ 18,081 24-Jul-18 minibus 1 $ 17,037 24-Jul-18 accident repairing mobile manufacturer 1 $ 31,973 14-Sep-18 manipulator crane 1 $ 39,239 14-Sep-18 truck dumper machine 1 $ 42,656 24-Sep-18 garbage truck 1 $ 53,916 4-Oct-18 multifunctional excavator 1 $ 76,779 22-Oct-18 testing facility for diagnostic and tune-up purposes of high-pressure fuel 1 $ 22,306 22-Oct-18 pumps garbage bin metallic 35 $ 6,125 10-Dec-18

II. Assessment of the Project’s objectives, structure, implementation and practical experience

1. The main objectives of the program:

The project is strongly aligned with the Bank’s twin goals, such as supporting elements of the Armenia Development Strategy that focus on eliminating extreme poverty, and mitigating poverty of the poorest 40 percent of the population, boosting their prosperity, and reducing territorial development disparities. This includes the rehabilitation and creation of social infrastructure aimed at improving social welfare in poor and vulnerable communities, mitigating territorial disparities through the implementation of projects in these vulnerable communities and areas, and strengthening efficiency in community governance.

The development goal of the project was to improve the capacities of selected communities in south Armenia to enable them to provide their residents with public infrastructures and newly developed and improved public services.

All the objectives have been fully implemented.

2. The Project Structure

The Project had one component:

Component 1: Capital Investments for Local Development and Public Service Provision and Capacity Building (US$2.4 million). This component of the project has facilitated tangible improvements in local

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development and sustainable public service provision through the implementation of subprojects at the intercommunity level.

The project structure is estimated to be satisfactory.

3. Project implementation and practical experience

❖ Community Investment:

Five micro-project proposals were received from the urban and rural communities of Vayots Dzor and Syunik marzes within duration of the Project, which all were implemented.

A brief summary of the completed micro-projects is presented below in the table.

Description Totals / Subprojects Ave % % in totals Code S-01 S-02 S-03 S-04 S-05 Consolidated 5 Gorayk Meghri Jermuk Zaritap Tegh Communities Settlements 38 4 13 5 9 7 Cost of 1,181,015,213 84,509,610 384,823,649 304,275,000 135,520,000 271,886,954 project, AMD Components 16 2 4 3 2 5 Contribution, 43,895,156 16,648,708 9,479,149 7,606,875 3,388,000 6,772,424 AMD % of 3.7% 19.7% 2.5% 2.5% 2.5% 2.5% 5.9% contribution Population (as 32,239 870 11,604 9,700 4,350 5,715 per Applications) of which 15,327 214 5,833 4,760 1,700 2,820 women % of women 47.5% 24.6% 50.3% 49.1% 39.1% 49.3% 42.5% in population Direct users 27,015 562 10,507 6,981 3,250 5,715 of which 13,088 138 5,300 3,430 1,400 2,820 women % of women 48.4% 24.6% 50.4% 49.1% 43.1% 49.3% 43.3% in direct users Direct users 83.8% 64.6% 90.5% 72.0% 74.7% 100.0% 80.4% /population N of CGMs 32 1 10 5 9 7 N of 3,566 64 1955 416 471 660 Participants of which 1,555 21 1029 188 132 185 women

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Description Totals / Subprojects Ave % % in totals of which 43.6% 32.8% 52.6% 45.2% 28.0% 28.0% 37.3% women in CGMs % of 11.1% 11.4% 18.6% 6.0% 14.5% 11.5% 12.4% population participated in CGMs Perm work 59 8 16 10 7 18 places created Temp work 3,470 320 2,250 900 places created (men*day in construction) Temp work 3,894 458 2578 858 places created (actual

Nine contracts (51 lots) were concluded with total value of about 933 million AMD for purchase of utility machinery, self-propelled agricultural machinery and agricultural equipment (59 items) and 743 garbage bins (both metallic and plastic bins) for the communities involved in the Project.

Grievance redress mechanisms (GRM): GRM were in place during the entire project implementation . GRM focal points at the local level were selected in the communities during the first consultation meeting and the selection was communicated to the community members during the next consultation meetings and through posting of corresponding announcement on the information desk at Community administrative office. ATDF billboards and booklets including hot line number, e-mail address and web- page were delivered to the all settlements and posted in public visible places. No grievances from the communities were registered during project implementation.

The strengths of the project:

1. Building Capacity of the Communities. The project was aimed at building capacity of the enlarged communities on design and implementation of the development programs.

2. Activities aimed at investment sustainability. The sustainability of investments is ensured by establishing a multifunctional utility enterprise and correctly planning its legal, social, and organizational aspects. For this purpose, the hired consultant developed and submitted the methodological manual.

The results of the implemented work were presented at the “Consulting on Community Infrastructure and Provided Services Management" seminar held on May 17, 2018 in Jermuk. The workshop was attended by representatives of CNCO (Community non-commercial organization), Cooperatives, and Community Council Officers of consolidated communities, SDC, WB, USAID and ATDF employees.

After the seminar practical consultations were provided regarding introduction of working tools as well as guidance for further works in all five communities, which would be of continuous nature. Besides, the work has been implemented for introduction/connection of effective management systems in the

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community databases (MIS) through multifunctional enterprises (SNCO, cooperative, municipal community utility department).

In other words, a new product - an effective management system - has been developed, which is applicable not only for the communities covered by the 2nd component of the SILD, but for any community.

The weaknesses of the project

Generated proposals of subprojects have not been accepted on a competitive basis, as 13 out of the first 18 consolidated communities have been targeted by USAID, and 5 - within the framework of the SILD RETF (SDC Grant) Programs.

III. Assessment of Bank’s, Grantee’s and ATDF’s performance

❖ Bank’s Performance

In general, the Bank's performance in the preparation and supervision of the Project is assessed as satisfactory. The main goal of the project was well-defined, and the Project components were well-suited to this goal and the Government's reforms. During the implementation of the project, the Bank's team consisted of professionals and dedicated to continuing support in all issues related to implementation and has been working with ATDF staff and government officials effectively.

❖ Grantee’s Performance

The performance of the Grantee is evaluated as satisfactory. The Government has consistently taken the interest and commitment to ATDF.

❖ ATDF’s Performance

The ATDF’s Executive Office has been the main coordinating link for the Project implementation and has been working hard with all aspects of Project Implementation. The ATDF’s staff has been greatly encouraged by the Project, has been committed to providing community participation in the implementation of the projects, and has made the best cooperation with the SDC.

Lessons learnt During the 1st week of December SWOT analysis of subprojects was conducted with the participation of community leaders and CNCOs in 5 communities, with the support of ATDF specialists. Further, a workshop on the experience and results of the SDC Grant Program was held on December 13, during which the results of the SWOT analysis were summarized. These results were sent to the seminar participants, expecting their response within a week to finalize results and lessons learnt.

Particularly, participants concluded that:

• Warranty service is costly, and its warranty period should be reduced;

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• There is a need for involvement of sectoral specialists in subproject initiating groups;

• Appraisal period is long, and appraisal process should be reviewed;

• Economic component of subprojects should be strengthened.

At the beginning of next year, discussions will be held on the participation of representatives of donors, MTAD and ATDF, and the lessons learned from the Project implementation will be formulated.

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ANNEX 4. SUMMARY OF THE END LINE BENEFICIARY ASSESSMENT

End line Assessment of Citizen Satisfaction with Public Services and Infrastructure in Five Consolidated Communities of Armenia

The Citizen Satisfaction Assessment Report has been produced by UNDP Armenia with funding from the Swiss Agency for Development and Cooperation (SDC), within the framework of the “Local Governance Programme in Armenia”. The views expressed in this Report are those of the author(s) and do not necessarily represent views of the SDC and UNDP.

Executive Summary

This report presents the End line assessment (EA) data on citizen satisfaction with public services and infrastructure in five consolidated communities of Vayots Dzor and Syunik marzes of Armenia. In 2017- 2019, the Swiss Agency for Development and Cooperation (SDC) has supported the implementation of Community Investment Projects (CIP) in Gorayk, Jermuk, Meghri, Tegh and Zaritap consolidated communities. The development projects were supported in the framework of the Local Governance Program (LoGoPro) in Armenia in cooperation with the RA Ministry of Territorial Administration and Development (MTAD). Public services and infrastructure projects in five communities have been implemented by the Armenian Territorial Development Fund (ATDF).

In the period June-August 2017, prior to launching the improvement projects in consolidated communities, the UNDP Women in Local Democracy 2 project (WiLD 2) team has conducted a baseline assessment (BA) of citizen satisfaction with the existing services and infrastructure. The BA has been conducted with the purpose to exercise data prior to the intervention (implementation of projects). As the data for this End line report has been collected, the selected projects have been completed, while some were in progress. This assessment has been conducted to seek for data with the purpose of comparing it with BA results of 2017, to provide an understanding on whether the intervention has influenced any change. EA results in this report are discussed in a comparative to BA perspective.

This report presents data on citizen satisfaction, knowledge, perceptions and attitudes towards conditions of selected public services and infrastructure, including inter-settlement roads, public transportation, agricultural services and waste management. The research also assesses citizens’ knowledge on participation in local communities, issues of trust towards local officials and impact of CIPs. The assessment presents quantitative findings supported by qualitative data analysis. The EA was conducted in the period from March to April 2019. This BA was implemented by UNDP, fieldwork team (members of WiLD leadership program) under the supervision of project researcher.

Conclusion

The research presented in this report shows positive shift in a number of areas assessed in the framework of Baseline and End line assessments. The citizen satisfaction level with all services, including among women has been at 43%, according to baseline data. The EA registered a ten percent increased result for citizen overall satisfaction with services (52.7%). Along the positive shift however, findings point to unchanged results regarding selected indicators and communities, which did not register any progress in two years. The results of the BA assessment conducted in 2017 pointed to either missing or poor

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conditions of the most public services and infrastructure in five consolidated communities. The BA also indicated limited access to services and low levels of public trust towards LSGs. While access to selected services remains a concern, the situation seems improved regarding residents’ attitudes towards the importance of their voice in their community and increased levels of trust towards LSGs.

Jermuk community seems to remain problematic regarding low levels of citizen satisfaction with indicators assessed. The EA data makes Jermuk look different from other consolidated communities. The residents still complain about community's agricultural machinery renting cost, which is not different from cost of private providers. Low levels of trust and disbelief that citizen voice matters in their community are other distinguishing factors, which seemingly did not undergo any changes here since BA. The problem seems to stem from the detachment of urban from village communities. This generates low satisfaction and trust outcomes. The future work in this community should concentrate on closing this gap. In Zaritap community, the main problem is the lack of citizen knowledge on the safety of waste usage, its final destination and consequences. This has been and remains a concern for the most of communities considered in this research. Meghri seems to register as a success story among CIP-recipient communities. Most of the indicators have visibly improved. In Gorayk community the only project implemented was improvement of agricultural services. It will be fair to conclude that the project did not live to its purpose. The findings show that up to date, the community exercises a lack of necessary agricultural machinery, which leads to citizen dissatisfaction. In Tegh community, which has been the recipient of all four types of investment projects, a relative improvement is detected. Tegh residents seem to be using taxis and not complaining about the lack of public transportation, which they did not get to use. This is how, among others, the relatively improved assessment can be explained, which leads to the importance of, perhaps, reconsidering policies on identifying the needs for communities prior to intervention.

The majority of communities demonstrate drastically improved results regarding public trust towards LSGs and belief that the citizen voice matters in their community. Considering the changes in the political environment of Armenia, it is somewhat difficult to assign the overall positive attitudes to CIPs only. This means that positively influenced transformation may be the result of overall changes in the country.

Recommendations

This EA develops the following six recommendations for attention of and implementation by stakeholders, with the view towards any possible future intervention in communities. The recommendations should be considered by the following institutions and actors: MTAD, LSGs, ATDF, SDC, UNDP, international donors and civil society.

• Local residents' knowledge on waste management safety remains a concern in local communities. More activities are necessary to educate residents about waste usage and safety matters. The same issue has come up during BA, and it seems to persist. Residents’ knowledge and perceptions of waste management remain distorted and necessitate future action. There is a need for both policy regulations and awareness campaigns aimed at better education on waste usage and safety measures. There is a need to build awareness on best waste management practices (separation, collection, dumping and utilization). There is neither a system – nor culture of waste proper usage in considered consolidated communities.

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• There is a need for a tangible (and measurable) involvement of local residents into decision making processes in their communities. Particularly, in cases where the intention is to identify the type of need for intervention. BA and EA results show that the projects implemented corresponded to the needs of the communities. At the same time, the findings reveal new problems, urgent concerns, which may have been overlooked. Future intervention should not solely rely on community council members to identify problems in the entire consolidated community, which risks leaving out some existing serious concerns. It is recommended that a representative survey, discussions and participatory research approaches are conducted/applied involving residents of communities prior to any intervention. Communities necessitate an improved attention towards how to prioritize issues, which will ultimately necessitate residents’ representative involvement

• Among the top priority concerns, citizens in five consolidated communities point to the problem of water, including loss of drinking water, lack of irrigation and sewerage system conditions. It is recommended that future intervention projects consider the issue of water as potential and necessary area of involvement necessitating prior assessment and support for local communities in Armenia.

• Now, when the assessments are drawn to a close, while still selected CIPs are in progress of implementation, monitoring of all services becomes beyond preferable, but necessary. It is recommended that local residents, UNDP team or ATDF establish a body to monitor final stage of implementation of all services in communities, to be able to track if the projects lived up to their purpose, as initially designed.

• This research measured citizens’ perceptions towards potential impact of the projects implemented in communities. The overwhelming majority of respondents said the greatest impact has been social (including health and education sectors) as a result of public transportation improvement, and economic and social impact as a result of road infrastructure improvement. It would be useful to exercise a research designed specifically to measure impact of each of the community projects’ indicators on the selected areas, to be able to compare results against citizens’ understanding of reality.

• Targeting all stakeholders, it is highly recommended to design approaches aimed at continued women’s empowerment work in consolidated communities. Residents’ belief that the increased number of women in LSGs will register positive effect has been declined, which is concerning, especially in the times of “change” and hope for new practices and opportunities towards country development. Initiatives engaging more women should remain a highlight of activities, towards development of Armenian local communities and society at large.

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