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. Page 1 of 38 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 Page 2 of 38 The World Bank Social Investment and Local Development Trust Fund (P156378) 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 Page 3 of 38 The World Bank Social Investment and Local Development Trust Fund (P156378) 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. Page 4 of 38 The World Bank Social Investment and Local Development Trust Fund (P156378) 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