Document of The World Bank FOROFFICIAL USEONLY ReportNo: 35630-BA PROJECTAPPRAISAL DOCUMENT ONA PROPOSEDCREDIT INTHE AMOUNT OF SDR 10.4MILLION (US$15 MILLIONEQUIVALENT) TO BOSNIA AND HERZEGOVINA FORA LAND REGISTRATIONPROJECT March 28, 2006 Environmentallyand Socially SustainableDevelopmentSector Unit Southeast EuropeCountryUnit Europeand Central Asia Region This document has a restricted distribution and may be used by recipients only in the performanceo f their official duties. Its contents may not otherwise be disclosedwithout World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective March 1, 2006 Currency Unit = KM KM1.64 = US$1 US$1.45 = SDR 1 FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS ADA AustrianTechnical Cooperation Coordination Office BiH Bosnia and Herzegovina BP (World) Bank Practice CAS Country Assistance Strategy EC EuropeanCommission ECSSD Europe and Central Asia, Environmentally and Socially Sustainable Development Sector Department EMP Environmental Management Plan EU European Union FY Financial year FBiH Federation o f Bosnia and Herzegovina GA Administration for Geodetic and Property Affairs GTZ German Technical Assistance Agency (Deutsche Gesellschaft fur Technische Zusammenarbeit) HJPC HighJudicial andProsecutorialCouncil ICB International Competitive Bidding IDA InternationalDevelopment Association I T Information Technology KM Convertible Marks LRU LandRegistration Unit (within the Entitylevel MOJ) M O F Ministry ofFinance MOJ Ministry o f Justice MTDS MediumTerm Development Strategy N C L A National Board For Land Administration OD Operational Directive OP Operational Policy OPN Operational Policy Note RS Republic Srpska RVP Regional Vice-president Sida Swedish International Development Agency TA Technical Assistance UNHCR UnitedNations HighCommission for Refugees USAID UnitedStates Agency for International Development Vice President: Shigeo Katsu Country ManagedDirector: Orsalia Kalantzopolous Sector Manager: Marjory-Anne Bromhead Task Team Leader: Gavin P. Adlington BOSNIA-HERZEGOVINA Land RegistrationProject CONTENTS Page A. STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 1. Country and sector issues.................................................................................................... 1 2. Rationale for Bank involvement ......................................................................................... 2 3. Higher level objectives to which the project contributes .................................................... 2 B. PROJECT DESCRIPTION ................................................................................................. 3 1. Lendinginstrument ............................................................................................................. 3 2. Program Objectives and Phases .......................................................................................... 3 3. Project development objective and key indicators.............................................................. 4 4. Project components ............................................................................................................. 5 5. Lessons learned and reflected inthe project design............................................................ 6 6. Alternatives considered and reasons for rejection .............................................................. 6 C. IMPLEMENTATION .......................................................................................................... 7 1. Partnership arrangements (ifapplicable) ............................................................................ 7 2. Institutional and implementation arrangements.................................................................. 7 3. Monitoring and evaluation o f outcomes/results.................................................................. 9 4. Sustainability....................................................................................................................... . . . 9 5. Critical risks and possible controversial aspects............................................................... 10 6. Loadcredit conditions and covenants ............................................................................... 11 D. APPRAISAL SUMMARY ................................................................................................. 12 1. Economic and financial analyses ...................................................................................... 12 2. Technical........................................................................................................................... 13 3. Fiduciary ........................................................................................................................... 14 4. Social................................................................................................................................. 14 5. Environment...................................................................................................................... 15 6. Safeguard policies............................................................................................................. 15 7. Policy Exceptions and Readiness...................................................................................... 16 Annex 1: Country and Sector or Program Background ......................................................... 17 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies .................21 Annex 3: Results Framework and Monitoring ........................................................................ 22 Annex 4: Detailed Project Description ...................................................................................... 32 Annex 5: Project Costs............................................................................................................... 43 Annex 6: Implementation Arrangements ................................................................................. 44 Annex 7: Financial Management and DisbursementArrangements ..................................... 48 Annex 8: Procurement Arrangements ...................................................................................... 57 Annex 9: Economic and Financial Analysis ............................................................................. 61 Annex 10: Safeguard Policy Issues ............................................................................................ 64 Annex 11: Project Preparation and Supervision ..................................................................... 66 Annex 12: Documents in the Project File ................................................................................. 68 Annex 13: Statement o f Loans and Credits .............................................................................. 69 Annex 14: Country at a Glance ................................................................................................. 71 Annex 15: Social and Institutional Issues ................................................................................. 73 MAP Bosnia and Herzegovina 34483 ....................................................................................... 78 A. STRATEGIC CONTEXT AND RATIONALE 1. Countryand sector issues Countrv background Bosnia and Herzegovina (BiH) has made considerable progress since the end o f the conflict in 1995. Nevertheless, the legacy o f conflict persists, particularly infragmented governance structures. Inaddition to State Authorities, there are two entities, the federation o fBosnia and Herzegovina (FBiH) and the Republika Srpska (RS), and a separate territory o f Brcko. The entities have separate administrative and legislative bodies and a considerable degree o f authority. The transition agenda remains incomplete. Despite reasonable growth over the past decade, the economy stands at only 70% o f its pre-war level, and the business environment i s not as investor friendly as it needs to be to attract the levels o f investment required for sustained levels o f economic growth. Some 50% o f the 4.1 million population are at or near the poverty level, and the lack o f employment opportunities i s a major factor limiting the resettlement o f refugees and internally displaced persons. Country strategy All levels o f governments are trying to encourage economic growth through providing a business friendly environment at local government level and they are trying to improve the quality o f government services and reduce corruption as part o f this drive to improve the economy. Economic growth i s highly dependant on the ability to occupy and use real estate for production, residence and as security for investment capital. It i s therefore imperative that a secure and publicly accepted means o f registering and protecting property rights and transactions with property i s inplace. Land administration issues Systems for the registration o f property rights inBiHhave been indisarray since World War I1 when many o f the records and documents relating to property were destroyed. The situation was made worse during 1992-1995 war when more records were lost and people were displaced, sometimes permanently, and the legal records often no longer match the occupation. The breakdown ininstitutional capacity and deterioration of land and property records that followed the conflicts has resulted in a situation that makes it very difficult to complete basic real estate transactions or to borrow money based on property as collateral. InBiH the taxes imposed during the socialist period discouraged people from registering changes in ownership and even where the LandBooks were maintained they are not up to date. Property development inurban areas i s restricted because o f inadequate urban planning documentation and the uncertainty caused by a real property restitution initiative, which has been proposedbut not yet detailed. Illegal constructions and encroachments onto public land have occurred and these often cannot be regularized because o f legal barriers or because the costs to regularize the property are beyond what the occupants are willing to pay. An informalproperty market has developed inmany places. Municipal efforts to deal with these issues are inadequate because the property records are unreliable and there i s an inadequate property tax system to help generate public revenues. I The Entity governments have realizedthe importance o f secure property tenure and efficient property markets and passed the law on Land Registry inbothEntitiesin2002 to underpinthe establishment o f a reliable registration system. GTZ has been assisting with the development o f a viable system and the country i s now inthe position to implement it nationwide. However, the impedimentsrelating to illegal development, inadequate urbanplanning andpermittingsystems, incomplete cadastre, etc. require greater analysis and the development o fpolicies, strategies and perhaps legislation for dealing with these impediments. The country i s inthe position that it i s imperative to implement the registration system as soon as possible, thereby providing immediate benefit to the estimated 85% o f the population that do have clear ownership rights, and working quickly to develop the program and understand the resources requiredfor correcting the other impedimentsto operation o f the land market. 2. Rationale for Bank involvement Readiness for Bank Support The legal and institutional framework has beenreviewed duringproject preparationand found to be adequate for implementing a registrationsystem. The long term and immediate goals are well considered and can be implemented as planned. There i s very strong support from the key counterparts at Entityand State level, i.e. the Ministries o f Justice, Urban Planning, Finance and the Geodetic Administrations. Value Addedby the World Bank The Bank is currently financing several similar projects inthe region, including Serbia, FYR Macedonia, Croatia, Slovenia, Bulgaria and Romania and therefore has considerable experience with this type o fproject. The Bank also brings awide regional and global experience with land administration projects and has developed good, effective relationships with State and Entity government and other donors involved inland administration. 3. Higher level objectives to which the project contributes The governments MediumTerm Development Strategy (MTDS), which i s mirrored inthe CAS, lays out three primary goals for the 2004 to 2007 period. (i) sustainable and balanced economic development; (ii) reduction o f poverty by one fifth; and (iii) accelerate European integration. to The MTDS and CAS also refer to addressing: corruption; improving government service - with probable downsizing in staff numbers; and helpingmunicipal government provide a business friendly environment and better social services. Eacho fthese issues is addressed to some extent through the project. Although a land registration project i s not specifically included inthe CAS, the recipient has expressed to bank management the priority placed on World Bank support to strengthenthe land registration system. Legal reforms supported by German and other development assistance now also provide for an opportunity that was not available at the CAS design stage. Giventhe importance o f a strong land registration systemand a functioning land market to encourage wider access to capital and broad based economic growth, Bank Management has agreed to submit this proposedoperation for Board approval. 2 B. PROJECT DESCRIPTION 1. Lendinginstrument A specific investment loan (SIL) is recommended as it i s better suitedto buildingeffective registration and cadastre systems, and for building capacity as i s needed inthis project. Support i s necessary inthis sector over the long haul and this i s difficult with most adjustment operations. Getting policy right i s only the beginning - completing the reform requires years o f detailed work and resolution o f numerous contentious issues which always arise when establishing a new system as fundamental as this. It i s only by being present through these years on a continuous basis that the Bank can effectively support such reform programs. Systemic change requires a long-term commitment and therefore, this project should be seen as the first phase o f a longer term program. 2. ProgramObjectivesand Phases The long term objective for BiH i s to facilitate economic development and good governance by having clear records for all real property, easily accessible to users through electronic media in an automated system, as well as having sound policies addressing related land administration and revenue generation issues. Economic development i s heavily reliant on allowing the commercial and industrial sectors to operate freely. The business community needs access to land and simple but secure procedures for developing property, obtaining credit and transactinginthe property market. The records system combined with related improvements would help to improve transparency in dealing with property, reduce corruption, and improve client service. All properties would be inthe formal sector and records inthe land registry and cadastre fully compatible. Real estate development and economically dynamic land use will be encouraged through more efficient land use planning and permitting procedures that are simpler and less expensive. Investment, often funded by credit advanced usingreal estate as collateral, would be more secure because there would be a guaranteed registration system that protects property rights and registers transactions quickly and inexpensively. The long term goal will require actions to: a) Establish a secure and efficient real estate registration system b) Complete the cadastre records for all property inBiH c) Increase the efficiency and reduce the costs o f systems for issuance o f land use and constructionpermits and update urban planning documentationto reflect the situation on the ground d) Regularize illegal developments and encroachments e) Finalize outstanding restitution claims from persons displaced during the war years and resolve the approach to be taken with respect to claims to property nationalized duringthe socialist period f ) Facilitate the landprivatization process and create more private land ownership as the foundation o f landmarkets g) Establish an adequate property tax system to help fund local government services 3 These long term goals cannot be achieved in one step and must be phased inover the coming decade. An Advisory and Coordination Board for Land Administration ("Advisory Board") has beenestablishedto facilitate achievement o f the long term goals and to provide advice and assistance inthe implementation o f projects by donors and lenders - includingthe Bank funded LandRegistrationProject. The objective o f the Land Registrationproject is to commence the first phase over a four year period. This will entail achievement o f goal `a' and developing the necessary strategies and procedures to commence achievement o f goals `byto `g'. It is possible to complete the establishment o fthe registration system (goal `a') duringthe project periodbecause a great deal o fpreliminary work has been done with the help o f GTZ using fhds from Germany, Austria and Sweden. The legal framework i s inplace, training o f staff i s well underway and an automated registration system has been developed and i s inthe process o f beinginstallednation-wide. The project canprovide the office refurbishments, equipment and further system development and training to implement a registration system any European country would be proud of. The completion o f the cadastre system requires substantial funds and, as yet, the full scope and cost o f the work i s not known. The legal framework for cadastre i s intransition and this affects the institutional arrangements for cadastre work, especially inthe FBiH.N e w procedures that are both sufficiently accurate yet economical need to be developed- especially as the information systems required are complex and not yet designed. Other long-term goals described above (c-g) require further analysis to understand the scope o f the problems and to develop methodologies and the regulatory framework for dealing with them. The Land Registration Project, as the first phase o f the long-term program, would concentrate on providing the registration system, and also include policy analysis, strategy, and regulatory development work on the other goals. The initial focus on registration will enable those people and businesses that have, or can obtain, clear title to participate in all aspects o f the real estate market at reasonable cost and investment o f time. It i s estimated that 15% o f all properties will haveproblems because o f illegal development or encroachments, so even a conservative estimate shows that three quarters o f the population could benefit immediately from a more efficient registration system. Thisjustifies the approach o f rapidly dealing with goal `a' over the four year period o f the project, but ensuring that that the remaining goals are addressed insuch a way that a second phase can commence towards the end o f the project period. Ifgoals `byto `g' are successfully addressed in a policy, strategy and regulatory framework duringthe first three years o f the project, the fourth year of the project can include preparation o f a second intervention to address these goals. 3. Project development objective and key indicators The project objective i s to facilitate the orderly development o f transparent land markets through the registration o f real estate rights and complementary policies that enable transactions to be made with security and efficiency. The key target beneficiaries are those people and businesses that want security intheir land or real property holdings in order to invest (either labor or money) and require premises or loans to do so. The Project will help to remove the current impediments to investment that occur inurban areas so that investment i s not hampered and to provide clear title to people inrural areas so that they can securely invest intheir land . 4 The registration component o f the project will cover the entire country with the exceptiono f BrEko district. By the end o f the project the existing registration application backlogs will be eliminated and each o f the 47 Court Registration offices (19 inRS and 28 inFBiH)will be fully automated with all records stored indigital form and available for legitimate enquirers to rapidly and inexpensively obtain information about properties, their owners and the encumbrances on the property. Registrationo f any new transactionwill be completed within a day for 95% of cases. It i s anticipated that enquiries and, maybe even registration, will be able to be completed `on-line' inappropriate cases. With respect to the cadastre component o f the project, preliminary work in at least 8 project sites will have been completed to complete systematic registrationo f property and property rights. Data gathered inthe course o f the cadastre component o f the project will be used to analyze the extent o f the problems and resources required to address the issues of: illegal development and encroachment; privatization o f land; land use and development control; restitution; and real property taxation. The project outcomes will be measured through statistical analysis o frecords describing: the numbers o f transactions and information enquiries; income generated; time taken for registration; levels o f mortgages registered; and property values. Customer satisfaction will be measured through customer satisfaction surveys. 4. Project components The project will have three components, as follows: a. Registration. (US$7.376 million o f the Credit funds. 49%). This component will improve the transparency speed and accuracy o f registering transactions. . Activities include (i) develop service standards and a sustainable service runalong business lines with effective public communication; (ii) improvement o f the physical condition and the facilities o f the offices with a focus on customer reception and service, (iii) inclusion o f apartments within the registration system so that transactions with apartments can be more easily and securely made; and (iv) harmonizing cadastre records with land registry records together with data entry and system integration. b. Cadastre. (US$6.557 million o f the credit funds. 44%). This component will improve the efficiency and speed o f providing data on property units for clients wishing to register their property rights. Activities include (i) development o f service standards and business plans for cadastral agencies, and procedural manuals for agencies and other practitioners (ii) eightsites, systematicsurveying,mappingandsituationanalysis,(iii) in digitization o f cadastral maps, and (iv) development o f information communications technology including associated re-engineering o f associated information management. The systematic mapping and situation analysis will test procedures to enable subsequent registrationinthe land books for all properties in selected sites, and to understand the scope and nature o f issues that arise. The sites have been selected as those with active property markets, with backlogs o f registration and known to have significant problems inthe land administration sector. The surveys will take into considerationthe illegal structures, obsolescence o f urban planning documentation, poorly defined and undocumented property rights and other impediments to the development o f land and the operation o f the land market. Subcomponents include information system development and the provision o f digital cadastre data for linkage with the registration service and providing information to the public more efficiently. The data and analysis required for 5 developing the policy, strategy and recommendedregulatory interventions inthe land administration sector, which can be implemented in a second phase o f the project, will be gathered under the systematic surveying contracts envisaged under this component. c. Policy Development and Project Management. (US$1.066 million of the credit funds. 7%). This component will develop the strategies and draft legislation required for removing the current impediments to business development and economic growth that exist inthe land administration sector. Activities may include, inter alia: (i) analysis o f land use planning and construction permit issues; (ii) policies and procedures governing land privatization, and (iii)development o f policies for revenue generation that arise from property taxes, transaction taxes and other fees. Inthe last year o f the project a plan for the next phase o f the long term program will be developed. Project management and monitoring i s also included within this component. 5. Lessonslearnedand reflectedin the projectdesign Lessons learned from similar projects inthe Balkanregion show that it i s counter-productive to embark on systematic cadastral work before ensuring that the regulations and methodologies for undertaking the work are cost effective and sustainable. There are traditions inthe region that require large amounts o f data that may not be used and accuracies that are unnecessary for land markets to operate. It has taken years in some cases (such as Bulgaria) for geodesists to agree to simplify approaches. However, the land market can operate on a sporadic basis (i.e. dealingwith applications when customers request) without having a complete cadastre. The key i s to ensure that the registrationoffices can operate in an efficient customer friendly manner and the project i s designed to establish the registration system and undertake the necessary investigative work to deal with the other problems affecting the property market. Other projects inthe regionhave shown that, even ifregistration systems work properly, ifthe construction permitting and land use planning system i s not improved then little new development will occur. The primary problems concern illegal developments and planning rules that are restrictive or make construction permitting too onerous. Although by far the majority o f regular transactions (buying, selling, leasing, inheritance and mortgaging) can be dealt with through improved registration services, regularizingprior illegal developments and overcoming bureaucratic hurdles to new developments i s challenging and it has been seen from other projects inthe regionthat these issues mustbe addressediflandandproperty development is to be unhindered. Other issues constraining the property market include slow privatization o f land that i s still nominally held by the State even though the buildings are inprivate ownership, and the uncertainty caused by possible future restitution claims. Component B o f the project i s designed to investigate the scope o f these problems and Component C i s designed to develop the policy, strategy and legal framework for dealing with them. 6. Alternatives consideredand reasons for rejection Include systematic cadastreproduction work in theproject. This would entail reducing the scope o f the project as the funds available through IDA would be insufficient for such a large program. It would also entail a much longer preparationperiodwhile agreement is reached on the methodology and regulatory changes that would be necessary for such a program to be 6 implemented responsibly (from a practical and fiduciary perspective). However, the registration system was ready to be implemented immediately and had been developed to such a stage through other donors that delays inimplementation o f the full program would be highly damagingto the credibility o f the registration system and the property market. Also, implementing the registration system would have an immediate beneficial impact on the majority o f the population. Thus, it was agreed to go ahead with the registration activities and undertake the necessary investigations and pilot work for improvement o f the cadastre and other hurdles to the land market and development. Pressfor a single agency model. The Bank `best practice' model i s to have registrationand cadastre ina single agency. However, the previous government had attempted to implement this model inthe late 1980's and 1990's through cadastre agencies, but this was unsuccessful and they reverted to a dual agency model. This was partly because o f their historical experience with the dual agency model and partly through a desire to emulate the systems seen intheir neighborhood, includingthe established systems inAustria, Switzerland and Germany, and the developing system in Croatia. A great deal o f preliminary work through donors had been done based on the dual agency model and a new law had been passed. At this stage pressure to revert to a single agency model would have met with strong opposition at all levels. However, the situation will be reviewed at the mid-termreview stage. C. IMPLEMENTATION 1. Partnershiparrangements (if applicable) Sweden (through Sida) and the Austrian Technical Cooperation Coordination Office (ADA) have been funding technical assistance inland registration and cadastre since 2000 through contracts with GTZ. A new program for assistance that will runfrom 2006-2007 has been agreed and it is closely coordinated with the Bank funded project, providingmost o fthe technical assistance and training required for the project. It will be parallel financing and i s a continuation o f their current program. The parallel fundingproviding technical assistance and training for the project i s planned for continuation through to the end o f the project period, with budget commitments finalized on a two year cycle in accordance with donor procedures. The indicative costs o f this support are included inthe total project costs and financing plan. USAID has been working with municipal governments to improve their overall management capabilities and have identified use o f land and generating revenue through property taxes as a key focus o f their future plans. In2006 a new project on Tax Administration will commence and close coordination i s planned with U S A I D and its contractors. It i s envisaged that many o f the same project sties will be selected for work inboth the U S A I D and Bank projects and that the USAID funded experts inmass appraisal and property tax systems will coordinate with the Bank project's experts. 2. Institutionaland implementationarrangements Registration o frights 7 Registrationo fproperty rights i s a function o f the courts o f first instance. The president o f each court i s responsible for all operations o f the courts, but the Ministries o f Justice (MOJ) at Entity level (incoordination with the Cantons inFBiH) are responsible for all budget applications through the Ministry o f Finance and the regulations and operational guidelines for the registration offices. The HighJudicial and ProsecutorialCouncil (HJPC) has a role inthe court system which includes appointment o fjudges, assisting in formulation o f budgets and guidance on information technology. The main counterparts for the project are the Ministries o f Justice at Entity level and each Ministry has been asked to establish a LandRegistrationUnit (LRU) within its headquarters for two purposes - to provide long-term methodological guidance to the registration work o f the courts and inthe short-term to serve as the project implementationunits. Project funds will be used to supplement the LRUs with a financial manager, accountant, procurement officer and translator for processing Bank documentation. Thus, there will be two LRUs, one at each o f the two Entity level MOJ offices, which will carry out the usual functions o f a project implementation unit.Each LRUwill operate its own DesignatedAccount for the project. Cadastre Cadastre and mapping work i s the responsibility o f the Geodetic Administration inRS and a combination o f Municipal and Cantonal governments inthe FBiH.However, inFBiHa central Geodetic Administration (GA) exists to provide operational guidelines and a new law on Cadastre i s under development that will make all cadastre work the responsibility of the central GA inFBiHina similar manner to that which already exists inRS. The GA inRS andFBiH primary function i s development o f maps and cadastre records and they will be able to manage project activities usingtheir normal staff. Technical Assistance and Training GTZ will continue to provide technical assistance and training support as they have inthe past, butwith a focus now on supporting project activities. They will be providingtechnical assistance inproject management as well as the economic, legal andtechnical aspects o fthe project. However, project management i s the responsibility o f each entity level MOJ, which will have the advice and assistance, as necessary, o f the Advisory Board. The membership o f the Advisory Board will include entity level representatives from the MOJs, GAS,Ministries o f Finance and Ministries o f UrbanPlanning and at State level representatives from the MOJ, Ministry o f Finance and HJPC. Advisorv Board The Advisory Board has been created to provide advice to the project implementing agencies regarding immediate issues o f project implementation as well as the long-term objectives of the project. The Board will provide a forum for discussion o f issues affecting the World Bank funded project as well as related projects o f other donors. Consisting o f highlevel government officials having experience and interest inthe land administration sector, the Boardwill provide stakeholders with the opportunity to express institutional views regarding project 8 implementation, and to discuss and resolve institutional conflicts. Members o f the Board would be expected to represent the needs o f the project within their own Ministries and organizations and assist in facilitating coordination o f official action in support o f the project. The Board could serve to bring some uniformity to the approaches taken by the two entities by sharingbest practice ideas and experiences, and provide the basis for a permanent system o f agency and entity consultation on land administration matters. Project Management Currently the MOJs have little capacity for management o f land registration throughout the country. The project has a major role to build up this capacity so that service standards can be monitored and the property market enhanced through the monitoring by the dedicated LRUs. The role o f the LRUs will include advice and guidance to the courts and registry offices on substantive issues o f property and registration law; development o fmodem business management capacities inthe registration offices; serving as a repository and disseminator o f "best practice" information; analysis o f issues and trends inregistration and cadastre practice; and development o f proposals for regulatory and legislative development affecting title registration. Placing the responsibility for project management within the LRUs will help the LRUs to build capacity and develop experience with management o fprojects and monitoring o f outputs. The technical assistance provided by GTZ; the hiring o f experienced financial managers and procurement officers; and the need to implement project activities financed through the project, will help the LRUs to develop into fully functioning Registration Departments within the MOJs. 3. Monitoring and evaluation of outcomes/results The MOJs and GAShave been collecting data for monitoring the land market using GTZ technical assistance over the last two years and this activity will continue during the course o fthe project. Statistical data i s already gathered from court registration offices and this i s essential to monitor the growth inproperty market activity and the reduction o fbacklogs. Customer surveys will monitor the improvements intransparency and customer service. Duringthe course o fthe project the capacity to monitor service standards and property market activity will be built up within the LRUs. Regular quarterly reports to the Advisory Board, copied to the Bank, will be prepared and project progress reviewed inthe Advisory Board forum. Failure to meet project outputs will be apparent at the quarterly reviews. Policy recommendations and project strategies will be developed only after appropriate investigatory and survey work. A land market and customer survey will be conducted towards the end o f the project to assess the final results o f the project. 4. Sustainability The Recipient has stressed the importance o f this project duringproject preparation at Ministerial level both inthe Ministries o f Finance and the key stakeholder Ministries and Administrations. The State and Entitygovernments have recognizedthe importance o f the property markets in 9 their MTDS and the Ministries o f Justice have worked closely with GTZ through donor finding to prepare legislation and complete training programs and software applications to improve registration services. The Entity Ministries o f Finance and Justice specifically requested rapid project preparation as they needed the capital to continue the progress achieved so far. The Entity Ministries o f Justice have agreed to establish the LRUs within the MOJs at Entity level and the project i s designed to build up the capacity o f these units for the ongoing monitoring o f service standards and development o f improved regulations and working methods. There i s a subcomponent inboth the registration and cadastre components specifically to address issues o f ongoing service standards, human resource development and financial sustainability o f the registration and cadastre systems provided through fees received for services. 5. Critical risks and possible controversial aspects Political risks remain substantial inBiH. The project will have to maintain some flexibility in the event that the State takes over some o fthe Entity government roles but this should not affect the main development objective, and in any case a unified approach would be more efficient and cost effective. The Entities may decide to develop different policies for land administration, but the likelihood o f this i s considered low. The main risk to the development objective would be the weak capacity o f the MOJto manage a registration service and there may be incentives that exist at local registration offices to retain a level o f inefficiency and confusion for rent-seeking purposes. These risks are recognized and addressed inthe project design to build capacity inthe MOJ and to improve service delivery through a combination o f good office design, improved office practice and automation. There are risks inthe cadastre and policy development components that existing methodologies and legal requirements in the cadastre, planning and permitting processes will take time to change. Change i s required because existing methodologies are outdated and can not meet development demand, but there i s a difference o f opinion among our counterparts on the need to change long established technical practice. The Geodetic Administrations would like to get underway immediately with a comprehensive systematic cadastre development program, but the project i s designed to commence cadastral and investigative work so that a comprehensive strategy and methodology can be prepared duringthe first two to three years o f the project for cadastre, planning, regularization o f illegal developments, property tax system development, further privatization o f land inurban areas and related land administration activities. There i s a riskthat agreements will not be reached, but this is seen as a low risk. Restitution o fproperty rights expropriated inthe socialist period remains controversial and uncertain. The project only intends to investigate the scope o f the issue and the level o f investment that might be required and will not actually get involvedwith restitution claims as such during the project. The Bank team has been assured that settlement o f claims relating to displacement following the 1992-95 war has been substantially completed (with a small percentage referred to the courts), but there are still concerns that some owners can not physically return to their properties and that some o f their properties are no longer habitable. The project will try to understand the extent o f the remaining problems but will only be making recommendations, if it i s found necessary, for discussion inthe policy and legal development 10 component (Component C). Thus there i s little risk that the project will be involved inany controversial actions. There are low level risks that (a) the current legislation allowing apartments to be registered without having the land around the building and the common ownership o f the buildingitself registered first might be re-interpreted; (b) the law on electronic signature may not be passed and this will prevent a registration system based on internet technology beingimplemented.Both are considered low level risks and do not have major impact on the development objective ifthey come to pass. 6. Loanlcreditconditionsand covenants Board Conditions: a. None Effectiveness Conditions: a. The Memorandum o f Understandingbetween GTZ, the Swedish International Development Cooperation Agency, the Austrian Development Agency, the MOJ, the HJPC, the FederationMOJ, the Federation GA, the Federation MUP,the RS MOJ, the RS GA, and the RS MU" on collaborationinsupport o fthe implementation o f effective and efficient land administration and registration reform on the territory o f the Recipient inthe period from January 1,2006 to December 31, 2007 has been signed by allparties and i s implemented. Loan Covenants: a. The State or Entity governments will not amend, suspend, abrogate, repeal or waive legislation affecting land administration in such a way that, inthe opinion of the Bank, it materially affects the performance o f the Recipient or either o f the Entities under the project. b. The Entity level MOJs will maintain land registration units responsible for monitoring service standards, amending regulations and procedures to improve customer service and to manage project activities throughout the period o f the project. C. The State and Entity level governments will maintain the Advisory Board, which meets quarterly, for the duration o f the project. d. By the end o f September 2007 the Entitylevel MOJs will agree on registration service standards, a humanresources development strategy and a business plan for continued operation o f the registration service and implement these thereafter. 11 e. The land registration units will provide quarterly project activity progress reports to the Advisory Board and the Bank inboth Bosnian and Englishlanguage within 21 days o f the end o f each calendar quarter. f. Newconstructionwork or majorrefurbishments will becompletedinaccordance withthe terms o f the Environmental Management Plan. g. A draft policy and strategy document for completion o fthe long term goals inthe land administration sector will be agreed with the Bank by the end o f June 2009. h. Where buildingsor dwellings have beenconstructed or occupiedotherwisethan in accordance with applicable laws or regulations o fthe Recipient or of the Entities, as the case may be, the Recipient shall cause each o f the Entities to only record the buildingsor dwellings inthe cadastre and shall not register any ownership rights over the relevant land, unless and until such buildings or dwellings have been regularizedin accordance with such applicable laws or regulations, inwhich case ownership rights over the buildingsor dwellings, and the relevant land, shall be registered by the Entities inthe land registry upon application o f the occupier and fulfillment o f the conditions prescribed by such laws or regulations. D. APPRAISAL SUMMARY 1. Economic and financial analyses Economic benefits. As inother land administration projects, the main economic benefits include 0 increased security o f tenure, 0 improved allocation o f real estate inways which optimize productive use, 0 decreased property transaction costs, 0 improved access to real estate, land administration services, and credit, and 0 improved public sector management associated with improved governance, increased revenue and land use management. As indicated inthe results framework (Annex 3), specific benefitswhich lendthemselves to quantitative measurement, such as transaction costs and public revenue, as well as intermediate indicators such as number o f folders inthe registry, will be monitored throughout the project period and compared with targets. Poverty alleviation. The project will not target poor people, but poor and other disadvantaged people are likely to particularly benefit due to the project's emphasis on improved access to services and information, efficiency (hence lower direct and other costs), consistent standards, and accountability. Fiscal impact ofproject. The revision o f the service standards and fees, combined with improvedperformance and a dramatic increase inthe volume o f transactions will ensure that by the end o f the project (2010) the land registry offices operate on a full cost-recovery basis for each entity as a whole (there may be some cross-subsidization between urban and rural areas). T o fully recover not only the operating costs but also the costs o f repaying the IDA credit from 12 government revenue directly associated with land transactions, the revenue from the combination o f land registry fees, transactiontaxes, and cadastral fees would need to be some US$ 860,000 above operating costs (of the registry offices and the cadastral agencies) by 2016 (when the IDA credit would beginto be repaid), something which will be achievable assuming more than 100,000 transactions annually (5%) on more than 2 million folders which are expected to be in the registries by that time, even if there i s not a follow-on project. This calculation does not even include the incremental revenue generated before 2016 (before the IDA Credit begins to be repaid), nor the additional tax revenues associated with a higher rate o f economic growth. 2. Technical LegalFramework.-The current legal framework for registration i s a sufficient basis for the project and it conforms to practice found inneighboring countries. It would have beenpreferable to have had a law based on a single agency model combining registration and cadastre, but this was not feasible inBiHgiven the recent history and legal developments inthe sector. The overall goal o f the project i s to improve the functioning o f the property market and this can be achieved by concentrating on the development o fregistration services utilizingthe current law. Cadastre legislation i s under development in FBiH, but RS has a well structured law and institutional arrangement to undertake cadastre work. The cadastral regulations and practice in both entities were considered to be too costly and time intensive and therefore the project was designed to undertake only a limited amount o f cadastre work inorder to help develop more sustainable methods. The legal framework may also need improvement with respect to regularizationo f illegally developed properties, urban planning and permitting, valuation and taxation, and land privatization, and some advice on best practice may be requested in developing the legislation on restitution. For this reason the project i s designed to investigate the issues and scope o f the problems inthese fields before developing policies and strategies to deal with them. Legislative change that may be required thereafter will be drafted as part o fthe project. Information technology.-Information technology can be used as a tool to improve the speed, accuracy and transparency o f services provided to the public. Current trends internationally are to include the information on property and ownership in a freely accessible internet based system that does not require human interface to access information. Actual transactions will still require checking and approving by officials, but the applications should be able to be made electronically as well as inpaper format. The existing software prepared for the registration system provides the first step in automation and the project will extend this to include full functionality and the inclusion o f cadastral data. Cadastralsurvey and mappingwork.-The survey and mapping to be undertaken duringthe project i s primarily o f an investigative nature to survey and record all properties, the occupation, values and legal rights that refer to that property. For some areas the results will be put on public display and cadastre registers and legal property registers can be developed. The work will be tendered inLots by municipalityto the private sector both for efficiency purposes and to build up capacity and experience inthe private sector. Outsourcing the survey and mapping work should result inbetter utilization o f modern surveying methods and development o f more cost-efficient 13 procedures. The information gathered during the course o f the survey, mapping and investigation work will be utilized to develop the policies, strategies and legal framework to be developed under Component C. 3. Fiduciary Financia1Management Financial management assessment o f the LRUs in the Federation and R S M o J was undertaken in December 2005 to determine whether the financial management arrangements are acceptable to IDA. Both the MoJs have appointed experienced Financial Managers to manage the project finance and accounting function, implemented reliable financial management software, and has prepared financial management manuals outlining internal control procedures. Since this project has mainstreamed implementation within the MOJs, project management, in particular, internal financial procedures will need careful supervision to ensure that there are no undue bureaucratic delays inprocessing financial transactions. Procurement. Project implementationwill be coordinated/executed by the LRUin each entity. Neither LRU has experience with the management o f fund mechanisms under the World Bank financed projects. To overcome this lack o f capacity an experienced consultant procurement officer, acceptable to IDA, has been appointed to manage procurement activities under the project. Also a focus will be given during first year o f implementation o f the project to developing the procurement management capacity. These developing activities / capacity buildingo fthe Recipient staff / will be in form of workshops and on-the-job-training under responsibility o fthe Bank Procurement Analyst based inthe Country Office. 4. Social Social and institutional issues. Project implementation will take into account a range o f social and institutional issues: 0 Post-conflict context and refugees. 0 Ethnic divisions and national integration. Poverty. 0 Gender 0 Socialist legacy. Corruption issues 0 Dispute resolution. See Annex 15 for detailed discussion o f these issues and project implications. 14 Social and Institutional Analysis. As part o f the project preparationactivities, a baseline social and institutional analysis has been completed based on desk review, focus group discussions with stakeholders, a customer survey, and a workshop on the draft report. Project stakeholders. The project beneficiaries will be those people and businesses who want security intheir land or real property holdings. Other stakeholders include some professional groups (notaries, lawyers, real estate brokers), research community, some special interest groups (former private owners, private business, apartments associations, associations that support certain vulnerable groups), and government institutions. 5. Environment The environmental effects o f the project, if any, will be minor and indirect. The project is classified as Category B. Other than renovation o f office space, the project will not support civil works, land conversion, resource extractions or any other activities that could potentially damage the environment. The framework Environmental Management Plan (EMP) i s a summary o f how existing laws and regulations will be applied to the project renovation works. Contracts for civil works under the project will be subject to screening for environmental impacts by the responsible environmental agency. All civil works contracts will include measures to minimize or mitigate environmental damage. Standard operating procedures will include measures applying to construction ingeneral, such as measures to control dust, noise, and traffic at construction sites, and guidelines for controlling erosion and clean-up after construction. Field surveying will focus on eight specific urban and peri-urban areas and therefore will not involve surveying or delineating forest lands or protected areas. The proposed project i s expected to be positive from an environmental standpoint. Based on the experience o f similar land administrationprojects, the increased tenure security and improved land allocation i s likely to induce environmentally positive behavioral changes among property owners. The project i s also likely to contribute to improvements ininformation and the regulatory framework that should facilitate better public sector management o f land use. 6. Safeguard policies Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP/GP 4.0 1) [XI [I Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Cultural Property (OPN 11.03, beingrevised as OP 4.11) [X 1 [I Involuntary Resettlement (OP/BP 4.12) [I [XI Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I [XI Forests (OP/BP 4.36) 11 [XI Safety o f Dams (OP/BP 4.37) [I [XI Projects inDisputed Areas (OP/BP/GP 7.60)* [I [XI Projects on International Waterways (OP/BP/GP 7.50) [I [XI * By supporting theproposed project, the Bank does not intend to prejudice thefinal determination of theparties' claims on the disputed areas 15 Only the safeguard on environmental assessment applies. The project has been assigned an S2 Safeguards classification. Environmental assessment (OP 4.01). See section D5 above. Cultural Property. If any cultural heritage elements (e.g. wall frescos) are encountered during the implementation o f civil works, the Environmental Management Plan specifies that the contractor will cease works, notify the competent authorities and comply with their instructions. Involuntary resettlement (OP 4.12). The project will not support land acquisition and associated involuntary resettlement. The project will also not change ownership or use rights inforest lands or protected areas. The project also does not support eviction or similar enforcement o f laws addressing illegal occupation o f state land. However, the project will begin to assess the magnitude and nature o f the illegal or other informal occupation and settlements, and develop a strategy to address these issues inthe second phase o f the long-term program. This strategy will take into account good practice and lessons learned from OP 4.12 implementation inother countries. 7. Policy Exceptions andReadiness No policy exceptions. 16 Annex 1: Country and Sector or ProgramBackground BOSNIA-HERZEGOVINA: LandRegistration Country Background Bosnia and Herzegovina (BiH)i s a lower middle-income country with a gross national income per capita o f US$2,040 in2003. Approximately 61% o f GDP i s created inthe service sector, 23% inindustry, and 11% in agriculture. Since the Dayton Peace Agreements ended the war in 1995,the country has made tremendous progress inpost-conflict reconstruction, social integration and state building. It i s now working towards integration with the EuropeanUnion, membership o f the WTO, and association in NATO's `Partnership for Peace' program. Since 1995,GDP has tripled, merchandise exports are up ten-fold, and price stability has beenmaintainedwith inflation rates below 1percent inthe past three years. However, poverty levels are close to 18%, and a further 30% o f all citizens are indanger o f falling into povertyinthe event o f an income shock. There are now a number o f challenges that BiHmust face as it strives for closer integration with the EU. They need to improve competitiveness through private sector growth and reduce the highcurrent account deficit through greater fiscal discipline and structural reforms that reduce government expenditures. The land administration sector i s key to promoting private sector growth and the Land Registration Project i s designed to reduce corruption and increase worker efficiency, while at the same time reducing reliance on government fundingby helping the sector to become self-financing and, additionally, to contribute towards local government financing. Greater resources at the local level will help inthe fight against poverty and improving social services, which are also goals o f the government's Medium term development Strategy (MTDS) and the CAS. The land registration project objectives are closely aligned to the three key areas o f the MTDS: 0 Improvingpublic finance and strengthening institutions Promoting sustainable private sector-led growth 0 Investing inkey social and economic infrastructure InBiHthere is a huge shadow economy because inthe formal economy it is time consuming and costly to go through official channels. The recent Country Economic Memorandum stated that "policy uncertainty and corruption in official circles obstruct foreign investment and creation o f new businesses. The cost and access to: finance; tax rates and administration; anti-competitive practices; and the poor functioning of the legal system inprotecting property rights and contracts place a significant burden on business development and investment." The LandRegistration project i s designed to rapidly deal with the constraints to the `legal system inprotecting property rights' and to commence the process o f correcting the other major factors inhibitingthe investment and development. 17 Sector issues Inorder to improve the functioning o fthe sector it is necessary over the longterm to correct constraints on land and property market activity. This includes, for example, the reluctance of authorities to allow land inurban areas to be privatized and the difficulties investors have in getting planning permission, building permits and loans based on property as collateral. Even if they can get loans the loan conditions are more onerous than would be necessary were issues o f title security and development rights to be addressed. The uncertainty inthe landmarket i s fuelled by informal transactions and illegal developments that occur because o f the hurdles that have to be overcome when working through the formal sector (because o f inefficient bureaucracy, fees and taxes and corruption). Inthe long term BiHwould like to have all properties and all development and transactions recorded inthe formal sector. The records should be accessible, reliable and simple to understand and utilize. Development permissions and transaction registrations should be rapid and inexpensive. This would increase revenue from fees and taxes and public confidence to invest inproperty based development. The long term goal i s to: develop a secure and efficient real estate registration system; complete the cadastre records for all property; increase the efficiency and reduce the costs o f systems for issuance o f land use and construction permits and update urban planning documentation to reflect the situation on the ground; regularize illegal developments and encroachments; finalize outstanding claims from persons displaced during the war years and resolve the approach to be taken with respect to claims to property nationalized duringthe communist period; facilitate the land privatizationprocess and create more private land ownership as the foundation of land markets; and establish a property tax system for local government finance. Only the first o f these goals i s ready for immediate implementation. All others require further analysis to understand the scope o f the problems and the resources required to solve the problems. Once these are developed the policies, strategies and legal framework for implementing the policies can be prepared. Institutions responsible for land administration The Government structure of Bosnia and Herzegovina (BiH) i s administratively divided intwo entities: the Federationo f BiH (FBiH) and the Republika Srpska (RS). The FBiHconsists o f 10 cantons and 80 municipalities while the RS has no intermediate-level government betweenthe entity and its 62 municipalities. In the FBiHthe cities o f Sarajevo and Mostar consist o f two or more municipalities with separate levels o f governance. The BrCko District i s not included in either FBiHor RS, but in accordance with the decision o f the Arbitration Commission for BrEko established under the Dayton Accords, i s a separate district under the authority o f BiH. BiHhas 13MoJs: one on state level, two on entity level and 10on cantonal level plusrelevant institutions inBrCko District. Based on the new Law on the HJPC of BiH (2005) one High Judicial and Prosecutorial Council (HJPC) for the entire BiHwas established replacing the HJPCs on entity level. BiHhas a three-tier court system for each entity. Based on the Law on Land Registry (2002) adopted inboth entities the Land Registries are part o f the courts o f first instance. InRS there are 5 district courts and 19 courts o f first instance. InFBiHthere are 10 cantonal courts and 28 courts o f first instance. The courts within BiH are supervised by the Ministries o f Justice in each entity, which have the authority to make regulations governing the 18 land registration function. The courts o f BiH are supervised incertain matters, not including land registration, by the HJPC. The State level Ministryo f Justice also has nojurisdiction over landregistration activities. Intotal there are 48 courts o f first instance with land registry offices inBiHwith 211permanentemployees. The Geodetic Administration (GA) ineach entity is responsible for all geodetic tasks including Land Consolidation and Fundamental Geodetic network. The Municipal Cadastral Offices maintain all the cadastral data. Under draft legislationthe GA will have the responsibility for appointing chartered surveyors (private sector) to undertake cadastral work. InFBiHthere are 40 municipal Cadastre Ofjces, as part o fmunicipality, receivingmethodology instruction from the GA. Four o f the cantons have administrative units reporting to the GA. In the RS the former 62 Municipal Cadastre Offices have been moved under the responsibility of the RS-Geodetic Administration. Inpractice however the services provided are closley linked to municipal services. The GA have established 4 regional centers (Banja Luka, Trebinje, Bijeljina, and East Sarajevo). The Cadastral Office inBrCko i s independent but i s guided by the RS GA on methodological issues. Urban land use i s controlled by a complex system o f planning and land allocation. The planning system currently operates at three levels: (1) a national spatial plan designates land for construction, forestry and agricultural use; (2) municipal and cantonal regulations allocate construction land for industrial, residential and public use; and (3) local zoning schemes establish design parameters and use restrictions for specific parcels o f property. Many municipalities do not have updatedurban plans or complete regulatory schemes for land management. Progress with addressing sector issues Sida has been financing a project to modernisethe Land Registration service since 2003, and the ADA has been co-financing this since 2004. Interventions inthe field o f land administration have been ongoing since 2000 when the German government and Sida supported projects in cadastre development. GTZ has been the contractor throughout this period and has assisted with the development o f legislation, registrationprocedures and software. It has helped to provide training and the gradual data loading into the newly developed software. Sida and ADA will continue to provide assistance through 2006 and 2007 and have developed a program that i s supportive o f the Bank funded project. GTZ will continue to provide technical assistance and training during the course o f the Bank funded project using Sida, German and ADA financing. USAID has also been active inthe field of land administration. InJune 2004 the ongoing Bosnia Financial Sector project funded a study on real estate finance and real estate markets that forms the basis upon which many o f the interventions inthe Bank funded project are based. USAID ('jointly with Sida) has been working with local government intheir GAP project to improve local government services and as a follow on from this their latest project on taxation i s to be 19 launched in 2006. The Tax Administration Modernisation project (TAMP) will include corporate and personal income tax issues as well as property taxes. U S A l D will be providing assistance to local government to address the problems o f illegally developed buildings and construction permitting as well as developing the legal and procedural framework requiredto implement a property tax that can replace the existing taxes on enterprises and their profits that effectively discourage new businesses from investing locally. The U SAID program complements the work under the project and close cooperation between the projects i s necessary. The EuropeanCommission (EC) has beenworking with the courts through the CARDS programs for 2004 - 2006 to improve the services provided at the courts. The project works primarilythrough HJPC to improve the functioning o f the courts and the information technology capacity o f the courts. The communication systems that are to be developed will be utilised under the Land Registrationproject as part o f the communications network. Recently the HJPC, with assistance from U S A I D and the EC, has been reviewing the conditions o f the court buildings inorder to assess the physical requirements to improve the image ofthejudicial system and upgrade them to EU standards. They will then seek donor financing for the refurbishments. As the registrationsystem operates from the courts o f first instance there is some coordination requiredwith this program as it develops. The EC has issued a tender to review and make recommendations on the technology standards that should be adopted by the registration offices, and the cadastre, taking into account the developments that have so far been accomplished inthe IT sector. The results o fthis study are due to be delivered inApril 2006 and they will be utilised by the Land Registrationproject. Dialogue with the EC will continue as there is a possibility that the 2007 EC program could include further help inthe sector. The Urban Infrastructure and Service Delivery project, fundedby the Bank, became effective in February 2005. This project i s rated satisfactory. I t focuses on improving the delivery o fbasic urban services: (i)improve the availability, quality and reliability o f basic municipal services and inparticular, water supplyand sanitation; (ii) strengthen the ability o f cantonal and municipal governments to improve management and institutional capacity for infrastructure development through Urban Management Development Plans; and (iii) where possible, foster deeper social cohesion through improvements in overall living conditions. These projects overlap to the extent that the funding for local government to improve infrastructure and service delivery can be partially covered through property taxes. Some level o f coordination betweenprojects will be necessary. 20 Annex 2: Major RelatedProjectsFinancedby the Bank and/or other Agencies BOSNIA-HERZEGOVINA: LandRegistration 1, World Bank Financedproiects Urban Infrastructureand Service Delivery Project. Rated Satisfactory. Forest Development and Conservation Project. Rated Moderately Satisfactory. 2. Other Development Agency Financed proiects Land registrationproject fundedby Sida and ADA. GTZ are implementing the project. Technical assistance, training and software development. 2004-2005. Continuation in 2006-2007 providing also support to the World Bank funded Land Registrationproject and increasing level o f support to include cadastre activities. Tax Administration Modernization project funded by U SAID. 2003-2006, with new program developed for 2006 and 2007 as a continuation. Governance Accountability Project (GAP)funded by USAID and Sida. Ongoing program to support good governance at municipality level. FA0guidelines for Participatory LandUse Development.Part time technical assistanceprovided to develop guidelines for land use. Ongoing. 21 Annex 3: ResultsFrameworkand Monitoring BOSNIA-HERZEGOVINA: LandRegistration ResultsFramework 2016 Vision' 2016 Outcome Indicators Use o f Outcome Information Establishment of a well- Records Set project outcomes in context of long- functioning land Clear for all real property term vision, and in future, assess administration systemwhich Easily accessible on the internet in an effectivenessof cumulative actions in facilitates investment and automated system, with transparent property achieving desired outcomes. good governance transactions. Fully compatible in the land registry and cadastre Comprehensive(all real properties in the formal land administration system) Investment Encouragedand development controlled through more effective land use planningand simple and inexpensivepermit issuance procedures Often funded by credit using real estate as collateral Property rights and transactions Resolution of real property rights widely regarded as fair by all groups of stakeholders Property rights secure and protected by guaranteed registration Property transactionsefficient registered - within a few hours Project Development 2010 Outcome Indicators Use of Outcome Information Objective Facilitate the orderly Improved land registration system as evidenced Gauge: developmentof transparent by: Extent and scale of changes in land markets through Improvedtransparency, speed, and accuracy transactionsand records in registration of real estate of making land transactions for clients comparison with baseline, rights and complimentary wishing to buy, sell, inherit, mortgage or intentions, and what might have policies that enable lease happened in absence of project transactions to be made with Data from all registry folders in accessible Realismof projections and adjust security and efficiency database and at least 50% registry folders project design or expectationsif updated and reconciled with existing necessary I cadastral data based on office review. Incorporationo f apartments into main land 1 The 2016 vision i s indicative only and does not representa formal view of the Government. It will be further consideredandrefinedunder the policy coniponentofthe project 22 Project Development 2010 Outcome Indicators Use of Outcome Information Objective Improved cadastre as evidencedby: Gauge Improved efficiency and speed of providing success of efforts to improve relevant existing cadastre data and initiation servicedelivery and implications of data quality improvement for clients for next stage of program wishing to register their property rights, to whether information from pilots access property maps, to appraise property has beenprovided as required for values, or to undertakeefficient, responsibly design of next stage ofprogram managed development investments whether required cadastre requiring land. information systems are in place Completion in 8 sites of systematic as required for next stage of registration of property rights and in program situation analysis to understand magnitude of property related impediments to development Development of cadastre information management systems Development of policy and legal framework as Gauge whether policy and legal evidenced by: framework required for next stage of Strategies on how to deal with issues of programi s inplace illegal development, encroachments, privatization, restitution, and planning Legislative changes addressing use of electronic systems, modifications of law or legal procedurestaking into account implementation experienceof existing legal framework (e.g., mortgage, appraisal, transaction and property tax, restitution, planning, third party mediation), and use and/or disposal of state and municipal land Strategies for land-related revenue including legislative changes, addressing issues such as the cumulative impact o f all land related service fees and taxes, policies on intergovernmental exchange and sharing of revenue and information, and methodology for property tax system using mass appraisals Initiation of 2"dphase of long-term program Intermediate Results Results Indicators for Each Component Use of Results Monitoring A. Registration Al. Development of service Service standards, and business plan and Delays may flag constraints inpolitical standards and annual business plans human resources strategy adopted and understandingand/or commitment, implemented operational arrangements, or unrealistic I exoectations A2. Improvements o f working 47 offices renovated and up to 52 offices Delays may flag constraints in conditions and public reception equipped contracting arrangements, fund flow, areas capacity, or operational arrangements, or unrealistic expectations A3. Conversion of data on 1 Data on an estimated300,000 apartment IIDelays may flag constraints in . apartments (book of deposited contracts checked and entered into land I I contracting arrangements, fund flow, contracts) into land registry registry capacity, operational arrangements, or methodologies, or unrealistic 23 Intermediate Results Results Indicators for Each Component Jse of Results Monitoring A4. Datareconciliation, data entry, Registry data entered for 2 million Mays may flag constraints in and system integration cumulative folders (including apartments); :ontracting arrangements, fund flow, data for 1 million cumulative registry :apacity, operational arrangements, or folders (including those from sporadic nethodologies, or unrealistic demands) updated & reconciled with :xpectations cadastral data through office review. Discrepanciesbetween registry and cadastre records identified, and, to the extent possible without additional field survey and/or investigation, eliminated Advice and training for registry office staff Delays may flag constraints in Training and other stakeholders provided :ontracting arrangements, fund flow, :apacity, or operational arrangements, sr unrealistic expectations Procedurenianuals drafted and ordinances Delays may flag constraints inpolitical changed to reflect improved service understandingand/or commitment, or standards, arrangements for outsourcing sperational arrangements, or unrealistic cadastre survey work, and varied clients. Expectations E-commerce strategydeveloped to enable marketing of digital maps and cadastral data B2. Systematic registration and Systematic survey, field investigation, and Delays may flag constraints in mapping in selected locations regularization of 100,000 cadastral objects contracting arrangements, fund flow, in 8 sites, as well as assessment of capacity, operational arrangements, or regulatory, post-conflict, and other methodologies, or unrealistic constraints completed and analyzed expectations B3. Digitizing cadastral maps Strategy for digitizing cadastre maps Delays may flag constraints in developed and then mass digitizingor contracting arrangements, fund flow, conversion o f 1.4 million ha in new format. capacity, operational arrangements, or 1 methodologies, or unrealistic expectations B4. InformationCommunications Cadastre information system (capableof Delays may flag constraints inpolitical integration with the registry information understanding and/or commitment, system) designed and associated work contracting arrangements, fund flow, or Technology processes re-engineered capacity, or unrealistic expectations Advice and training for cadastre office Delays may flag constraints in Training staff and other stakeholders provided contracting arrangements, fund flow, capacity, or operational arrangements, or unrealistic exoectations C. Policy Development and Project Studies completed on: Delays may flag constraints inpolitical public attitudes and market demands understanding and/or commitment, for land administration services contracting arrangements, fund flow, or strategy for dealing with illegal capacity, or unrealistic expectations encroachment, including I------ recommendedregulatory changes strategies for dealing with other issues including privatization, restitution, land planning and development controls and land-relateddisputes C2. Policy and legislative change Legal review of relevant laws completed Delays may flag constraints inpolitical and modifications to law or understanding and/or commitment, implementation procedures recommended contracting arrangements, fund flow, 01 capacity, or unrealistic expectations 24 Intermediate Results Results Indicators for Each Component Use o f Results Monitoring C3. Land-related revenue Proposals and associated legislative action Delays may flag constraintsinpolitical completed on understandingand/or commitment, cumulative impact of all land related contracting arrangements, fund flow, or service fees and taxes, capacity, or unrealistic expectations policies on intergovernmental exchange and sharingof revenue and information, and methodology for property tax system using mass appraisals based on cadastral data C4. Preparationfor phase 2 Detailed project implementation Delays may flag constraintsin political plan for phase two developed commitment, contracting arrangements, fund flow, or capacity, or unrealistic expectations C5. Project management Project management assessedas successful Delays may flag constraintsin political by Bank supervision missions, and commitment, contracting assessedas having reputation for integrity arrangements, fund flow, capacity, and effectivenessas assessedby operational arrangements, or unrealistic stakeholder and public opinion surveys. exoectations CG. Technical Assistance and Advice and training for all stakeholders Delays may flag constraints in Training including LRUs and Advisory Board contracting arrangements, fund flow, provided capacity, or operational arrangements, or unrealistic expectations 25 a a a a a a * m U I % e L z 3 o\ N . . . e P) a 9 - QI 3 0 . . . N .* 8M a . . a a 3 P \o e P) 3 -J 0 Y Y 9 V e, v) . . 2 i z 1 f e El a, 3 3 1 > L 3 1 0- m .I ? a, a T 0 3 3 4 0 M t t s Q1 33 Q\ 6 e a2 93 3 m 00 e 0 3 3 t- o 0 9 3 rg ? 0 3 T M 0 f V Annex 4: DetailedProjectDescription BOSNIA-HERZEGOVINA: LandRegistration The project will have three components: A. Registration B. Cadastre C. Policy Development and Project Management The outputs, targets for each component and monitoring indicators are contained inAnnex 3. ComponentA - Registration Registrationprocedures have changed frequently inBiH, from the Austro-Hungarian court- based model prior to World War 11, then to a socialist system o f unifiedreal estate cadastre, and recently under the law on Land Registry (2002) once again reverting to the court-based system. GTZ has been assisting the Entity Ministries o f Justice and local courts to establish a secure registration system, but at this time there are still large backlogs o f cases inthe larger, busier offices and informal transactions are common. Lack o f transparency and efficiency o f service are recognized as problems by the business community and the general public and there i s still a lack o f public confidence inthe system. InFBiHmost apartments are not included inthe registration system, but the records o f transactions involving apartments are kept in `Books o f Deposited Contracts' (BDC) held at the registration offices. Inthe RS a greater percentage o f apartment rights are already inthe land book registration system. Currently the system o f keeping these records on apartment transactions inthe BDC i s adequate, but as time passes and the numbers o f recorded transactions increase the systems inbuilt inefficiencieswill become more apparent. However, substantial progress has been made and most offices now maintain `land books' and staff have been given sufficient training to maintain the system effectively. Software has been developed and, as an interim measure, i t should speed up and make more reliable the registrationo f property rights. Most offices are inpoor condition and lack the equipment, furniture and basic materials (paper, files, toners, etc.) to be able to provide good customer services. I t i s now necessary to improve customer service facilities, check and enter data into the new system and develop the longer term solutions for "e-conveyancing" (web-based enquiries and registration) as part o f an integrated solution with cadastre procedures. The Component will, inter alia: a. Improve the transparency, speed and accuracy o f making transactions for clients wishing to buy, sell, inherit, mortgage or lease. b. Increase the number o fproperties registered by: i.IntegratingandharmonizingexistingCadastrerecordswithlandregistry 11. Making first registration simpler and easier to complete .. records c. Incorporate the apartments register within the main land registry 32 Component A o f the project will cover all 47 registration offices inRS and FBiHand has the aim to provide a fully automated registration service that will provide `on-line' instant information to users about property rights, and registrationo f property rights within 24 hours for 95% o f all applications. Processing o f information and registration applications will be fully automated. The project will refurbish and equip all offices to enable them to operate in a `customer friendly', transparent manner. The existing backlog o f cases (estimated at over 80,000 cases) will be reduced to zero and approximately 2 million land registry records will be entered inthe land registry database and the records from 1million landparcels will be checked, `reconciled' with cadastre records and entered into the database (without field work unless the areas are covered under Component B). Of this number approximately 300,000 records on `deposited contracts' that refer to apartments will be analyzed, cadastre numbers issued and the records entered into the land registry database. Inorder to achieve this, the following sub-components havebeenidentified: A1 - Development o f service standards and annual business plans. Service standards will be developed to ensure that services are o f the highest possible caliber and meet European standards. The service standards will incorporate the speed o f service, quality of service, numbers o f cases covered within a day and complaints procedures. An annual business plan will include: assessments o f expected workloads, assessments o f income to be derived, the place o f the land registry within the courts, fee structures, investments from donors and government, human resources strategies, administration and sustainability o f automated systems (including replacement o f equipment and upgrading o f software), general operating costs and the means for ensuring that sufficient funds are provided from court budgets for the ongoing operations. Public information brochures and guidance will be provided to increase public awareness o f the availability o fregistration services, and ensure public accountability of the service standards. Technical assistance for this sub-component will be provided by GTZ (see subcomponent A5). The responsibility for the task lies with the Entity level Ministries o fJustice (MoJs). A working group for the development o f service standards and annual business plans will be established before the early in 2006 and a first draft o f the service standards and business plan developed by the end o f 2006. It i s planned that the standards, business plan and human resources strategy will be adopted by EntityMinistries o f Justice in October 2007 and implemented in2008. As part o fthe process a strategy for public information will be developedand the necessary handouts, pamphlets and documents for public information will be printed and distributed from 2007 onwards. The cost o f media presentations and printingwill be covered through project finances, A 2 - Improvements to Working Conditions and Public receptionAreas Working conditions and poor public reception areas are the biggest cause for complaint by staff and users. Poor working conditions are often responsible for slow work output, non- transparent practice and client dissatisfaction. Office renovations, furniture, archives and 33 equipment will be suppliedand the existing automated registration software `LARIS' will be provided to each office in sufficient numbersto improve customer services and make it possible to meet the service standards. GTZ have completed an inventory o fbuilding sizes and conditions, staff numbers and requirementsfor renovations, furniture, archives and equipment.Offices havebeendivided into categories 1, 2 and 3, dependant upon the numbers o f clients they serve and the work load o f the office. Category 1offices will undergo renovations in2006-2007, and category 2 and 3 offices in2007-2008. A3 -Apartment registration Most apartments are not registered inthe land books because the land parcel, common areas and buildingplans are not available. Transactions with apartments are recordedinthe `book o f deposited contracts', but this i s a short term solution applied because there i s no land parcel or object recorded inthe land book. The project will develop a methodology for incorporating all apartments into the land registry and then convert the information from the book o f deposited contracts into the LARIS software. GTZ will provide the technical assistance necessary to develop the methodology during 2006, and then staff will be hiredto undertake the conversion. It i s expected that the staff will be required for the full lengtho f the project as there are approximately 300,000 deposited contracts to be checked and entered into the system.The staff selected will work on both subcomponents A3 and A4. A 4 -Data harmonization, data entrv and systeminteaation There are knownto be many discrepancies betweenthe records inthe cadastre and those held at the land registries. Records held by the cadastre offices will be accessed and checked against land registry records before being entered into the LARIS software. Always, the most current and reliable records from the two sources will needto be utilized. The staff required to do this work will be hired as temporary contract employees on an individual basis ineach locality. GTZ will provide the training and supervision o f the temporary employees and will supervise a group o f about 12 regional coordinators responsible for monitoring their work, providing in-office advice and gathering data for the monitoring o f project outputs and project results. The temporary employees (and coordinators) may be equippedwith software tools, which will be developed by GTZ during the project. These will identifydiscrepancies betweenrecords and, ifpossible, eliminate them automatically. This `audit' function will create log files, reports, etc. so that the quality o f data can be monitored by registrars and consultants. In2005, GTZ had already commenced trial work with data entry into the LARIS software using temporary staff and coordinators to ensure the methodology i s workable. The temporary staff will be entering data into the L A R I S software, but during the course o f the project the software will be upgraded and adapted to runas a WEB based solution capable o f allowing online queryingand e-conveyancing for a fee. The system will also be designedto interface (including data exchange and data sharing) with cadastre applications developed under Component B, under one joint contract. New laws governing electronic business and electronic signature have already beenproposed and an agency responsible for system administration and managing communications 34 networks may be established. Ifcreated, the agency would probably be known as the Electronic Business Agency (EBA) and it would use the existing CIPS system as a basis for its operation^.^ Inthe secondhalfo f2005 the EC awarded a contract to prepare data standards and aplanfor an integrated land registration/ cadastre system. This i s expected to be completedby April 2006. GTZ will be coordinating this activity and will provide guidance on the next steps in system development thereafter. It i s envisaged that two contracts (joint for bothregistration and cadastre components o f the project) will be awarded. The first will develop the final IT/IM4strategy for the project and the ongoing work o fthe registration and cadastre services and then supervise its implementation. The second will be for application development as needed. It i s estimated that an I T / I M strategy will be completed by the end o f November 2006 and the first version o f the integrated land registry/ cadastre application be readyby the middle o f 2008. Inthe cost tables one quarter o f the costs for the I T / I M strategy, system development, telecommunications and servers are assigned to this subcomponent and three quarters to Component B as most o f the costs are associated with Component B. A5 - Technical Assistance and Training GTZ will continue to provide technical assistance and training inmatters relatingto registration procedures, development o f standard forms and contracts, implementation o f the LARIS software and public awareness activities. As part o f the assistance GTZ will be providing specialists inproject management (including WEB technology), economics (for subcomponent Al) and legal matters to help review laws, regulations and procedures. A focus o f their assistance will be providing training to existing registration office staff and conducting regular workshops and seminars for both the public and private sectors. A help desk facility will be provided so that advice may be given by telephone (or through a visit) at any time. As the new Notary law i s now in effect and it i s planned that Notaries and private licensed surveyors will commence activities in2006, some o f the GTZ training resources will be directed to these professionals. All o f this work will be funded through Swedish and Austrian bilateral funds. The monetary value o f the technical assistance has been provided in the cost tables in order to give a complete picture o f resources being used. Component B -Cadastre Cadastre i s an integral part o f the information required for the registration system because the property descriptions, includingunique property identifiers and clear boundary demarcation, are needed to ensure that properties are not registered in different registers (allowing The CIPS system was created as a project under the Ministry of Civil Affairs to record personaland passport data, criminal records and other informationrequiredby the Ministry. It has establisheda fast communications link through all regions and most municipalities and now offers services to administer databases andmanage communicationnetworks. There are secure server rooms provided and duplicate servers locatedinSarajevo and Banja Luka.A current EC project to be implemented during 2006 will be linking all courts through this CIPS system and as the Registration Offices are part of the Court systemthey will also be connected.HJPCprovide a coordinating role with the EC to help install the various software applications and the WAN for the Court system. The work to be completedunder the project will be coordinatedclosely with the CIPS, EC andHJPC activity. Information Technology/ Information Management 35 conflicting transactions for the same property), that there are no overlaps inproperty boundaries, and that it i s possible to relocate property boundaries when there i s a dispute. Thus, for legal security purposes, it i s essential to at least have a series o f index maps showing the properties registered. However, cadastres are also used to record all properties in a given geographic area as a basis for land use monitoring, planning and property tax systems. Thus, when considering the cadastre requirements for the Land Registrationproject, these other uses must also be considered and the tools for providingthe necessary data to users on a cost effective basis needs to be implemented. Historically inBiH cadastre work has been completed on a systematic basis by undertaking new surveys, assessing the legal ownership and land usage and displaying the results to the public so that the complete record i s formally recognizedor objections officially raised. By international standards the methods used for this work were precise, but very time consuming and expensive. The L a w on Land Registry now places the responsibility for legal verification o f property rights on the Courts and the Geodetic Agencies now have the regulatory and control function only for identifying the properties and their use. BiHhas a complete collection o fmaps which were preparedbased on survey work completed between 1978 and 1991. Since this period there has been conflict and a huge amount o f displacement o f people. However, the Commission for Real Property Claims o f Displaced Persons and Refugees reviewed over 300,000 cases between 1996 and 2003 and, with local government initiatives, it is not now thought there i s a serious problem with displaced persons or absentee landholders5.Even so, the maps from 1991 and earlier would have to be updated before they could be adopted as official records o fproperty locations. The methodology for updating prior to creating new cadastre maps should be revised to take account o f international good practice and the availability o f modem technology. Followingmany years o f uncontrolled development, BiHhas a serious problemo f illegal development and encroachment onto publicly owned land. There are also potentially many claims to land or property that was expropriatedby the State inthe socialist period, but whether or how such claims may be satisfied has not yet been decided. The extent o fthe illegal construction and potential property claims and the amount o f work involved in rectifying each situation are not yet known. I t i s also unclear how the existing urban and rural development plans should be amended to take the actual situation on the ground into account. The Cadastre Component must provide the basic information for the registration offices to register properties, but it i s also necessary to undertake analysis o f the extent o f the problems related to land markets and development and to develop solutions on how to deal with them. For future use the cadastre system should be fully automated and linked with the registration office. Thus, the Cadastre Component will: a) Improve the efficiency and speed ofproviding relevant data onproperty units (cadastre numbers and sketches)for clients wishing register theirproperty rights. b) Undertakeprograms in selected municipalitiesfor: i. Systematic registration of property rights 5There also seems to have been a lot of inter-country and inter-canton transfer as people have been compensated for land or property they left inone area with land or property that another person left inanother area. However, it has beennoted that Croats seem to have lost out as they did not qualify for land inCroatia ifthey left BiHduring the war. 36 ii. Situation analysis to understand the magnitude of impediments to real property markets and land development c) Develop cadastre information management systems Component B o f the project will concentrate on improvingthe service provision o f cadastre offices throughout BiHby establishingimproved customer services and promoting private sector capacity to undertake cadastral survey work. Municipalities willing to be included in the project will be identified and a number selected to pilot the completion and updating o f the cadastre units and subsequent registration o fpropertyrights. While undertakingthe updating a full record o f property units and occupation, whether legal or illegal, will be mapped and valued inorder to analyze the scope and severity o f problems to be resolved under Component C. An integrated IT system will be developed to enable cadastre information to be available indigital form in an integrated WEB based application that connects with the land registry offices and municipal services. Inorder to achieve this, the following sub-components havebeenidentified: B1.Provisiono fdata services The cadastre should be providing information to a number o f users according to the needs and requirements o f those users. The primary users o f cadastre systems are the municipalities, who require information about all development and the usage o f property. The data i s a fundamental requirement for the planned property tax system. (See Component C). Municipalities and other government or private users (especially notaries, surveyors and real estate agents) are usually willing to pay for this data if it i s presented inthe manner and with the content that they need. Thus, the primary focus o f this subcomponent is to develop the tools for providing data to users. The data needs to be available even when property i s not yet legalized and it needs to be linked to the legal data available at the registration office and be available on-line. Service standards and a business plan will be developed along the same lines as those described under Component A. This will also include elaboration o f an e- commerce strategy that will help marketing o f digital maps and cadastral data via the internet. This will need to be linked to the registrationoffices so that data about ownership i s also available. Inorder to achieve improved service standards and outsource cadastral survey work, changes to various ordinances will be drafted and improved procedure manuals developed - including those related to a) survey and mapping work required for cadastral purposes; (b) licensing the private sector cadastral surveyors; and (c) public disclosure and registration o f property rights inthe Courts. Vehicles will be purchased so that Geodetic Administrations can monitor work and undertake quality control tasks. B2. Systematic Registration and Mapping, and situation analysis in selected sites. Agreements will be made with municipalities interested inregularizing land administration activities intheir jurisdictions. After confirmation that it i s legally permissible to start systematic registration, terms o f reference will be prepared encompassing all activities associated with systematically mapping properties and registering property and property rights.Inthe process o f gathering the data neededfor systematic mappingand registration 37 the project will also gather the data relevant to analyzing issues and problems affecting achievement o f the long term project objectives, including: property values and parameters relevant to property valuation and implementation o f property tax systems (incooperation with USAID); market turnover and mortgage transactions; prevalence o f forms o f land and property rights; absentee ownership; illegal construction (encroachments and permits); progress o f land parcel privatization; availability o f vacant land parcels; prevalence o fpoorly documented or disputed titles; poorly defined or undefined parcel boundaries; outdated planning documentations; and estimates on the scope o frestitution claims. . Contracts will be issued to private contractors to accomplish all these tasks. It i s estimated that eight contracts, tendered by national competitive bidding, covering some portion o f the municipalities of Sarajevo Center, Mostar, Zenica and Calijna inFBiH, and Banja Luka, Gradiska, Mrkonjic Grad and Bijeljina inRS, will be awarded. Quality control and assistance with preparation o f specifications and supervision will be the responsibility o f the Geodetic Administrations with technical assistance from GTZ. All records will be handed over to the court registration offices for completion o f the land book registers once the systematic survey work and investigation i s completed. B3. Digitizing Cadastral Maps Inorder to be o fuse inan integrated digital environment inwhich the property ownership records are readily available on the internet the existing cadastral maps must be converted into digital form. This would be done sporadically as information requests come into the offices and systematically in certain locations. The first stage i s to develop a strategy for digital mapping and the creation o f a data model before digitizing can commence. The work program will be constrained by the funds available and the user requirements of the digital versions o f the maps. For example, some information i s only required for background information and can be retained as raster images or photo-images from photomaps (such as topography, historic layers or administrative boundaries). Other information, such as property boundaries and utility lines, will needto be invector form as they are often used for calculation or analysis and are amended when boundary changes occur. The quality o fthe data will need to be clearly visible on the digital maps as the source material will differ in accuracy, age and completeness. It should be noted that digitizing the maps does not make them any `better' than before, but makes it easier to issue extracts and update them when changes occur. Only the new digital maps in the selected sites for Component B2 will be true reflections o f current occupation and ownership. The Geodetic Administrations, utilizing TA from GTZ, will prepare a strategy for digitizing cadastre maps during the first six months of the GTZ assistance in2006. A specificationwill then be prepared for those sites that will be included in digitizing and companies will be hired to work under GA guidance on digitizing. B4. Information Communications Technology The descriptiono f the requirements with respect to information technology are contained in the description for Sub-component A4. The requirements with respect to cadastre are usually much more complicated as they require geographic data to be included and integrated with 38 the attribute data included within the databases about the property and owners. InBiHthere are a variety o f computer systems inuse and each has its own advantages and disadvantages. Inorder to develop one system for BiHthat canbe integratedwiththe LandRegistrysystem it will be necessary to completely re-engineer the processes and design a new (or modified) system. The new system will also take into account the EUINSPIRE (Information for Spatial Infrastructure in Europe) proposed directive with regard to N S D I (National Spatial Data Infrastructure) systems as the new applications are developed. GTZ will provide technical assistance to oversee the development o f the information system and e-commerce solutions and there are several excellent companies inBiHthat can be contracted for system design and development. Equipment will be supplied as needed and some o f the equipment supplied will go directly to the municipalities included within the pilot locations as they are responsible for cadastre work inFBiH.Three quarters o f the costs o f the IT/IMstrategy. System development, telecommunications costs and servers are assigned to this sub- component and one quarter to component A. B 5 -Technical Assistance and Training GTZ will provide technical assistance and training inmatters relating to cadastre methodologies, cadastre regulations and laws, geo-information and geo-technology and software development. They will provide the guidance needed to ensure that a suitable automated system for cadastre i s developed that links with the registration offices according to the needs o f the users. The economists that work on Component A1 will also be working on Component B1. They will focus on providingtraining to cadastre staff and have a series o fworkshops and seminars for both the public and private sectors scheduled. All o f this work will be funded through Swedish, German and Austrian bilateral funds. The monetary value o f the technical assistance has been provided inthe cost tables in order to give a complete picture o f resources being used. Component C - PoliofDevelopment and Proiect Rlanapement There are numerous impediments, other than land registration, that currently constrain the real property market. These include the land use planning and construction permit systems, illegal development and encroachment, tax systems, difficulty with mortgages because o fpoor registrationand enforcement procedures, poorly defined systems o f commonbuilding ownership, etc. Component C will: Developpolicies, impleinentation strategies and draft legislation (including implementation methodologies) as necessaryfor removing the impediments to business development and economic growth that exist in the land administration sector. The basic legal framework for property registration i s inplace and adequate for the purposes o f the project. There are some amendments that could usefully be added, inparticular the concept o f `qualiJied titles ' or some equivalent provision to register the fact o fpossession while putting enquirers on notice that there may be some legal defect o f title . The most obvious o f these inthe BiHcontext would be a notice that a future restitutionclaimmaybe made or that a buildinghas not received a construction permit. Qualified titles or systems o f `notice' are used frequently in other countries inorder to bring all properties onto the register (thus avoiding informal market development and ensuring that all relevant taxes are paid) and to gradually regularize titles by 39 bringingthemto an unqualified status after a set periodo f years. The usual state guarantee and indemnity provisions do not apply to qualified titles. The key associated law that will impact land administrationingeneral is the Law on Property. This is a major piece o f legislation that has been drafted and i s being considered. Other related legislationincludes the law on inheritance, law on agriculture, law on forestry, law on water management, law on land consolidation, law on urban planning, etc. These laws have not necessarily been reconciled with each other or with good international practice and it i s anticipated that some amount o f further legal analysis and redrafting will be necessary. GTZ will be providing international assistance inthis field, but the project will need to provide the local resources necessary for legal analysis and drafting. There are several issues that are still problematic with respect to land administration inBiH. Encroachments onto State land are common and although some o f these could be regularized, others can not because the encroachers occupy protected public land, for example, part o f the road reserve. Illegal development and encroachment i s a serious concern for the authorities and previous attempts to solve the problems have not met with great success. Insome cases it i s the cost o f regularization that i s a problem, being beyond what the property occupiers can afford or are willing to pay, and in others it i s the lack o f development plans validating the current use or difficulty in changing land use categories. There are incentives to avoid registering property sales inorder to avoidpayingtransfer taxes and incentives to avoid the officialbuildingpermitting procedures because o f the number o f liceiises and permits needed and the time and cost o f going through the official processes. There are also concerns that future claims for restitutionmay occur and deprive a person o f the property they occupy, and further uncertainty occurs because most urban land i s still in State ownership even though a building may be privately owned. There seems to be little movement toward privatizing the land occupied by privately-owned buildings and inadequate legislation governing common usage o fmultiple dwellingbuildings and their appurtenant land plots. There are problems in foreclosure o n mortgages, understanding property values and property portfolio management. These uncertainties have an adverse impact on property values, rates o f transaction and revenue from taxes. The Ministries o f Finance inboth RS and FBiHare particularly concerned that the uncertain situation with respect to property rights makes i t difficult to implement a property tax system. The property tax system i s needed to help municipalities to finance their services. The United States Agency for International Development (USAID) has been requested to assist local and Entitygovernment with fiscal policy, and implementation and establishment o f a viable property tax system i s one o f their tasks. As this issue i s linked to property ownership and regularization o f illegal development or encroachment the proposed project anticipates close cooperationwith the USAIDproject indesign o f cadastral information systems and design o f approaches to regularization o f illegal structures. The Policy Development and Project Management Component will have six subcomponents: C1. Planning and development GTZ and/or hiredconsultants will help to analyze the results o fthe data gathered under Component B and undertake any further studies required to prepare action plans dealing with the outstanding issues affecting project objectives, including for example illegal development, encroachments, privatization, restitution and land use and development controls. A portion o f 40 this work will be undertaken inthe form o f a market study which, usingdata gathered under Component B and supplementary survey research, will analyze real estate market dynamics from the perspective o f market professionals and the public, assessing attitudes towards and demand for government services affecting property rights and development. Such government services may include, for example, procedures for land parcel privatization or regularization o f illegal structures. The analysis will be collated and by the end o f 2007 developed into an action program for dealing with illegal development and encroachments. Any regulatory changes needed will be drafted as part o f this action program. The complete action program will be completed by end o f 2008. The human resources required for this subcomponent will be provided primarily by GTZ (see subcomponent C6) and municipalplanning offices. C2. Policy and Legislative ChanPe The results o f sub-component C1 and component B will be utilized while undertakingthe legal review o f the relevant laws - some o f which are likely to require some action during the project period. For example, there will need to be some changes to legislation to accommodate the use of electronic systems (because current laws assume a paper based system) and the use o f electronic signatures and e-commerce or e-conveyancing. It i s possible that during this review some suggested modifications to the law or implementationprocedures dealing with mortgage creation and registration, transaction and property taxes, issuance o fplanning and construction approvals, land privatization rights and procedures and alternative approaches to mediation and resolution o f property-related disputes may be recommended. The implications of a proposed program for restitutionwill be considered.' The full legal framework affecting land administrationwill be considered under this subcomponent. A final policy document and proposals for legislative action will be due by the end o f October 2008. The resources required for this subcomponent will be provided by GTZ (see subcomponent C6) in2006 to 2007 and the follow on assistance providedbybilateral donors expected for 2008- 2009. However, much o f the detailed analysis and drafting will require hiringnational legal consultants and a budget i s allocated for this. C3. Land related revenue USAID has identified a project to address property tax issues in selected pilot localities as part o f their municipal development and fiscal policy program. It will also continue with its existing program to improve municipal governance. Revenue from land may derive from the property tax system, but there i s also revenue derived from property transfer taxes, leasingmunicipal land and property and sales o f municipal land and property. All o f these activities generate funds and require good administration to ensure the best returns from land and property assets. The project will work closely with the USAID project to ensure that these issues are part o fthe final policy framework and strategy for the project. The technical assistance and development o f methodology for property tax systems will be generally guided through the U S A I D project and the GTZ assistance. The project will seek to adapt the design o f the cadastral data system to the Datarelevantto the government's considerationo f the restitution program will be gatheredunder ComponentB. 41 needs o f the mass appraisal, ad valorem property tax system envisionedby the U S A I D project, and the investigative work conducted under Component B will be coordinatedwith the USAID work to ensure that the same locations are selected as pilot locations for USAID's property tax work. The project activity under Component B will include cooperationin gathering data for mass property appraisal. An agreed methodology for mass appraisal and proposals for revenue generation and management o f property, together with any legislative changes necessary are planned to be completed by the end o f 2008. C4. Preparation for phase 2. Duringthe later years o fthe project the results o f all analyticalworks will be taken into account inorder to develop a detailedimplementation plan for the next phase o fwork. This mightbe through another intervention from the World Bank or through BiHfinances, EUor bilateral assistance as identified at that time. C5. Project Manaaement. The project will be managed by the LRUs at the Entity level MOJs as described inAnnex 6. In order to support the LRUs external assistance will be contracted for financial management, procurement and translation so that the World Bank guidelines on Financial Management and Procurement can be applied. C6. Technical Assistance and Training GTZ will provide both international and local project management support. Althoughtheir work will primarily be concerned with managing the Sida, German and ADA funded project they will also be supporting the LRUs at entity level in all aspects o f project management. Monitoring and Evaluation o f project outputs and results will be completed by GTZ in a similar manner to the work they have been doing over the past few years, but with a new focus on the outputs and objectives relating to the Bank funded Land Registrationproject as described inAnnex 3. The monetary value o f the technical assistance has been provided inthe cost tables in order to give a complete picture o f resources beingused. 42 Annex 5: Project Costs BOSNIA-HERZEGOVINA: Land Registration Project Cost By Component and/or Activity Local Foreign Total U S $million U S $million U S $million Component A: Registration 7.111 2.611 9.722 A 1 - Service standards and business plans 0.096 A2 -Working conditions and public areas 3.437 A3 - Conversion o f apartment data 1.344 A4 - Data entry and reconciliation 3.008 A5 - Technical assistance andtraining 1.837 Component B: Cadastre 5.162 3.895 9.057 B 1 - Service standards and strategy 1.242 B 2 - Systematic mapping and situation analysis 2.736 B3 - Digitizing maps 1.670 B4 - Information Communication Technology 1.335 B5 - Technical assistance and training 2.074 Component C: Policydevelopment and project 1.188 1.506 2.695 management C1- Planning and development 0.100 C2 - Policy and legislative change 0.150 C3 - Land related revenue 0.000 C4 - Preparation for phase 2 0.000 C5 -Project management 0.938 C6 -Technical assistance andtraining 1.506 Total Baseline Cost 13.462 8.012 21.474 Physical Contingencies 0.373 0.208 0.581 Price Contingencies 0.525 0.3 14 0.839 Total Project Costs' 14.360 8.534 22.893 Interest during construction 0 Front-endFee 0 Total FinancingRequired 22.893 43 Annex 6: ImplementationArrangements BOSNIA-HERZEGOVINA: Land Registration Advisory and CoordinationBoard On Issues of LandAdministration Broadrole. An Advisory and Coordination Board for Land Administration ("Advisory Board") will be created with participation o f each entity and the State government. The Advisory Board will provide advice to the project implementing agencies regarding immediate issues o fproject implementation, but also provide a forum for discussion o f broader land administration issues affecting the long term project objectives. Consisting o f highlevel government officials having experience and interest inthe land administration sector, the Board will provide stakeholders with the opportunity to express institutional views regarding project implementation, and to discuss and resolve institutional conflicts. Members o f the Boardwould be expected to represent the needs o f the project within their own Ministries and organizations and assist infacilitating coordination o f official action in support o f the project. The Board could serve to bringsome uniformity to the approaches taken by the two entities by sharing best practice ideas and experiences, and provide the basis for a permanent system o f agency and entity consultationon land administration matters. While the immediate impetus for its creation i s the Land Registration Project being directly financed by the World Bank and supported by GTZ technical assistance and training (financed by Sida, Germany and the Government o fAustria), the Advisory Boardwill also be available to provide similar assistance to relevant land-related initiatives o f other donors such as USAID's plannedwork on property taxation. The existence o f the Advisory Board i s likely to facilitate future interest by the EU inproviding support to BiH for the development o f land administration resources and policy, provided that it would continue to function after the completion of the World Bank project. Projectrole. Project specific assistance providedby the Advisory Boardwill include: 0 Discussion and guidance on proposals for policy and legislative reform and harmonization; 0 Facilitationby individual Advisory Board members o f required follow-up intheir respective government agencies and entity parliaments; 0 Review and discussion o f quarterly reports and other presentations o f the entity-level Land RegistrationUnits (LRUs) on project progress; 0 Provision o f feedback and guidance to the LRUs on overall project progress; 0 Coordination o f actions requiring an integrated or harmonized approach across entities, such as software development and service standards; 0 Policy dialogue with Bank staff, GTZ advisors, and other concerned donors. Membership.The Advisory Boardwould comprise 0 for each entity, one representative from the Ministry o f Justice, . Ministryo f Finance, Ministry o f Planning and Urban Development (or equivalent), and Geodetic Administration. 0 Inaddition Advisory Boardmembers would include one representative each from the 44 ... State Ministry o f Finance, State Ministryo f Justice, and HighJudicial and ProsecutorialCouncil (HJPC).' 0 LRUrepresentatives will participate inmeetings butina non-voting capacity As a neutral party, the representative from the State Ministryo f Justice would serve as chair and additional Members o f the Board could be appointed, with IDA prior approval, following resolution o f the Coordinating Committee for Economic Development and Integration or the Council o f Ministers. The Advisory Board members will need to be able to have sufficient time and professional background to be able to participate actively and regularly inthe quarterly meetings, and be sufficiently senior to have the necessary decision-making authority. Formation. The Advisory Boardhas beencreated by resolution o fthe Coordination Committee for Economic Development and EUIntegration and the most o f the members have been appointed. An organizational meeting should be held duringApril 2006. Logistics. The Advisory Boardwould meet quarterly. Travel andper diem expenses o fmeeting participants would be eligible for financing by the IDA Credit, provided they are consistent with established norms. Staff assistance to the Advisory Board will be provided by the State Ministry o f Justice either from within its Ministry or as delegated from another government agency, and the State Ministry o f Justice would be authorized to accept financial and other assistance to support the work o f the Board from foreign donors. ProjectImplementationUnit Organizationallocation and staffing. Land RegistrationUnitswill be established ineach entity. Each LRUwill be a unit within the entity-level Ministry o f Justice and headed by an MOJ staffpersonwho will work full-time on land registration and relatedproject activities. The LRUmay also include additional full or part-time seconded staff from the MOJas well as from the Geodetic Administration. Based on the experience o f other countries, the overall staffing o f the LRUi s likely to grow as the level o f project activities increase. All M O J and GA staffwill work on the project as regular government employees in accordance with their normal government employment conditions, and their salaries and benefits will not be eligible for Bank financing. Inaddition to regular government employees, the LRUs will include persons contracted for the duration o f the project only, with IDA financing, to provide administrative support. Permanent government positions for this support are not required nor appropriate, since these functions would not continue after the project i s completed. The contracted administrative support positions include a Financial Manager, a Procurement Specialist, an Accountant/disbursement officer who will also provide general office support, and the services o f a translator/interpreter as required. It has been agreed with the M O J o f each entity that the core staff o f the MOJ's LandRegistration Unitwill serve also as the project implementationstaff, as discussed further below. 7 HJPC needs to be represented on the LPSC because o f its legally mandated responsibilities inoverseeing the courts (where the land registries are located) and incoordinating the information technology ofthe courts. 45 Responsibilities. The responsibilities o f the LRUinclude day-to day logistical, administrative, and technical management o f all project activities. Specific responsibilities comprise: Preparation o f annual activity plans, updating o f the Project Implementation Schedule and budgets for each component consistent with detailed designs, standards, and guidelines developed with the technical assistance support Ensuring that all activities are carried out efficiently and on schedule, and ensuring that communication and coordination functions smoothly among all parties involved in specific project activities Monitoringo f all project activities and their results Preparation o f quarterly Financial Monitoring Reports and Project Progress Reports as required by the World Bank and the respective entity governments. Carrying out financial management in accordance with the job descriptions o f the Financial Manager and the Financial Management Manual. Making arrangements for auditing as necessary Preparation o f all tender documentation and ensure that procurement activities are in line with the detailed designs, standards, and guidelines developed with technical assistance support, and otherwise fulfilling the job description o f the Procurement Specialist. This will include arranging for a unified tender across entities where required. Operational level liaison with other government agencies that have an interest in various aspects o f the project Liaison with all donors directly supporting or otherwise interested in the project, and, in particular, with Sida, the Government o f Austria, USAID, and the EU Communicating about the project with the public, the media, and key stakeholders, and exchange information on experiences with other similar programs, both nationally and internationally. Providing support for Bank supervision missions and liaison with Sarajevo-based Bank staff Ensuringrepresentatives participate inthe Advisory Boardmeeting ina non-voting capacity Ifso decided, providing secretariat services for the Advisory Board, on a rotatingbasis with the LRUo fthe other entity. GTZ support. GTZ anticipates that it will provide ongoing advice and training to eachLRU. GTZ support will include capacity development intechnical and legal aspects and inmonitoring and evaluation, as well as initial logistical support prior to project effectiveness. Longterm role of the LRUs. It is envisaged that the LRUwill serve as a permanent unit within the MOJwhich will continue to oversee and coordinate land registration activities (e.g. compliance with service standards, entity-wide monitoring, policy development) after project completion. Roles envisioned for the LRUs include: advice and guidance to the courts and registry offices on substantive issues o f property and registration law; development o f modern business management capacities inthe registrationoffices; serving as a repository and disseminator o f "best practice" information; analysis o f issues and trends inregistration and cadastre practice; and development o f proposals for regulatory and legislative development. The LandRegistrationContractors. Under Component A, individuals will be hiredat local offices to review land records, compare them with cadastre records and enter relevant information into the registration system software. I t i s envisaged that over 70 to 80 people will 46 be recruited for this work and a further 11persons will be recruited as regional coordinators to monitor the work o f the task force and ensure good quality control. Training and supervision o f the task force and coordinators will be provided by GTZ. CadastralMappingand Survey work. Under Component B, the surveying and cartographic work required to produce the cadastral maps and detailed maps showing the current occupation will be contracted inlots to the private sector. It is envisaged that there will be 8 separate lots. Digitizingwill require recruitment o f companies to undertake the work and deliver the final product to the GAS. Cooperationwith other agencies. The survey and mapping work under Component B and the resulting analysis and policy decisions under Component C will require cooperation and coordinationbetween the MOJ and GA with local municipalities and the Ministries o f Urban Planning. It will also require close cooperationwith U S A I D and U S A I D contractors who are working to improve property tax systems and local governance. This will be accomplished through regular meetings and inclusion inworkshops. Supervision missions from the Bank will include these Ministries and USAID intheir regular monitoring. 47 Annex 7: FinancialManagementand DisbursementArrangements BOSNIA-HERZEGOVINA: LandRegistration Financia1Management 1. Summary of the FinancialManagementAssessment ExecutiveSummary and Conclusion An assessment to determine whether the financial management arrangements for project implementation Units within the entity Ministry o f Justices (MoJ) for the Land Registration Project are acceptable to IDA was undertaken in December 2005. Project management will be the responsibility o f a Land Registration Unit (LRU) established within the MOJ at Entity level. The assessment concluded that LRUs currently satisfy Bank's minimum financial management requirements. Both entity MoJs have established the LRUs, appointed staff including fiduciary staff in the LRUs, and developed financial management procedural manuals. A summary o f financial management assessment and conclusions are as follows: (will be completed once LRUs are established and stage4 Financial Management Assessment Rating Comments 1.Implementing Entity Marginally LRUsare newly established-have no prior satisfactory experience inimplementing Bank projects, are mainstreamed in the ministries and will needcareful supervision to ensure that there are no undue bureaucratic delays 2. Funds Flow Marginally Counterpart funds are problem though Satisfactory situation has improved inthe recent past - however the uncertainty surrounding the budget for 2006 raises some concerns about timely availability o f counterpart funds. 3. Staffing Satisfactory Experienced Finance Managers, who are involved in several Bank-financed projects 4. Accounting Policies and Procedures Satisfactory 11Although Financial Management Manual has outlined standard control procedures, actual implementation will need to be carefully monitored considering the nature o f LRUs. 5. Internal Audit N.A. The Entities do not have any internalaudit arrangements though EMSAC envisions enactment o f satisfactory internal audit laws. 6. External Audit Satisfactory External audit arrangements inBiHhave worked well. 7. Reporting and Monitoring Satisfactory II LRUs have implemented reliable financial software capable o f generating required renorts. 8. Information Systems Satisfactory I Asabove 48 OVERALLFINANCIAL Satisfactory MANAGEMENT R.4 TING Detailed financial management assessment questionnaires are included in the project files. A report on the Review o f Financial Management System i s also included inthe project files. CountryIssues A Country Financial Accountability Assessment (CFAA) for BiHwas carried out in2001. The CFAA identified systemic and structural weaknesses in public sector budgeting, accounting, reporting, and auditing. However, there have been several positive developments in the past three years, most notably, implementation o f a fully automated treasury system across all the Cantons in the Federation and all the regions in the Republic. The introduction o f the on-line treasury system has brought about a major improvement in the accounting and reporting o f budget execution at the State, entity, and cantonal levels. The Country Financial Management Strategy (CFMS) envisages mainstreaming o f project management into Ministries and Departments, and abstain from creating stand-alone Project Implementation Units (PIUs) outside the ministries for implementing Bank-financed projects. This project accordingly will use the LRU(established to manage Land Registration for the Ministry)for the purposes o f coordinating the implementation o f this project. 2. FinancialManagementAssessment (a) ImplementingEntities The IDA credit would be provided to the Government o f BiH (State), and it would actually be disbursedby the LRUs. The LRUwill prepare and carry out financial management, supervision, reporting, and evaluation during the project implementationperiod. The LRUDirector reports to the Entitylevel MoJ. All payments to suppliers, contractors, and consultants would be made by the LRU, which would review and verify supporting documents before making such payments. This would ensure project funds are paid after thorough scrutiny and multiple reviews. The LRUs have neither previous experience in implementing a Bank-financed project nor exposure to the fiduciary requirements o f the Bank. The risk associated with the implementing entities i s moderate. (b) Funds Flow The total project expenditures would be U S $17.125 million equivalent, o f which US $15 million would be financed from the IDA Credit, and U S 2.125 million from both the entities. A Designated Account would be established in both the entities, which would be held in a commercial bank acceptable to IDA. Also, the LRUwould maintain local accounts for payments in local currency. Local bank balances, by way o f transfers from the IDA foreign currency Designated account, o f more than 4 weeks' expenditures, inprinciple, will not be allowed. LRUs will also open local bank accounts for counterpart funds to be deposited by the respective entity government. 49 The LRU would be responsible for making all payments directly to the contractors, suppliers, and consultants. Availability o f counterpart funds was a major concern in the past. However, the situation has improved considerably in the recent past with the introduction o f treasury single account and automated treasury system, which has improved cash management capacity within the entity treasury departments. The uncertainty surrounding the enactment o f 2006 budget raises concerns about immediate availability o f counterpart funds for the project. Flow o f funds charts and related documents in the respective Financial Management Manuals form the basis for the project accounting procedures, and describe all tasks involved in the flow o f funds and accounting. The administrative procedures for the flow o f funds would be established inthe LRUand documented inthe Financial Management Manual. The risk associated with flow o f funds i s considered moderate. (c) Staffing The LRU finance and accounts f h c t i o n i s headed by a consultant specially appointed for this purpose. Both the LRU Finance Managers have extensive experience in implementing Bank- financed projects, in preparing regular project financial reports, and in anticipating audit requirements. Appointment o f an accountant or cashier i s not envisioned in the immediate future considering the limited scale o f transactions. Payment authorizations described in the flow o f funds diagrams are designed to ensure proper segregation of duties between the Director, procurement and financial staff. All payment orders would requirejoint signatures. The risk associated with staff - given the consultant nature o f appointment o f the FM staff - i s moderate - intensive financial management supervision in the first couple years o f project implementation would be undertaken. (d) Accountingand ReportingSystem GTZ has procured and installed a financial accounting and reporting software ( developed by the Federation Sustainable Development Foundation (FSD) using Microsoft Access@) and called FMS) that i s successfully used in several Bank-financed projects in BiH. The software has necessary capabilities to produce the required reports and maintain a trail o f transactions in verifiable manner. The chart o f account in the accounting system, classified by component and reflecting the sources o f funds and broken down into different types o f expenditures for the project, will need to be created for the project. The software i s capable o f providing information on the receipt and use of funds and produce financial reports comparing budget with actual expenditures at any given time. It has adequate security levels and meets the Bank's minimum reporting requirements. These arrangements are considered satisfactory to the Bank and the risk associated with it i s negligible. 50 (e) AccountingPolicies and Procedures Accounting procedures are set out in the Financial Management Manuals. The manual contains procedures for flow o f accounting information, invoice verification procedures, payment controls, and reporting formats. The manual i s satisfactory and the risk associated with the accounting policies and procedures i s negligible. (f) InternalControls The Project Financial Management Manual describes various internal controls including verification and payment procedures, segregation o f duties, regular reconciliation, regular reporting etc. All procurement for the project will be undertaken following acceptable Bank procedures - major hardware and software will be procured using ICB procedures. All invoices will be verified by users or ultimate beneficiaries as regards quality o f goods or works or services and then by the finance manager for compliance with the contractual terms. All payments will be made after prior verification by the LRU director. All payments will be made directly to the credit o f the supplier bank account. Regular bank reconciliations will be prepared and verified by the LRUdirector. The risk associated with internal controls, based on documented procedures, i s moderate. Actual implementation o f procedures will be reviewed during FM supervision. (g) Planningand Budgeting LRUwill prepare annual plans based on projects implementationprogram. (h) Audit reportsfor the previousyears As the LRUis a newly established unit within the MOJ, there are no previous audit reports to be reviewed. 3. Audit Arrangements Internal Audit. Since MoJ is part o f the government set-up, it is subject to an audit by the respective Supreme Audit Institution o f the entity. Currently, neither entity has enacted law on internal audit inthe public sector, though it i s EMSAC conditionality. However, establishment o f internal audit units within ministries i s a long term process and has not been factored into while assessing internal control environment for the project. External Audit. The project financial statements will be audited annually using acceptable auditing standards and by acceptable independent auditors. Audit arrangements for the entire portfolio are handledby the Government o f BiH (State) instead o f by each project authority. The State Ministry o f Finance and Treasury (MoF&T) o f BiH has a three-year contract (2004-2006) with an international audit firm for auditing all WB-financed projects (with the exception o f revenue-earning projects). According to the master audit agreement, audited project financial 51 statements would be sent to the Bank within six (6) months o f the end o f the fiscal year. Audit reports include opinions on the project financial statement (including statements o f expenditures), the Designated Account, and on the LRU's internal control arrangements and cover all financial sources (IDA, Trust Funds, counterpart funds, etc.). The umbrella audit agreement has ensured submission o f timely audit reports. The global audit arrangements have worked well and are satisfactory to the Bank. The auditors would audit consolidatedproject financial statements and issue management letters. The Terms o f Reference used would be the standard TORissued by the BiH State MoF&T. The first audited project financial statements and an audit report from the beginning o f the project until December 3 1, 2007 are expected by June 30,2008. 4. Reporting and Monitoring. The LRUs would maintain separate financial records for the Project and would ensure appropriate accounting for the fhds provided. They would prepare and submit quarterly Interim Financial Reports (IFR) in agreed formats. The IFRswould include: 1. Project Sources and Uses o f Funds Statement 2. Uses o f Funds by Project Component Statement 3. Project Balance Sheet 4. Designated Account Statement Plus Local Bank Account Statement 5. Output MonitoringReports 6. Procurement Process Monitoring (consultants) 7. Procurement Process Monitoring (Goods and Works) 8. Reconciliation o f Credit Account balances Format o f Financial Statements: The LRU would also prepare annual project financial statements in the format already agreed between the Government o f BiH and the auditors, which have been found consistent with the IFRs and acceptable to the Bank. 7. FinancialRisk Analysis From a financial management perspective, the proposed Project i s considered medium risk project. A summary o f the consolidatedrisk assessment for the project i s as follows: I Risk 1Rating I Comments I Inherent Risk 1. Country FinancialManagement Risk High Based on CFAA, there i s generally low financial management capacity and accountability inpublic sector. 2. Project Financial Management Issues Moderate New LRU, complex coordinationbetween LRUs. 3. Banking sector Moderate 1Liquidity & credit risks ina developing banking sector. 52 4. Perceivedcorruption High CFAA notes pervasivecorruption at all levels of the economy. OverallInherent Risk His@ Contro1Risk 1~ImplementingEntity LRUs are newly established-havenoprevious experienceinimplementing Bank-financed projects -areanintegral-partoftheMoJs-proneto - possiblebureaucraticdelays 2. Funds Flow Moderate Availability of counterpart funds has improved in the recentpastbut uncertainty surrounding2006 The following financial management risks could adversely affect project implementation: (i) High corruption. During 1999 and subsequently, concerns have been raised concerning fraud, waste and abuse o f donor funds in BiH. This has been reported in the following studies: (a) The 2001 Corruption Diagnostic Report o f the World Bank., (b) The 2003 CFAA reports an environment o f pervasive corruption at all levels o f the economy and governments, and (c) The 2005 Business Environment and Enterprise Performance Survey (BEEPS) conducted by the World Bank and the European Bank for Reconstruction and Development (EBRD) demonstrates that BiH, though has improved its ranking in terms o f corruption index, i s still at the bottom half of ECA countries. Even though the project i s to be implemented in an environment o f perceived high corruption, the risk that Bank funds will not used as intended i s judged as manageable for a number o f reasons - all high value contracts will be prior reviewed by the Bank, direct involvement o f GTZ in working with the MoJs, and intense Bank supervision, at least in the initial years. Furthermore, the project has identified several steps indicated below, to minimize the risk o f misuse o f Bank funds. (ii) Possible misuse of project funds by LRUs. The risk of misuse will be minimizedinthe following ways: Technical assistanceprovided by GTZto support implementation o f the project. Advisory and Coordinating Boardfor Land Administration will meet at least quarterly providing uniformity to the approaches taken by the two entities. Disbursements will be based on traditional withdrawal procedures (rather than report based disbursements). and 53 0 Intensive supervision by the World Bank. Overall supervision, including procurement and FMsupervision, will be undertaken on a regular basis by Bank staff. The overall financial management risk for this project i s considered to be moderate. Adequate measures will be taken by the LRUs to ensure all financial risks that are identified are properly addressed and reflected in the project financial management manuals. The risks would be continually evaluated and appropriate remedial measures taken during Bank's supervision missions. 8. DisbursementArrangements It is expected that the proceeds o f the credit would be disbursed over a period o f six years (2006 through 2011). Disbursements from the Credit would follow the transaction-based method, i.e., the traditional Bank procedures including reimbursements with full documentation, Statements o f Expenditure (SOE), direct payments and special commitments. Disbursements from the Credit proceeds would be administered by the LRUs. LRU will be responsible for retaining supporting documentation for SOEs and making it available to IDA supervision missions and to the auditors. The table below shows the Categories of items to be financed out o f the proceeds o f the Credit, the allocation o f the amounts o f the Credit to each Category, and the Percentage o f Expenditures for items so to be financed in each Category. 54 Table :Allocation of Grant Proceeds ExpenditureCategory Amount in US$million FinancingPercentage Part A of the Project (The Federation) Goods, Works, Consultant services and Operating Costs 8.8 nillion 88% 8.8 million Subtotal PartB.of the Project (Republika Srpska) Goods, Works, Consultant services and Operating Costs 6.2 nillion 88% Subtotal 6.2 millioii Total 15 nillion Use of statements of expenditures(SOEs): Replenishment applications should be submitted on a monthly basis and must be fully documented and supported by statements and reconciliation statements. SOE disbursements should be made for: (i) contracts for individual consultants valued at less than U S $50,000; (ii) contracts for consulting firms valued at less than U S $100,000; (iii) contracts for goods costing less than U S $100,000; and (iv) training workshops and study tours, audit fees, and incremental operating costs. The minimum size o f application for direct payment withdrawals and the issuance o f special commitments from the Credit account would be 20 percent o f the Authorized Allocation to the Designated Account. This documentation would be made available for the required audit as well as to IDA supervision Missions, and would be retained by the implementingunits for at least one year after receipt by the Bank o f the audit report for the last fiscal year inwhich disbursement was made. Designated Account: To facilitate timely project implementation, the respective recipients would establish, maintain and operate, under terms and conditions acceptable to the Bank, Designated Accounts, to be denominated inEuro. The initial authorized allocation for the Designated Account for each LRUi s Euro 400,000. 9. SupervisionPlan The frequency o f supervision would be dependent on the Project's risk rating. However, during the initial stage o f the project, considering the moderate risk profile o f the project, intense 55 supervision efforts would be ensured. During supervision missions, project's financial management and disbursement arrangements (including a review o f a sample o f SOEs and movements on the Designated Account) would be reviewed to ensure compliance with the Bank's minimumfiduciary requirements. The CountryFMS would review the IFRs for the projecton a regular basis andthe results andor issues would be followed up during the supervision missions. The Audited Project Financial Statements for the LRU would be reviewed and identified issues would be followed up with the LRU. 56 Annex 8: ProcurementArrangements BOSNIA-HERZEGOVINA: LandRegistration A. General Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement Under IBRDLoans and IDA Credits" dated M a y 2004; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers'' dated M a y 2004, and the provisions stipulated inthe Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loadcredit, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreedbetween the Recipient and the Bank inthe Procurement Plan. The Procurement Planwill be updated at least annually or as required to reflect the actual project implementationneeds and improvements ininstitutional capacity. Procurement of Works: Works procured under this project would include renovations to registration Offices and Office refLirbishment. To the extent possible, contracts for these works will be grouped into bidding packages estimated to cost more than US$ 500,000 equivalent and procured following International Competitive Bidding (ICB) procedures, using relevant Bank- issued Standard Bidding Documents for procurement o f works. Contracts for works which cannot be grouped into larger biddingpackages and estimated to cost less than US$500,000 per contract may be procured usingNCB procedures based on bidding documents for procurement o f works satisfactory to the Bank. Procurementof Goods: Goods procured under this project would include off-the-shelf goods, including office and computer equipment o f standard specifications, office supplies and operational expenditure items required by the PIUs. To the extent possible, contracts for these goods will be grouped into bidding packages estimated to cost more than US$ 100,000 equivalent and procured following International Competitive Bidding(ICB) procedures, using relevant Bank-issued Standard Bidding Documents for procurement o f goods and One-stage- bidding ICB procedure for procurement IS items usingrelevant Bank-issued Standard Bidding. Contracts for goods which cannot be grouped into larger bidding packages and estimated to cost less than US$lOO,OOO per contract may be procured using shopping procedures based on a model request for quotations satisfactory to the Bank. Procurementof non-consultingservices: Non-consulting technical services, such as Survey and mapping and other, should the need arise during project implementation, will be procured following the above spelled arrangements for Procurement o f Works. Selection of Consultants: Consulting services from firms and individuals required for the project will include technical assistance to participating State and Entities institutions, development o f communication activities, studies, surveys, training, seminars, workshops and study tours. 57 Firms Contracts with firms estimated to cost US$lOO,OOO equivalent or more will be procured using Quality and Cost-Based Selection (QCBS) procedures and the relevant World Bank Standard Request for Proposals (RFP). Small and simple contracts estimated to cost less than US$lOO,OOO equivalent will be procured using Consultants' Qualifications Selection (CQS), Selection under a Fixed Budget (FBS), or Least Cost Selection (LCS) procedures. Ina case by case basis and with Bank's approval, CQS could be used for contracts estimated to cost more than US$lOO,OOO, but less than US$200,000. Single-source selection o f firms will be allowed only with the previous approval of the Bank and under the exceptional cases described inParagraphs 3.9 through 3.13 o f the Consultant Guidelines. Individuals Services would be provided by individual consultants selected by comparison o f qualifications o f three candidates and hired in accordance with the provisions o f paragraphs 5.1 through 5.3 o f the Consultant Guidelines. In case o f direct invitation (not publicly advertised), the list o f individuals to be invited to submit CVs should be determinedby a committee or commission. Sole-source selection o f individual consultants will be allowed only with the previous approval o f the Bank and under the exceptional cases described inParagraph 5.4 o f the Consultant Guidelines. Short lists o f consultants for services estimated to cost less than US$lOO,OOO equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines. Universities and research centers, as well as government officials and civil servants inthe Recipient's country, my be hired as consultants only when they meet the eligibility criteria set forth inparagraph 1.11o f the Consultant Guidelines. OperatingCosts: Operating costs generated by project implementation, including the day-to- day operating cost for office maintenance, supplies and consumables, and incremental costs of operating and maintaining the equipment provided under the project, other sundry items, recurrent cost o f the implementing agency directly related to project implementation, would be financed by the project. B. Assessment of the agency's capacity to implement procurement An assessment o fthe capacity o f Entity Ministries of Justices, within which the implementing units will act was carried out by the Procurement Analyst based at the WE3 Sarajevo CO and concludedhalized on January 16, 2006. The assessment reviewed the organizational structure for 58 implementing the project and the interaction between the project's staff responsible for procurement inthe units and the Ministry. However, most o f the issuedrisks concerning procurement management for implementation o f the project have been already identified and include: (i)there i s little procurement capacity in the ministry; (ii) current administrative structure o f the country is complex and does not lend itself the for taking advantage o f economies o f scale; (iii) there i s a new procurement law in line with European Union procurement regulations, but it has not been effectively applied and the new system together with its enforcement are not in place. The capacity and culture for implementation o f the new law are not in place. In the above described business environment, attempts to exert political or administrative influence in the outcome o f competitive procurement processes, and even corrupt practices, are a real probability. The following measure i s envisaged to mitigate these risks: The Entity Ministry o f Justices will employ procurement specialists as consultants to help the project implementation. The services o f this consultant will be paid from the LR Credit proceeds and will be procured under terms o f reference acceptable to the World Bank. The overall project risk for procurement under the project i s rated as high. However, this i s a country, rather than a project-specific issue. Procurement under previous and ongoing Bank- financed projects have systematically been rated as Satisfactory on PSRs. C. ProcurementPlan A Procurement Plan for project implementation is developed and agreed with the Recipient. It provides the basis for the procurement methods. This plan i s going to be agreed between the Recipient and the Project Team during appraisal o f the project. It will also be available inthe Project's database and in the Bank's external website. The Procurement Planwill be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. D. Frequency of ProcurementSupervision Inadditionto the prior review supervisionto be carriedout from Bank offices, the capacity assessment o f the Implementing Agency has recommended supervision missions to visit the field every six months to carry out post review o f procurement actions. 59 E. Detailsof the ProcurementArrangements InvolvingInternationalCompetition 1. Goods, Works, and Non ConsultingServices (a) List o f contract packages to be procured following ICB and direct contracting: 1 1 1 2 3 1 4 1 5 6 7 8 Ref. Contract Procurement P-Q Domestic Review Expected Comments No. (Description) Method Preference by Bank Bid- (yedno) (Prior / Post) Opening Date A4, IT system ICB" NIA N o Prior Sept 2007 B 4 developme nt A2, IT ICB N/A No Prior Feb 2007 B4 Hardware A4, Archive ICB NIA N o Prior N o v 2006 B4 Furniture (b) ICB contracts estimated to cost above US$lOO,OOO per contract and all direct contractingwill be subject to prior review by the Bank. * It will be lStprocurement method. ICB 2. ConsultingServices 1 1 (a) List o f consulting assignments with short-list o f international firms. 1 2 3 4 5 6 7 Ref. No. Descriptionof Estimated Selection Review Expected Comments Assignment Method by Bank Proposals (Prior / Submission Post) Date ~ A4, B 4 ITIIM 212,000 QCBS Prior Sept 2006 Strategy ~ ~ c 5 Audit 66,000 LCS Prior Feb 2007 B1,A1 Development 102,000 QCBS Prior Feb 2008 o f e- commerce solution (b) Consultancy services estimated to cost above USS100,OOO per contract and single source selection o f consultants (firms) for assignments estimated to cost above US$50,000 will be subject to prior review by the Bank. 60 Annex 9: Economic and FinancialAnalysis BOSNIA-HERZEGOVINA: LandRegistration Importanceof property rightsto economic growth. Economic growth is highly dependent on the ability to occupy and use real estate for production, residence, and as security for investment capital. Infully developed economies it has been estimated that at least 20%, or more often between 50% and 80%, o f GDP i s generated through the ability to utilize real estate inthese ways. It i s therefore imperative that a secure and publicly accepted means o f registering and protectingproperty rights and transactions with property i s inplace. Main economic benefits. As with similar land administrationprojects, the mainbenefits from a reliable and efficient system for verifying rights inimmovable property include the following: Increased security o f tenure, which increases the incentives to invest, and often provides better access to credit Improved allocation o f land and real estate assets inways which better optimize their productive use, as well as facilitating the development o f financial markets Decreased wasteful transaction costs (both direct and opportunity costs) o f defendingpoorly defined or poorly enforced property rights, and o f carrying out land-related transactions inan inefficient and/or non-transparent system. Improvingaccess to land assets and land administration services by people who mightbe restricted or otherwise disadvantaged ina less transparent system or a system that i s rationed by non-market factors (e.g., political favoritism) Improvedpublic sector management associated with improved governance, improved land use planning and management, and increased public revenue resulting from increased transparency and accountability, the improved land administration and fiscal cadastre information base, increased land asset values, and increased volume o f land transactions. Current CountryEconomy Context. BiHis well-placed to receivebenefits from land registry improvements. Real GDP growth o f BiH increased to 5.7 percent in 2004. However costs o f business creation and development, including those associated with the problems inthe land registry, constrain BiH from achieving its full potential ineconomic growth. Business establishment costs 5 1.8% o f per capita income, more than double the ECA average and three time the amount required inneighboring Croatia. In addition to the land registry support, the policy work on the land use regulatory framework should directly reduce business entry costs. The project will also help to streamline the banltruptcy and liquidation process, as well as facilitate more ethically sound privatization, thereby reducing unfair competition from subsidized government enterprises. Quantitative assessment. Problems in attribution and inselecting assumptions about the other factors which affect economic growth make specific estimates o f the overall impact on growth speculative and difficult to verify, and therefore are not being attempted for this project. However, most economists agree that the incremental impact on economic growth o f an improved land registration system, even if it i s operational for only 75% o f all properties (conservatively assuming 25% face problems that cannot be easily rectified), i s likely to be significant. Furthermore, as indicated inthe results framework, specific benefits which lend themselves to quantitative measurement, such as average transaction costs and total public 61 revenue from land transactions, as well as intermediate indicators such as the number o f folders inthe registry, will bemonitored throughout theprojectperiod. Pre-project situation regarding transaction costs. The Customer Survey o f the Social and InstitutionalAnalysis found that about half the respondents visited the land registry office some 2 to 5 times to resolve a specific transaction, that some 13% made between 6 and 10 visits, and that some 11%made more than 10 visits. Each visit averaged about 50 minutes, but duration varies by location, with long delays particularly common in Sarajevo. Some 13% o f the respondents admitted to make informal payments in order to resolve issues, which averaged about one third o f their direct cash costs. Due to the sensitivity about corruption, this estimate i s likely to not fully reflect the incidence o f bribery. The service standards to be introduced under the project should significantly reduce the opportunity cost o f client time, as well as the incidence o f bribery. Relationship to poverty. The project will not target poor people, but in addition to the benefits associated with economic growth, poor and other disadvantaged people are likely to particularly benefit due to the project's emphasis on improved access to services and information, efficiency (hence lower direct and other costs), consistent standards, and accountability. Currently, problems inthe land registry system significantly disadvantage poorer property owners. Such owners sometimes cannot afford suppoi-t for lawyers or brokers, or the unofficial "gifts" to officials that are often necessary to obtain timely service or even to complete transactions at all. The opportunity costs interms o f lost wages o f multiple trips to registry offices may represent a significant portion o f their income, requiring sacrifices innon-discretionary expenses. They have less access to information about land administration procedures, and less bargaining power due to their poor access to land administration data. They are generally unaware o f the availability o f legal aid services. As a result o f all o f these problems, poorer property owners are less able register their rights or carry out property transactions. The Customer Survey also found that there i s a widespread perception that land registry and cadastre offices do not treat clients equally - those with personal or political connections receive much better service, and that poor people particularly lack access to services and information. The survey also found that the land registry and cadastral office clients believe some 5% o f clients have been discriminated against because of their ethnic heritage, and some 5% o f clients have been discriminated against because o f gender. It found that clients believe that some 10% o f refugees have experienced discrimination. There i s also anecdotal evidence from UNHCR that refugees also are disadvantaged in accessing land administration services. A follow-up social assessment at the mid-term review will assess changes in customer service performance, including aspects which particularly affect disadvantaged groups. Current performance of registry offices. Current land registry fees collected annually throughout BiHtotal less than U S $1.6 million, compared to estimated registry office annual operating costs of less than U S $ 2.6 million per year. The fees average about US$ 52 per contract and U S $ 4 per extract. Current registry fees vary by Federationcanton and the RS from 2-40 KMper request, 4-100 KMper entry, 2-40 KMper notation ofjudicially enforced receivership, 2-40 KMper priority ranking, and 2 -10 KMper extract. According to USAID analysis, most contract requests take at least 30 to 90 days to complete. Furthermore there i s a growing backlog of pending requests, probably totaling over 200,000. The current poor service 62 undermines client willingness to use the registry system, and many transactions therefore take place informally. Inthe Customer Survey, respondents said they would not mindpaying more if they were provided with fast and accurate service and advance information on all the charges and taxes, and their purpose. 0 Project targets for registry offices. Project resulttargets include reduction o f the processing time to less than 24 hours for 95% o f all cases inregistry, elimination o f the backlog, revision o f the fee structure to ensure consistency across registry offices, office operation in accordance with business plans which would ensure cost recovery o f operational expenses, and an increased transaction volume associated not only with increased efficiency and quality o f outputs, but also with having 2 million folders (instead o f the current 150,000 folders) entered inthe registry. Fiscal impact of project. The revision o f the service standards and fees, combined with improved performance and a dramatic increase inthe volume o f transactions will ensure that after the project (2011) the land registry offices operate on a full cost-recovery basis for each entity as a whole (there may be some cross-subsidization between urban and rural areas), a fee rates that encourage full participation in the registry system. Experience in other countries, in fact, demonstrates that well functioning registry systems usually generate surplus revenue even with low fees unless explicitlyprohibited from doing so by government policy. To fully recover not only the operating costs but also the costs o f repaying the IDA credit from revenue directly associated with land transactions, the revenue from the combination o f land registry fees, transaction taxes, and cadastral fees would need to be some US$ 860,000 above operating costs (of the registry offices and the cadastral agencies) by 2016 (when the IDA credit would begin to be repaid), something which will be achievable assuming more than 100,000 transactions annually (5 %) on more than 2 inillioii folders which are expected to be inthe registries by that time, even ifthere i s not a follow-on project. This calculation does not even include the incremental revenue generated before 2016 (before the IDA Credit begins to be repaid), nor the additional tax revenues associated with a higher rate o f economic growth. At a more general level, the project will contribute to a range o f public finance reform priorities, including 0 Reducing the tax burden, while iiicreasing total revenue 0 Increasing the productivity o f government employees Rationalizingthe mix o f expenditures through establishment and implementation o fbusiness plans for registry and cadastral offices improving the efficiency, transparency, and accountability o fbudget preparation, execution and reporting, and strengthening intergovernmental fiscal policy through improved coordination among levels o f government, and resolving mismatches between expenditure responsibilities and local revenue capacities. 63 Annex 10: SafeguardPolicyIssues BOSNIA-HERZEGOVINA: LandRegistration EnvironmentalAssessment (OP/BP 4.01) The proposed project i s classified as Category B, although potential risks o f the project are very modest. Any adverse environmental effects o f the project will be minor and indirect. Other than renovation o f office space, the project will not support civil works, land conversion, resource extractions or any other activities that could potentially damage the environment. Project i s expected to be positive from an environmental standpoint. Based on the experience o f similar land administration projects, the increased tenure security and improved land allocation i s likely to induce environmentally positive behavioral changes among property owners. The project i s also likely to contribute to improvements ininformation and the regulatory framework that should facilitate better public sector management o f land use. The Recipient has prepared Environmental Assessment including an acceptable Environmental Management Plan (EMP) addressing environmental and cultural heritage issues associated with civil works. The two entity-level governments, the cantons, and the municipalities have sound legal frameworks, clear allocation o f responsibilities, and sufficient oversight capacity to implement this Environmental Management Plan. 111accordance with the Environmental Management Plan, contracts for civil works under the project will be subject to screening for environmental impacts by the responsible authority. All civil works contracts will include measures to minimize or mitigate environmental damage, and maximize cost-effective energy efficiency. Standard operating procedures will include measures applying to constructionin general, such as measures to control dust, noise, and traffic at construction sites, and guidelines for controlling erosion and clean-up after construction. EMPhas beenpreparedcovering the details o fmitigation and monitoringmeasures o fthe activities identified prior to appraisal. The EA was submitted to the World Bank on November 1, 2005 and has been reviewed and approved by ECA Regional Environment Unit.Disclosure o f the EA, including an Environmental Management Plan (EMP) took place in-country on November 17, 2005 and i s also available to the public through the World Bank INFO Shop. NaturalHabitats(OP/BP4.04): Not applicable Forests (OP/BP4.36): Not applicable 64 Pest Management (OP 4.09): Not applicable Cultural Property (OPN 11.03): The project will not involve any physical activities at or near sites o f cultural/historical/religious etc. significance. Nonetheless, if any cultural heritage elements (e.g. wall frescos) are encountered during the implementation o f civil works, the Environmental Management Plan specifies that the contractor will cease works, notify the competent authorities and comply with their instructions. IndigenousPeoples (OD 4.20): Not applicable Involuntary Resettlement (OP/BP 4.12): The project will not support land acquisition and associated involuntary resettlement. The project will also not change ownership or use rights in forest lands or protected areas. The project also does not support eviction or similar enforcement o f laws addressing illegal occupation o f state land. However, the project will begin to assess the magnitude and nature o f the illegal or other informal occupation and settlements, and develop a strategy to address these issues inthe second phase o f the long-term program. This strategy will take into account good practice and lessons learned from OP 4.12 implementation in other countries. Safety of Dams (OP/BP 4.37): Not applicable Proiects on International Waterways (OP/BP 7.50): Not applicable Proiectsin DisputedAreas (OP/BP 7.60): Not applicable 65 Annex 11: ProjectPreparation and Supervision BOSNIA-HERZEGOVINA: LandRegistration Planned Actual PCNreview July 2005 July 2005 InitialPID to PIC August 2005 July 2005 Initial ISDS to PIC August 2005 July 2005 Appraisal January 2006 December 2005 Negotiations February 2006 February 2006 Board/RVP approval April 2006 Planned date o f effectiveness July 2006 Planned date o f mid-tern review February 2009 Planned closing date March2011 Key institutions responsible for preparation o f the project: Entity level Ministry o f Justice Entitylevel Geodetic Administration Bank staff and consultants who worked on the project included: Name Title Unit Gavin Adlington Task team leader ECSSD Jessica Mott Senior Natural Resources ECSSD Economist MirjanaKarahasanovic Operations Analyst ECSHD Nikola Kerleta Procurement Analyst ECSPS Sanjay Vani Sr. Financial Management ECSPS Specialist Mark Walker Lead Counsel LEGEC Stephen Butler Legal Consultant Gerhard Muggenhuber Cadastre Consultant Andrej Kwitowski IT Consultant Miroslav Ruzica Senior Social Scientist PA9SS Hiwote Tadesse Senior Program Assistant ECSSD Nicholay Chistyakov Senior Finance Officer LOAGl Samra Bajramovic Program Assistant ECCBA Bank funds expended to date on project preparation: 1. Bank resources: $213,357 2. Trust funds: $45,800 3. Total: $259,157 EstimatedApproval and Supervision costs: 66 1. Remainingcosts to approval: $20,000 2. Estimatedannual supervisioncost: $90,000 67 Annex 12: Documents in the ProjectFile BOSNIA-HERZEGOVINA: LandRegistration The following files are found inIRIS: 1. Butler interim and final reports on legal and institutional situation and land market development issues. 2. Muggenhuber Report on Cadastral issues. 3 . Kwitowski report on the IT framework. 4. Detailed Cost tables and procurement plan 5. Sociologic report 6. EMP 7. Financial management manual 68 Annex 13: Statement of Loans and Credits BOSNIA-HERZEGOVINA: LandRegistration Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Ong. Frm. Rev'd PO88663 2005 HLT SEC ENHANC 0.00 17.00 0.00 a0.00 0.00 16.34 2.23 0.00 PO83353 2005 URB INFRA & SERV DEL 0.00 20.00 0.00 0.00 0.00 18.89 -0.87 0.00 PO79226 2005 EDUC RESTRUCTURING 0.00 10.00 0.00 0.00 0.00 9.78 0.00 0.00 PO84596 2004 EMPLYMT 2 0.00 12.00 0.00 0.00 0.00 10.64 0.74 -0.68 PO71039 2004 ECON MGMT SACIIBTA 0.00 34.00 0.00 0.00 0.00 23.93 4.45 0.00 PO70992 2004 SOSAC2 0.00 51.00 0.00 0.00 0.00 50.63 24.00 0.00 PO71004 2003 SOC INSTA 0.00 7.00 0.00 0.00 0.00 8.01 1.44 0.00 PO79161 2003 FOREST DEVTICNSRV TA 0.00 3.75 0.00 0.00 0.00 3.40 1S O 0.00 PO55434 2003 SM SC COM AGRlC 0.00 12.00 0 00 0.00 0.00 9.04 -1.86 0.00 PO71001 2002 BUS ENABLG ENV SAC 0.00 44.00 0.00 0.00 0.00 29.33 -20.02 0.00 PO71347 2002 ROAD MGMT SAFETY 0.00 30.00 0.00 0.00 0.00 11.86 -2.32 0.00 PO57950 2002 SOLID WASTE MGMT 0.00 18.00 0.00 0.00 0.00 25.87 -2.93 0.00 PO70995 2001 COMM DEVT 0.00 15.00 0.00 0.00 0.00 6.71 4.59 4.23 PO70917 2001 PRIVTA 0.00 19.80 0.00 0.00 0.00 19.39 16.37 0.00 PO70079 2001 TRADE & TRANS FACIL IN SE EUR 0.00 11.00 0.00 0.00 0.00 0.07 1.60 0.00 PO58521 2001 ELEC PWR 3 RECN 0.00 35.00 0.00 0.00 0.00 8.15 4.22 0.00 Total: 0.00 339.55 0.00 0.00 0.00 252.04 33.14 3.55 BOSNIA-HERZEGOVINA STATEMENT OF IFC's Held andDisbursedPortfolio InMillionsofUS Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 1985 Energoinvest 9.49 0.00 0.00 0.00 9.49 0.00 0.00 0.00 1997 Enterprise Fund 0.00 1.52 0.00 0.00 0.00 0.94 0.00 0.00 2002 FCL 12.11 0.00 0.00 2.48 12.11 0.00 0.00 2.48 2004105 HVB CPB 0.00 4.06 0.00 0.00 0.00 4.06 0.00 0.00 2001 PBS-SPV 0.00 0.00 0.71 0.00 0.00 0.00 0.00 0.00 1997/99/01/02 Procredit Bosnia 3.63 0.00 0.00 0.00 3.63 0.00 0.00 0.00 2002105 Raiffeisen-BOS 14.53 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1998 SEF Akova 0.59 0.00 0.00 0.00 0.59 0.00 0.00 0.00 1999/01/05 SEF Bosnalijek 9.08 0.00 0.00 0.00 3.63 0.00 0.00 0.00 1998 SEF Lignosper 2.57 0.00 0.00 0.00 2.23 0.00 0.00 0.00 1999 SEF Lijanovici 0.85 0.00 0.00 0.00 0.85 0.00 0.00 0.00 1977 TKA Caziii 4.12 0.00 0.00 0.00 4.12 0.00 0.00 0.00 1998 Wood Agency-AL 5.53 0.00 0.00 0.00 0.00 0.00 0.00 0.00 69 Wood Koiijuli 2.16 0.00 0.00 0.00 1.85 0.00 0.00 0.00 Wood Kozara 1,95 0.00 0.00 0.00 1.64 0.00 0.00 0.00 Wood Podgradci 1.34 0.00 0.00 0.00 I.09 0.00 0.00 0.00 Wood Vrbas 1.95 0.00 0.00 0.00 0.39 0.00 0.00 0.00 Total portfolio: 69.90 5.58 0.71 2.48 41.62 5.00 0.00 2.48 Approvals PendingCommitment FY Approval Company Loan Equity Quasi Partic. 2002 Lukavac 0.01 0.00 0.00 0.00 Total pending commitment: 0.01 0.00 0.00 0.00 70 Annex 14: Country at a Glance BOSNIA-HERZEGOVINA: Land Registration Bosnia Europe & Lower- I POVERTY and SOCIAL and Central middle- - __ ~ ~ Herze go vina Asia income Development diamond" 2003 Population, mid-year (miiiions) 4.1 473 2,655 Life expectancy GNI per capita (Atlas method, US$) 1,540 2,570 1,480 GNI (Atlas method, US$ billions) 6.4 1.2I7 3,934 Average annual growth, 1997.03 Population (%) 2.1 0 0 0.9 Labor force (%) 2.3 0 2 1.2 I GN I Gross per _- 1 primaq M a s t recent estimate (latest year available, 1997.03) I capita enrollment Poverty (% of population beiownatio naipo verfyiine) 20 Urban population (%of totalpopulation) 44 63 50 Life expectancyat birth (years) 74 69 69 Infant mortality(per 1OOOiivebirths) 25 31 32 Child malnutrition (%of children under 5) 4 11 Access to improved water source Access to an improved water source (77 ofpopuiation) 91 81 l I Illiteracy(%ofpopulafion age 151) 5 3 ?I Gross primary enrollment (%of schooi-age popuiation) x33 It? e-e-- Bosnia andHerzegovina osnia Herzegovina Male m4 It3 1 Lo wer-middie-income group Female x32 111 KEY ECONOMIC RATIOS and LONG-TERM T R E N D S 1983 1993 2 0 0 2 2 0 0 3 - . _ Economic ratios* GDP (US$ billions) 5 6 7.O Gross domestic investmentlGDP 196 19.9 Trade Exports of goods and ServicesIGDP 24 5 25.2 Gross domestic savingslGDP -17 1 -14.0 Gross nationalsavingslGDP -2 5 0.9 Current account baiancelGDP -22 2 -19.0 Domestic Interest paymentsiGDP 10 08 savings Total debtlGDP 45 8 41.3 Total debt servicelexports 7 1 7.1 Present value of debtiGDP 29 2 23.8 Present value of debtlexports 120 8 m9.3 Indebtedness 1983-93 1993-03 2 0 0 2 - 2 0 0 3 2 0 0 3 - 0 7 - (average annualgrowth) GOP .. 7.8 5.5 2.7 4.2 1 a, osnia and Herzegovina GDP percapita 25.4 4.4 2.4 3.6 ~ - - Lower-middie-incomegroup L __ - 7 . . , , STRUCTURE o f the ECONOMY 1983 1993 2 0 0 2 2 0 0 3 Growth o f i n i e s ? m e n t a n d G D P (Oh) (%ofGDP) I Agriculture ?49 14.9 60 Industry 32 1 31.9 Manufacturing 152 15.1 Services 52 9 52.8 Private consumption 92 3 91.8 General government consumption 24 8 22.3 Imports of goods and services 612 59.2 1983-93 1993-03 2 0 0 2 2 0 0 3 [Giiiwth o f exports and (average annualgrowth) Agriculture 2 5 I 8 ' T Industry 2.5 60 P\, Manufacturing 2.5 \ Services 2.2 40 20 Private consumption 0 General government consumption 1-20 Gross domestic investment .. 35.6 Imports of goods and services 11.1 17.9 20 2 i exports -inports - 71 Bosnia and Herzegovina ~ ~ ~~ PRICES and GOVERNMENT F i N A N C E 1983 1993 2002 2 0 0 3 __ I ~ Inflation -..-- ( O h ) Domestic prices (% changej Consumer prices 0.3 0.2 implicit GDP deflator 1.0 0.9 Government finance (%of GDP,includes current grants) Current revenue 50.7 49.3 -5 - 98 9-9 00 01 02 Current budget balance 6 5 6.5 Overall SurDlUSidefiCit -2.5 0.3 I T R A D E 1983 1993 2002 2 0 0 3 - _ _ (US$ miiiionsj Export and import levels (US$ mill.) Totaiexports (fob) 952 1,272 5000 n.a. n.a. 4 000 Manufactures 3 000 Total imports (cif) 3,233 3.890 2 000 Food Fuel and energy I Capitai goods 1 97 99 00 01 Export price index (B95=WO) 98 02 Import price index (B95=WOj I e Exports 3 IrrpOrtS Terms of trade (SSS=lOOj O3 B A L A N C E o f P A Y M E N T S 1983 1993 2002 2 0 0 3 _ _-~- ~ - ~ ~~ (US$ millions) Current a c c o u n t balance to G D P (%) Exports of goodsandservices 1,374 1,759 0 Imports of goods and services 3,428 4,Ql Resource balance -2,054 -2,362 -10 Net income 248 327 Net current transfers 565 711 -20 Current account balance -1,241 -1,325 1-30 Financing items (net) 1.282 1,806 Changes in net reserves -41 -481 i-40 Memo: Reserves including gold (US$ miiiionsj 0 1,785 Conversion rate (DEC, /ocai/US$j 2.1 1.7 EXTERNAL DEBT and RESOURCE FLOWS 1983 1993 2002 2 0 0 3 . (US$ mi//ionsj C o m p o s i t i o n o f 2003 debt (US$ mill.) Total debt outstanding and disbursed 2,563 2.880 IBRD 424 538 540 5:os IDA 0 726 803 A 540 Total debt service I25 151 18RD 0 45 43 IDA 0 5 6 Composition of net resourcefiows Official grants 32 Official creditors Private creditors B 803 Foreign direct investment Portfolio equity D 71 C 92 World Bank program Commitments 0 m2 23 A IBRD - E - Bilateral Disbursements 0 97 35 8-IDA D-Othermrltilalerai G- Short-term F-Private Principal repayments 0 23 23 C - I M F 72 Annex 15: Social and InstitutionalIssues BOSNIA-HERZEGOVINA: LandRegistration Social and Institutional Analysis. As part o f the project preparation activities, a baseline Social and InstitutionalAnalysis has been completed which (a) provides data on key stakeholders and the social context, including legal aspects, (b) assesses client perceptions o f the quality, efficiency and effectiveness o f land administration service provision, (c) recommends a communications strategy o f the project, and (d) evaluates the organizational structure and capacities. The analysis was based on desk review, focus group discussions with representative stakeholders, and a customer survey. The report was subject to a stakeholder discussion in November, 2005. A follow-up social and institutional analysis i s planned as part o f the mid-term review. Annex 9 summarizes some key highlights regarding client perceptions on transaction costs and poverty issues. Annex 6 addresses organizational aspects. Hence this Annex focuses on other findings from the analysis. Social and iizstitutiorzal issues. On the basis o f informal preliminary research as well as the Social and Institutional Analysis, the following social and institutional issues have been identified, which will need to be taken into account duringproject implementation: Post-conflict context and refugees. From 1992-5, BiHexperienced the most devastating violent conflict and collapse o f any European economy since World War 11. The war altered the social and economic landscape o f the country, took a heavy toll on its population, and caused widespread physical damage. An estimated 2.5 million people, more than half the population, either left the country as refugees or were internally displaced. As o f October 2005, approximately 1million refugees and internally displaced persons are now settled permanently within BiH, o f whom some 450,000 have returned to their place o f origin, while the remainder have settled innew locations. An additional 300,000 remain displaced within BiH,and some 150,000 people living outside BiHwant to return, but lack o f employment opportunities, destroyed private property and hostility toward returnees prevent them from doing so. Interms o f property right claims, the Commission for Real Property Claims of Displaced Persons and Refugees reviewed over 300,000 cases between 1996 and 2003 and, with local government initiatives, it is not now thought there is not a serious problem with rights involving displaced persons or absentee landholders. However, there has been some transfer o fpopulations within the former countries o f Yugoslavia, and in at least one case different national policies have left one group particularly disadvantaged - some 22,000 ethnic Serbs who have resettled to the RS from Croatia are not being compensated by Croatia for the loss o f their property rights (because Croatia i s according rights by current use), and therefore often do not have the financial resources to purchase property rights within the RS (since both RS and FBiH accord rights based on historical ownership). The UNHCR i s working on the resolution o f this issue. Another concern regarding refugees i s the anecdotal evidence that some refugees have experienced difficulties obtaining good service from a range o f government offices, including land registry offices. Returnees are also associated with the increased number o f illegal and semi-legal settlements - an issue which the Land RegistrationProject will address by both assessing the scope o f the problem and working on policies to address this. Stakeholders consulted to date have consistently viewed the Land 73 RegistrationProject as likely to make a highly positive contribution to the post-conflict agenda. 0 Ethnic divisions and national integration. Under the 1995 Dayton accords, BiHconsists of two entities: the Federation o f BiH, comprised primarily o f Bosniacs and Croats, and the Republicka Srpska, mainly Serb, which handle most policy decisions and implementation, with a weak "state" government at the national level. Although there has beenprogress in recent years, inter-ethnic hostility continues and project actions such as consistent application o f service standards to all ethnic groups will require attention throughout the project period. The project will also have to work within the existing "entity" structure o f government, while taking steps wherever possible to encourage increased national integration. 0 Poverty, About one fifth o f the population lives below the poverty line and an additional 30% lives close to the poverty line and i s vulnerable to falling below the line with small declines in income. Women, displaced persons and returnees, persons with l o w levels o f education, and the unemployed are particularly at risk. Most o f the population cannot afford a lawyer and are not sufficiently informed about the availability o f free legal aid. As explained above under the economic analysis inAnnex 9, the Land RegistrationProject will directly address a number o f measures inpriority areas (e.g., fiscal reform, private sector development, reduced corruption) to reduce poverty. As with ethnic and refugee groups, consistent application of service standards to the poor and other vulnerable groups will be an important part o f project implementation. 0 Gender. With regard to gender, women's property rights are legally protected. However, tradition frequently favors male inheritance o f property, and men tend to play the lead role. According to the Social Analysis, while the majority o f married clients report taking most property related decision in consultation with their partners, ownership o f property i s traditionally registered to male family members. Another custom i s for sisters to waive the right to their share o fproperty inherited from parents for the benefit o ftheir brothers. As a post-conflict country, female-headed households have become more common but there i s no indication that such status i s affecting registration and protection o f property rights. The communication activities under the project will need to include specific considerationo f gender issues. Regarding staffing o f project implementing agencies, registry office staff have been disproportionately female, because they were historically regarded as clerical positions not requiring even a high school diploma. Professional development for existing staff i s being provided to enable existing staff to pass the new state exams, and the new requirements for a university law degree i s likely to increase the proportion o f men among new recruits. The Social and Institutional Analysis recommended that gender issues be subject to further research during the project, Socialist legacy. Duringthe initial period o f socialist rule as part o f Yugoslavia, fi-om 1945 to 1963, property rights for dwellings and small land plots were often transformed into rights o f use and most other properties were fully nationalized. Under the 1963 Constitution, small amounts o f private property were permitted with l i m i t s and restrictions. Private property rightshave been strengthened since the transition and the end o fthe war. As inother countries intransition from state socialism, public employees have a large learning curve to adopt client-orientedbehavior, operate with integrity, disseminate information, and take initiative, while citizens have a deep distrust in all levels o f government. Corruption issues. According to recent surveys, general corruption i s ranked as one o f the most significant problems inBiH. The public perceives corruption as increasing, although 74 the justice system (which includes the registry offices) i s regarded as less corrupt. The Customer Survey o f the Social and InstitutionalAnalysis undertaken as part o f the Land Registration Project preparation found that some 13 % o f land registry clients admitted to making informalpayments, and due to the sensitivity o f the issue this estimate i s likely to be an undercount. Inmore general surveys o f public perceptions about governance, the privatizationprocess i s regarded as particularly corrupt. The Land Registration Project should help address this by having a more consistent and transparent basis for asset valuation and transfer. Politicians are regarded as the gainers and citizens the losers from corruption, and the project will have to strategically manage these interests and associated risks so that its anti-corruption measures are successfully implemented. Legal Analysis. The legal analysis contained inthe Social and Institutional Analysis suggests that BiH laws today provide firm protections for human, civil and property rights inaccordance with the best international standards, but that it is taking somewhat longer to raise the commercial and administrative laws to the same standards. For example, few if any issues o f gender discrimination arise under BiH law, and the comprehensive laws and regulations governing restitution o f property rights o f post-conflict refugees and Internally Displaced Persons have been very successfdly implemented, but there remain legal issues affecting development o f modem systems o f land use and development controls or mortgage finance. Areas for further legal development identified in the report, which substantially agree with the Bank's own findings duringproject preparation, include the need to accelerate adoption o f the proposed Law On Property and harmonize its many new concepts with the related legislation o f BiH; improvementsto the procedures o furbanlandprivatization and issuance o fconstruction permits; clarification o f the laws governing common ownership and maintenance o f real property (condominium); and development o f effective legal approaches to the issues o f illegal construction and encroachments on public lands. All o f these issues may be further investigated and appropriate legislative and regulatory solutions recommended under various components o f the project. Dispute resolution. The project is expected to encounter property disputes inthe course o f a title registration project, but, as indicated above inthe description o f the post-conflict context, there are indications that the number o f disputes in BiHmay have been significantly diminished by the work o f Dayton's Commission for Real Property Claims for Displaced Persons (CRPC). The CRPC, now dissolved, issued over 300,000 decisions resolving post-conflict property claims and disputes and it i s estimated that the implementation rate o f those decisions exceeds 93%. Resolution o f remaining claims i s now inthe hands o f entity level ministries and municipalities and the UNHCRbelieve that it i s progressing satisfactorily. With regard to the typical property disputesthat arise in every system (e.g. boundary disputes, inheritance, etc.), the Social and Institutional Analysis suggests that a significant 16% o f the interview sample o f users o f the land registry were involved in some sort o f dispute concerning property rights, usually involving disputed ownership rights or encroachments. Whether such disputes are amenable to resolution inthe process o fsystematic cadastre andregistrationunder component Bo fthe project, which is itself a form o f alternative dispute resolution, can not be determined until much more detail about the nature o f the disputes i s obtained, which i s an objective o f the project. On the basis o f further analysis o f the nature o f the disputes it may be detennined that some are amenable to other forms o f informal or alternative dispute resolution (e.g. professional mediation) and recommendations 75 to that effect may be made by the project. Pilot projects in alternative dispute resolutionhave been conducted inBiHby the EC relating to other types o f legal disputes, and those projects may hold some relevant lessons. Communicatioizs Strategy. The Social and Institutional Analysis found that land registry clients, especially those who are not professionals but rather members o f the general public, need improved access to information about procedures and required documents, on where to obtain and submit necessary documents, and about specific fees and taxes. Public awareness o fthe importance o f land administration and potential project benefits i s also limited. The Analysis recommends that the efforts o n communications include the following actions: Use o f infonnation boards and brochures on procedures, required documents, fees, etc. Packaging o f messages about the project in simple, informal language and forms (e.g. radio and televisionjingles) Use o f TV and radio stations which have large audiences, and use o f links on the most popular web pages to the GTZ land project web page Formats which promote two-way communication that engage potential clients, such as (i) media programs which provide opportunities for public comments and for question and answers involving professionals engaged in the land administration sector, and (ii) interactive monitoring and evaluation processes (client interviews, focus groups, opinion polls) on client experiences and opinions Educating municipal legal services, selected NGOs, and the press on land administration issues, client rights, and project activities, and encouraging them to disseminate information to citizens. Project stakeholders. The main direct project beneficiaries will be those people and businesses who want security intheir land or real property holdings inorder to invest (either labor or money) and require premises or loans to do so. Stakeholder categories will include some professional groups (notaries, lawyers, real estate brokers), research community, some associations that support certain vulnerable groups (rural elderly, refugees, internally displaced persons, Roma and other ethnic minority groups and certain groups o f women) some special interest groups (former private owners, private business, apartments associations), and government institutions (e.g. municipalities, courts, etc.). I t also includes any special interest groups that work with resolving land claims, e.g. lawyers specializing inhandling land claims by people living outside the country. Stakeholder interests. The Social and Institutional Analysis found that (a) general stakeholder interests include: Faster registration 0 Hamionizing old and new cadastral maps Resolving issues related to inappropriate land use management controls Training o f land registry staff 0 Standards for office procedures and information dissemination (b) private persons' interests include Better awareness o f land registrationbenefits Increased communication skills o f land registry staff Greater availability o f information 76 Taxes better adapted to socioeconomic status o f population 0 Greater availability o f legal aid (c) private professionals' interests include: 0 Additional technical support to registry offices on information and communication Appropriate and precisely defined fees Scheduling o f appointments 1 0 Acceptance o f agent contracts instead o f specific verified client authorization (d) land registry employees' interests include 0 Appropriate office premises and equipment Sufficient number o f employees with proper education 0 Harmonizing legislation Better inter-institutional cooperation (e.g., registry and cadastre offices) 0 Electronic data processing 0 Overcoming system o f dual registration Social Impact Iizdicators. The Social and Institutional Analysis recommended that impact indicators include: 0 Decrease inthe required number o f visits 0 Shortened duration o f visits 0 Greater availability o f information Increased level o f client satisfaction with specific services 0 Reduced use o f informal transactions Reduced amount of informal payments Reduced discrimination o f clients by office staff 0 More frequent use o f legal aid Increased level o f satisfactionwith received legal aid The mid-termreview will include a follow-up review o f these indicators. 77 MAP SECTION IBRD 34483 16 17 18 19 C R O A T I A Danube Bosanski Brod Bosanski Brod POSAVINAPOSAVINA (Srp.Brod) (Srp.Brod) Bosanska Novi Bosanska Novi Bosanska Gradiska Bosanska Gradiska Sava (Novi Grad) (Novi Grad) (Srp. Gradiska) (Srp. Gradiska) B. Samac B. Samac 45 45 CazinCazin Prijedor Prijedor DeDerventrventa Derventa Modrica Modrica Brcko Brcko Una Bosanska Bosanska Prnjavor Prnjavornjavor na GradacacGradacac BrckoBrcko Bihac Bihac´ KrupaKrupa Banja Banja Bos District District Bijeljina Bijeljina Sanski Most Sanski Most Luka Luka Doboj Doboj GracanicaGracanica Spionica Spionica UNA SANA UNA SANA REPUBLIKA SRPSKA REPUBLIKA SRPSKA Bosanski Bosanski Kotor Varos Kotor VaroVaros Teslic TesliTeslic ´ Tesanj TesanTesanj T U Z L A Petrovac Petrovac Vrba Tuzla TuzlTuzla Loznica Loznica KljucKljuc Maglaj Maglaj Lukavac Lukavac s Skender Vakuf Skender VakuVakuf Zivinice Zivinice Kljuc Kljuc Zavidovici Zavidovici ´ (Ribnik) (Ribnik) Mrkonjic Mrkonjic Banovici Banovici´ Zvornik ZvoZvornirnik CROATIA Drvar Drvarvar Grad Grad Zepce P O D R I N J E Jezero Jezero Jajce Jajce ZENICAZENICA Sakovica Sakovica ´ Drina Travnik TravniTravnik Kladanj Kladanj Sipovo Sipovo CENTRALCENTRAL DOBOJDOBOJ Zenica Zenica Bratunac Bratunac Pucareve Pucareve Kakanj Kakanj Vitez ViteVitez Vares VareVares Vlasenica Vlasenica Olovo Olovo Donji Vakuf Donji VakuVakuf Srebrenica Srebrenica Knin Knin Busovaca Busovaca Glamoc Glamoc Bugojno Bugojno Visoko VisokVisoko 44 44 BOSNIABOSNIA Fojnica Fojnica Semizovak Semizovak Sokolac Sokolac Kijevo L I V N O Gornji Vakuf GoGornji Vaku rnji Vakuf Kresevo Kresevo SARAJEVOSARAJEVO Livno Livno FEDERATION OF BOSNIA FEDERATION OF BOSNIA Pale Pale Rogatica Rogatica Visegrad VisegraVisegrad Prozor Prozor SARAJEVOSARAJEVO Duvno Duvno AND HERZEGOVINA AND HERZEGOVINA Sibenik Gorazde Gorazde Jablanica Jablanica Konjic Konjic BOSNA BOSNA Trnovo novo PODRINJE PODRINJE HERZEGOVINAHERZEGOVINA NERETVA NERETVA Neretva Posusje Posusje FocaFoca Split WESTWEST Kalinovik Kalinovik (Srbinje) (Srbinje) HERZEGOVINA HERZEGOVINA Mostar Mostar REPUBLIKA REPUBLIKA A d r i a t i c SRPSKASRPSKA Nevesinje Nevesinje S e a Gacko Gacko Capljina Capljina Stolac Stolac 43 Ploce 43 Neum Bileca Bileca ´ SERBIA AND Trebinje TrebinjTrebinje MONTENEGRO Dubrovnik BOSNIA AND HERZEGOVINA 19 DAYTON AGREEMENT LINES LUX. 10° 20° 30° 50° REPUBLIKA SRPSKA CZECH POLAND REP. UKRAINE CANTON BOUNDARIES GERMANY FRANCE SLOVAK REP. MOLDOVA MUNICIPAL BOUNDARIES SWITZ. AUSTRIA HUNGARY SELECTED TOWNS 42 SLOVENIA ROMANIA 42 CROATIA NATIONAL CAPITAL This map was produced by the Map Design Unit of The Adriatic BOSNIA AND INTERNATIONAL BOUNDARIES World Bank. The boundaries, HERZEGOVINA SERBIA Black colors, denominations and & ITALY MONTENEGRO BULGARIA Sea any other information shown Sea on this map do not imply, on FYR 0 25 50 75 the part of The World Bank MACEDONIA Group, any judgment on the ALBANIA 40° 40° KILOMETERS legal status of any territory, Tyrrhenian or any endorsement or Sea GREECE Aegean 30° a c c e p t a n c e o f s u c h Sea 16 17 TURKEY boundaries. 10° 20° JANUARY 2006