PERFORMANCE AND LEARNING REVIEW Document of The World Bank Group FOR OFFICIAL USE ONLY Report No. 105224-MD INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL FINANCE CORPORATION AND MULTILATERAL INVESTMENT GUARANTEE AGENCY PERFORMANCE AND LEARNING REVIEW OF THE COUNTRY PARTNERSHIP STRATEGY FOR THE REPUBLIC OF MOLDOVA FOR THE PERIOD FY14-FY17 April 25, 2016 Belarus, Moldova and Ukraine Country Management Unit Europe and Central Asia Region International Finance Corporation Europe and Central Asia Region The Multilateral Investment Guarantee Agency This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank Group authorization. The date of the last Country Partnership Strategy was August 9, 2013. CURRENCY EQUIVALENTS GOVERNMENT FISCAL YEAR (Exchange Rate Effective as of March 11, 2016) January 1 to December 31 Currency Unit = MDL (Moldovan Leu) WEIGHTS AND MEASURES USD 1 = MDL 19.90 Metric System ABBREVIATIONS AND ACRONYMS AA Association Agreement ENPI European Neighborhood and Partnership AAA Analytical & Advisory Activities Instrument AF Additional Financing ESMAP Energy Sector Management Assistance ANRE National Agency for Energy Regulation Program ASA Advisory Services and Analytics ESREI Energy Sector Restructuring and Efficiency Improvement A2F Access to Finance EU European Union BEEPS Business Environment and Enterprise Performance Survey FD Family Doctor BEM Banca de Economii FDI Foreign Direct Investment BNPP Bank Netherlands Partnership Program FinSAC Financial Sector Advisory Center B40 Bottom 40 percent of the population FSA Food Safety Agency CE Citizens’ engagement FSAP Financial Sector Assessment Program CEP Competitiveness Enhancement Project FY Fiscal Year CFR Corporate Financial Reporting GAC Governance and Anti-Corruption CHP Combined Heat and Power GCal Gigacalorie CIS Commonwealth of Independent States GDP Gross Domestic Product CoA Court of Accounts GEF Global Environment Facility CODB Cost of Doing Business GeT Governance e-Transformation CPAR Central Public Administration Reform GIZ German Federal Enterprise for International Development CPI Consumer Price Index GPSA Global Partnership for Social Accountability CPIA Country Policy and Institutional Assessment HBS Household Budget Survey CPS Country Partnership Strategy HD Human Development CSD Centralized Securities Deposit HTO Health Transformation Operation DCFTA Deep and Comprehensive Free Trade Area IBRD International Bank for reconstruction and DFID UK Department for International Development Development ICT Information and Communications DH District Heating Technology DHEIP District Heating Energy Efficiency IDA International Development Association Improvement Project IDF Institutional Development Fund DLI Disbursement Linked Indicator IEG Independent Evaluation Group DP Development partner IFC International Finance Corporation DPO Development Policy Operation IFI International Financial Institution EBRD European Bank for Reconstruction and Development IFRS International Financial Reporting Standards EC European Commission IMF International Monetary Fund ECA Europe and Central Asia INT Department for Institutional Integrity EIB European Investment Bank IPF Investment Project Financing EMCWF European Center for Medium-Range KST Korea Trust Fund to Support Transitions Weather Forecasting LFS Labor Force Survey EMIS Education Management Information System LRIP Local Roads Improvement Project i MACP Moldova Agriculture Competitiveness PIE Public Interest Entity Project PISA Program for International Student MAFI Ministry of Agriculture and Food Industry Assessment PLR Performance and Learning Review MDL Moldovan Leu PPP Purchasing Power Parity MGSP Modernization of Government Services PPPs Public Private Partnerships Project p.p Percentage points MIEPO Moldova Investment and Export Promotion PSD Private Sector Development Organization P4P Pay for Performance MIGA Multilateral Investment Guarantee Agency RBF Results-based Financing MITC Ministry of Information and RBI Risk Based Inspection Communications Technology ROSC Report on Observance of Standards and MLSPF Ministry of Labor, Social Protection and Codes Family SABER Systems Approach for Better Education MoH Ministry of Health Results MoJ Ministry of Justice SDR Special Drawing Right MSIF Moldova Social Investment Fund Sida Swedish International Development MSMEs Micro, Small and Medium Enterprises Cooperation Agency NBM National Bank of Moldova SIFMIS Sustainable and Integrated Forest NBS National Bureau of Statistics Management and Carbon Sequestration NCFM National Commission of Financial Market through Forestation NPLs Non-performing Loans SME Small and Medium-sized Enterprises OECD Organization for Economic Cooperation and SPS Sanitary and Phytosanitary Development STAR/Eap Strengthening Auditing and Reporting in OSCE Organization for Security and Co-operation Countries of the Eastern Partnership in Europe TA Technical Assistance PAR Public Administration Reform TAMP Tax Administration Modernization Project PAYG Pay-As-You-Go Pension System TF Trust Fund PCG Partial Credit Guarantee UNICEF United Nations Children’s Fund PD Professional Development USAID United States Agency for International PEFA Public Expenditure & Financial Development Accountability USD United States Dollar PER Public Expenditure Review WB World Bank PFM Public Financial Management WBG World Bank Group PforR Program-for-Results WBI World Bank Institute PHRD Policy and Human Resources Development Fund The World Bank Group Team World Bank IFC MIGA Vice President Cyril Muller Dimitris Tsitsiragos Karin Finkelston Country Director Qimiao Fan Tomasz Telma Dan Biller Country Manager Alexander Kremer Ana Maria Mihaescu Task Team Leader Carolina Odobescu Kartick Kumar Franciscus Johannes Linden ii PERFORMANCE AND LEARNING REVIEW OF THE COUNTRY PARTNERSHIP STRATEGY FOR THE REPUBLIC OF MOLDOVA Contents I.  INTRODUCTION..............................................................................................................1  II.  MAIN CHANGES IN COUNTRY CONTEXT .....................................................................1  III.  SUMMARY OF PROGRAM IMPLEMENTATION ............................................................5  IV.  EMERGING LESSONS .....................................................................................................11  V.  ADJUSTMENTS TO CPS AND FUTURE ENGAGEMENT..............................................12  VI.  RISKS TO THE COUNTRY PARTNERSHIP STRATEGY ..............................................14  Figures Figure 1: National poverty rate in Moldova, by location, percent ................................................................................. 4  Figure 2: Poverty headcount at US$5 and $2.5 a day (PPP), percent (2012 and 2013) ................................................. 4  Figure 3: Gender informedness by dimension, FY14-16 ............................................................................................... 9  Figure 4: Gender informedness by dimension & GP, FY14-17..................................................................................... 9  Tables Table 1: Key Macroeconomic Indicators....................................................................................................................... 3  Table 2: Proposed Moldova Lending Program, FY14-17 CPS ................................................................................... 14  Annexes Annex 1: Updated CPS Results Matrix ....................................................................................................................... 16  Annex 2: Matrix of changes to the original FY14-17 CPS Results Matrix ................................................................. 24  Annex 3: Matrix summarizing progress toward CPS objectives ................................................................................. 34  Annex 4: FY14-17 CPS Lending and Analytics .......................................................................................................... 45  Annex 5: World Bank Group Portfolio in Moldova .................................................................................................... 46  Annex 6: Social Accountability and Citizens’ Engagement ........................................................................................ 48  Annex 7: Key Macroeconomic Indicators ................................................................................................................... 50  Annex 8: Consultations ............................................................................................................................................... 51  Annex 9: Extended version of overview of progress towards CPS Objectives ........................................................... 52  iii I. INTRODUCTION 1. This Performance and Learning Review (PLR) summarizes implementation of the FY14-17 Moldova Country Partnership Strategy (CPS), which is organized around three pillars: Increasing Competitiveness; Enhancing Human Capital and Minimizing Social Risks; and Promoting a Green, Clean and Resilient Moldova. The CPS has a cross-cutting emphasis on Governance, particularly in the public sector. The CPS is closely aligned to the agenda for European integration which has remained the Government’s stated intent despite several changes of government since 2013. This PLR does not extend the CPS period. 2. The CPS is on course to deliver the CPS outcomes, but further progress is contingent on strong commitment to improvements in governance. Enhanced efficiency of the education sector, improved targeting of social assistance, adaptation to climate change, and improved natural resources management all represent successful CPS outcomes. However, many actions intended to increase competitiveness are undermined by weakened governance and control of corruption, notably a large banking fraud, and other outcomes such as improvements in the quality of education and quality of healthcare are at risk because political instability has led to frequent changes in counterparts and delays in policy decisions. 3. The strategic areas of focus in the CPS remain valid for the World Bank Group (WBG)’s engagement in Moldova, but some adjustments are required to address the challenges which have emerged since 2013. The CPS was optimistic in terms of the commitments it expected from the Government. Going forward, the WBG should on the one hand make fewer assumptions in project design about institutional integrity and the commitment to reform, and on the other address governance challenges more directly. II. MAIN CHANGES IN COUNTRY CONTEXT 4. Political instability became more marked between 2013 and 2015, manifesting itself as frequent changes of governing coalitions. There were seven prime ministers or acting prime ministers and three periods without a Government between September 2014 and January 2016. The November 2015 Public Opinion Barometer1 showed that 88 percent of Moldovans thought that the country was moving in the wrong direction. 5. Corruption and governance indicators have worsened markedly. Moldova fell from the 30th to the 20th percentile for Control of Corruption between 2012 and 2014.2 The Business Environment and Enterprise Performance Survey (BEEPS) shows a fourfold increase in the percentage of firms that rate the bribing of both officials and members of parliament during 2005- 13 as negatively impacting the business environment. Moldova’s Country Policy and Institutional Assessment (CPIA) score fell in 2014 by one tenth of a point. 6. The large 2013-14 bank fraud in Banca de Economii, Banca Sociala and Unibank demonstrated the workings of Moldova’s political economy. Starting in late-2013, data suggesting banking fraud became apparent and were noted in the 2014 Financial Sector Assessment Program (FSAP). From April 2014, therefore, it was decided that World Bank (WB) budget support would not be provided until the authorities’ response to the banking sector risks was clear. After the three banks collapsed in November 2014 it transpired that around 12 percent of the Gross Domestic Product (GDP) had been lost to fraud. The subsequent monetization of the 1 Bi-annual poll measuring political, social and economic sentiment. The poll has a margin error of +/-3 percent and was done on a representative sample of 1,160 people aged 18 and over, during November 8-December 1, 2015. 2 2015 World Governance Indicators. 1 losses contributed to the depreciation of the Moldovan Leu (MDL) in early 2015, to inflation, and thus to high real interest rates, and will impair public debt sustainability when the Government guarantee to the National Bank of Moldova (NBM) in respect of the failed banks’ deposits is securitized. The WBG was concerned that many of the governance conditions which permitted the 2013-14 fraud persisted beyond 2015. Specifically, lack of clarity concerning the timetable for carrying out and acting upon the diagnostic audits of Moldindconbank, MAIB and Victoria Bank was a factor contributing to the delay of WB budget support into 2016. Governance issues and vested interests in the financial sector have restricted intermediation. This in turn has negatively impacted the sector’s role in reducing poverty and promoting shared prosperity. 7. Moldova’s formal integration with the European Union (EU) has continued during the CPS period. Moldova and the EU signed an Association Agreement (AA) and a Deep and Comprehensive Free Trade Area (DCFTA) agreement in June 2014. The DCFTA provides for mutual elimination of customs duties for industrial and most agricultural products, further liberalization of the services market, and addressing other barriers to trade. The AA also provides a framework for critical cross-cutting area reforms in governance, public administration, independent judiciary, and rule of law. Visa-free access for Moldovan citizens travelling to the Schengen area came into effect in April 2014. However, in 2014, the food safety agency of another major trading partner, Russia, imposed restrictions on Moldovan fruit, vegetable and wine exports. 8. While significant uncertainties remain concerning Transnistria, there is sufficient space for dialogue. The resumption of dialogue – the so-called 5+2 settlement process – in February 2012, after being stalled for six years, provides an opportunity for further progress3, although developments in eastern Ukraine and Transnistria’s difficult economic situation are new sources of risks. 9. Extreme weather events have impaired macroeconomic stability. Droughts in 2012 and 2015 suggest that meteorological phenomena once considered exceptional are now routine. Both droughts affected Moldova’s growth, fiscal balance and poverty levels; the WB supported an emergency response to the 2013 drought. Recent Economic Developments 10. Despite external challenges, Moldova’s economic performance until late-2014 was strong; however, the economy is slowing and downside risks are materializing. After a drought-induced contraction of the economy in 2012, a record harvest in 2013 drove GDP growth of 9.4 percent year on year (YoY). In 2014, economic activity slowed and real GDP grew 4.6 percent YoY. On the expenditure side, strong growth in fixed investment (10.1 percent YoY), was driven by higher public capital expenditure, while the expansion of private consumption was moderate (2.9 percent) due to lower remittances in the fourth quarter. The growth of real exports was faster than that of imports; however, the contribution of net exports to growth was zero. In the third quarter of 2015, the Moldovan economy entered into recession, decreasing 3.6 percent YoY. A bad harvest contributed negatively to the overall growth. On the expenditure side, due to anemic internal demand, consumption and investment contributed negatively. While benefitting from the depreciation of the national currency, net exports contributed 2.8 percentage points (p.p.). 11. Greater flexibility of the exchange rate and a policy shift toward inflation targeting allowed the NBM to maintain Consumer Price Index (CPI) inflation within the target range 3 Moldova, Transnistria, Ukraine, Russia, and the OSCE are direct participants in this process, and the United States and the EU act as external observers. 2 of 5 percent +/- 1.5 percent until 2014. However, by end-2014, on the back of currency depreciation and monetization of the bailout of three troubled banks, inflationary pressures increased. By end-2015, consumer prices increased 13.6 percent YoY due to the pass-through from currency depreciation and liquidity injections to support 100 percent guarantee to depositors of three failed banks and higher utility and energy prices. In response, base interest rates were raised to a record high level of 19.5 percent (from 3.5 percent in early December 2014) and mandatory reserves in national currency were sharply increased. 12. The unfavorable regional environment affected Moldova’s external position. The current account deficit narrowed from 8.8 percent of GDP in 2012 to 6.6 percent of GDP in 2013. A sharp drop of remittances from the Commonwealth of Independent States (CIS) countries in 2014 widened the deficit to 8.0 percent of GDP. In 2015, recessions in eastern trading partners and Russia’s trade restrictions reduced foreign inflows to Moldova. As of end-2015, transfers through the banking sector, a proxy for remittances, decreased 30 percent YoY. As a result, in the first nine months of 2015 the MDL lost a quarter of its value against the USD (United States Dollar), while reserves decreased by a fifth in the same period, still covering three months of imports. 13. After maintaining fiscal discipline throughout 2013 and 2014, the government faced fiscal pressures in 2015 due to lower tax collections and lower external assistance, while public debt increased due to the public guarantee to depositors of the three failed banks. Moldova restrained transfers and public consumption while increasing capital expenditures, reducing the overall fiscal deficit from 4.3 p.p. of GDP in 2009 to 1.8 percent of GDP in 2013. In 2014, despite higher recurrent expenditures introduced at the end of the year, additional one-off telecom licenses revenue of 1 percent of GDP helped to keep the deficit at 1.8 percent of GDP. In 2015, weaker economic activity and tighter monetary conditions, coupled with lower external assistance, have imposed the rationalization of government spending. Most capital investments were cut, and beginning in summer 2015 the procurement of goods and services was halted. As a result, the government deficit in the first nine months of 2015 was 1 percent of GDP. Recognition of losses in the banking sector as a result of a large-scale banking fraud increased public and publicly guaranteed debt to almost 50 percent of GDP. Table 1: Key Macroeconomic Indicators 2009 2010 2011 2012 2013 2014F 2015F 2016F 2017F Nominal GDP, MDL billion 60.4 71.9 82.3 88.2 100.5 111.8 119.3 131.7 144.4 Real GDP, % change -6.0 7.1 6.8 -0.7 9.4 4.6 -2.0 0.5 4.0 Private Consumption, % change -8.0 9.6 9.3 1.0 6.4 2.9 -1.8 0.6 3.7 Government Consumption, % change -2.0 -1.1 -1.0 0.6 -0.8 0.2 -2.0 0.2 2.2 Gross Fixed Investment, % change -30.9 17.2 13.0 0.4 3.8 10.1 -7.3 -0.8 1.4 Export, % change -12.1 13.7 27.4 2.3 9.6 1.1 -1.1 3.7 4.5 Import, % change -23.6 14.3 19.7 2.5 4.4 0.4 -3.5 2.8 3.8 GDP deflator, % change 2.2 11.3 7.2 7.9 4.1 6.3 8.9 9.8 5.4 CPI, % average 0.0 7.4 7.6 4.6 4.6 5.1 9.5 11.9 5.0 Current Account Balance, % GDP* -8.2 -7.5 -11.0 -8.8 -6.6 -8.0 -8.1 -7.4 -6.4 Remittances, % change, USD -36.2 13.2 21.7 10.7 10.7 -1.0 -19.4 1.6 6.7 Terms of Trade, % change 0.1 0.0 -1.4 -0.6 -1.1 -1.4 6.3 0.2 -0.2 International gross reserves, million, USD, eop 1480 1717 1965 2515 2820 2156 1768 In months of next year’s imports 4.4 3.4 3.9 4.6 4.5 4.0 3.2 Budget revenues, % GDP 38.9 38.3 36.6 38.0 36.7 38.0 36.0 36.9 37.2 Budget expenditures, % GDP 45.3 40.8 39.0 40.1 38.5 39.8 38.7 39.9 39.7 Fiscal balance, % GDP -6.3 -2.5 -2.4 -2.1 -1.8 -1.8 -2.7 -3.0 -2.5 Public debt and guarantees, % GDP 28.7 31.9 30.4 33.2 31.7 32.5 47.5 47.0 44.8 Note:* Starting with 2012, BMP6 methodology is used. Source: Moldovan Authorities, WB projections. 3 14. In the current environment, Moldova’s economy is estimated to have been in a recession in the second half of 2015, followed by a projected slow recovery in 2016. Economic downturn in the eastern partners, trade restrictions, severe summer drought, and tight internal monetary and fiscal policies have pushed Moldova into an estimated 2 percent recession for 2015. The economy is likely to regain its growth momentum slowly in 2016, increasing 0.5 percent. The downside risks are substantial: with pending inclusion of fiscal costs of the bank resolution into state budget’s debt service, lower economic activity, higher prices and lower foreign reserves, Moldova has limited macroeconomic buffers. The long overdue increase of utility tariffs will keep inflation above the target range in 2015-16. With a weaker economy, fiscal pressures will persist from high recurrent expenditures, increased debt service payments, recognition of the fiscal cost of bank resolution and lower external budget support. Poverty and Shared Prosperity 15. Moldova has made progress in reducing poverty and boosting shared prosperity in recent years, but remains one of the poorest countries in the region. Following rapid growth in remittances and consumption, poverty continued to decline from 45.3 percent in 2011 down to 39.6 percent in 2013, and a projected rate of 36.6 percent in 20144 based on the Europe and Central Asia (ECA) regional poverty line of USD 5/day at Purchasing Power Parity (PPP). The incidence of extreme poverty (USD 2.5/day at PPP) is estimated to have more than halved between 2011 and 2013, going from 7 to 3.1 percent. National trends are also positive, with the national poverty rate falling from 17.5 percent in 2011 to 12.7 percent in 2013 (Figures 1 and 2). Consumption by the bottom 40 (B40) percent of the population increased by 5 percent between 2008 and 2013, outpacing the average growth rate of 1.8 percent. Figure 1: National poverty rate in Moldova, by Figure 2: Poverty headcount at US$5 and $2.5 a day location, percent (PPP), percent (2012 and 2013) 40% 100.0 39.6 30% 50.0 0.0 20% 18.8% 2013 2013 2012 2013 2013 2013 13% 10% Armenia Georgia Kyrgyz Moldova Romania Ukraine total 4.6% Republic 0% rural 2007 2008 2009 2010 2011 2012 2013 US$ 2.50 US$ 5.00 Source: National authorities, ECATSD. 16. Newly released data confirm that mean consumption growth, rather than changes in inequality, has played a key role in poverty reduction in recent years. Increases in household income are mostly from remittances and pensions. Changes in poverty in 2011-13 are driven by higher mean growth in consumption, which in turn follows GDP growth closely. Pension income has increased across quintiles, particularly among those in the bottom quintile (4.3 percent over the period). Remittances have increased for all groups, but more so for the top 60 percent, with a 5 percent increase in remittances for the top quintile (compared to 1.2 percent for the bottom). 17. Higher inflation, lower remittances and a severe summer drought are estimated to negatively impact living standards in Moldova in 2015. Remittances and agricultural income are key sources of income for households (particularly the less well-off, at 12 percent and 18 percent, respectively, among the bottom 40). Poverty is estimated to increase from 36.6 in 2014 to 4 Based on the World Bank’s Macro-Poverty Outlook, October 2015. 4 37.8 in 2015 (USD 5/day at PPP) as the economy is expected to contract in 2015 and, with a low projected recovery in 2016, gains in poverty will be very limited. If the economy picks up as expected in 2017 – the final year of the CPS period – poverty reduction trends could resume. III. SUMMARY OF PROGRAM IMPLEMENTATION 18. CPS objectives remain valid but some outcomes could end up not being delivered. The WBG has continued to support the Government in implementing a reform agenda, but the governance trends noted above and the frequent changes in government led to operational delays and uncertainty in policy direction. For example, instability in the policy-making process and changing counterparts affected policy-related operations in the education and health sectors. CPS outcomes linked to support from the International Finance Corporation (IFC) and WB support for competitiveness are likely to be compromised by the weakened governance environment in the implementation of business regulations and by the after-effects of the banking fraud. WBG support for the e-Governance Strategy has improved delivery of some government services, but is insufficient to address broader concerns regarding public sector capacity. In addition to the summary below, further details are presented in Annex 9. Pillar 1: Increasing Competitiveness 19. The Development Policy Operation (DPO) series was intended to support improvements in the business climate, promote financial sector stability, and improve the equity and efficiency of public expenditure, but the authorities’ delayed response to improper behavior in the banking sector delayed the second operation. The first DPO was approved in March 2014. Despite progress on most agreed measures of DPO-2, supported by pillars for improving the business climate and equity and efficiency of public expenditure, there were delays in addressing the large macro-fiscal risks related to stability of the banking sector. Political changes have also impinged upon discussions with the International Monetary Fund (IMF). Therefore, DPOs5 are not expected to resume until Q4 FY16 at the earliest. 20. Reforms have been made to improve competitiveness but challenges remain, in particular continuing regulatory constraints and limited access to financial services due to the banking crisis. With support of the Competitiveness Enhancement II project (CEP-II) the Government is developing a system of performance indicators for public authorities with business regulatory functions and undertaking other reforms related to licensing and permits. IFC and WB advisory services and analytics have helped the Government focus on the most promising actions and instruments in export development, and to target government support at high-potential sectors and companies. The CEP-II Matching Grants Facility, launched in September 2015, provides for business improvement projects aimed at export development and promotion. This co-financing will be available for exporting Small and Medium Enterprises (SMEs), and aims to improve company competitiveness. In addition, a Credit Line of USD29.4 million is being disbursed to eligible direct and indirect exporters. The Government remains committed to implementing the activities supported by CEP-II. 21. Alongside CEP-II, IFC’s Investment Climate Reform (ICR) project supports reforms to improve the business climate and enhance competitiveness. The insolvency framework has been modified and streamlined, leading to accelerated restructuring procedures, simplified dissolution procedures, practical clarifications with respect to rights and obligations of participants 5 Other providers of donor support include the EU and Romania. 5 to the process and timeframes for procedural phases of insolvency. However, further legal reform is required, as is full implementation of these reforms to speed up insolvency proceedings. Remaining weaknesses in the insolvency regime create uncertainty and discourage financial transactions. The project has also supported trade facilitation through, inter alia, support to Moldova’s Customs Administration to establish a trade facilitation committee, to strengthen trade automation and risk management and support for drafting of a new Customs Code and related regulations, and help with strengthening logistics services. Publication of the Investor Incentives Inventory developed by the project has closed an important information gap raised by the 2013 Investor Perception Survey and has effectively increased the transparency of investor incentives in Moldova. Phase II (2015-18) will tackle continuing deficiencies in the regulatory framework, agribusiness and food safety, customs administration, and investment policy. 22. Despite such improvements in the de jure regulatory framework, WBG analytics have shown that growing corruption in regulatory implementation has produced a deterioration in the investment climate and private sector outlook. IFC’s Cost of Doing Business and BEEPS surveys indicate that enterprises perceiving a decline in the business environment outnumbered those seeing an improvement by 4:1 and 2:1 in 2014 and 2015, respectively. The percentage of a Government contract’s value spent on bribes rose from 8 percent to 11 percent during 2008-13. The percentage of firms saying that bribes were at least moderately important in getting business went up from 12 percent to 53 percent during 2005-13. The percentage of firms saying they had to pay a bribe to get a construction permit rose from 23 percent to 43 percent during 2008-13; it went up from 7 percent to 22 percent to get an operating license. Private firms in 2014 rated corruption as their number 2 problem (after political instability). The WB’s FY16 Trade Study documents the impact of this decline in economic governance upon firms’ productivity, performance and international competitiveness. 23. Financial support and technical assistance (TA) have increased market access for farmers. Twenty eight producer groups have been established and utilized the support of the Moldova Agriculture Competitiveness project (MACP) to develop productive partnerships and realize investments for mutual benefit, particularly in cold storage facilities. These partnerships have also been a vehicle for providing support to farmers in implementing sustainable land management practices. The International Development Association (IDA) also financed through MACP Additional Financing (AF) compensations to smaller fruit farmers, who are most disadvantaged and affected by Russia’s 2014 export restrictions. In 2014, the IFC provided financing to the Trans-Oil group of companies, a leading integrated agro-industrial group focused on grain origination trading and oilseed crushing. The transaction has had a positive impact on farmers through the procurement of agricultural commodities from around 15,000 farmers in FY2015. Furthermore, the transaction provided better opportunities to local farmers by integrating them with higher value added international markets. Moreover, the IFC has provided loans to Moldovan banks to finance SMEs with at least three credit lines extended during the CPS period. 24. Significant progress has been made in increasing agricultural competitiveness but recent political and institutional instability has hampered progress. The IFC’s ICR project and IDA-financed MACP supported the creation of a single Food Safety Agency (FSA), a pre- condition for signing of the AA/DCFTA with the EU and for realizing Moldova’s food export potential. FSA capacity has been enhanced through training of staff responsible for inspections and controls in the newly introduced risk-based inspections approach. Due to changes in government, the FSA has not had an effective leadership for some time, which limits the implementation of the overall food safety reform agenda and affects the IDA operation. 6 Pillar 2: Enhancing Human Capital and Minimizing Social Risks 25. Results in this pillar have been variable, with good progress in the implementation of some education reforms, more moderate progress in the health sector, and limited progress or even regression in pensions and social assistance due to ad hoc policy actions by the Government. Efficiency improvements in the education sector are demonstrated through the introduction of per student financing in 2013 and increases in the student-teacher ratio. Quality improvements are underway with improvements to the student assessment system introduced in 2015 and quality assurance standards for hub schools approved in 2013, but implementation of these standards has been slow. As with other sectors, progress in education was affected by the political context and a significant staff turnover at the Ministry of Education, leading to concerns over policy direction and the sustainability of interventions. 26. There have been a number of ad hoc pension increases, but these have not improved the replacement rate, which in 2014 was 26 percent of the average wage, and pensions could further be put at risk because of fiscal pressures. Coverage of the Ajutor Social assistance system among the poorest quintile was reduced between 2012 and 2014, driven by policy changes in the program, poor outreach by social workers and ad hoc increases in categorical benefits. These ad hoc increases have also increased spending on categorical benefits, reversing earlier progress in reducing the delivery of these costly and poorly targeted programs. The Government has more recently made concerted efforts to reverse the declining coverage of Ajutor Social. The Government has provided pension top-ups for recipients of lower pensions, but due to strong GDP growth, pension spending has remained static proportionate to GDP. 27. In the health sector, health insurance coverage reached the 2017 target of 85 percent by 2015, but this has been driven by higher income households taking up insurance. The 2013 Health Budget Survey shows that coverage amongst the B40 percent of households had reduced over the previous two years. There has been some reduction in reported out-of-pocket expenditures, but among the B40 percent of households such payments have not reduced as a proportion of household non-food expenditure. Delays in the implementation of the Health Transformation Operation (HTO), together with high turnover of staff in the Ministry of Health, have slowed reforms to improve the quality and efficiency of the sector. Additionally, the IFC successfully committed one Public-Private Partnership (PPP) during the CPS period, with a second one delayed due to the turnover of personnel within the Ministry of Health. 28. Previous gains in education and health infrastructure rationalization will be further strengthened by the new Local Roads Improvement project (LRIP) approved in FY16. One of the main expected results of LRIP, which is the largest project to date in our portfolio, is improved physical access of the rural population, as one of the most vulnerable groups, to vital education and health services, as well as regional markets, connected by better local roads. Pillar 3: Promoting a Clean, Green and Resilient Moldova 29. Progress in this pillar has been driven by achievement of results in adaptation and climate change and improved natural resource management. There has been substantial progress in capacity to forecast severe weather and respond accordingly. Investment grants have produced positive results by providing farmers with information on practical techniques for adaptation to climate risks. Delays in implementation of the District Heating Efficiency Improvement project (DHEIP) have hampered progress on energy efficiency and security. Government changes led to DHEIP being declared effective 10 months after approval. In a 7 relatively poor regulatory environment, the National Agency for Energy Regulation (ANRE) has delayed increasing DH tariffs, which in turn delays the restructuring of the utility Termoelectrica’s debt and thus take-up of an International Bank for Reconstruction and Development (IBRD) partial risk guarantee. Moldova is also part of the Danube Water Program, which supports policy dialogue and capacity development to achieve smart policies, strong utilities, and sustainable services in the water supply and wastewater sector of the Danube region. The European Neighborhood and Partnership Instrument – Forest Law Enforcement and Governance II Program (ENPI-FLEG 2) TA has supported improvement of forest and land management in non-state (including municipal) lands, which often suffer from weak management practices. Along with these interventions, the ongoing Climate TA will provide further guidance on how to address increasing climate change challenges, including for the most vulnerable, in a follow-up project. Governance as a cross cutting issue and opportunities to support citizens’ engagement 30. The WBG fulfilled its commitment to identify opportunities to support governance across the program, but not necessarily as explicitly as the context now requires. Government services have increasingly been delivered through the Government’s shared computing infrastructure, financed by the Government e-Transformation (GeT) project. Utilization rates and service quality ratings increased consistently during 2013-15. More than 2,000 public servants have received e-government training, and there are estimated to be more than 350,000 beneficiaries, 52 percent of whom are women. The underlying rationale for most regulatory reforms supported by CEP-II, the ICR project, the programmatic Financial Sector TA and the DPO series was to improve private sector profitability by reducing rent-seeking opportunities for state institutions. The IFC’s ICR project, along with the WB/EBRD BEEPS and Cost of Doing Business, served as a key objective metric of deteriorating corruption. The Public Investment Management TA has recommended processes for transparency and rules-based decision-making. 31. The WB is carrying out its CPS commitment to identify opportunities to support social accountability. A full schedule of citizens’ engagement (CE) activities is described in Annex 6. This includes Global Partnership for Social Accountability (GPSA) activities in education and health, customer perceptions surveys and complaints mechanisms for Chisinau’s district heating sector, community monitoring of road rehabilitation, gender-representative road- user consultations, advocacy for pension reform, an Open Contracting Initiative, DPO actions on public investment transparency, and collaboration with the Open Government Partnership. Portfolio Performance 32. Since the beginning of the CPS period, five projects and two AFs have been approved for a total of USD240.3 million (USD160.8 million IDA financing and USD79.5 million IBRD lending), while five projects exited the portfolio. Currently, there are nine active projects totaling USD335.3 million, of which 66.3 percent is undisbursed. Portfolio implementation was smooth in FY14, with a 30.2 percent disbursement ratio. However, program implementation has worsened and the number of problem projects reached a peak in FY15 – four out of eight projects (50 percent). After turning around these projects through a Country Program Problem Review, regular dialogue on required policy decisions, technical portfolio discussions and exceptions monitoring, and after a 25.8 percent disbursement ratio in FY15, two other projects entered into problem status in FY16. Proactivity has been at 100 percent. The current disbursement ratio looks promising – 26.3 percent for FY16 to March – but further progress on policy decisions is required to sustain program implementation. 8 33. Lengthy parliamentary ratification procedures, interruptions in normal government operation and policy questions have also affected and delayed the processing cycle of our lending and Trust Fund (TF) portfolio. A critical project preparation grant for local roads was lost in 2015 due to non-ratification, the failure to address banking fraud in 2014-15 held up the DPO program, and the energy regulator’s non-implementation of approved tariff formulae has blocked the IBRD district heating guarantee. However, the April 2016 legal amendment dispensing with ratification of grants was a positive development. 34. Moldova’s original indicative IDA17 allocation was SDR115.0 million, of which SDR4.7 million were on hard terms, as determined at the start of IDA17. In FY16, the IDA17 indicative allocation was revised downward, to SDR103.4 million (including SDR4.0 million on hard terms), partly because of the downgrading of Moldova’s CPIA score. For FY16 and FY17, Moldova’s remaining indicative IDA envelope is SDR26.5 million, or, at current exchange rates, about USD36.88 million (see Table 2: Proposed Indicative Lending Program, FY14-17 CPS in Section V). The potential revision of Moldova’s CPIA score may lead to a change in its FY17 indicative allocation6. The IDA16 allocation was fully used in FY14. 35. There has been solid progress in mainstreaming gender in projects across the portfolio. Social sectors such as health, education, and social protection have historically had a stronger gender focus. Since FY14 to date, 100 percent of new projects have been gender-informed in at least one dimension (Figures 3 and 4), and 36.4 percent of projects on all three dimensions. Although women’s and girls’ access to services was already being addressed by the design of WB social sector programs, the 2014 gender assessment highlighted unequal labor market outcomes as “the most prominent gender gaps”, and that these are determined in the latter years of education. While IFC’s FY16 ICR project has a component on gender equality in business regulation, the FY16-17 Systematic Country Diagnostic (SCD) and an FY17 TA on skills will identify entry points for WBG to support women’s preparation for the labor market during the FY18-21 CPF. Figure 3: Gender informedness by dimension, Figure 4: Gender informedness by dimension & GP, FY14-16 FY14-17 100.0% 100.0% 50.0% 0.0% 0.0% Analysis Action M&E Analysis Action M&E Source: Own staff estimates. 36. IFC’s committed portfolio in Moldova is USD63.6 million (USD60.6 million outstanding), consisting of 83 percent loans and 17 percent equity and quasi-equity. In FY15, IFC completed a pre-export financing transaction of USD30 million with a major agribusiness group, building on more than a decade of IFC experience in this sector. The IFC has targeted yearly commitments of USD30 million (not including mobilization) depending on market 6 Actual IDA allocation for FY17 will depend on: (i) total IDA resources available; (ii) the country’s performance rating, per capita GNI and population; (iii) the country’s financing terms of IDA assistance (grants/credits); (iv) the country’s allocation deductions associated with MDRI annual debt service foregone (as applicable); (v) performance, allocation parameters and IDA assistance terms of other IDA borrowers; and (vi) number of IDA eligible countries. 9 conditions. Due to the challenging investment climate, the program of USD30 million might not be achieved in the years to come. In parallel, the IFC noted a weaker quality of its portfolio. 37. A significant challenge for IFC's operations in Moldova stems from insufficient enabling conditions for private sector development. As highlighted previously, Moldova faces significant challenges in the business environment investment climate. Governance and transparency in the banking sector must be addressed to allow for IFC to develop local capacity and create a platform for attracting investment. The primary challenge for the Moldovan banking sector is the lack of transparency in ownership structures. Complicated shareholding structures of domestic banks lead to diminished shareholder transparency and, as a result, diminished corporate governance and distortion of competition in the sector. At the same time, the challenges could present an opportunity for the IFC. The Moldovan banking sector is quite underdeveloped when it comes to financial products and risk mitigation and governance best practices. As a result, the banking system does not provide sufficient private sector friendly products, especially for MSMEs. The IFC and other IFIs have the opportunity to provide long-term capital for on lending to MSMEs by working with foreign banks on risk-sharing and co-financing frameworks. However, the extent of this support will depend on concerted actions by the Government to tackle issues surrounding ownership in local banks and steps to address judicial reform. 38. The current net exposure of the Multilateral Investment Guarantee Agency (MIGA) in Moldova amounts to USD20.3 million in four projects. All projects support foreign banks' subsidiaries in the country, including micro-finance organizations and leasing operations. MIGA’s continuing support to these projects signals the Agency’s efforts to underwrite projects in Moldova, encourage inward foreign direct investment (FDI), and add to the WBG’s strategy of encouraging private sector development in the country. External Partnerships 39. Partnerships with other donors have been effective in leveraging co-financing and speaking as one on key reforms. The WBG convened the multi-donor Briefing Book which has been the basic document for donors’ policy dialogue with governments during 2015-16. The WB also organized a cabinet-level one-day retreat with the government and three policy meetings with the political leadership during 2015. The WB leads the transport donor group, is setting up a similar arrangement for the energy sector, informally coordinates health donors, participates actively in all government’s sector councils and hosts the monthly donor forum. The WBG’s SCD is being coordinated with the EU’s joint programming process. Collaboration with the EU Delegation, EU Commission and EU member states has been essential in the CPS period, particularly in the energy sector and on governance reforms. Operations in the WBG portfolio have also attracted the support of other development partners (DPs), including the Global Environment Facility (GEF), the Governments of the Netherlands, Sweden, Switzerland, Japan, the United Nations Children’s Fund (UNICEF), and the U.S. Agency for International Development (USAID), which co-financed IDA operations, financed carbon operations, and provided other forms of support, including for Advisory Services and Analytics. The size of the active TF portfolio is USD23.9 million. Extensive use has been made of the ECAPDEV TF for project preparation which has helped in an environment of constrained lending resources and internal BB funds. TFs will continue to play an important role in leveraging financing for analysis and reforms. 10 Advisory Services and Analytics (ASA) 40. Despite resource constraints, TFs and rationalization of the lending program have enabled an active ASA program. In energy, Swedish, Korean and multi-donor TFs have provided support to DH restructuring and reform, informing the design of the DHEIP. In the financial sector, FIRST TFs have helped to strengthen the National Commission for Financial Markets’ (NCFM) institutional capacity and to advise on financial sector regulation. Various IFC groups, teams, practices, and projects have provided continued assistance for private sector development through regulatory and business environment reform. In addition to monitoring the macro-fiscal, financial and socio-economic situation (labor market, poverty, skills and pensions, and programmatic human development TA), and ongoing IFC advisory support for the investment climate, key ASA comprised economic and sector work on road financing, water sector regionalization, water and wastewater state of the sector country note, public expenditure, land governance, trade, and a number of activities supporting public sector capacity. There were no major changes from the original ASA program: the Village Development Scoping Study aiming at the geographical targeting of the most vulnerable and the DFID-financed Good Governance TF TAs are the few examples of new activities. Annex 4 presents the link between our ASA and lending programs. 41. A noteworthy example of a WB-led analytical effort is the Briefing Book consisting of twenty eight policy notes, developed by Moldova’s partners in FY15, setting out Development Partners’ collective recommendations on development policy and providing a potential platform for dialogue and strategic partnership with governments. IV. EMERGING LESSONS Rapid changes in Moldova’s development context have provided a range of salutary lessons: 42. Frequent government changes have affected portfolio performance, for example on the consolidation of the tax service and hospitals and the lengthy ratification of recipient-executed grants for project preparation. 43. Risks to program implementation from political fluidity are amplified when a large portion of the portfolio and pipeline is in policy-based lending (DPOs, Results-based Financing [RBF] and Program-for-results [PforR]). There was a hiatus of nearly two years in the DPO program due to the authorities’ tolerance of banking irregularities and political instability, and the political backing for education, health and social protection reforms, which are supported by policy-based financing, is unclear. 44. The lending pipeline should remain flexible and selective to adapt to changing priorities. With successive governments proving slow to address financial sector risks and to agree an IMF-supported macroeconomic framework, pipeline resources were reallocated away from budget support to emergency investment projects and rural roads. Program consolidation has also taken place to accommodate budget constraints. 45. Coordination among development partners providing budget support is necessary for effective leverage over key governance issues. The WBG’s leadership of the multi-donor Briefing Book and public communications on anti-corruption have helped to harmonize policy positions among development partners. This has established a solid track record for the WBG’s convening power and leading role as a knowledge bank. 46. Electronic governance projects should be set within a broad governance reform agenda for maximum impact. While the Governance e-Transformation project has delivered 11 significant benefits, there is further scope for cost-savings and systems integration. The FY17 Modernization of Government Services project will therefore integrate front-end digitization and back-end process re-engineering. 47. The IFC’s investment climate research uncovers a widening divergence between investment climate reforms and their implementation, the “regulatory implementation gap”. While this does not reduce the need for regulatory reform, it indicates the importance of monitoring implementation through instruments such as the Cost of Doing Business survey and BEEPS. 48. The WB’s procurement procedures, notably the “No Objection” process, were a critical protection against attempts to interfere in larger tenders. Indeed, there was a degree of skepticism regarding RBFs and PforRs from implementing institutions, which valued the protection afforded by the WB’s “No Objection”. This would suggest a preference for continued use of WBG fiduciary controls as the WB’s procurement reforms are implemented in Moldova. V. ADJUSTMENTS TO CPS AND FUTURE ENGAGEMENT 49. Therefore, while the original CPS pillars and objectives remain relevant, changing country circumstances and project-level experience have called for adjustments. The main modifications relate to: (i) WB flexibility in responding to urgent emerging needs; (ii) an adjustment to program content in respect of corruption and state capture7; (iii) pipeline consolidation; (iv) delay of some operations, pending policy decisions and commitment; and (v) project-level adjustments based on implementation experience. Revisions to CPS outcomes and indicators are presented in annexes, most of them being due do project-level implementation experience. This PLR does not extend the CPS period. 50. The WB has been flexible in respect of unexpected needs. In FY15, the WB allocated USD12 million of IDA resources to finance compensation for fruit-growers affected by Russian import restrictions. The second MACP AF will be brought forward from FY17 to FY16 to reflect the rapid implementation of the matching grants component. The WB also approved USD2 million of IDA AF to cover a cost-overrun under the Disaster and Climate Risk Management project (DCRMP). 51. The weakening in governance will require flexibility from the WBG during FY16-17. There are possible lending trajectories in which zero, one, or two DPOs are approved before June 30, 2017. However, that flexibility will be strictly bounded by an understanding of the state’s governance performance. The WBG has informed the current Government that this understanding will be informed, inter alia, by: (i) the state’s response to WBG proposals for prior actions addressing state capture in future DPOs; (ii) data from IFC enterprise surveys; (iii) measures taken to improving financial sector governance, notably when and how the observations of ongoing diagnostic audits are addressed; and (iv) the degree of interference in WB-funded procurement and recruitment. The WB will maintain its close alignment with the IMF on financial sector governance and fiscal stability; an IMF-supported program will be a prerequisite for WB budget support for the foreseeable future. 52. One side of the WBG’s response to the heightened governance and corruption challenge is to address them explicitly. The WB has informed the Government that any further DPO would contain proposals to address state capture. Two governance projects are under preparation for FY 2016-17: Tax Administration Modernization project (TAMP) and 7 Meaning the control of public institutions by private interests through private channels of influence. 12 Modernization of Government Services project (MGSP). Four new TAs to be implemented under the cross-cutting governance theme will be financed from the new UK’s “Good Governance and Investment Climate” TF: Tax Legislation Revision, State Owned Enterprise Reform, Justice Sector Reform, and Government Reform Scorecard. The ongoing SCD will explicitly analyze the impacts of corruption upon growth. The IFC and IBRD have both disseminated analysis of governance and corruption metrics extensively in the broadcast and electronic media. 53. The other facet of the WBG’s response has been to reallocate resources away from policy-based lending. While the WBG remains open to budget support, delays in addressing banking sector risks meant that the planned DPO was not approved in FY15, and approval envisaged for FY16 is not certain at the time of writing. IDA resources can thus be reallocated to investment project financing (IPF). For example, the FY16 LRIP was increased from USD30 to USD80 million, and available IDA funds could also be redirected to climate change adaptation investments in FY17. Total IBRD commitments could be reduced, as the regulator’s failure to implement its tariff methodology means that there is uncertainty about the IBRD guarantee to support the financial restructuring of the combined heat and power company Termoelectrica. More generally, in the design of IPFs, the WB will be more cautious in committing to support activities which depend upon difficult policy decisions or inter-institutional collaboration. For example, the Education Reform project will reallocate funds from RBF to WB-supervised procurement. The mix of IFC activity will continue to shift away from investment towards ASA, particularly on agri- business, in reflection of economic governance and the outlook for the investment climate. The design of IFC and WB ASA will shift somewhat the mix of activities from analysis towards communication and technical support for implementation. 54. It was necessary to rationalize the lending program to protect the ASA budget. A single Climate Adaptation and Forestry project for over USD20 million replaced the Forestry and Sustainable Land Management and the Climate Adaptation and Resilience project. The FY17 MGSP combines support for public administration reform and e-governance, which were conceived in the CPS as separate projects. 55. In addition to the abovementioned factors, other adjustments to the CPS results framework have been necessitated by delays in decision-making or by project-level developments. Political fluidity has caused delays in the project cycle (e.g. preparation of the TAMP) and hampered policy-dependent operations (e.g. restructuring of hospitals, consolidation of social benefits). At a more mundane level, with the passage of time some projects turned out differently than expected (e.g. no WB support for information technology parks, as envisaged in the original CPS). Indicators and targets have been adjusted to reflect the latest information. 56. Any future agreement on the indicative lending program would be subject to revision, depending upon future events, notably emerging priorities, progress on reforms, fulfilment of budget support prior actions, revision of IDA allocation for FY17, global economic developments affecting IBRD’s financial capacity, country demand, and demand from other IBRD borrowers. Current PLR modifications and program adjustments are reflected in Table 2 and Annex 4. 13 Table 2: Proposed Indicative Lending Program, FY14-17 CPS Project name IDA, IBRD, Change vs. original CPS Status (as per CPS) USD M USD M December 2015 FY14 Development Policy Operation (DPO) 21.0 9.0 - Closed Health Transformation Operation - 30.8 Active (PforR) FY15 Titled “Private Sector Development” in the Competitiveness Enhancement II 15.0 Active 30.0 original CPS District Heating Efficiency 40.5 FY14 in the original CPS Active Improvement Disaster and Climate Risk Management Cost overrun. Not planned in the original CPS. 2.0 Active Additional Financing (AF) Compensation for fruit growers. Not planned Agriculture Competitiveness AF 12.0 Active in the original CPS. FY16 Local Roads Improvement 80.0 0.0 USD30 M in the original CPS Approved Tax Administration Modernization 20.0 FY15 in the original CPS Pipeline Advanced from FY17 in the original CPS, Agriculture Competitiveness AF2 10.0 Pipeline amount reduced 35.0 Increase from USD30 M; IDA/IBRD split to DPO-2 10.0 Pipeline be confirmed. FY17 Replaces 2 projects in the original CPS Modernization of Government Services 7.0 Pipeline 13.0 (USD30 M); IDA/IBRD split to be confirmed. Education Reform AF 15.0 - Pipeline District Heating Partial Credit Risk 80.0 FY14 in the original CPS Pipeline Guarantee Replaces 2 projects in the original CPS Climate Adaptation and Forestry 1.5 Pipeline 18.5 (USD40 M); IDA/IBRD split to be confirmed. Economic Governance DPO-1 30.0 - Pipeline TOTAL 224.3 256.0 VI. RISKS TO THE COUNTRY PARTNERSHIP STRATEGY 57. The CPS assessment remains valid and the overall risk rating is Substantial, warranted by the following High and Substantial risk categories, discussed below. 58. Political instability has exacerbated the risk of policy volatility, but there is renewed opportunity to advance policy dialogue and action on necessary reforms. The WBG has taken a lead in structuring DPs’ policy dialogue with successive governments. The Briefing Book lays out the most urgent and longer-term required actions, which have been widely endorsed by all governments since February 2015, by civil society and by DPs. Support for policy reforms through DPOs envisaged in the CPS remain the base case. However, if these do not materialize, resources will be reallocated to IPFs with tangible results for the population, with particular focus on projects that alleviate the impact on the most vulnerable and affected. The Government sworn in on January 20, 2016 reopens the opportunity for policy dialogue and action on immediate reforms. 59. The commercial and reputational risks associated with investment in the private sector are generally high. Consequently, it is expected that the mix of IFC’s activities in Moldova will shift away from investment towards Advisory Services. 60. Macroeconomic risks have materialized, with the downturn in Russia and Ukraine cutting an estimated 4.6 percent from the 2015 GDP and over 12 percent of GDP lost to the banking sector fraud. The economic downturn has led to severe fiscal compression, with customs receipts and VAT falling below expectations and public spending 15.8 percent below planned budget as of November 2015. While according to the Joint IMF-WB DSA (December 2015) 14 Moldova’s risk of debt distress is low even after absorbing the fiscal costs of the three insolvent banks, fiscal disciple is critical to ensuring debt sustainability. Potential downward revision of Moldova’s CPIA score could lead to negative changes in the risk category. The WBG will continue to support improved macroeconomic management and good governance in the banking sector through its budgets support series and financial sector TA, and will remain flexible and supportive to the unforeseen economic challenges and emerging priorities. Should structural reforms stall or macroeconomic risks materialize, DPOs will not be considered and resources will be reallocated towards IPFs with tangible benefits for the population, with particular focus on the most vulnerable and poor. 61. The institutional capacity and sustainability of our interventions has been affected by staff turnover which accompanied each government change, and the WB will be therefore more cautious in project design in committing to support activities that depend upon difficult policy decisions or inter-institutional collaboration. The WB will continue to actively engage with counterparts to maintain adequate implementation capacity and streamline burdensome national requirements for grant and project processing. 62. Fiduciary risks have grown and have affected project implementation. The WBG’s Department for Institutional Integrity (INT) has received a large number of reports referring to Moldova in the past five years, most related to procurement. To prevent and mitigate these risks, the WB will: (i) continue strong anti-corruption communications efforts; (ii) enhance awareness of how supervision and control are applied in our operations; and (iii) build a record of suspicious cases for further analysis and action. Although procurement thresholds will remain unchanged, they may be applied flexibly in suspicious circumstances. 63. Extreme weather events have impaired macroeconomic stability and impacted the structure of our portfolio. Droughts in 2012 and 2015 suggest that meteorological events once considered exceptional are now routine and are affecting Moldova’s growth and fiscal balance, thus diluting the macroeconomic stability results of budget support operations. These risks can be partially mitigated by building resilience through the ongoing and planned lending and ASA program. Better preparedness capacity has been enhanced through the DCRMP, and adaptation measures have been included in MACP and a series of soil conservation activities. An ongoing Climate TA will inform the preparation of a climate change adaptation investment project. Risk Categories Rating 1. Political and governance High 2. Macroeconomic Substantial 3. Sector strategies and policies Moderate 4. Technical design of project or program Moderate 5. Institutional capacity for implementation & sustainability Substantial 6. Fiduciary Substantial 7. Environment and social Moderate 8. Stakeholders Moderate Overall Substantial 15 Annex 1: Updated CPS Results Matrix Country Development World Bank Group Instruments Outcomes Directly Influenced by the Program Goals Pillar 1: Increasing Competitiveness CPS Outcome 1.1. Improved business environment and access to finance for business operation Improving the business Customs procedures are streamlined and more transparent. Ongoing: climate, promoting Indicator1: Reduced number of days to prepare documents for export operations IFC Investment Climate Reform (ICR) project competition policies, and (“Trading Across Borders” indicator of Doing Business) ASA: streamlining the regulatory Baseline: 20 (2012) Trade Study framework (Moldova 2020 Target: 16 (2017) Partners: Priority #4). USAID, EU Decreased regulatory burden on enterprises. Ongoing: Indicator 1: Reduced management time for regulatory requirement compliance Competitiveness Enhancement II project (annual domestic Cost of Doing Business (CODB) survey) (CEP-II) Baseline: 10 percent (2012) IFC ICR project Target: 8 percent (2017) Partners: Indicator 2: Implemented risk-based inspection methodologies USAID Targets: 40 percent (2017) of inspection bodies (baseline: 0 percent) follow the risk-based inspection (RBI) methodologies, based on clear risk criteria and approved plan for inspections. Ad-hoc inspections are reduced to 7 percent (2017) (from a baseline of almost 100 percent), under clear criteria for unplanned inspections. 100 percent of planned inspections are published on the e-Government Center’s website. Indicator 3: Reduced number of permits and licenses Baseline: 416 (2015) Target: 238 (2017) Improving the Cumulative number of business development services provided to Small and Ongoing: competitiveness of Medium Enterprises (SMEs) with the support of WBG investment. CEP-II enterprises to increase Baseline: 0 (2013) IFC ICR project growth and employment Target: 240 (2017) Reducing financing costs Improved access of private enterprises to formal sources of finance. Ongoing: by increasing competition Indicator: Increased domestic credit to private sector as share of GDP in nominal CEP-II in the financial sector and terms (percentage) Pipeline: developing risk Target: 15 percent increase (2017) versus 2013 DPO-2 management tools Direct IFC investment (Moldova 2020 Priority Capital market continues to be strengthened to facilitate increased access to #3). finance. 16 Country Development World Bank Group Instruments Outcomes Directly Influenced by the Program Goals Indicator: Government bonds listed on the stock exchange TFs: IFC has helped the NCFM with advice Baseline: Non-existent (2012) on financial sector regulation assistance Target: Government bonds with >1 year maturity are traded on the stock Strengthening Auditing and Reporting in exchange (2017) Countries of the Eastern Partnership Indicator 1: Number of known insolvent banks subject to regulatory forbearance (STAR/EaP) Baseline: 3 banks known to be insolvent but still operating FinSAC (Vienna Center) Target: 0 (all such banking licenses withdrawn, and liquidation initiated) ASA: Indicator 2: Number of at-risk banks subject to special diagnostic audits and/or Financial Sector Development TA (FY14-16) restructuring FSAP Update (FY15) Baseline: 0 Partners: Target: 3 banks audits and time-bound restructuring plans adopted and initiated IMF, EBRD Indicator 3: Legal framework for timely intervention in distressed banks Baseline: NBM regulations delayed by Ministry of Justice (MoJ) approval process; NBM staff lack immunity for duties carried out in good faith Target: Legal amendments: (i) eliminating MoJ power to delay registration of NBM regulations, and (ii) conferring immunity to NBM staff for duties carried out in good faith. Greater alignment of the Corporate Financial Reporting (CFR) legislation and practice with the EU acquis through: (i) improved financial reporting standards in Public Interest Entities (PIEs) by implementing International Financial Reporting Standards (IFRS); (ii) redesigned audit public oversight system; (iii) further simplified and improved SME financial reporting standards; and (iv) enhanced public availability of financial statements. Indicator 1. Minimum 80 percent of PIEs file and publish IFRS-based financial statements (FSs) Indicator 2. Provisions of Directive 2006/43/EU (amended in June 2014) transposed in the draft Auditing Law, and draft Auditing Law passed to Parliament for adoption Indicator 3. Provisions of Directive 2013/34/EU (accounting directive) transposed in the draft Accounting Law, and draft Accounting Law passed to Parliament for adoption Indicator 4. Public Registry of FSs is fully operational, i.e. systems and processes in place to enable collecting and making financial statements available online 17 CPS Outcome 1.2. Improved competitiveness in agriculture Enhancing agricultural Enhanced competitiveness of the agro-food sector by supporting the Ongoing: export competitiveness, modernization of the food safety management system. Moldova Agriculture Competitiveness project attracting investments and Indicator 1: Completion of targeted food safety actions for approximation to EU (MACP) and AF achieving closer trade Sanitary and Phytosanitary (SPS) requirements IFC ICR project integration with the EU. Baseline: 20 percent (2013) IFC investments in agriculture Target: 100 percent (2017) Pipeline: MACP 2nd AF Increased market access for farmers. Indicator 1: Increased sales in volume terms (domestic and exports) of high value TFs: crops by targeted partnerships that receive investment support grants MACP GEF Baseline: 0 percent (2013) ASA: Target: 50 percent (2017) DCFTA Preparation Support in Agriculture TA Stabilized level of production of apples, plums and grapes among beneficiaries of Food Security and Agricultural Policy compensatory grants. Formulation TA Baseline: 100 percent (2014 – average production for 2012-14 for apples, plums and grapes) Target: 85 percent (2016 – average over 2015-17) Pillar 2: Enhancing Human Capital and Minimizing Social Risks CPS Outcome 2.1. Improved quality of and access to health and education services Strengthening the quality Strengthened quality of education. Completed: of education, while Indicator 1: Implementation of quality assurance standards for hub schools initiated Quality Education in Rural Areas of Moldova supporting the efficiency and scaled up (percent of hub schools) project AF reforms being implemented Baseline: 0 percent (2013) Ongoing: in the education sector. Target: 70 percent (2017) Moldova Education Reform project (MERP) Indicator 2: Improved student assessment system Moldova Labor TA on skills mismatch linked Revised tests administered and baseline for grade 4 and grade 9 tests established in to information asymmetries 2015, including disaggregation by socio-economic background. TFs: Education GPSA Improved efficiency of the education sector. Japan PHRD Disability and Development Indicator 1: Implementation of per-student financing nationwide (in 2013) Grant for the integration of children with Indicator 2: Increased student-teacher ratio disabilities into hub schools Baseline: 10.85:1 (2011-12 school year) Target: 11.5:1 (2015/16 school year) Partners: Japan Increasing access to quality Improved access to quality healthcare. Completed: and efficient health Indicator 1: Better population coverage with mandatory health insurance Health Services and Social Assistance project services with the aim of Baseline: 81 percent (2013) IDF Health Management Information System increasing life expectancy, Target: 85 percent (2017) (of which 44% are male and circa 56% are female) grant 18 and reducing premature Indicator 2: Share of out-of-pocket payments (formal and informal) in total health Ongoing: mortality and disability. expenditure reduced Health Transformation Operation (PforR) Baseline: 45 percent (2013) TFs: Target: 35 percent (2017) Health GPSA Indicator 3: Number of family doctor (FD) visits per person PPP in health structured by IFC Baseline: 2.9 ( 2014) Target: 3.2 ( 2017) Indicator 4: Annual acute care hospital discharges per 100 persons Baseline: 17.6 (2011) Target: 16.0 ( 2017) Improved physical access to rural education and health services. Ongoing: Indicator 1: Number of schools connected by rehabilitated/upgraded local roads Local Roads Improvement project (LRIP) corridors Baseline: 0 (2015) Target: 10 (2017) Indicator 2: Number of health facilities connected by rehabilitated/upgraded local roads corridors Baseline: 0 (2015) Target: 9 (2017) CPS Outcome 2.2. Fiscally sustainable and equitable pension and social assistance systems Creating an equitable and Fiscally sustainable pension system Pipeline: sustainable pension system Indicator 1: Pension (PAYG) expenditures are kept below 8 percent of GDP (without New DPO series (Moldova 2020 Priority intervention expenditures will increase) ASA: #6) Baseline: 8 percent (2013) Programmatic HD (pension policy TA) Target: <8 percent (2017) Partners: Indicator 2: Pension system fairness is improved through maximized replacement IMF rates within a given PAYG budget envelope Baseline: 28 percent (2013) Ongoing: Target: 30 percent (2017) Strengthening the Effectiveness of the Social Implementing a well- Improved equity of social assistance. Safety Net (SESSN) RBF project targeted and sustainable Indicator 1: Improved equity in social assistance system, measured as percentage of cash transfer program to population in the poorest quintile receiving Ajutor Social benefits (gender estimates improve the poverty will be provided by adult recipients) impact of resources for Baseline: 14.9 percent (2011) transfers through reduced Target: 20 percent (2017) inclusion and exclusion Indicator 2: Consolidated categorical benefits: spending on categorical benefits errors, and a system further reduced by 20 percent focused on a welfare Baseline: 7 percent (2012) concept of poverty. Target: 30 percent (2017) 19 Pillar 3: Promoting a Green, Clean and Resilient Moldova CPS Outcome 3.1. Greater adaptation and resilience to climate change Reducing the country’s Strengthened State Hydro-meteorological Service’s ability to forecast severe Ongoing: adaptation deficit to weather and Moldova’s improved capacity to prepare for and respond to natural Disaster and Climate Risk Management climate variability and disasters. project (DCRMP) and AF climate change. Indicator 1: Issuing more accurate and specific forecasts of weather conditions ASA: Baseline: Scale of weather forecasts at 5000 sq. km (2013) Social Dimensions of Climate Change Target: Scale of weather forecasts reduced to 300 sq. km (2017) Country assessment (BNPP) Indicator 2: Expanded lead-time for weather warnings to users TFs: Baseline: Lead time for severe weather warnings only 10 minutes to 1 hour Global Fund for Disaster Risk Reduction: (2013) Moldova Disaster and Climate Risk Target: Lead time for severe weather warnings expanded to 12 hours (2017) Management Capacity Building Indicator 3: Strengthened capacity to coordinate emergency responses Baseline: No Emergency Command Center to coordinate response among relevant agencies (2013) Target: Emergency response drill shows capacity improvements as compared to the baseline and the recent test of the system (2017) CPS Outcome 3.2: Improved Natural Resources Management Reducing environmental Sequestration of 0.8 million tons of CO2 through forestation of degraded lands Ongoing: degradation and negative (during the CPS period – 2014-17). MACP impacts of economic ENPI Forest Law and Enforcement and activities on the Enhanced competitiveness of the agro-food sector by mainstreaming agro- Governance II Program environment, natural environmental and sustainable land management practices. ASA: resources and human Indicator 1: Increased on-farm area benefitting from sustainable land management Forestry Policy Note (delivered in FY15) health. practices Climate TA (FY16) Baseline: 0 hectares (2013) TFs: Target: 10,000 hectares (2017) Community Forestry Project Indicator 2: Increased area protected by robust anti-erosion shelterbelts rehabilitated Soil Conservation Project Baseline: 0 hectares (2013) Community Support Program for Sustainable Target: 50,000 hectares (2017) and Integrated Forest Management and Carbon Sequestration through Forestation (SIFMSF) Potential partners: GEF, Climate Investment Fund, Green Climate Fund 20 CPS Outcome 3.3 Increased energy efficiency and security Increasing energy Decreased energy supply costs, increased quality of supply and improved Ongoing: efficiency and security. affordability of heat supply in Chisinau. Implementation of building level metering District Heating Efficiency Improvement and temperature controls, with incentives for customers to decrease energy use. project (DHEIP) Indicator 1: People that gained access to more energy-efficient cooking and/or heat- ASA: generating facilities (number) TA Program: Energy Sector Restructuring and Baseline: 27,000 (2015) Efficiency Improvement (ESREI) TA Target: 63,000 (2017), of which 50 percent female beneficiaries TA Program: DH and Electricity Tariff Indicator 2: Actual fuel savings (GCal) Affordability Analysis Baseline: 0 GCal (2015) Pipeline: Target: 52,759 GCal (2017) DH sector debt and financial restructuring IBRD PCG Project (FY16) District Heating Company debt restructured by 2017 to improve its Potential IFC PPPs Advisory Program on creditworthiness. resource efficiency for SMEs Indicator 1: Debt Restructuring Plan signed with Moldovagaz Potential IFC provision of energy efficiency credit lines through financial intermediaries subject to adequate market conditions Potential IFC direct investment to improve resource efficiency in private sector companies Partners: Sweden, EBRD, EIB, EU Reducing power sector Indicator 1: Identified options for diversification of electricity supply (Ukraine, Potential IFC project in renewable energy vulnerability to supply Cuciurgan Power Station (MGRES), Chisinau CHPs, and interconnections with shortfall due to limited ENTSO-E (via Romania). supply options and aging of assets. Governance as a cross-cutting theme Establishing a professional Professionalization of the public service increased through implementation of the Completed: and motivated civil service. position of state secretaries. Central Public Administration Reform project Indicator 1: Level of professional management of public services Pipeline: Baseline: Ministries and central agencies are managed by politically appointed Government Services Modernization Reform officials (2013) project (MGSP) Target: All (percent) of ministries are managed by professional state secretaries Partners: (2017) Sida, EU Indicator 2: Number of professional development (PD) initiatives implemented, number of state secretaries involved in professional development programs Baseline: Number of PD programs for senior executive officials, including state secretaries (2013) 21 Target: PD program based on a defined set of competences and performance requirements is approved and under implementation (2017). Percent of program- covered state secretaries (90 percent). Improved legislative framework for tax administration. Pipeline: Target: Adoption of a revised Tax Code in line with requirements of the EU-Moldova Tax Administration Modernization project Association Agreement. (TAMP) DFID Good Governance TF: Tax Legislation Revision TA Strengthened capacity for monitoring of governance reform implementation in Pipeline: Moldova. DFID Good Governance TF: Governance Target: Initial Governance Scorecard is publicly available on-line (April 2017) Reform Scorecard TA Establishing effective and The Government monitors public investment as a means of improving strategic TFs: efficient government decision making and resource allocation. Public Investment Management TA programs, aligned with Indicator 1: Mechanism for monitoring of public investment projects national strategic goals. Baseline: No mechanism (2014) Target: Monitoring mechanism is developed and used. Existing public investment project databases are developed, with update possibilities (2017) Improved accountability of the Executive for public investment through access to information. Baseline: No cumulative information on public investments is available to citizens Target: Program evaluation mechanism is developed and used. At least 3 programs evaluated for targeting, effectiveness and efficiency of outcomes and impact. Increasing reliance on Improved capacity for audit oversight of public expenditure. Ongoing: country institutions with Target: Minimum 3 projects use national auditing procedures which meet the GPSA medium-term focus on following criteria: (i) audit performed in accordance with generally accepted auditing WBI support strengthening the capacity practices; (ii) audit is carried out by adequate staff with appropriate professional Pipeline: of public external audit and qualifications and experience; (iii) audit is performed under constitutional or legal Government Services Modernization project treasury system and the provisions designed to assure independence. (Baseline: 0) ASA: public procurement Financial Management TA system. Improved business processes in the Treasury system. Baseline: Manual processing of payment orders TFs: Target: Real-time processing of payment orders Strengthening the CoA Improved functionality and uptake of the electronic procurement system. TFs: Baseline: Paper-based public procurement procedures (2011) Strengthening Public Procurement IDF Grant Target: Technically upgraded e-procurement software, rolled out for use by 100 percent of central line ministries and subordinated agencies (2015) Improved social accountability environment through opening of government data Ongoing: and opportunities and capacity building for broad citizen engagement in service Governance e-Transformation (GeT) project delivery and public expenditure management processes. Education GPSA 22 More participatory nature of decision making processes and enhanced quality of public debate. Indicator 1: Number of WB-supported communities applying social accountability tools in the education sector Baseline: 0 (2013) Target: 40 (2016) Indicator 2: Number of government data sets’ downloads from the Open Data Portal Baseline: 0 (2013) Target: 1,450,000 (2016) Using ICT to support Increased uptake of government e-services, including female users (percent) Ongoing: effective, efficient, Indicator 1: Percent of direct project beneficiaries (including female) GeT project transparent and accessible Baseline: 20,000 (40 percent female) (2013) Partners: public services to citizens. Target: 300,000 (50 percent female) (2017) GIZ: Modernization of Local Public Services Project (extension of some e-services to Increased favorable citizen perception of quality of public service regional development agencies) Indicator 1: Citizen perception of public service quality (percent of satisfied citizens accessing Government Services Portal) Baseline: 45 percent (2013) Target: 60 percent (2017) Improved interaction and strengthened understanding of development TFs: challenges between representatives of both banks of Nistru river. Korean TF for Knowledge Program for Indicator 1.1: Introduction to WBG work and instruments Confidence Building in Moldova and Baseline: 0 (2013) Transnistria Target: 40 Transnistrian representatives + 15 representatives of the right bank (2015) Indicator 1.2: Training in international procurement and best practices Baseline: 0 (2013) Target: 20 Transnistrian representatives (2015) Indicator 1.3: Training in public-private partnerships Baseline: 0 (2013) Target: 20 Transnistrian representatives (2015) 23 Annex 2: Matrix of changes to the original FY14-17 CPS Results Matrix Outcomes in the Original CPS Results Matrix Status of Outcomes in the Revised CPS Results Matrix Pillar 1: Increasing Competitiveness CPS Outcome 1.1. Improved business environment and access to finance for business operation (The formulation of Outcome 1.1 was revised to articulate clearly the type of business infrastructure, namely access to finance, that the WBG is supporting”) Effective and efficient tax administration that will improve voluntary compliance and self- assessment and will reduce compliance costs. Indicator 1: Decreased cost of compliance as measured by share of audited companies selected Indicator dropped. This indicator was proposed as part of the based on risk profiles Tax Administration Modernization project, which was scheduled Baseline: 0 percent (2013) for FY15 in the original CPS. Due to delays caused by political Target: 100 percent (2017) fluidity, the project will only become effective in FY17, and the indicator could be achieved in the next CPF period. Indicator 2: Improved effectiveness of tax collection (PEFA PI-15 “Effectiveness in collection of Indicator dropped. Moved to the next CPF period to include the tax payments”) contribution of TAMP activities. Baseline: D+ (2013) Target: B (2017) Customs procedures are streamlined and more transparent. Indicator1: Reduced number of days to prepare documents for export operations (“Trading Across Unchanged. Borders” indicator of Doing Business) Baseline: 20 (2012) Target: 16 (2017) Decreased regulatory burden on enterprises. Indicator 1: Reduced management time for regulatory requirement compliance (annual domestic Unchanged. CODB survey) Baseline: 10 percent (2012) Target: 8 percent (2017) Indicator 2: Reduced inspection coverage (except tax, customs and financial – banking and non- Indicator revised to highlight the results-based inspection (RBI) banking) methodology supported under IFC’s ICR project, which besides Baseline: 100 percent reducing inspection coverage notes the existence of a clear Target: 40 percent (2017) methodology and risk criteria for unplanned inspections and enhances transparency. Implemented risk-based inspection methodologies. Targets: 40 percent (2017) of inspection bodies (baseline: 0%) follow the risk-based inspection (RBI) methodologies, based on clear risk criteria and approved plan for inspections. Ad-hoc inspections are reduced to 7 percent (2017) (from a baseline of almost 100%), under clear criteria for unplanned inspections. 100 percent of planned inspections are published on the e-Government Center’s website. 24 Outcomes in the Original CPS Results Matrix Status of Outcomes in the Revised CPS Results Matrix Indicator 3: Reduced number of permits and licenses Indicator unchanged but baseline revised according to the latest Baseline: 416 (2015) feasibility study (December 2015) for establishment of a one-stop Target: 238 (25 percent reduction) (2017) shop for permissive documents under CEP-II. Strengthened business managers’ capacity to make strategic decisions that increase competitiveness and job creation. Indicator 1: Additional number of managers trained in business strategy, financial management, Revised and established as per the FY15 CEP-II design, which and other relevant areas with the support of a new WBG project/investment focused on the number of business development services. Baseline: 0 (2013) Cumulative number of business development services provided Target: TBC in the design of the PSD project (FY15) to Small and Medium Enterprises (SMEs) with the support of WBG investment. Baseline: 0 (2013) Target: 240 (2017) Indicator 1: IT direct employment (number of people). Dropped. Ultimately, this objective was not covered by the Baseline: 21,000 (2012) Governance e-Transformation (GeT) project, which was developed Target: 25,000 (2017) later and focused on e-service delivery and cloud infrastructure for government services. Improved access to broadband Internet. Dropped. This objective was not covered by the GeT project Indicator 1: Access to broadband Internet services (number of subscribers per 100 people) Baseline: 11 percent (2012) Target: 20 percent (2017) Indicator 1.1: Access to Internet services for the bottom 40 percent (number of subscribers per 100 people) Baseline: 9 percent for bottom 40 percent (HBS 2011) Target: At least 16 percent for the bottom 40 percent (i.e. at least 82 percent increase, as targeted for the average population) Improved access of private enterprises to formal sources of finance. Indicator: Domestic credit to private sector as share of GDP Indicator revised due to the downturn in the economy and Baseline: 38.8 percent (2011) banking crisis, which distorted the real situation, with the team Target: 45 percent (2017) considering that it’s best to measure change in percentage (nominal terms). Increased domestic credit to private sector as share of GDP in nominal terms (percentage) Target: 15 percent increase (2017) versus 2013 Capital market continues to be strengthened to facilitate increased access to finance. Unchanged. Indicator: Government bonds listed on the stock exchange Baseline: Non-existent (2012) Target: Government bonds with >1 year maturity are traded on the stock exchange (2017) Indicator 1: Number of known insolvent banks subject to regulatory forbearance New indicators. Three new indicators directly influenced by Baseline: 3 banks known to be insolvent but still operating DPO-2, and addressing directly governance challenges in the Target: 0 (all such banking licenses withdrawn, and liquidation initiated) financial sector, are added to measure enhanced financial stability, 25 Outcomes in the Original CPS Results Matrix Status of Outcomes in the Revised CPS Results Matrix Indicator 2: Number of at-risk banks subject to special diagnostic audits and/or restructuring stemming irregularities and losses in the banking sector, improved Baseline: 0 bank resolution framework and implementation. Bank resolution Target: 3 banks audits and time-bound restructuring plans adopted and initiated is now the main focus of the WB’s financial sector work. Indicator 3: Legal framework for timely intervention in distressed banks Baseline: NBM regulations delayed by MoJ approval process; NBM staff lack immunity for duties carried out in good faith Target: Legal amendments: (i) eliminating MoJ power to delay registration of NBM regulations, and (ii) conferring immunity to NBM staff for duties carried out in good faith. Strengthened CFR institutional framework through improvements in A&A ROSC update Revised to improve formulation and facilitate further measurement. indicators, i.e. greater alignment of the CFR legislation and practice with the EU acquis, namely: (i) Public Interest Entities (PIEs) implement IFRS in practice; (ii) quality of external audits is Greater alignment of the Corporate Financial Reporting (CFR) strengthened through an operational audit oversight system; (iii) SME financial reporting standards legislation and practice with the EU acquis through: (i) improved are improved; (iv) public availability of financial statements. financial reporting standards in Public Interest Entities (PIEs) by implementing IFRS; (ii) redesigned audit public oversight system; (iii) further simplified and improved SME financial reporting standards; and (iv) enhanced public availability of financial statements. Indicator 1. Minimum 80 percent of PIEs file and publish IFRS- based financial statements (FSs) Indicator 2. Provisions of Directive 2006/43/EU (as amended in June 2014) transposed in the draft Auditing Law, and draft Auditing Law passed to Parliament for adoption Indicator 3. Provisions of the Directive 2013/34/EU (accounting directive) transposed in the draft Accounting Law, and draft Accounting Law passed to Parliament for adoption Indicator 4. Public Registry of Financial Statements is fully operational (i.e. systems and processes in place to enable collecting and making financial statements available online) CPS Outcome 1.2. Improved competitiveness in agriculture Enhanced competitiveness of the agro-food sector by supporting the modernization of the Unchanged. food safety management system. Indicator 1: Completion of targeted food safety actions for approximation to EU Sanitary and Phytosanitary (SPS) requirements Baseline: 20 percent (2013) Target: 100 percent (2017) Increased market access for farmers. Unchanged. Indicator 1: Increased sales in volume terms (domestic and exports) of high value crops by targeted partnerships that receive investment support grants Baseline: 0 percent (2013) 26 Outcomes in the Original CPS Results Matrix Status of Outcomes in the Revised CPS Results Matrix Target: 50 percent (2017) New outcome and indicator (achieved) for the emergency Stabilized level of production of apples, plums and grapes among beneficiaries of support under MACP AF, reflecting the WB’s flexibility to compensatory grants. emerging needs and provided for purposes of compensating Baseline: 100 percent (2014 – average production for 2012-14 for apples, plums and grapes) smaller fruit farmers, who are most disadvantaged and were Target: 85 percent (2016 – average over 2015-17) affected by Russia’s 2014 export restrictions. The team chose to include the MACP AF PDO indicator to reflect the stabilization of the level of production for these farmers. Pillar 2: Enhancing Human Capital and Minimizing Social Risks CPS Outcome 2.1. Improved quality of and access to health and education services Strengthened quality of education. Indicator 1: Implementation of quality assurance standards for hub schools initiated and scaled up Unchanged. (percent of hub schools) Baseline: 0 percent (2013) Target: 70 percent (2017) Indicator 2: Improved student assessment system Unchanged and achieved. Revised tests administered and baseline for grade 4 and grade 9 tests established in 2015, including disaggregation by socio-economic background. Improved efficiency of the education sector. Indicator 1: Implementation of per-student financing nationwide (in 2013) Unchanged and achieved. Indicator 2: Increased student-teacher ratio Baseline revised and indicator achieved. The baseline originally Baseline: 10.85:1 (2011-12 school year) included schools, teachers and students from private schools, Target: 11.5:1 (2015/16 school year) schools servicing students with special needs, republic schools, sanatoria schools, colleges, and schools under the responsibility of other ministries. None of those schools are part of the school optimization effort and they don’t get financing through the per capita financing formula so it is incorrect to include them in the indicator. In the last two years it also includes pedagogical staff supporting children with special needs, which came into effect two years ago with the new education code. The baseline will be amended under the ongoing project restructuring. Improved access to quality healthcare. Indicator 1: Better population coverage with mandatory health insurance (will be disaggregated by Unchanged and achieved. gender) Baseline: 81 percent (2013) Target: 85 percent (2017) (of which 44% are male and circa 56% are female) Indicator 1.1: Coverage of the bottom 40 percent (B40) Sub-indicator dropped as the Health Transformation Operation Baseline: 71.5 percent (HBS11) versus 81 percent for the top 60 percent (HTO) did not cover this. Target: At least 76.5 percent Indicator 2: Share of out-of-pocket payments (formal and informal) in total health expenditure Unchanged. reduced 27 Outcomes in the Original CPS Results Matrix Status of Outcomes in the Revised CPS Results Matrix Baseline: 45 percent (2013) Target: 35 percent (2017) Indicator 2.1: Percentage of the B40 who report having spent >10 or 25 percent of their total Sub-indicator dropped as the HTO did not cover this. expenditure on health Baseline: 14.2 percent of B40 spend more than 10 percent / 1.2 percent of B40 spend more than 25 percent (HBS11) Target: Less than 10 percent of B40 spend more than 10 percent /less than 1 percent of B40 spend more than 25 percent (2017) Indicator 3: Number of family doctor visits per person New indicator as per the design of the HTO. Baseline: 2.9 ( 2014) Target: 3.2 ( 2017) Indicator 4: Annual acute care hospital discharges per 100 persons New indicator as per the design of the HTO. Baseline: 17.6 (2011) Target: 16.0 ( 2017) New outcome and indicators as part of the FY16 Local Roads Improvement project (LRIP) which will consolidate previous gains in education and health infrastructure rationalization. One of the main expected results of LRIP, which is the largest project to date in our portfolio, is improved physical access of the rural population, as one of the most vulnerable groups, to vital education and health services, as well as regional markets, connected by better local roads, to demonstrate tangible results for the population. Improved physical access to rural education and health services. Indicator 1: Number of schools connected by rehabilitated/upgraded local roads corridors Baseline: 0 (2015) Target: 10 (2017) Indicator 2: Number of health facilities connected by rehabilitated/upgraded local roads corridors Baseline: 0 (2015) Target: 9 (2017) CPS Outcome 2.2. Fiscally sustainable and equitable pension and social assistance systems Fiscally sustainable and fair pension system. Indicator 1: Pension (PAYG) expenditures are kept below 8 percent of GDP Unchanged. Baseline: 8 percent (2013) Target: <8 percent (2017) Indicator 2: Pension system fairness is improved through maximized replacement rates within a Unchanged. given PAYG budget envelope Baseline: 28 percent (2013) Target: 30 percent (2017) 28 Outcomes in the Original CPS Results Matrix Status of Outcomes in the Revised CPS Results Matrix Improved equity of social assistance. Indicator 1: Improved equity in social assistance system, measured as percentage of population in Unchanged. the poorest quintile receiving Ajutor Social benefits (gender estimates will be provided by adult recipients) Baseline: 14.9 percent (2011) Target: 20 percent (2017) Indicator 2: Consolidated categorical benefits: spending on categorical benefits further reduced by Unchanged. 20 percent Baseline: 7 percent (2012) Target: 30 percent (2017) Pillar 3: Promoting a Green, Clean and Resilient Moldova CPS Outcome 3.1. Greater adaptation and resilience to climate change Strengthened State Hydro-meteorological Service’s ability to forecast severe weather and Moldova’s improved capacity to prepare for and respond to natural disasters. Indicator 1: Issuing more accurate and specific forecasts of weather conditions Unchanged. Baseline: Scale of weather forecasts at 5000 sq. km (2013) Target: Scale of weather forecasts reduced to 300 sq. km (2017) Indicator 2: Expanded lead-time for weather warnings to users Unchanged. Baseline: Lead time for severe weather warnings only 10 minutes to 1 hour (2013) Target: Lead time for severe weather warnings expanded to 12 hours (2017) Indicator 3: Strengthened capacity to coordinate emergency responses Unchanged and achieved. Baseline: No Emergency Command Center to coordinate response among relevant agencies (2013) Target: Emergency response drill shows capacity improvements as compared to the baseline and the recent test of the system (2017) CPS Outcome 3.2: Improved Natural Resources Management Sequestration of 2.5 million tons of CO2 through forestation of degraded lands. Revised and achieved. Sequestration of 0.8 million tons of CO2 through forestation of degraded lands (during the CPS period – 2014-17). The target was revised downward to only reflect the contribution of this CPS period to the sequestered volume, while also reporting that the overall target of 2.5 million tons under the operation (including and beyond this CPS) was also achieved. Enhanced competitiveness of the agro-food sector by mainstreaming agro-environmental and sustainable land management practices. Indicator 1: Increased on-farm area benefitting from sustainable land management practices Unchanged. Baseline: 0 hectares (2013) Target: 10,000 hectares (2017) Indicator 2: Increased area protected by robust anti-erosion shelterbelts rehabilitated Unchanged. Baseline: 0 hectares (2013) 29 Outcomes in the Original CPS Results Matrix Status of Outcomes in the Revised CPS Results Matrix Target: 50,000 hectares (2017) CPS Outcome 3.3 Increased energy efficiency and security Decreased energy supply costs, increased quality of supply and improved affordability of heat supply in Chisinau. Implementation of building level metering and temperature controls, with incentives for customers to decrease energy use. Indicator1: Direct beneficiaries in buildings with new individual heat substations (number), of Indicator revised as per the DHEIP design approved in FY15. which female (percent) Indicator 1: People that gained access to more energy-efficient cooking and/or heat-generating facilities (number) Baseline: 27,000 (2015) Target: 63,000 (2017), of which 50% female beneficiaries Indicator 2: Average specific heat consumption of buildings with modernized heating substations Indicator dropped and moved to the next CPF period as it is (KWh/m2 annually) unachievable till FY17 due to the project’s delayed approval compared to the original CPS plan. Indicator 3: Total amount of energy saved Indicator revised as per the DHEIP design approved in FY15. Baselines and targets will be determined at appraisal (fall 2013) Indicator 3: Actual fuel savings (GCal) Baseline: 0 GCal (2015) Target: 52,759 GCal (2017) Debt of the new DH Company restructured by 2013 to improve its creditworthiness, and Outcome revised as per the DHEIP design. debt burden to Moldovagaz reduced by at least 20 percent by 2017 District Heating Company debt restructured by 2017 to improve its creditworthiness. Indicator 1: Debt Restructuring Plan signed with Moldovagaz Indicator 1: Debt Restructuring Plan signed with Moldovagaz Indicator 2: Debt repayment of at least 5 percent per annum to reduce the debt burden by at least Indicator dropped and moved to the next CPF period as it is 20 percent by 2017 unachievable till FY17 due to the project’s delayed approval Baseline and target TBC following completion of the financial model by the consultant compared to the original CPS plan. Indicator1: Identified options for enhanced diversity of electricity supply (Ukraine, Cuciurgan Revised and achieved, as per the outcomes of the energy sector Power Station (MGRES) and Chisinau CHPs. TA. Identified options for diversification of electricity supply (Ukraine, Cuciurgan Power Station (MGRES), Chisinau CHPs, and interconnections with ENTSO-E (via Romania). Governance as a cross-cutting theme Professionalization of the public service increased through implementation of the position of state secretaries. Indicator 1: Level of professional management of public services Unchanged. Baseline: Ministries and central agencies are managed by politically appointed officials (2013) Target: All (percent) of ministries are managed by professional state secretaries (2017) Indicator 2: Number of professional development (PD) initiatives implemented, number of state Unchanged. secretaries involved in professional development programs Baseline: Number of PD programs for senior executive officials, including state secretaries (2013) 30 Outcomes in the Original CPS Results Matrix Status of Outcomes in the Revised CPS Results Matrix Target: PD program based on a defined set of competences and performance requirements is approved and under implementation (2017). Percent of program-covered state secretaries (90 percent). New outcome supporting legal reforms necessary to underpin improvements in the tax administration as part of the WBG emphasis on addressing weaknesses in public sector management and governance. Improved legislative framework for tax administration. Target: Adoption of a revised Tax Code in line with requirements of the EU-Moldova Association Agreement. New outcome in respect of the WB’s commitment to addressing directly governance issues. Strengthened capacity for monitoring of governance reform implementation in Moldova. Target: Initial Governance Scorecard is publicly available on-line (April 2017) The Government evaluates programs and related expenditure programs as a means of Revised outcome in respect of addressing governance challenges. improving strategic decision making and resource allocation. The Government monitors public investment as a means of Indicator 1: Number of government programs evaluated improving strategic decision making and resource allocation. Baseline: No mechanism for program evaluation Indicator 1: Mechanism for monitoring of public investment Target: Program evaluation mechanism is developed and used. At least 3 programs are projects evaluated for targeting, effectiveness and efficiency of outcomes and impact. Baseline: No mechanism (2014) Target: Monitoring mechanism is developed and used. Existing public investment project databases are developed, with update possibilities (2017) New outcome in respect of addressing governance challenges. Improved accountability of the Executive for public investment through access to information. Baseline: No cumulative information on public investments is available to citizens Target: Program evaluation mechanism is developed and used. At least 3 programs evaluated for targeting, effectiveness and efficiency of outcomes and impact. Improved accountability of the Executive for public expenditure through better quality of Revised to reflect better a change/improvement in processes and audit reports. facilitate further measurement (achieved). Indicator1: Involvement of Supreme Audit Institution in audit of World Bank-financed projects Improved capacity for audit oversight of public expenditure. Target: At least 2 projects are fully audited by the CoA Target: Minimum 3 projects use national auditing procedures which meet the following criteria: (i) audit performed in accordance with generally accepted auditing practices; (ii) audit is carried out by adequate staff with appropriate professional 31 Outcomes in the Original CPS Results Matrix Status of Outcomes in the Revised CPS Results Matrix qualifications and experience; (iii) audit is performed under constitutional or legal provisions designed to assure independence. (Baseline: 0) Improved business processes in the Treasury system. Revised to improve formulation and facilitate further Indicator 1: Capacity building workshops and seminars for Supreme Audit Institution and State measurement. Treasury Improved business processes in the Treasury system. Target: (i) Consolidated capacity of auditors to conduct the audit of public institutions and Baseline: Manual processing of payment orders government programs; (ii) Real-time processing of payment orders. Target: Real-time processing of payment orders Improved transparency and efficiency of the public procurement system: (i) by improved e- Revised to improve formulation and facilitate further procurement system and rolling it out for use by contracting agencies and economic operators; and measurement (achieved). (ii) adopted international standards and practices. Improved functionality and uptake of the electronic procurement system. Baseline: Paper-based public procurement procedures (2011) Target: Technically upgraded e-procurement software, rolled out for use by 100 percent of central line ministries and subordinated agencies (2015) Enhanced quality of public debate. Revised outcome and new indicators to reflect better the Improved social accountability environment through opportunities and capacity building for demand-side of CE. broad citizen engagement in service delivery and public expenditure management processes. Improved social accountability environment through opening of More participatory nature of decision making processes. government data and opportunities and capacity building for broad citizen engagement in service delivery and public expenditure management processes. More participatory nature of decision making processes and enhanced quality of public debate. Indicator 1: Number of WB-supported communities applying social accountability tools in the education sector Baseline: 0 (2013) Target: 40 (2016) Indicator 2: Number of government data sets’ downloads from the Open Data Portal Baseline: 0 (2013) Target: 1,450,000 (2016) 32 Outcomes in the Original CPS Results Matrix Status of Outcomes in the Revised CPS Results Matrix Increased number of direct project beneficiaries, including female (percent). Revised and achieved, as per the GeT project design. Indicator 1: Percent of direct project beneficiaries (including female) Increased uptake of government e-services, including female Baseline: 20,000 (40 percent female) (2013) users (percent) Target: 300,000 (50 percent female) (2017) Indicator 1: Percent of direct project beneficiaries (including female) Baseline: 20,000 (40 percent female) (2013) Target: 300,000 (50 percent female) (2017) Increased favorable citizen perception of quality of public service. Unchanged and achieved. Indicator 1: Citizen perception of public service quality (percent of satisfied citizens accessing Government Services Portal) Baseline: 45 percent of total users (2013) Target: 60 percent of total users (2017) Improved interaction and strengthened understanding of development challenges between New outcome and indicators (achieved) to reflect our representatives of both banks of Nistru river. engagement in Transnistria. Indicator 1.1: Introduction to WBG work and instruments Baseline: 0 (2013) Target: 40 Transnistrian representatives + 15 representatives of the right bank (2015) Indicator 1.2: Training in international procurement and best practices Baseline: 0 (2013) Target: 20 Transnistrian representatives (2015) Indicator 1.3: Training in public-private partnerships Baseline: 0 (2013) Target: 20 Transnistrian representatives (2015) 33 Annex 3: Matrix summarizing progress toward CPS objectives Progress to Date World Bank Group Outcomes Directly Influenced by the Program Instruments Pillar 1: Increasing Competitiveness CPS Outcome 1.1. Improved business environment and access to finance for business operation Customs procedures are streamlined and more Underway: The IFC Investment Climate Reform project will address Ongoing: transparent. customs logistics and trade across borders indicator, and the target is IFC ICR project Indicator1: Reduced number of days to prepare achievable by 2017. ASA: documents for export operations (“Trading Across Trade Study Borders” indicator of Doing Business) Partners: Baseline: 20 (2012) USAID, EU Target: 16 (2017) Decreased regulatory burden on enterprises. Underway: The share of management time spent interacting with Ongoing: Indicator 1: Reduced management time for regulatory representatives of state agencies decreased between 2002 (an average CEP-II requirement compliance (annual domestic CODB survey) of 19%) and 2015 (10.4%) but has increased from the 2012 base year IFC ICR project Baseline: 10 percent (2012) level of 10%. Rural businesses spend a greater (and increasing) share Partners: Target: 8 percent (2017) of management time on compliance activities than urban companies. USAID Indicator 2: Implemented risk-based inspection Underway: Legislation was passed in 2012 to specify the obligations methodologies for inspections and for entities subject to inspection. The Government Targets: 40 percent (2017) of inspection bodies (baseline: has established a website to provide information on inspection 0 percent) follow the risk-based inspection (RBI) requirements, results of inspections and details of complaints. The methodologies, based on clear risk criteria and approved most frequent inspections of companies are performed by the Tax plan for inspections. Inspectorate (58% of companies), the Fire Department (56%) and the Ad-hoc inspections are reduced to 7 percent Sanitary Epidemiological Service (48%). Labor Inspectors and Police (2017) (from a baseline of almost 100 percent), under clear have audited 40% of firms. criteria for unplanned inspections. 100 percent of planned inspections are published on the e-Government Center’s website Indicator 3: Reduced number of permits and licenses Underway: In the last 3 years no significant actions have been taken Baseline: 416 (2015) to reduce the number of permits and licenses. CEP-II will continue to Target: 238 (2017) address this. The baseline was revised in December 2015 under the CEP-II feasibility study for the one-stop shop for permissive documents. Cumulative number of business development services Underway: A public awareness and capacity building campaign for Ongoing: provided to SMEs with the support of WBG businesses to improve their understanding of DCFTA requirements IFC ICR project investment. and build skills and competencies for initiating and maintaining CEP-II Baseline: 0 (2013) export activities provided 47 workshops and reached over 1,000 34 Progress to Date World Bank Group Outcomes Directly Influenced by the Program Instruments Target: 240 (2017) companies throughout Moldova (including Transnistria) from June 2014 to July 2015. The indicator has been revised to reflect the activities of the CEP II project, through which a Matching Grants Manual has been developed and a matching grants facility for SME business development services was launched. 4 matching grants have been approved by the validation committee; however these were not disbursed yet, awaiting the implementation of their business improvement projects by grant beneficiaries. Improved access of private enterprises to formal Underway: Net domestic credit to private sector rose to 42.4 percent Ongoing: sources of finance. of GDP in 2013, but dropped to 36.9 percent in 2014. CEP-II Indicator: Increased domestic credit to private sector as Pipeline: share of GDP, nominal terms DPO-2 Target: 15 percent increase (2017) versus 2013 Direct IFC investment TFs: Capital market continues to be strengthened to Underway: In 2014 the NCFM approved regulations on trading of IFC has helped the NCFM with facilitate increased access to finance. government bonds on the stock exchange. Further progress is advice on financial sector Indicator: Government bonds listed on the stock dependent on the establishment and functioning of the Centralized regulation assistance exchange Securities Depository (CSD) at the NBM. An action plan has been Strengthening Auditing and Baseline: Non-existent (2012) prepared, and NBM has requested TA from the IMF to establish the Reporting in Countries of the Target: Government bonds with >1 year maturity CSD. Eastern Partnership are traded on the stock exchange (2017) (STAR/EaP) Indicator 1: Number of known insolvent banks subject to All are included as prerequisites under DPO-2. The resumption of FinSAC (Vienna Center) regulatory forbearance dialogue with the new government will indicate whether/when further Baseline: 3 banks known to be insolvent but still progress can/will be made. Another imperative prerequisite is a ASA: operating program with the IMF. Financial Sector Development Target: 0 (all such banking licenses withdrawn, and TA (FY14-16) liquidation initiated) FSAP Update (FY15) Indicator 2: Number of at-risk banks subject to special Partners: diagnostic audits and/or restructuring IMF, EBRD Baseline: 0 Target: 3 banks audits and time-bound restructuring plans adopted and initiated Indicator 3: Legal framework for timely intervention in distressed banks Baseline: NBM regulations delayed by MoJ approval process; NBM staff lack immunity for duties carried out in good faith Target: Legal amendments: (i) eliminating MoJ power to delay registration of NBM regulations, and (ii) 35 Progress to Date World Bank Group Outcomes Directly Influenced by the Program Instruments conferring immunity to NBM staff for duties carried out in good faith. Greater alignment of the Corporate Financial Underway: The CFRR continued its in-country engagement to take Reporting (CFR) legislation and practice with the EU forward reforms necessary to align with the EU acquis acquis through: (i) improved financial reporting standards communautaire, including technical discussions with the MoF on in Public Interest Entities (PIEs) by implementing IFRS; transposition tables to benchmark Accounting and Auditing (ii) redesigned audit public oversight system; (iii) further legislation to EU standards simplified and improved SME financial reporting The Ministry drafted and made public Accounting and Auditing standards; and (iv) enhanced public availability of transposition tables which will serve as a sound analytical financial statements. underpinning for the development of new laws on accounting and Indicator 1. Minimum 80 percent of PIEs file and publish auditing in 2015-16. IFRS-based financial statements Indicator 2. Provisions of the Directive 2006/43/EU (as amended in June 2014) transposed in the draft Auditing Law, and draft Auditing Law passed to Parliament for adoption Indicator 3. Provisions of the Directive 2013/34/EU (accounting directive) transposed in the draft Accounting Law, and draft Accounting Law passed to Parliament for adoption Indicator 4. Public Registry of Financial Statements is fully operational (i.e. systems and processes in place to enable collecting and making financial statements available online) CPS Outcome 1.2. Improved competitiveness in agriculture Enhanced competitiveness of the agro-food sector by Underway: 60 percent of targeted actions had been completed by Ongoing: supporting the modernization of the food safety May 2015, including harmonization of the national regulatory MACP and AF management system. framework with EU regulations on food safety, and strengthening the IFC ICR project Indicator 1: Completion of targeted food safety actions Food Safety Agency’s (FSA) human capacity. IFC investments in agriculture for approximation to EU SPS requirements TFs: Baseline: 20 percent (2013) MACP GEF Target: 100 percent (2017) ASA: DCFTA Preparation Support in Increased market access for farmers. Underway: there has been a 10 percent increase in sales through Agriculture TA Indicator 1: Increased sales in volume terms (domestic more than 20 productive partnerships which have received financial Food Security and Agricultural and exports) of high value crops by targeted partnerships support. Policy Formulation TA that receive investment support grants Baseline: 0 percent (2013) 36 Progress to Date World Bank Group Outcomes Directly Influenced by the Program Instruments Target: 50 percent (2017) Stabilized level of production of apples, plums and Achieved through the MACP AF (project’s PDO), supporting small grapes among beneficiaries of compensatory grants. farmers affected by the Russian restrictions imposed in 2014. Baseline: 100 percent Target: 85 percent Pillar 2: Enhancing Human Capital and Minimizing Social Risks CPS Outcome 2.1. Improved quality of and access to health and education services Strengthened quality of education. Completed: Indicator 1: Implementation of quality assurance Underway: Quality assurance standards for hub schools were Quality Education in Rural standards for hub schools initiated and scaled up (percent developed and approved in 2013 and implementation has begun. 11% Areas of Moldova project AF of hub schools) of schools have met the quality assurance standards. Ongoing: Baseline: 0 percent (2013) Moldova Education Reform Target: 70 percent (2017) project Indicator 2: Improved student assessment system Achieved: Revised tests for 4th graders and 9th graders were Moldova Labor TA on skills Revised tests administered and baseline for grade 4 and administered in May 2015, with the analysis of results (including mismatch linked to grade 9 tests established in 2015, including disaggregation disaggregation by student socioeconomic background) delivered at information asymmetries by socioeconomic background. the end of the year. TFs: Education GPSA Improved efficiency of the education sector. Japan PHRD Disability and Indicator 1: Implementation of per-student financing Achieved: Per-student financing was introduced nationwide in 2013. Development Grant for the nationwide (in 2013) integration of children with Indicator 2: Increased student-teacher ratio Achieved: Student-teacher ratio in the 2015/16 school year is disabilities into hub schools Baseline: 10.85:1 (2011/12 school year) 11.89:1, registering a 9.5% increase in the student/teacher ratio. Target: 11.5:1 (2015/16 school year) Partners: Japan Improved access to quality healthcare. Completed: Indicator 1: Better population coverage with mandatory Achieved: National Health Insurance House/MoH data showed that Health Services and Social health insurance health insurance coverage reached 85 percent by January 2015. Assistance project Baseline: 81 percent (2013) IDF Health Management Target: 85 percent (2017) (of which 44% are male Information System grant and circa 56% are female) Ongoing: Health Transformation Indicator 2: Share of out-of-pocket payments (formal and Underway: National Health Accounts data for 2013 provide an Operation (PforR) informal) in total health expenditure reduced estimate of 42.3 percent for out-of-pocket expenditures (formal and TFs: Baseline: 45 percent (2013) informal) in total health expenditures. PPP in health structured by Target: 35 percent (2017) IFC Health GPSA 37 Progress to Date World Bank Group Outcomes Directly Influenced by the Program Instruments Indicator 3: Number of family doctor (FD) visits per Underway: The PforR addresses improvement in the performance- person based incentive scheme in primary care and revision of Baseline: 2.9 ( 2014) reimbursement rate for antihypertensive drugs. The Government is Target: 3.2 ( 2017) annually revising the P4P scheme in family medicine. The GPSA project is looking at the performance of FDs as well. The Ministry of Indicator 4: Annual acute care hospital discharges per 100 Health undertook measures to reduce the number of acute care persons hospital beds and greater emphasis will be placed on the gatekeeping Baseline: 17.6 (2011) function of FDs. Target: 16.0 ( 2017) Improved physical access to rural education and Underway: One of the main expected results of LRIP is improved Ongoing: health services. physical access of the rural population, as one of the most vulnerable Local Roads Improvement Indicator 1: Number of schools connected by groups, to vital education and health services, as well as regional project (LRIP) rehabilitated/upgraded local roads corridors markets, connected by better local roads. This will consolidate the Baseline: 0 (2015) gains made through the rationalization of education and health Target: 10 (2017) infrastructure. Activities will start as soon as the project becomes Indicator 2: Number of health facilities connected by effective, and are achievable by 2017. rehabilitated/upgraded local roads corridors Baseline: 0 (2015) Target: 9 (2017) CPS Outcome 2.2. Fiscally sustainable and equitable pension and social assistance systems Fiscally sustainable pension system Pipeline: Indicator 1: Pension (PAYG) expenditures are kept below Underway (static): Pension spending remained at 8 percent of GDP New DPO series 8 percent of GDP in 2014. The Government introduced pension top-ups for recipients of ASA: Baseline: 8 percent (2013) lower pensions but this did not show in a higher GDP-pensions ratio Programmatic HD (pension Target: <8 percent (2017) because of strong GDP growth. policy TA) Partners: Indicator 2: Pension system fairness is improved through Underway (negative trend): Ad hoc pension increases did not IMF maximized replacement rates within a given PAYG improve the replacement rate. At the end of 2014, the average old-age budget envelope pension benefit was slightly above 26 percent of the average wage. Ongoing: Baseline: 28 percent (2013) This is explained by wage growth but also by a low initial Strengthening the Target: 30 percent (2017) replacement rate of new pensioners due to lack of wage valorization Effectiveness of the Social of their salary base used for benefit calculation. Safety Net RBF project Improved equity of social assistance. Indicator 1: Improved equity in social assistance system, Underway: Expansion of Ajutor Social benefits increased the measured as percentage of population in the poorest program’s coverage from to18.8 percent of the poorest population quintile receiving Ajutor Social benefits (gender estimates quintile by 2012. However, since then the number of beneficiaries can be provided by adult recipients) has decreased to 12.2 percent, according to 2014 Household Budget Baseline: 14.9 percent (2011) Survey data. The decline was driven by ad-hoc increases in Target: 20 percent (2017) categorical benefits, changes in treatment of the rural self-employed, 38 Progress to Date World Bank Group Outcomes Directly Influenced by the Program Instruments inadequate adjustment of Ajutor Social eligibility parameters, and insufficient outreach by social workers. Recently, the Government has made concerted efforts, to expand the coverage of the program, with a reversal in 2015 of the declining coverage trend observed in 2013-14. At the same time, the program remains well targeted by ECA regional standards. Indicator 2: Consolidated categorical benefits: spending Underway: Eliminating the nominative compensation program in on categorical benefits further reduced by 20 percent 2012 enabled the Government to consolidate social assistance Baseline: 7 percent (2012) spending and meet the target of 30 percent in 2013. Subsequent Target: 30 percent (2017) increases in a number of categorical benefits in late 2013-14 increased the spending and reversed previous progress: in 2014, this indicator was back to the baseline level. Pillar 3: Promoting a Green, Clean and Resilient Moldova CPS Outcome 3.1. Greater adaptation and resilience to climate change Strengthened State Hydro-meteorological Service’s Ongoing: ability to forecast severe weather and Moldova’s Disaster and Climate Risk improved capacity to prepare for and respond to Management project and AF natural disasters. ASA: Indicator 1: Issuing more accurate and specific forecasts Underway: The use of the European Center for Medium-Range Climate Change Adaptive of weather conditions Weather Forecast (EMCWF) numerical model has been Capacity and Resilience Study Baseline: Scale of weather forecasts at 5000 sq. km mainstreamed, which will lead to accomplishment of the target. Social Dimensions of Climate (2013) Change Country assessment Target: Scale of weather forecasts reduced to 300 (BNPP) sq. km (2017) TFs: Global Fund for Disaster Risk Indicator 2: Expanded lead-time for weather warnings to Underway: Target partially completed with the installation and Reduction: Moldova Disaster users operationalization of the Doppler Radar System. and Climate Risk Management Baseline: Lead time for severe weather warnings only Capacity Building 10 minutes to 1 hour (2013) Target: Lead time for severe weather warnings expanded to 12 hours (2017) Indicator 3: Strengthened capacity to coordinate Achieved: The Emergency Command Center has been established emergency responses and emergency response drills performed. Baseline: No Emergency Command Center to coordinate response among relevant agencies (2013) 39 Progress to Date World Bank Group Outcomes Directly Influenced by the Program Instruments Target: Emergency response drill shows capacity improvements as compared to the baseline and the recent test of the system (2017) CPS Outcome 3.2: Improved Natural Resources Management Sequestration of 0.8 million tons of CO2 through Achieved: Altogether 2.5 million tons of CO2 were sequestered Ongoing: forestation of degraded lands (during the CPS period through afforestation of about 30 thousand ha of degraded agricultural MACP 2014-17). lands under the ongoing operations, of which 0.8 million tons ENPI Forest Law and attributable to this CPS period. Enforcement and Governance Enhanced competitiveness of the agro-food sector by II Program mainstreaming agro-environmental and sustainable ASA: land management practices. Forestry Policy Note (delivered Indicator 1: Increased on-farm area benefitting from Underway: Target is expected to be met by the end of 2015 – in FY15) sustainable land management practices beginning of 2016. Climate TA (FY16) Baseline: 0 hectares (2013) TFs: Target: 10,000 hectares (2017) Community Forestry Project Soil Conservation Project Indicator 2: Increased area protected by robust anti- Underway: 24,600 ha has been protected as the result of about 900 Community Support Program erosion shelterbelts rehabilitated ha of rehabilitated anti-erosion shelterbelts under MACP. for SIFMSF Baseline: 0 hectares (2013) Target: 50,000 hectares (2017) Potential partners: GEF, Climate Investment Fund, Green Climate Fund CPS Outcome 3.3 Increased energy efficiency and security Decreased energy supply costs, increased quality of Underway: Several procurement packages have either been approved Ongoing: supply and improved affordability of heat supply in or are under review. The indicators are achievable by 2017. District Heating Efficiency Chisinau. Implementation of building level metering and Improvement project (DHEIP) temperature controls, with incentives for customers to ASA: decrease energy use. TA Program: Energy Sector Indicator 1: People that gained access to more energy- Restructuring and Efficiency efficient cooking and/or heat-generating facilities Improvement (ESREI) TA (number) TA Program: District Heating Baseline: 27,000 (2015) and Electricity Tariff Target: 63,000 (2017), of which 50 percent female Affordability Analysis beneficiaries Pipeline: Indicator 2: Actual fuel savings (GCal) District Heating (DH) sector Baseline: 0 GCal (2015) debt and financial restructuring Target: 52,759 GCal (2017) IBRD PCG Project (FY16) 40 Progress to Date World Bank Group Outcomes Directly Influenced by the Program Instruments District Heating Company debt restructured by 2017 Underway: The Memorandum of Understanding for the main terms Potential IFC PPPs Advisory to improve its creditworthiness. of the debt restructuring plan has been developed and is now with Program on resource efficiency Indicator 1: Debt Restructuring Plan signed with Gazprom for review and approval. for SMEs Moldovagaz Potential IFC provision of energy efficiency credit lines through financial intermediaries subject to adequate market conditions Potential IFC direct investment to improve resource efficiency in private sector companies Partners: Sweden, EBRD, EIB, EU Indicator 1: Identified options for diversification of Achieved. The ESMAP Moldova Power Sector Note identified the ASA: electricity supply (Ukraine, Cuciurgan Power Station options for enhanced diversity of electricity supply. ESMAP Moldova Power (MGRES), Chisinau CHPs, and interconnections with Sector Note ENTSO-E (via Romania). Potential IFC project in renewable energy Partners: EU, Sweden, EBRD, EIB Governance as a cross-cutting theme Professionalization of the public service increased Completed: through implementation of the position of state CPAR project secretaries. Pipeline: Indicator 1: Level of professional management of public Underway: Position of State Secretary introduced in legislation in Government Services services 2014 and by spring 2015 State Secretaries in 9 out of 16 ministries Modernization of Reform Baseline: Ministries and central agencies are had been competitively recruited. Accountabilities, functions and project managed by politically appointed officials (2013) division of labor between State Secretaries and Deputy Ministers are Partners: Target: All (percent) of ministries are managed by still unclear and so it may be premature to suggest that ministries are Sida, EU professional state secretaries (2017) managed by State Secretaries. Indicator 2: Number of professional development (PD) Underway: Training of State Secretaries is a Government priority (as initiatives implemented, number of state secretaries reflected in draft PAR roadmap of 2014) and State Secretaries are involved in professional development programs being trained under an EU funded twinning project, launched in Baseline: Number of PD programs for senior spring 2015. Competencies and performance requirements for senior executive officials, including state secretaries (2013) civil servants’ training are yet to be developed and approved. Target: PD program based on a defined set of competences and performance requirements is 41 Progress to Date World Bank Group Outcomes Directly Influenced by the Program Instruments approved and under implementation (2017). Percent of program-covered state secretaries (90 percent). Improved legislative framework for tax administration. Underway: Supporting legal reforms necessary to underpin Pipeline: Target: Adoption of a revised Tax Code in line with improvements in the tax administration are part of the WBG emphasis Tax Administration requirements of EU-Moldova Association Agreement. on addressing broader weaknesses in public sector management and Modernization project governance. The project is planned for Board discussion by the end of Ongoing: FY16. Activity under the Tax Legislation Revision TA has Good Governance TF: Tax commenced and is achievable by 2017. Legislation Revision TA Strengthened capacity for monitoring of governance Underway: The TA will help the State Chancellery strengthen the Ongoing: reform implementation in Moldova. monitoring arrangements for Governance reform in Moldova through Good Governance TF: Target: Initial Governance Scorecard is publicly available the development of a Governance Scorecard. The Scorecard will Governance Reform Scorecard on-line (April 2017) measure the performance of the Moldovan Government towards TA reform goals in selected areas of governance and public administration reform and communicate progress made to the public. The Government monitors public investment as a TFs: means of improving strategic decision making and Public Investment resource allocation. Management TA Indicator 1: Mechanism for monitoring of public Underway: The Ministry of Finance provided initial collection of investment projects information about existing state and local public investment projects. Baseline: No mechanism (2014) During preparation of the State Budget 2015, the MoF received Target: Monitoring mechanism is developed and project concepts from state and local levels authorities for budget used. Existing public investment project databases are allocation in 2015 and estimations for 2016-17 fiscal years. This developed, with update possibilities (2017) information is used as a basis to develop appropriate requirements for the monitoring mechanism and the databases. Improved accountability of the Executive for public Underway: The implementation of program evaluation mechanisms investment through access to information. will support improved transparency in decision making and greater Baseline: No cumulative information on public public awareness of investments. Preliminary mapping of selected investments is available to citizens public investment projects on both central and local levels has been Target: Program evaluation mechanism is completed. Once the monitoring mechanism is developed, the form of developed and used. At least 3 programs evaluated for quarterly information will be prepared. targeting, effectiveness and efficiency of outcomes and impact. Improved capacity for audit oversight of public Achieved: Capacity building workshops and seminars for the Ongoing: expenditure. Supreme Audit Institution have been delivered. Workshops on WB Governance Filter Target: Minimum 3 projects use national auditing fiduciary practices/procedures were conducted with representatives of Global Partnership for Social procedures which meet the following criteria: (i) audit the CoA and Treasury. As of now we have three big operations Accountability (GPSA) performed in accordance with generally accepted auditing audited by the Court of Accounts. WBI support practices; (ii) audit is carried out by adequate staff with Pipeline: 42 Progress to Date World Bank Group Outcomes Directly Influenced by the Program Instruments appropriate professional qualifications and experience; Government Services (iii) audit is performed under constitutional or legal Modernization project provisions designed to assure independence. (Baseline: 0) GPSAs ASA: Improved business processes in the Treasury system. Underway. Financial Management TA Baseline: Manual processing of payment orders TFs: Target: Real-time processing of payment orders Strengthening the CoA Improved functionality and uptake of the electronic Achieved: The e-procurement system was further developed and new TFs: procurement system. functionalities added, such as: announcement of intended procurement Strengthening Public Baseline: Paper-based public procurement procedures activities, availability of electronic bidding documents, the automated Procurement IDF Grant (2011) public procurement bulletin, and generation of an electronic bid Target: Technically upgraded e-procurement template for economic operators. Furthermore, the system provides software, rolled out for use by 100 percent of central line more procurement information and collects data for statistical and audit ministries and subordinated agencies (2015) use which in turn ensures a greater transparency in public procurement procedures. The system lacks the electronic bid submission functionality. However, this functionality was outside the scope of the project due to limited budget available under the Grant. As of October 2014, a total number of 149 contracting authorities were using the system (advertisement, uploading of bidding documents, contracts, and contract amendments), including all central public authorities, numerous public institutions subordinated to them and some local public authorities. Standard Procurement Documents and various Guidance Notes were developed. All authorities are staffed with at least one certified public procurement officer and further 16 Public Procurement Agency Certified Procurement Officers were trained as part of this grant and were placed in the field thus covering the entire country. Improved social accountability environment through Ongoing: opening of government data and opportunities and Governance e-Transformation capacity building for broad citizen engagement in project service delivery and public expenditure management Education and Health GPSA processes. More participatory nature of decision making processes and enhanced quality of public debate. Indicator 1: Number of WB-supported communities Underway: The Education GPSA is contributing to better public applying social accountability tools in the education debate and enhanced citizen engagement in service delivery and public sector Baseline: 0 (2013) expenditure management. Every year, a group of 20 schools Target: 40 (2016) (communities) is selected. As a result of project implementation, 40 local community-level coalitions mobilized and engaged in evidence- 43 Progress to Date World Bank Group Outcomes Directly Influenced by the Program Instruments based policy and budget dialogue regarding educational reform, quality of services and allocation of resources at schools. Each school organizes meetings/public hearings; prepares education stakeholder report cards, analyzes the results and presents them to the public to facilitate discussion on next year budget and priorities. Indicator 2: Number of government data sets’ downloads Underway and close to being achieved. Over 1,000,000 downloads from the Open Data Portal have already been registered at the end of 2015. Baseline: 0 (2013) Target: 1,450,000 (2016) Increased uptake of government e-services, including Ongoing: female users (percent) Governance e-Transformation Indicator 1: Percent of direct project beneficiaries Achieved: 306,565 direct project beneficiaries by 2015, of which 51.6 project (including female) percent were female. Partners: Baseline: 20,000 (40 percent female) (2013) GIZ: Modernization of Local Target: 300,000 (50 percent female) (2017) Public Services Project (extension of some e-services Increased favorable citizen perception of quality of to regional development public service agencies) Indicator 1: Citizen perception of public service quality Achieved: The 2014 National Annual Public Perception Survey (percent of satisfied citizens accessing Government reported that 66.3 percent of respondents were satisfied. Services Portal) Baseline: 45 percent (2013) Target: 60 percent (2017) Improved interaction and strengthened understanding Achieved. TFs: of development challenges between representatives of Korean TF for Knowledge both banks of Nistru river. Program for Confidence Indicator 1.1: Introduction to WBG work and instruments Building in Moldova and Baseline: 0 (2013) Transnistria Target: 40 Transnistrian representatives + 15 representatives of the right bank (2015) Indicator 1.2: Training in international procurement and best practices Baseline: 0 (2013) Target: 20 Transnistrian representatives (2015) Indicator 1.3: Training in public-private partnerships Baseline: 0 (2013) Target: 20 Transnistrian representatives (2015) 44 Annex 4: FY14-17 CPS Lending and Analytics FY14 FY15 FY16 FY17 Advisory Services and Analytics Changes to ASA Pillar 1: Increasing Competitiveness Development Policy Operation 30 Accountancy curricula improvement TA (FY14) Power System DPO-2 45 Moldova Public Expenditure Reviews (FY14-FY17) Interconnection Analysis Competitiveness Enhancement II 45 Moldova FSAP Update (FY15) (FY17) Agriculture Competitiveness AFs 12 10 MD Food Security Notes (FY14-15) District Heating Partial Credit Risk Guarantee 80 Trade Study (FY16) District Heating and Electricity Tariff (FY16) Programmatic Financial Sector Monitoring TA (FY14-16) Advice on Strengthening Public Invt. Mgm (FY15-16) Energy Efficiency Transformation in DH (FY17) Power System Interconnection Analysis (FY17) Pillar 2: Enhancing Human Capital and Minimizing Social Risks Health Transformation Operation 30.8 Local Road Management and Finance (FY14) Education Reform AF 15 Programmatic Human Development TA: Health, Pensions, Local Roads Improvement 80 Jobs & Skills (FY14-15) Moldova Poverty Assessment (FY16) Labor TA Moldova (FY16) Pillar 3: Promoting a Green, Clean and Resilient Moldova District Heating Efficiency Improvement 40.5 Water Sector Regionalization Review (FY14) New Village Development Disaster and Climate Risk Management AF 2 Land Governance Assessment Framework TA (FY14) Scoping Study (FY16) 20 Social Accountability in Forestry TA (FY14) Moldova Forest Policy Note (FY15) Climate Adaptation and Forestry Electric Power Market Options (FY15) Village Development Scoping Study (FY16) Climate TA (FY16) Cross-cutting Governance theme Tax Administration Modernization 20 Knowledge for Confidence Building: MD/TN (FY14-17) 3 new TAs financed from Modernization of Government Services 20 Open Contracting in Moldova (FY15-16) the UK’s DFID “Good 30 SOE Reform TA (FY16) Governance and Governance Reform Scorecard (FY17) Investment Climate” TF: Tax Legislation Revision TA (FY17) Support to Moldova’s Tax Economic Governance DPO Code Revision, State Owned Enterprise Reform and Government Reform Scorecard TOTAL US$480.3 million 60.8 99.5 155 165 45 Annex 5: World Bank Group Portfolio in Moldova WB Active Portfolio in Moldova Proj Net IDA IBRD Tot Date, IDA IBRD Tot Disb in Practice Rev Age Lst Port Comm Comm Comm Tot Disb Undisb % Disb Proj ID Project Name Board App Lst IP Disb Disb Undisb % Disb FY Manager Closing in DO Stat Amt Amt Amt ($m) Begin Ratio * ($m) ($m) Bal ($m) ($m) Yrs ($m) ($m) ($m) FY ($m) P127388 EDUCATION REFORM Mario Cristian Aedo01/24/2013 08/31/2018 3.1 MS MS A 40.00 40.00 0.00 17.82 17.82 0.00 19.16 44.6% 26.28 7.12 27.1% P132443 DIST HEAT EFFIC IMPR Ranjit J. Lamech 11/21/2014 06/30/2020 1.3 MS MU A 40.50 0.00 40.50 2.51 0.00 2.51 37.99 6.2% 40.40 2.41 6.0% P118518 AG COMP Marianne Grosclau 05/01/2012 06/30/2017 3.9 MS MS A 30.00 30.00 0.00 20.21 20.21 0.00 8.32 67.4% 24.09 15.77 65.4% P144892 Moldova Health Transformation ProjeEnis Baris 05/22/2014 03/30/2019 1.8 MU MU A 30.80 30.80 0.00 2.91 2.91 0.00 24.56 9.4% 27.47 2.91 0.0% P120913 Strengthen SSN - Results Andrew D. Mason 06/09/2011 06/30/2017 4.8 MS MS A 37.00 37.00 0.00 25.84 25.84 0.00 8.04 69.8% 10.96 2.92 26.6% P115634 DISASTER & CLIMATE RISK MGT David N. Sislen 08/05/2010 06/30/2016 5.6 MS MS A 12.00 12.00 0.00 11.40 11.40 0.00 0.97 95.0% 2.17 1.20 55.4% P144103 Second Competitiveness Enhancem Lisa A. Kaestner 07/11/2014 01/31/2020 1.7 MS MS A 45.00 15.00 30.00 10.40 1.44 8.96 33.09 23.1% 39.69 6.61 16.6% P121231 MOLDOVA eTRANSFORMATION Randeep Sudan 06/09/2011 12/31/2016 4.8 S S A 20.00 20.00 0.00 13.79 13.79 0.00 4.68 69.0% 8.78 4.10 46.7% P150357 Local Roads Improvement Project Juan Gaviria 10/30/2015 03/31/2021 0.4 MS MS A 80.00 80.00 0.00 0.00 0.00 0.00 79.81 0.0% 0.00 0.00 0.0% 9 335.30 264.80 70.50 104.87 93.41 11.47 216.64 31.3% 179.85 43.02 26.3% No signing, effectiveness, disbursement delays for the IDA/IBRD portfolio. No stale ISRs or ICRs. IFC Portfolio in Moldova International Finance Corporation Statement of IFC's Committed and Outstanding Portfolio Amounts in US Dollar Millions Accounting Date as of : 01/31/2016 Re gion(s): Europe a nd Ce ntra l Asia Country(s) : Moldova Commitment Institution LN LN ET QL + QE GT RM ALL ALL LN ET QL + QE GT RM ALL ALL Repayment Fiscal Year Short Name Cmtd - IFC Cmtd - IFC Cmtd - IFC Cmtd - IFC Cmtd - IFC Cmtd - IFC Cmtd - Part Out - IFC Out - IFC Out - IFC Out - IFC Out - IFC Out - IFC Out - Part - IFC 2008/ 2013 Bostavan 0 0 1.12 0 0 0 1.12 0 0 1.12 0 0 0 1.12 0.00 2011 Chisinau 5.73 4.27 0 0 0 0 5.73 0 5.73 0 0 0 0 5.73 0.00 2012/ 2013 Energo Continent 0 0 0 2.95 0 0 2.95 0 0 0 0 0 0 0 0.00 2012 GC Prim 2.08 0.92 0 7.00 0 0 9.08 0 2.08 0 7.00 0 0 9.08 0.00 1999/ 2000/ 2001 Orange Moldova 0 4.53 0 1.62 0 0 1.62 0 0 0 1.62 0 0 1.62 0.00 2013/ 2015 TransOil 32.13 35.67 0 0.00 0 0 32.13 9.51 32.13 0 0.00 0 0 32.13 9.51 2002/ 2010 UF Moldova 7.52 27.48 0 0 0 0 7.52 0 7.52 0 0 0 0 7.52 0.00 Total Portfolio 47.46 72.88 1.12 11.58 0 0 60.16 9. 51 47.46 1.12 8.62 0 0 57.20 9.51 46 ASA Program (FY14-16) FY14 Final Mgmt. Produ JIT/ Mgmt Del./ Project Project Global Practice Resp Approval ct Dis/ Endor. Of Completion ID Name Practice Manager Unit of Line Subtask Delivery * Concept * Summary * EW 2 2 2 2 EW P147451 Local Road Management and Finance D Transport & ICT GAVIRIA GTIDR 11/28/13 A 05/29/14 A 06/23/14 A EW P133219 Water Sector Regionalization Review D Water UWANYILIGIRA GWADR 05/09/13 A 02/05/14 A 12/30/13 A TA 5 3 4 5 TA P143560 Accountancy curricula improvement MD J Governance FORTIN GGOFR NA NA 01/01/14 A TA P132485 LGAF TF Supervision D Env. & Natrl Resrcs na GENDR 01/09/13 A 03/24/14 A 04/13/14 A TA P146628 Moldova PER 2014 D MacroEco & Fis. Mgmt KAHKONEN GMFDR 10/04/13 A 05/17/14 A 06/23/14 A TA P146769 Knowledge for Confidence Building: MD/TN D Soc. Urb. Rur.& GP BHATT GSURR 11/06/13 A 06/13/14 A 06/26/14 A TA P145214 Social accountability in Forestry J Soc. Urb. Rur.& GP BHATT GSURR NA NA 12/29/13 A TE 1 0 0 1 TE P122122 Road Safety Workshop - Moldova Transport & ICT GAVIRIA GTIDR 05/20/10 03/28/14 A Total 8 5 6 8 FY15 Final Mgmt. Produ JIT/ Mgmt Del./ Project Project Global Practice Resp Approval ct Dis/ Endor. Of Completion ID Name Practice Manager Unit of Line Subtask Delivery * Concept * Summary * EW 5 5 5 5 EW P146476 Moldova Forest Policy Note D Env. & Natrl Resrcs AHMED GEN03 11/27/13 A 10/15/14 A 01/03/15 A EW P146486 Moldova FSAP Update D Finance & Markets GUADAMILLAS GFMDR 12/16/13 A 12/03/14 A 02/22/15 A EW P148765 Moldova - ICR ROSC D Finance & Markets CIRASINO GFMDR 11/25/13 A 12/15/14 A 03/16/15 A EW P124627 MD Food Security Notes D Agriculture UMALI-DEININGE GFADR 11/16/10 A 03/19/15 A 04/25/15 A EW P146401 Electric Power Market Options D Energy & Extractives LAMECH GEE03 10/15/13 A 03/05/15 A 06/26/15 A PA 1 1 0 1 PA P143613 Programmatic HD Technical Assistance NA Soc. Prot. & Labor MASON GSP03 04/02/13 A NA 06/10/15 A TA 5 2 2 5 TA P152248 Health financing Subtask Soc. Prot. & Labor MASON GSP03 NA NA 05/24/15 A TA P152249 Jobs and skills Subtask Soc. Prot. & Labor MASON GSP03 NA NA 05/29/15 A TA P152247 Pension reform Subtask Soc. Prot. & Labor MASON GSP03 NA NA 06/02/15 A TA P151612 Moldova PER 2015 D MacroEco & Fis. Mgmt IZVORSKI GMF03 12/15/14 A 06/24/15 A 06/26/15 A TA P130155 Moldova #10151 Improv Access to Credit D Finance & Markets FERRARI GFMDR 01/23/12 A 11/28/14 A 12/13/14 A Total 11 8 7 11 FY16 Final Mgmt. Produ JIT/ Mgmt Del./ Project Project Global Practice Resp Approval ct Dis/ Endor. Of Completion ID Name Practice Manager Unit of Line Subtask Delivery * Concept * Summary * EW 4 4 1 1 EW P148369 Trade Study D Trade & Cmptitvnss KAESTNER GTC10 06/10/14 A 01/15/16 02/12/16 EW P151472 Moldova poverty assessment D Poverty and Equity SANCHEZ GPV03 02/13/15 A 04/20/16 05/20/16 EW P157689 Moldova PFR2016 D MacroEco & Fis. Mgmt IZVORSKI GMF03 12/21/15 A 04/20/16 05/31/16 EW P151113 District Heating and Electricity Tariff D Energy & Extractives LAMECH GEE03 01/09/15 A 06/29/15 A 12/07/15 A PA 1 1 0 0 PA P147063 Programmatic FS Monitoring TA NA Finance & Markets FERRARI GFM03 11/15/13 A NA 05/25/16 TA 6 5 0 0 TA P152911 Labor TA Moldova D Soc. Prot. & Labor MASON GSP03 04/21/15 A 02/02/16 03/11/16 TA P156336 Village Development Scoping Study D Soc. Urb. Rur.& GP SISLEN GSU09 11/04/15 A 04/22/16 04/28/16 TA P154652 Moldova Climate TA D Env. & Natrl Resrcs AHMED GEN03 07/07/15 A 04/06/16 04/29/16 TA P130304 Advice on Strengthening Public Invt. Mgm D Governance FOZZARD GGO15 03/25/14 A 04/30/16 05/30/16 TA P157759 Advocacy for Pension Reform D Soc. Prot. & Labor MASON GSP03 11/23/15 A 05/15/16 05/31/16 TA P156904 Moldova NRA Subtask Finance & Markets PESME GFMFI NA NA 06/30/16 Total 11 10 1 1 Grand Total 30 23 14 20 47 Annex 6: Social Accountability and Citizen Engagement Participatory/com Customer  munity monitoring perception surveys Open Data  Budget  Electronic public  Grievance redress  initiative and  Targeted  transparency Dialogue  services for citizens  Disclosure of  mechanisms in all  IFC public‐private  Action Plan communications  /consultations with  and private sector information and  new operations dialogue (ICR  Public investment  Direct access to  and advocacy  community groups Citizen  participation at all  Complaints  project) mgmt transparency electronic public  initiatives ‐ e.g.   Gender‐sensitive  participation portal  stages of the  handling (DH  users,  Cooperation with  BOOST services  advocacy for  consultations www.particip.gov. contracting cycle road rehabilitation,  business  (Governnace e‐ pension reform DPO md  TAMP) associations Education & Health  Transformation) GPSAs Exploring PPPs The WBG is carrying out its CPS commitment to identify opportunities to integrate social accountability and citizen engagement in its operations. Joint WB-IFC consultations with civil society and private sector stakeholders have taken place for all strategy products (FY14-17 CPS, PLR, ongoing SCD), PforR and IPFs across all three pillars of the CPS. Beneficiary feedback and grievance redress mechanisms are fully integrated in projects (see below FY14-16 WBG portfolio CE analytics) and all but one IPF have citizen-oriented designs. In addition, IFC promotes CE in public-private dialogue (ICR project), PPPs and through perception surveys such as Cost of Doing Business and BEEPS, along with involving business associations and the private sector in decision-making. Specific examples illustrate the incorporation of Citizen Engagement into operations. These include: community monitoring of road rehabilitation under LRIP, direct access for citizens and private sector to electronic public services/data and customer perceptions surveys (GeT project), complaints mechanisms for Chisinau’s District Heating customers under DHEIP, and further complaint handling under TAMP. Two GPSA activities are currently being implemented in the education and health sectors to enhance SA in the monitoring of use of public funds. An Open Contracting initiative is ongoing, aiming at increasing transparency and opening data in public procurement. Support for open government approaches includes our collaboration with the Open Government Partnership, the use of the BOOST tool to publicize expenditure data, and DPO actions on public investment management and budget transparency. 48 CE Mainstreaming Progress (approved in FY15‐16) Note: No IPFs were approved in 120% FY14. FY14 approvals included a 100% DPO and a PforR. 80% 60% 40% 20% 0% Beneficiary feedback in IPFs with direct Citizen oriented design beneficiaries CE Mainstreaming by FY 120% Note: No IPFs were approved in 100% FY14. 80% Out of four IPFs approved in 60% FY15, one AF (Disaster and 40% Climate Risk Management) did not have a citizen oriented design due 20% to its nature – purchase of 0% meteorological systems. FY15 FY16 Beneficiary feedback in IPFs with direct beneficiaries Citizen oriented design 49 Annex 7: Key Macroeconomic Indicators Key Macroeconomic Indicators, in percent of GDP unless otherwise indicated 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F Nominal GDP, MDL billion 60.4 71.9 82.3 88.2 100.5 111.8 119.3 131.7 144.4 GDP, % real change -6 7.1 6.8 -0.7 9.4 4.6 -2 0.5 4 Consumption, % real change -0.9 9.2 9.4 0.9 5.2 2.9 -1.8 0.6 3.6 Gross fixed investment, % real c -30.9 17.2 13 0.4 3.8 10.1 -7.3 -0.8 1.4 Exports, % real change -12.1 13.7 27.4 2.3 9.6 1.1 -1.1 3.7 4.5 Imports, % real change -23.6 14.3 19.7 2.5 4.4 0.4 -3.5 2.8 3.8 GDP deflator, % change 2.2 11.3 7.2 7.9 4.1 6.3 8.9 9.8 5.4 CPI, % change, average 0 7.4 7.6 4.6 4.6 5.1 9.5 11.9 5 Current account balance* -8.2 -7.5 -11 -7.4 -5 -8 -8.1 -7.4 -6.4 Remittances, % change, USD -36.2 13.2 21.7 10.7 10.7 -1 -19.4 1.6 6.7 Terms of trade, % change 0.1 0 -1.4 -0.6 -1.1 -1.4 6.3 0.2 -0.2 External debt 79.6 81 76.4 82.6 83.6 82.5 103.5 102.2 99.1 Budget revenues 38.9 38.3 36.6 38 36.7 38 36 36.9 37.2 Budget expenditures 45.3 40.8 39 40.1 38.5 39.8 38.7 39.9 39.7 Fiscal balance -6.3 -2.5 -2.4 -2.1 -1.8 -1.8 -2.7 -3 -2.5 Public Debt and Guarantees 28.7 31.9 30.4 33.2 31.7 32.5 47.5 47 44.8 Source: Moldovan Authorities, World Bank projections Note: * BMP6 methodology from 2014 50 Annex 8: Consultations To inform the PLR, the WBG Country Team for Moldova has undertaken broad ranging consultations with stakeholders. The team has met with Government counterparts, civil society organizations, private sector representatives and development partners to review the progress of the WBG’s support to Moldova in light of socio-political and economic developments in the country. Following the successful online consultations for the development of the CPS, a similar web-based consultation on the PLR has been established, allowing a broader range of stakeholders including those from academia, think-tanks, individual experts and others to express their views on the PLR and the WBG’s support. Stakeholders have expressed broad support for the analysis and proposed adjustments to the program. The consultations have shown that partners and stakeholders are in agreement with the proposed pillars, the individual projects and advisory services and agree on the revised results and targets. There is appreciation for the WBG’s support in Moldova. Stakeholders and program partners, in particular Government partners, have expressed their appreciation for the WB-financed programs and advisory services and analytics provided to Moldova. 51 Annex 9: Extended version of overview of progress towards CPS Objectives Pillar 1: Increasing Competitiveness Outcome 1.1: Improved business environment and access to finance for business operation The business environment in Moldova is improving gradually, but challenges remain. Regulatory reforms need to be deepened, and the rule of law strengthened to encourage private investment. The competitiveness of Moldovan firms remains limited by a business environment characterized by uncertainty and high transaction costs. The Government has developed a Regulatory Reform Strategy for the period 2013-20 which will require full implementation if some of the important barriers are to be addressed. The FY14-17 CPS has provided support to the Government in a number of these areas as part of support for improving the business environment. Following a downward trend in the regulatory burden on businesses, this has recently increased. Management time spent interacting with state agencies decreased from an average of 19 percent in 2002 to 10 percent in 2012, but it rose to 11.3 percent in 2014 and 10.4 percent in 2015. Rural businesses face a significantly higher burden, on average spending 70 percent more time on regulatory activities than urban businesses. Legislation adopted in 2012 establishes an inspection regimen for businesses which are not subject to existing regulatory frameworks8, identifying the type, frequency, duration, rights and obligations of inspectors and businesses. Over recent years, there has been little attention to reducing the number of activities which require inspection. With support of the CEP-II and IFC’s Investment Climate Reform Advisory program the Government is developing a system of performance indicators for public authorities with business regulatory functions and undertaking other reforms relating to licensing and permits. The CEP-II project became effective in October 2015. The system of performance indicators, together with the Regulatory Impact Assessment Secretariat developed under the previous CEP-I, aim to increase the accountability of government agencies which have a regulatory function related to business. The Project is also supporting strengthening of the Ministry of Economy’s oversight of the implementation of the Regulatory Reform Strategy Action Plan. IFC’s Investment Climate Reform advisory program, which focuses on regulatory streamlining and investment promotion in agribusiness, has targeted direct compliance cost savings to businesses of around US$6 million. Regulatory reform slowed following the resignation of the former minister in mid-2014 and the subsequent disruption of the series of elections. The WBG program has supported competition policy reforms. Prior actions for DPOs supported a series of regulatory reforms stemming from the competition and state aid laws, and the adoption of instruments to support a network connecting state aid grantors and the Competition Council. CEP-II is providing specific support to identifying and addressing competition constraints in selected markets. The ICR project will support a review of competition conditions and identify regulatory changes in selected agribusiness markets (sugar, sunflowers, seed and wheat). The TA on strengthening the state aid control framework in Moldova (2013-16) under the Global Investment Climate project on Competition has provided support to implementation of a state aid control framework to reduce competition distortions and contribute to more efficient public spending. 8 The State Tax Inspectorate, Customs Service, National Bank and the National Commission on Financial Markets maintain their own inspection regimes. 52 ASA services have helped the Government focus on the most promising actions and instruments in export development, and to target government support at high-potential sectors and companies. The Government is revising the strategies of the Moldovan Export Promotion Organization and Organization for SME development. A Matching Grants Facility (MGF), launched in September 2015, provides for business improvement projects (e.g. business development services, management and technical training) aimed at export development and promotion. In addition, a Credit Line of USD 29.4 million is being disbursed to eligible direct and indirect exporters, with USD 3.2 million equivalent of loans approved by the end of FY15. Disbursement has been slower than expected due to the ineligibility of the largest banks in Moldova failing the due diligence process due to high risks and poor governance. The Government is developing a new Investment attraction for Export promotion Strategy which will outline further reforms needed in the business and investment climate to achieve meaningful progress, and originally intended to be adopted by the end of 2015, but delayed. As a result of the banking crisis in Moldova and weaknesses and risks in the financial system, access to financial services in Moldova remains relatively low. Credit to the private sector is about 35 percent of GDP, and deposits remain about 45 percent of GDP. Access to finance is identified as one of the most pressing issues for enterprise development. Weaknesses in the insolvency regime and in the rights of creditors and debtors, including the pledge system, create uncertainty and discourage financial transactions. Contributory factors are: The Moldovan banking sector has been in crisis since a major fraud in three banks reached its culmination with the loss of USD 1 billion (12 percent of GDP). Three banks (Banca de Economii, Unibank, and Banca Sociala) were placed under special administration in late 2014 due to fraudulent transactions between themselves and with foreign banks and companies. A flawed recapitalization of BEM in 2013 by private investors diluted the government’s majority stake and appears to have been financed by BEM itself through foreign bank intermediaries. The purpose of taking over BEM was: (i) to erase records of previous loans to related parties by means of “sales” of those loans to offshore entities in exchange for never-to-be-paid promissory notes; and (ii) to use BEM’s deposit base to finance further never-to-be-repaid loans to related parties. In 2013, this group also gained control over UB and BS to tap their deposits for further lending. Weak governance throughout the system, shown by the lack of shareholder transparency and protection of property rights, restrains further growth and competition in the financial sector. NBM has ordered special diagnostic audits in the next three largest banks in the system. Weaknesses in the share registry system have contributed to “raider attacks” in which securities are fraudulently transferred from their rightful owners to others. At least three banks and some insurance companies are believed to have been subject to a change of control as a result of such processes, which in turn jeopardizes good governance and enables fraud in the banking and insurance sectors. On September 21, 2015, the NBM governor announced his resignation in the wake of the banking fraud and political pressure, adding to the uncertainty facing the banking sector’s future governance. Weaknesses in the legal, regulatory, and supervisory system contributed to the authorities’ inaction as risks in the financial system built up. A Constitutional Court ruling in 2013 on the NBM Law raised risks to the effectiveness of monetary policy and banking regulation. The government moved swiftly to put in place mitigating legislative measures and committed to further remedial actions, but other problems remain. The lack of legal immunity for NBM staff carrying out their duties has contributed to reluctance to intervene in distressed financial institutions. The 53 Ministry of Justice’s authority to review NBM regulations has interfered with the substance of such regulations and delayed their approval, thus restricting NBM’s ability to react promptly when risks are identified. Risks are rising in the insurance sector for similar reasons – a Constitutional Court decision restricting implementation of NCFM regulations; lack of immunity for NCFM staff carrying out their duties; and MOJ’s power to review and delay NCFM regulations. An IFC Financial Infrastructure project has supported NCFM to improve Moldova’s credit reporting system. NCFM is the supervisory body for private credit bureaus and asked for support to amend the law on Credit History Bureaux and guidelines for supervision of private credit bureaus. Using the draft guidelines, the NCFM conducted its first on-site inspection of a private credit bureau in November 2015. The BAFI project will assist NCFM to draft amendments to the Law on Credit History Bureaus and undertake regulatory impact analysis. Moldova’s commitment to the regional program on Strengthening Auditing and Reporting in the Countries of the Eastern Partnership (STAREP) continues to be high. Ministry of Finance staff demonstrate increased knowledge and understanding of the provisions of the EU Accounting and Auditing Directives. Key policy areas for new accounting and auditing legislation were confirmed by the Ministry of Finance as part of the process of further alignment of the legislation with the EU acquis communautaire. By the end of 2015, MOF with CFRR’s support discussed with key stakeholders the Concept of key policy areas for new Accounting and Auditing Laws which will incorporate the Accounting Directive for simplifying financial reporting for SMEs, and outline the new concept for public audit oversight, its scope and design, and other key aspects regulated by the Auditing Directive. The new Accounting and Auditing laws, based on the agreed Concept, will be developed in 2016. Also, the Bank CFRR assisted in developing a concept for improving the functionality of the Public Register of financial statements, which was agreed with key stakeholders. It will optimize the workflows related to filing of financial statements by business entities, will improve public access to financial statements by interested users, including investors and creditors, and will reduce the actual time related to registering, updating and analysis of data captured from financial statements. The Bank CFRR will help identify relevant support for implementing the concept. The efficiency of tax administration has improved but remains insufficiently focused with too much attention on small taxpayers and minor compliance matters. The Development Plan for Tax Administration Reform for 2011-15 introduced reforms including simplification of procedures and improving the quality of services for taxpayers, functional and structural consolidation of the state tax service, broader use of information technologies and stronger human resource management. The Doing Business 2015 report showed that Moldova rose from 105th to 70th in the Paying Taxes indicator due to reforms including easier tax payment for companies through an electronic system for filing and paying social security contributions and introduction of new filing requirements for VAT. Large taxpayer offices use risk profiling to select companies for audit. As a result the number of audits went down from 971 in 2012 to 543 in 2014, while collections from audits increased from 39 to 46 MDL million. However, the decentralized structure of the State Tax Service complicates the use of compliance risk management and results in a large number of ad hoc audits of non-large taxpayers (about 70,000 in 2013). Legislation has been drafted to set a legal framework for unification of the tax administration. Approval of this law is critical to further strengthen tax administration. The Tax Administration Modernization Project, under development for approval in FY16, will focus on tax legislation reform, strengthening the 54 institutional and operational capacity of the Main State Tax Inspectorate, and IT infrastructure and system modernization. Outcome 1.2: Improved competitiveness in agriculture Significant progress has been made in this outcome but recent political and institutional instability has hampered the functioning of the food safety management system. The IFC’s Moldova Investment Climate Reform Project and the Bank’s Agriculture Competitiveness Project supported the creation of a single Food Standards Agency, a pre-condition for signing of the AA/DCFTA with the EU. FSA capacity has been enhanced through training of staff responsible for inspections and controls in the newly introduced risk-based inspections approach. A potential cost overrun (due to exchange rate depreciations and unexpectedly high construction costs) on the food safety component of the MACP has been addressed in part by the Additional Financing of $12 million agreed in May 2015; the project, which became effective in September 2012, is due to be completed by June 2017. The FSA’s institutional subordination was changed from the Ministry of Agriculture (MAFI) to the Government of Moldova in 2013. A recent demand by MAFI that the country’s national laboratory for products of plant origin, on which construction was about to begin, be moved to a new location and come under the authority of MAFI runs counter to the single agency principle which has been at the center of the country’s food safety reform agenda. Due to changes in Government, the FSA has not had an effective leadership for some time, delaying resolution of the laboratory issue and limiting the implementation of the overall food safety reform agenda. IFC’s operations in Moldova during the FY14-16 period have focused on investment and advisory activities that enable private sector growth and diversification in support of the proposed CPS pillars. Investments in key sectors, including agribusiness and related industries, are aimed to support competitive players, raise standards of service provision, provide an important demonstration effect, and attract additional investment. With deteriorating market conditions, IFC faced challenges in its efforts to strengthen the financial system, support trade and increase access to finance for micro, small, and medium enterprises (MSMEs) across sectors through advisory and investment in financial intermediaries. IFC has sought to attract private sector investors to develop infrastructure, including through PPPs and other instruments. Financial support and technical assistance has increased market access for farmers. 28 producer groups have been established and utilized the support of the Bank to develop productive partnerships and realize investments for mutual benefit, particularly in cold storage facilities. These partnerships have also been a vehicle for providing support to farmers in implementing sustainable land management practices. Pillar 2: Enhancing Human Capital and Minimizing Social Risks Outcome 2.1: Improved quality of and access to health and education services Moldova faces significant labor challenges, in particular in terms of labor force participation and productivity. Employment rates in Moldova are low compared to the 60-70 percent typical for ECA countries, mostly because of very low Labor Force Participation (LFP), which has decreased dramatically over the past ten years (from 53 percent in 2005 to 39 percent in 2014). The low employment rate is both a cause and a consequence of very high international migration – in 2013 about 14 percent of men and 8 percent of women of working age were working abroad 55 or looking for work abroad. By contrast, internal mobility is low: less than 20 percent of the population aged 18 and older moved to a different city in the past 20 years. Skills are missing in Moldova both in the current workforce and in the next generation. In the EBRD-WB BEEPS businesses mention skills as the third obstacle to their growth in 2013, up from fourth in 2008. More than 30 percent of firms cite lack of skills as a major challenge for their operations, one of the highest figures in ECA. Skills are also missing in the upcoming labor force: the latest available PISA results – conducted in 2010 - show that 57 percent of Moldova’s 15 year- olds are functionally illiterate. To improve labor productivity and the skills of the labor force, the Government of Moldova is aligning education with labor market needs and undertaking reforms to improve the quality of education. Moldova is conducting key activities and reforms to monitor and improve the quality of its education system introducing a PISA assessment for students aged 15, creating centers of excellence in vocational education, and creating the Agency for Evaluation and Accreditation in higher education. At the same time, the success rate at Baccalaureate decreased from 68 percent in 2013 to 56 percent in 2014 and 54 percent in 2015, suggesting increased quality standards for this exam. On-going and planned WB support for labor in Moldova aims to better understand mismatches in the labor market. The WB has supported the Government with a diagnostic of its workforce development (Systems Approach for Better Education Results (SABER)) and has provided technical assistance with data collection and analysis to examine how individuals make schooling and jobs decisions. The results of this will feed into current career guidance activities in Moldova, and is closely related to the efforts of other development partners to support improved career guidance in Moldova. A recipient-executed trust fund has been raised for the Ministry of Labor Social Protection and Family (MLSPF) to undertake household and employer surveys on skills. Lastly, as part of the Poverty Assessment, the World Bank will examine the relationship between connectivity – distance to local roads – and labor market outcomes. The efficiency of the education sector has improved, but quality improvements have been less steady. Efficiency improvements are demonstrated through the introduction of per student financing in 2013, and improvements in the student teacher ratio. 80 percent of primary and general secondary schools had 2015 budgets approved according to the financing formula, and a system is in place to monitor dropouts closely, including differential effects on girls and boys. Quality improvements have shown less progress: there have been delays in implementing school quality standards which were approved in 2013, and in establishing teacher and school directors’ training and remuneration programs. Improvements to the student assessment system were introduced in 2015 with Moldova now enrolled in PISA, and with a national testing system for 4th and 9th grade students completed. A consolidated EMIS has been established. As with other sectors, progress in education was affected by the political context and a significant staff turnover at the Ministry of Education, leading to concerns over policy direction and sustainability of interventions. In the health sector, increased access to healthcare may be limited to better-off households. Overall, health insurance coverage had reached the 2017 target of 85 percent by 2015, but this has been driven by higher income households taking up insurance. The 2013 Health Budget Survey shows that coverage amongst the bottom 40% of households had actually reduced over the previous two years. There has been some reduction in reported out of pocket expenditures, but 56 amongst the bottom 40% of households, such payments have not reduced as a proportion of household non-food expenditure. Delays in implementation of the Health Transformation Operation, together with the turbulent political environment have slowed reforms to improve the quality and efficiency of the health sector. The HTO implementation was delayed for six months after project agreement, and was then followed by changes in the MoH leadership and two MoH reorganizations leading to further delays. However, the Government is committed to the reform process and recent efforts have led to two out of eight Disbursement Linked Indicators being achieved. Other health outcome related DLIs related to reduction in Non-Communicable Diseases, in particular reduction in smoking which is prevalent amongst men, will require cooperation from other sectors and counterparts. Sensitive reforms in the health sector itself, such as hospital optimization will require commitment and support from the current Government. Improving local roads is an important priority for the Government and development partners and there is agreement to move forward with coordinated action. Better roads will improve accessibility to education, health and market facilities by providing a safe and sustainable local roads network in selected areas of Moldova. The Bank is developing a project to finance the rehabilitation and upgrading of about 300 km of Local Roads along with institutional strengthening to build capacity within the sector for effectively maintaining and improving the regional and local road networks. Outcome 2.2: Fiscally sustainable and equitable pension and social assistance systems Expansion of the social assistance program Ajutor Social has been uneven. After expansion of coverage in 2011-12 the program reached 18.8 of the poorest population quintile. Subsequently, ad hoc increases in categorical benefits, changes in the treatment of the rural self-employed, inadequate adjustment of Ajutor Social eligibility parameters, and insufficient outreach by social workers led to a decrease in coverage to 14.7 percent in 2013 and 12.2 percent in 2014. More recently the Government has made a concerted effort, both on the policy side and in implementation, to expand coverage of the program, leading to an increase in beneficiary households to 45,000 taking up the monthly benefits by April 2015. This marks a reversal of recent declining trends. At the same time, the program remains well targeted by ECA regional standards, with transfers reaching 79 percent of the poorest population quintile in 2014 – down from 84.1 percent in 2014. Costly and poorly targeted social assistance programs continue to be delivered. By eliminating the costly and poorly targeted program of Nominative Compensations in 2012, the Government made a significant step towards consolidating the social assistance spending. However, subsequent increases in a number of categorical benefits in late 2013-2014 increased spending and reversed previous progress. Pillar 3: Promoting a Green, Clean and Resilient Moldova Outcome 3.1: Greater adaptation and resilience to climate change State capacity to forecast severe weather has improved. The country has made substantive progress towards improving technical and human capacity in the State Hydro-Meteorological Service and the Civil Protection Service related to severe weather forecasting and disaster preparedness and response. All goods and services to be financed under the Disaster and Climate 57 Risk Management Project have been procured. Implementation delays were caused by the volatile political situation in 2015, in particular the operationalization of a network of automated weather stations, but activities are on track to be completed on schedule in June 2016. Outcome 3.2: Improved Natural Resources Management Investment grants have been used to positive effect to provide farmers with information on practical techniques for adaptation to climate risks. At least 50 grants have been provided and more than 90 demonstration events have been organized to disseminate information to farmers. Mainstreaming agro-environmental and sustainable land management practices is expected to lead to enhanced competitiveness of the agro-food sector. ENPI-FLEG 2 TA has supported improvement of forest and land management in non-state (including municipal) lands which often suffer from weak management practices. Outcome 3.3 Increased energy efficiency and security Implementation delays have hampered progress in this outcome and work must be done to improve the regulatory environment. The actions by Government were delayed by the elections of 2014, but the DHEIP was declared effective in August 2015. There have also been delays in taking the requisite actions necessary to optimize the District Heating supply and ensure timely procurement processes. The financial sustainability of the new integrated utility Termoelectrica requires an increase in the DH tariff, but delays by the regulator, ANRE, are symptomatic of a relatively poor regulatory environment. TA to ANRE is being provided by the Swedish government and is intended to assist ANRE to meet EU directives and to improve the regulatory environment. The DH tariff is also necessary to allow the Bank to continue its support to the restructuring of Termoelectrica’s debt. Governance as a cross cutting theme The weaknesses identified in the public investment management system have not yet been fully addressed. The Government of Moldova’s development strategy requires considerable public investment particularly in education, health, energy efficiency and transport. A number of weaknesses in the PIM system have been identified: inadequate project screening and appraisal; lack of project prioritization; inefficiencies in resource allocation due to political pressures; unpredictability in funding for existing projects; weak monitoring and evaluation of ongoing projects. In 2013, the Government identified policy changes to improve the PIM system and norms have now been introduced through the Law on Public Finance and Fiscal Responsibilities. However the implementation of new approaches is still weak. The PER 2013 proposes that local governments are given greater responsibility for allocating local capital expenditures. However, decentralization of decision-making for capital expenditure will need to be designed in a way that is not in conflict with rationalization objectives in sectors with significant excess capacity (notably health and education). At the same time, the Ministry of Finance’s gate-keeping role in the capital budgeting process will need to be strengthened if there is to be a credible and disciplined public investment management process. The WBG continues to support the Government’s objective to transform the delivery of selected public services using ICT. Two data portals have been developed, the Open Data Portal and the Public Services Portal, and a government shared computing infrastructure M-Cloud has been launched. More than 2,000 public servants and other employees of central and local public agencies have received e-government training under the project. There are more than 350,000 58 direct project beneficiaries, out of which more than 52 percent are women. Currently under preparation to be submitted to the Board in the FY 2016-17 is a Modernization of Government Services Project. Key objectives of the Project are to improve access to, efficiency of delivery, and quality of selected government administrative services. It would include the continuation of the Government e-Transformation agenda and consolidate overall progress under the e-Governance agenda. Currently, there are two ongoing GPSA activities – in health and education. The health GPSA project was initially planned as complementary to the PforR Health Transformation Operation, aiming to generate information on performance of the healthcare sector for the Government, and to enhance the policy dialogue between the citizens and MoH. However, due to insufficient initial coordination, the project is being restructured now to improve project design and expected outcomes. The education GPSA implementation is on track and expected to satisfactorily achieve its development objective by closing in December 2018. The objective is to empower the country’s civil society to: (i) engage local, regional and national authorities in evidence-based policy and budget dialogue in Moldova education sector; and (ii) to promote an enabling environment for social accountability. Engagement in Transnistria is based on support to confidence building measures along with support to the twin objectives of supporting poverty reduction and boosting shared prosperity. The Korea Trust Fund to Support Transitions (KST) funded Knowledge Program on Confidence Building in Moldova and Transnistria was launched to establish dialogue and build relationships between stakeholders, which initially took place in 2013 and 2014. Issues for potential longer term technical assistance were identified, however engagement was disrupted by the deteriorating political situation both nationally and regionally. Although the environment remains strained, the Bank has been able to undertake some activities focusing on re-establishing relationships and on building capacity in fiduciary matters, PPPs and WBG procedures. Identifying appropriate working methods which can deliver results but are acceptable to both the Moldovan and Transnistrian authorities remains a challenge. 59