Document of The World Bank FOR OFFICIAL USE ONLY Report No: 74767-SS INTERNATIONAL DEVELOPMENT ASSOCIATION AND INTERNATIONAL FINANCE CORPORATION INTERIM STRATEGY NOTE (FY 2013-2014) FOR THE REPUBLIC OF SOUTH SUDAN January 30, 2013 AFCE4, Africa Region The International Finance Corporation This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective 01/22/2013) Currency Unit = South Sudanese Pound SSP 2.95 = US$1 US$ 0.34 = SSP 1 ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Activities MoFEP Ministry of Finance and Economic CDD Community Driven Development Planning CPA Comprehensive Peace Agreement MoH Ministry of Health CIFA Country Integrated Fiduciary MoLACD Ministry of Legal Affairs and Assessment Constitutional Development DDR Disarmament, Demobilization and MoPM Ministry of Petroleum and Mining Reintegration MoTPS Ministry of Telecommunications and DFID Department for International Postal Services Development ODA Official Development Assistance ESSAF Environmental and Social Screening PER Public Expenditure Review and Assessment Framework PFM Public Financial Management EU European Union PSG Peace-building and State-building FCS Fragile and Conflict-affected States Goals FDI Foreign Direct Investment RMF Road Maintenance Fund GBV Gender Based Violence SME Small and Medium Enterprises GDP Gross Domestic Product SPF State – and Peace-Building Fund GNI Gross National Income SPLA Sudan Peoples’ Liberation Army GRSS Government of the Republic of South SPLM Sudan Peoples’ Liberation Movement Sudan SSDP South Sudan Development Plan ICR Implementation Completion Report SSDI South Sudan Development Initiative ICT Information Communications and SSRA South Sudan Roads Authority Technology SSTTF South Sudan Transition Trust Fund IDA International Development Association TA Technical Assistance IDPs Internally Displaced Persons UNFPA United Nations Population Fund IFC International Finance Corporation UNHCR United Nations High Commission for IGAD Intergovernmental Authority on Refugees Development UN Women United Nations Entity for Gender IMF International Monetary Fund Equality and the Empowerment of ISN Interim Strategy Note Women JAM Joint Assessment Mission UNMIS United Nations Mission in Sudan LGSD Local Government and Service UNOPS United Nations Office for Project Delivery Service LICUS Low-income Country Under Stress USAID United States Agency for International MDG Millennium Development Goal Development MDTF Multi-Donor Trust Fund WDR World Development Report MDTF-SS Multi-Donor Trust Fund for Southern WFP World Food Program Sudan WBI World Bank Institute ACKNOWLEDGEMENTS World Bank IFC Vice President Makhtar Diop Bernard E Sheahan (acting) Country Director: Bella Bird Cheikh O. Seydi Country Manager/ Laura Kullenberg Zahia Msuya Lolila Representative Task Team Leaders Radhika Srinivasan & Bolormaa Amgaabazar Frank Douamba This Interim Strategy Note was prepared under the guidance of Bella Bird (Country Director). The task team leaders, Radhika Srinivasan and Bolormaa Amgaabazar, brought together a series of valuable insights, especially those from Nigel Roberts and Paolo Zacchia, and worked with a core team that also included Greg Toulmin, Laura Kullenberg, Joseph Saba, Nora Dudwick and Louise Scura. The team received support throughout the process from Joel Hellman, Alexandre Marc, and other staff of the Global Centre on Conflict, Security and Development. In addition, the following colleagues made important contributions to the ISN: Ian Bannon, Alastair McKechnie, Stephen Ndegwa, Diego Garrido Martin, Luca Bandiera, Humberto Lopez, Sanjeev Ahluwalia, Adenike Oyeyiola, Muhammad Zulfiqar Ahmed, Tesfamichael Nahusenay Mitiku, Museme Munira Issa, Pia Peters, Verena Phipps, Evarist Baimu, Kaliope Azzi-Huck, Espen Beer Prydz, Kenneth Anye, Marcelo Fabre, Juvenal Nzambimana, Helen Mbao, Renaud Seligmann, Waafas Ofusu-Amaah, Zara Sarzin, Berhane Manna, Kanishka Balasuriya, Lilian Foo, Khetsiwe Dlamini, Ida Mori, and Krishna Thapa. The IFC team integral to the development of the strategy was led by Frank Douamba with Zahia Msuya Lolila, Jean Lubega-Kyazze, and Catherine Masinde. Finally, special thanks are extended to the Government, people and civil society of South Sudan and to other development partners, for their contributions. INTERIM STRATEGY NOTE THE REPUBLIC OF SOUTH SUDAN Table of Contents Executive Summary ....................................................................................................................... i I. Introduction: Strategy for A Newly-Independent South Sudan................................... 1 II. Country Context and Challenges .................................................................................... 3 A. Recent Developments ............................................................................................. 4 B. Security and Conflict Challenges............................................................................ 5 C. Economic and Governance Challenges .................................................................. 6 D. Poverty and Human Development Challenges ..................................................... 10 E. Addressing the Challenges of Moving out of Fragility ........................................ 11 III. Donor and Government Priorities and Framework for Action.................................. 12 A. Development Partner Engagement ....................................................................... 12 IV. Bank Group Support 2005-2012 and Lessons Learned............................................... 16 A. Accomplishments of the CPA Period ................................................................... 16 B. Implementation Lessons from the CPA Period .................................................... 17 C. The Transition Period ........................................................................................... 19 V. Proposed Bank Group Interim Strategy for FY 13-14 ................................................ 19 A. Strategic Rationale and Program Overview .......................................................... 19 B. Cluster I: Economic Management and Governance for Effective Local Service Delivery................................................................................................................. 22 C. Cluster II: Support for Productive Employment and Livelihood Opportunities... 25 D. Towards A Results Matrix .................................................................................... 28 E. Recalibrating the Strategy and Program ............................................................... 28 VI. Program Implementation ............................................................................................... 29 VII. External and Internal Risks ........................................................................................... 34 Boxes Box 1: The South Sudan Development Plan................................................................................ 15 Box 2: Consultations with Government, Civil Society and Donors ............................................ 18 Box 3: South Sudan and IDA16 Priorities ................................................................................... 23 Box 4: Recalibration within Operations ...................................................................................... 29 Figure Figure 1: Relative Share of Donor Support (Expenditure), 2010 ......................................... 13 Tables Table 1: South Sudan Infrastructure .............................................................................................. 7 Table 2: South Sudan Selected Economic Indicators, 2008-2011 ................................................. 8 Table 3: Indicative World Bank/ IFC Program............................................................................ 21 Annexes Annex 1: South Sudan at a Glance ............................................................................................. 36 Annex 2: Donor Activity in South Sudan ................................................................................... 39 Annex 3: South Sudan Development Plan: National Priority Program Areas Core Targets and Development Outcome Objectives ............................................................................. 41 Annex 4: South Sudan: MDTF-SS: Lessons From Experience.................................................. 43 Annex 5: South Sudan Portfolio as of September 30, 2012 ....................................................... 46 INTERIM STRATEGY NOTE THE REPUBLIC OF SOUTH SUDAN EXECUTIVE SUMMARY i. On July 9, 2011, South Sudan, the world’s newest country came into being. South Sudan begins its independent life with significant oil resources, abundant arable land and a unifying narrative of independence. At the same time, South Sudan also faces formidable development challenges. Given the fluid and challenging environment, the World Bank Group’s first strategy for the country takes the form of an Interim Strategy Note (ISN) covering a period of two years, FY 13-14. In crafting the ISN, the Bank will build on the experiences of the Comprehensive Peace Agreement (CPA) period (2005-2011). It will also be informed by the World Bank's 2011 strategy for Africa, Africa's Future and the World Bank's Support to It, the 2011 World Development Report on Conflict, Security and Development, the Government of the Republic of South Sudan’s (GRSS) South Sudan Development Plan (SSDP) and the ‘New Deal’ of the g7+ states, of which South Sudan is a member, to base peace and state-building on a comprehensive understanding of fragility. ii. With the signing of the CPA in 2005 and the ending of over five decades of war, South Sudan has experienced relative peace though it remains deeply fragile. Exacerbated by its historical and geographical isolation, the period of heightened tensions between South Sudan and Sudan, and internal episodic violence, the legacy of economic underdevelopment and institutional deficits contribute to the fragility of the country. Despite its great resource wealth, its population is one of the most deprived, with extremely poor social indicators and dramatic gender disparities. Outside a few oil enclaves, South Sudan remains a relatively undeveloped subsistence economy. Oil revenues are also associated with poor governance and corruption, which have started to color the population’s perceptions of their state and threaten to undermine its legitimacy. The most significant stress factors include: possible future tensions with Sudan; internal conflicts resulting from contestation among different social and economic groups over access to power, resources and services; ineffective governance, corrupt public financial management, continued draining of oil revenues without capital investment or improved welfare; underdevelopment of the non-oil economy and extreme economic deprivation of the population. iii. While it is clear that South Sudan cannot address all of its problems at once, the road to resilience involves addressing the critical stresses through the following development tasks: (i) build transparent and accountable national institutions to convert oil revenues into equitably shared development gains for men and women; (ii) build local institutions to establish the authority and capability of the state to deliver services, represent local constituencies and resolve local conflicts; (iii) create an enabling environment for the private sector to generate jobs and economic opportunities, including for women and youth; (iv) develop the infrastructure base, and associated regulatory and institutional frameworks, particularly in roads, to establish domestic and regional connectivity as a foundation for diversifying the economy in future. The most successful transitions away from violence and instability in developing countries since World War II have been rooted in the creation of legitimate institutions, and building them is the work of a generation or more. Thus, the Bank program will begin the task of helping government lay i the foundations for effective and accountable institutions that use the country’s own resources to respond to its citizens’ needs and promote economic opportunities and improve livelihoods. This is a task which will need to be carried forward in future strategies for work with South Sudan. iv. The ISN will build on the lessons of the CPA period, and particularly of the Multi Donor Trust Fund for South Sudan (MDTF –SS). While there were important accomplishments during this period, donor aid investments overestimated government capacity and had an uneven record in building capability in GRSS. Instead, they relied heavily on NGOs for service delivery. Thus, despite the US$4.2 billion spent during the CPA period, the assistance did not have the expected impact on what should have been its priority – mitigating the sources of conflict in South Sudan and building systems to ensure that oil revenues would be used to improve the population’s economic and social welfare. Pending South Sudan’s membership in the World Bank Group, the Executive Directors approved creation of a South Sudan Transitional Trust Fund (SSTTF). The SSTTF has used lessons from MDTF-SS to inform the design of the three operations it funds. All three projects strike a balance between delivery of quick impact and building institutional capability. v. The proposed interim strategy is aligned with GRSS’s ambitions as reflected in the South Sudan Development Plan. The central challenge for South Sudan will be to lay the foundations for effective and accountable institutions that will use the country’s own resources to respond to its citizens’ needs. The Bank’s role in the ISN period will be to assist South Sudan in meeting this challenge by selecting interventions which will, over time, have a foundational or transformational impact that are guided by the priorities of GRSS, aligned with the activities and focus of development partners, and responsive to emerging needs. Building institutional accountability and capacity will be central to all programming. While building institutions is a long-term endeavor, it is important in the interim for the people of South Sudan to see a tangible return in improved livelihoods, services and a revitalized economy. Delivering on this dual mandate will require the Bank to strike a balance in AAA and operations between activities which meet immediate needs and manage emerging stresses, and those which focus on building sustainable institutional capacity and accountability. Most operations will be designed as the first in a series of involvements rather than as one-off interventions, and will focus on partnerships where the Bank’s catalytic and convening power can be leveraged. Filling the data gap by building systems for data collection and utilization, including citizen feedback, to inform policy decisions will be a key area of focus. Gender sensitivity will figure prominently in all activities, both for equity and efficiency considerations. vi. During the ISN period, the Bank expects that South Sudan will receive an IDA finance allocation of approximately US$130 million during FY13-14. In addition, the Bank Group will deliver knowledge products, policy advice and technical assistance in partnership with Government and other donors. The Bank will leverage its financing to crowd in other sources in key sectors. The program will have two clusters of activities. Cluster 1 will focus on improving economic management and governance for effective local service delivery, and includes (i) knowledge activities and technical assistance that address macroeconomic policies, public financial management and oil revenue management, and develop statistical capacity for generating data for decision making and accountability; (ii) a lending operation to build responsive, inclusive government structures for local service delivery and for addressing local grievances. A comprehensive approach to expanding productive employment opportunities is more effective than isolated interventions; therefore, a robust analytical program will underpin employment interventions in Cluster 2. The second cluster will pilot a public works and skills ii operation on livelihoods, targeting gender, youth and vulnerable groups, including ex- combatants; it will help build the foundations the economy by improving connectivity through a core network of roads, ICT and trade, including regional links. IFC is expected to focus on support to private-public partnerships in pharmaceutical development, introduce new mobile enabled services, and build capacity in small and medium enterprises. vii. Since progress toward stability and development is not likely to be linear, the Bank will need to be flexible in the way it operates to cope with volatility. The Bank strategy for dealing with the risk of recurrent crises will have two components: (i) monitoring how stress is building or manifesting itself, while maintaining continuous engagement with counterparts to assess risks and opportunities for scaling up or holding back implementation, while maintaining core visible impact; and (ii) integrating risk management into the design of each project. viii. The ISN identifies four key elements for ensuring that implementation of the program provides the right balance of risk and flexibility. These are to: • Fully deploy the provisions of, as appropriate, paragraph 11 of the draft OP10.00 on Investment Project Financing, together with paragraph 48 of BP10.00, or the previous OP8.00 on Rapid Response to Crises and Emergencies, depending on which OP is in force at the time individual operational decisions are made. • Plan to prepare a country-wide Environmental and Social Screening and Assessment Framework (ESSAF) for South Sudan, which would anticipate all the environmental and social screening required for all the lending and AAA operations under this ISN. • In particular, and assuming the planned ESSAF goes forward, prepare a social assessment for South Sudan on the application of OP4.10 Indigenous Peoples. • Consistent with the provisions of BP10.00, paragraph 48, apply the terms of paragraph 20 of OP11.00 on Procurement so as to allow procurement approaches which are consistent with the principles of the policy, but also appropriate to the circumstances in South Sudan. ix. Over the ISN period, interstate and intrastate violence, governance and capacity failure constitute significant dangers. The most urgent task of the Government and its development partners is to reduce these risks. A successful transition is by no means impossible, but it will require a combination of outstanding national leadership and consistent external support. To achieve success, South Sudan needs the support of a fully engaged Bank Group, which, along with other development partners, is committed to help it build the basic foundational institutions for peace and prosperity. iii INTERIM STRATEGY NOTE THE REPUBLIC OF SOUTH SUDAN I. INTRODUCTION: STRATEGY FOR A NEWLY-INDEPENDENT SOUTH SUDAN 1. On July 9, 2011, the Republic of South Sudan celebrated its independence. The country began its life with significant natural resources and a binding narrative of triumph and freedom, but with a legacy of over 50 years of conflict and an extremely low level of physical, human and institutional development. The neglect and destruction of war has left the country with virtually no infrastructure, agriculture at bare subsistence level, dismal human development indicators, distortions associated with its high dependence on oil revenues and weak formal institutions of government. The September 27, 2012 agreement with the Republic of Sudan on oil revenue sharing, however, has opened up new opportunities for the international community to help lay the foundations for competent and accountable state institutions that are able to translate available resources into better development outcomes. 2. South Sudan became the newest member of the World Bank Group (the Bank) on April 18, 2012. 1 This first Interim Strategy Note (ISN) for South Sudan, developed jointly with the International Finance Corporation (IFC), covers the period FY13-FY14, and aims to validate key elements for a longer-term strategic framework for a durable and consistent partnership with South Sudan, to be articulated in a subsequent strategy. Achieving stability in South Sudan is of paramount importance, but strengthening the state, connecting it with its citizens and consolidating legitimacy will require many years of institutional and economic growth. Even with strong, development oriented leadership and sustained, effective international assistance, progress in state building will depend on long term vision, patience and persistence. 3. The ISN is informed by the World Bank's 2011 strategy in Africa, Africa's Future and the World Bank's Support to It, and by the “New Deal for Engagement in Fragile States,� an initiative of the g7+ in fragile and conflict-affected states (FCS). 2 The Africa Strategy calls for the Bank to help cushion countries from the effects of conflict, natural disasters and socio-economic shocks, while assisting them to build economic resilience and 1 With signing of the Articles of Agreement and Conventions of the World Bank Group, South Sudan joined the International Bank of Reconstruction and Development (IBRD), the International Finance Corporation (IFC), International Development Association (IDA), the International Centre for Settlement of Investment Disputes (ICSID), and the Multilateral Investment Guarantee Agency (MIGA). 2 . A “New Deal� initiative was announced in November 2011 at the 4th High-Level Forum on Aid Effectiveness where the g7+ group of 19 fragile and conflict-affected countries, (including South Sudan), development partners, and international organizations endorsed an agreement on a new global direction for engagement with fragile states. The New Deal recognizes that despite the Paris Declaration on Aid Effectiveness (2005) and the Accra Agenda for Action (2008), results and value for money have been modest, international partners can often bypass national interests, and transitioning out of fragility is long, political work that requires country leadership and ownership. A “New Deal� aims to address this challenge. 1 competitiveness through diversification, job creation, skills training, and accountable public sector governance. The strategy’s dual emphasis on immediate impacts and longer-term, structural change is consistent with the approach of the South Sudan Development Plan 2011-13 (SSDP) of the Government of the Republic of South Sudan (GRSS) and this ISN. The New Deal argues for a new development architecture which is better tailored to the situation of fragile contexts and a thorough analysis of the sources of conflict and the drivers of instability. The emphasis placed by the g7+ states on the importance of diagnosing sources of fragility mirrors the argument in the Bank’s 2011 World Development Report (WDR), Conflict, Security and Development, that understanding context is vital. 4. Inspired by the 2011 WDR, this ISN focuses on the longer-term endeavor of building legitimate institutions that can mitigate the drivers of instability. The ISN builds on the following WDR guidance: (i) addressing fragility must begin with a clear understanding of the context and stress factors that have caused and are likely to perpetuate systemic instability; and (ii) increasing resilience depends on creating credible national institutions while also delivering short-term tangible benefits. The large presence of bilateral donors and international non-governmental organizations (NGOs) focused on short-term delivery suggests that Bank's comparative advantage lies in the area of longer-term institutional building. At the same time, the Bank will be willing to take advantage of short-term opportunities that arise to make tangible improvements in livelihoods and service delivery. 5. Drawing on an analysis of South Sudan’s main stresses, the institution building focus of the ISN is articulated in two program clusters: (i) improving economic management and governance for effective local service delivery, and (ii) expanding productive employment opportunities. The first cluster will support activities which build accountable state institutions that can deliver basic services to underserved populations, both by building central state capacity to manage the macro-economy and national fiduciary and statistical systems, and by developing local government capacity to deliver services. The second cluster focuses on building public and private institutions that can generate and sustain improved livelihoods and create jobs for the population. The ISN will build on the lessons of the Comprehensive Peace Agreement (CPA) period 2005-2011, particularly the experiences of the Bank-administered multi-donor trust fund in South Sudan (MDTF-SS). This period saw important accomplishments, but donor investments had an uneven record in building government capacity and legitimacy. 6. South Sudan’s combination of huge development needs, low domestic capacity, limited IDA resources, and a crowded donor and NGO presence calls for a selective Bank approach based on knowledge, leveraging and convening. Guided by the Africa Strategy’s emphasis on partnerships and knowledge, the Bank’s strategy relies on its ability to offer relevant advice and solution-oriented policy options from the global storehouse of development experience and on its convening potential. The country’s significant needs demand selectivity in Bank programming and strong partnerships with other actors which are catalytic in leveraging the Bank’s development impact. All knowledge, technical assistance (TA) and lending operations will be selective. Each of them, independent of their size, will be either foundational or transformational. Foundational interventions could include, for example, development of robust public financial management and statistical systems or local government service delivery 2 frameworks. Transformational operations could include an initiative in information, communication and technology (ICT) sector and an innovative private sector-led health delivery project. Where appropriate, interventions will also be responsive to emerging stresses by initiating investments to enhance opportunities for public works and skills or providing just in time advice to the government. 7. Given the fluidity of South Sudan’s security, macroeconomic and governance situation, risk management will be at the core of the ISN. The Bank will work with other partners to continuously monitor the impact of different stresses, and will incorporate risk management mechanisms in the design of all individual operations. 8. The ISN is structured as follows. Section II examines the country context and challenges, using the WDR framework for identifying stresses likely to precipitate systemic instability and reduce development aid effectiveness. Section III summarizes development partner engagement and reviews GRSS priorities and its framework for action. Section IV examines Bank support during 2005-2012 and lessons learned from it. Sections V and VI detail the proposed Bank interim strategy for FY13-14 and program implementation. Section VII concludes by examining the risks related to Bank program implementation. II. COUNTRY CONTEXT AND CHALLENGES 9. With the signing of the CPA in 2005 and the cessation of over five decades of war, South Sudan has experienced relative peace though it remains deeply fragile. During the last seven years between the CPA and the first anniversary of independence, there has been no major war between Sudan and South Sudan; however, there has been periodic heightening of tensions between the two countries. Internal, episodic violence, the legacy of insecurity, economic underdevelopment and institutional deficits contribute to the fragility of the country. The following discussion delineates the key stresses underlying South Sudan’s continuing fragility. 10. Since the signing of the CPA, South Sudan has witnessed notable though modest improvements in human development indicators; the broad driver of these improvements has been the end of the civil war. Although reliable poverty data from before 2005 is not available, partial evidence suggests that the national poverty rate of 51 percent is substantially lower than pre-CPA rate. There have also been significant gains in school attendance: primary enrollment has doubled from 0.7 million in 2005 to 1.4 million in 2009, but then remained constant until 2011. The gross enrollment rate decreased from 72 percent in 2009 to 63 percent in 2011. Large numbers of “overage� young South Sudanese are also in school catching up for years lost in war. Likewise, the rate of under-5 mortality3 has fallen by more than half from its levels at the height of the conflict. In 2006, one year after the signing of the CPA, under-five mortality rate was 135 per 1000 live births and decreased to 105 per 1000 live births by 2010. Infant mortality rate reached 75 per 1,000 live births in 2010, compared to 102 in 2006. On average, evidence-based interventions for children under the age of five reach about 50 percent of children in need. Even though skilled birth attendance increased from 41 percent of live births between 2004 and 2006 to 48 percent between 2008 and 2010, maternal mortality rate remains 3 This refers to the probability that a child will die before reaching a fifth birthday. 3 the highest in the world. Normal livelihood activities—chiefly subsistence agriculture and raising livestock—have increased. Service delivery has also been extended, due to the efforts of development partners, non-governmental organizations, and the government. A. Recent Developments 11. The short period since independence has been turbulent for South Sudan. The CPA that laid the foundation for the referendum on independence did not set provisions for post- independence oil sharing mechanisms, trade relations, citizenship or border demarcation, which resulted in a progressive breakdown in relations between Sudan and South Sudan. Border incursions continued heightening tensions between the two sides; unresolved citizenship rights created uncertainty over residence and property ownership on both sides of the border; and Sudan’s closing of the border to official trade between the two countries resulted in higher prices and shortages of essential commodities. The failure to reach agreement on oil transit fees from South Sudan’s oil fields through the pipelines in Sudan’s territory, led to the confiscation of oil by Sudan and in response, on 20 January 2012, South Sudan announced it would close down oil production until a fair deal on transit fees could be reached or an alternative pipeline built. 12. The oil shutdown deprived South Sudan of 98 percent of its revenues and most of its foreign exchange receipts, with potentially dire consequences for the economy, poverty and food security. It created a severe balance of payments and fiscal crisis and hiked price inflation. Following the oil shutdown, the government adopted an interim “austerity budget� for April to June 2012, reducing government consumption, transfers to the states, and the development budget, while maintaining wages and salaries. The government was unable to fully implement this austerity budget, however, and expenditure outlays remained at pre-austerity levels, leading to a faster depletion of fiscal reserves. A new austerity budget was approved in July 2012 for FY 2012/13 with an overall envelope that was 30 percent lower than the 2011 budget and with new measures to limit overruns. 13. With facilitation from the African Union High Level Panel and the UN, Sudan and South Sudan reached breakthrough agreements on many outstanding issues in September 2012. These agreements are expected to lead to the gradual resumption of oil production in early 2013. The agreements covered oil transit fees and monitoring arrangements, resumption of trade between the two countries, the establishment of a demilitarized zone along the border and a resolution of citizenship issues. The status of the disputed territory of Abyei and final demarcation of borders remain to be resolved. Under the ‘Agreement on Oil and Related Economic Matters’, South Sudan agreed to pay around US$10 per barrel and under a ‘transitional financial arrangement’, cash payments of around US$3 billion to Sudan over a period of three and a half years. The expectation of a resumption of oil revenues led to an appreciation of the exchange rate and helped reduce inflation in the second half of 2012. On the fiscal front, in the absence of oil revenues, the government has relied prominently on domestic borrowing from commercial banks to cover the reduced spending levels. Even if the September agreements are implemented, and oil revenues resume in the first quarter of 2013, it may not be sufficient to fully fund the FY13 budget. It also remains to be seen whether the relative spending discipline that the austerity period introduced can be sustained in the coming years. 4 B. Security and Conflict Challenges 14. The September agreements offer hope for a new era of cooperation between Sudan and South Sudan and have the potential to reduce the risk of future conflict, but external security threats remain. While the agreements are ground breaking and lay the foundation for mutual political, social and economic cooperation, the tensions that continue over the final status of the territory of Abyei, the unresolved issues of border demarcation, and continued allegations of support to insurgents on both sides of the border could result in heightened tensions in the future. The implementation arrangements for the agreements present a significant challenge on their own, and are being closely monitored by the African Union and the UN, but the historical enmity between the two countries and outstanding issues make it difficult to predict in a strategy how relations between the two countries will evolve. 15. Internal violence has declined since the signing of the CPA; however, years of civil war have exacerbated ethnic and livelihood-based rivalries and eroded traditional sources of authority. Displacement and mixing of populations over decades of civil war and the current influx of returning refugees and internally displaced persons (IDPs) has produced significant tensions and frequent violence around ownership and access to rural land, which is communally owned and administered by a mix of traditional and governmental authorities. 4 Nearly all of the major inter-communal conflicts in South Sudan can be linked either to cattle raiding and the subsequent spiral of violent retribution, or conflict among pastoralists and farmers over migration routes and access to water and pasture. The proliferation of arms into local communities has further worsened these conflicts. Rapid urbanization has put pressure on cities – Juba in particular – where unemployment, ineffective and contested land allocation and urban management processes have pitted local communities against the state and competing authorities. Women are particularly vulnerable to physical insecurity in the form of child and wife abductions and sexual and gender-based violence. 16. The size of the security forces and militia, the budget they consume and their uncertain future pose a threat to physical and economic security. The exact number of the combined Sudan People’s Liberation Army (SPLA) and southern militias is not known, but probably exceeds 300,000 and directly consumes about one-third of government spending, since many war veterans are currently on the public payroll. The security sector continues to evolve as South Sudan faces major external and internal security challenges including the border conflict with the Government of Sudan, militia and proxy forces, inter- and intra-ethnic fighting, and security force cohesion. The South Sudan Police Service (SSPS) and the Prisons and Wildlife Services came into being during the CPA period and the National Security Service (NSS), reporting to the Minister of National Security, was established under the Constitution in 2011. The Sudan People’s Liberation Army (SPLA) is now evolving into a more conventionally focused professional army in an attempt to meet the defense requirements of the new country. Civilian oversight and governance of the security sector remains limited both at national and state levels, however, GRSS continues to welcome international assistance to reform its security sector, and has taken steps to strengthen and professionalize the Ministry of Defense, SPLA and 4 Sara Pantuliano, et al., “The long road home: Opportunities and Obstacles to the reintegration of IDPs and refugees returning to Southern Sudan and the Three Areas� Report of Phase II (ODI, Humanitarian Policy Group), September 2008. 5 SSPS. The UN (UNMISS) is mandated, by UN Security Council resolution 1996 to support GRSS in developing strategies for security sector reform, rule of law and justice sector development, and to support GRSS in developing a military justice system complementary to the civil justice system. The other major partners supporting the security sector are the US and UK, through technical assistance, material support and training. GRSS together with support from donors is in the process of developing a national security policy. A National Security Act is expected to be presented soon to the Council of Ministers. C. Economic and Governance Challenges 17. The South Sudanese non-oil economy is extremely underdeveloped contributing to poor living standards and growing youth unemployment. In 2011, Gross Domestic Product (GDP) per capita income amounted to US$1,859, much higher than its East African neighbors; however, the Gross National Income (GNI) per capita is currently assumed to be US$1,513 due to the large income outflows to oil companies. At full potential, oil production contributes to two-thirds of South Sudan’s GDP; at current prices, net oil export receipts of about US$9 billion per annum are projected to gradually decline by more than 50 percent in the next 20 years. Outside the oil sector, livelihoods are concentrated in low productivity, subsistence agriculture and pastoralism, which account for less than 15 percent of GDP but engage about 78 percent of the population. The key fact about the job market in South Sudan is that most “workers� are unpaid; 84.4 percent of the working-age population works in unremunerated jobs. 5 Although the country has abundant arable land, only 4 percent is under cultivation. Modern agriculture and industry are almost non-existent. The service sector is embryonic and concentrated in Juba on food services and trade in construction materials, motorbike taxis etc,. According to the Doing Business in Juba, 2011, a report of the IFC and the Bank, the cost of starting a business is as much as 250 percent of per-capita income and more than twice the average cost in Sub-Saharan Africa. Juba’s poor infrastructure, complex administrative processes, limited access to credit and the lack of a collateral registry are serious impediments to trade and private sector investment. Meanwhile, Juba and other towns are experiencing an influx of unemployed youth triggered by insecurity and lack of opportunities in rural areas. The labor market is also struggling to absorb the return of South Sudanese from Sudan over the past year (approximately 22,000 civil servants and 60,000 from the armed forces). 18. The country’s infrastructure base is a small fraction of its neighbors and one of the lowest on earth. Table 1 compares South Sudan’s infrastructure to that of East Africa. Connectivity in South Sudan is meager -- road density is the lowest in Africa, at only 15 km per 1000 square km of arable area. Less than 2 percent of the primary network is paved and less than a third of the unpaved roads are in good condition; during the rainy season they are impassable. The roads along the regional corridors leading to the regional port of Mombasa, the lifeline for regional trade and personal mobility in landlocked South Sudan, are dilapidated; neither is there an all-weather road connection to the Port of Djibouti. Further, transit times along 5 These include: unpaid family workers (43.1%), unpaid non-family workers (4.8%), and own account workers (36.5%). South Sudan: Creating Jobs for Sustained Peace, Economic Growth and Poverty Reduction, A Preliminary Report of Country Case Study, Ebony Center for Strategic Studies, South Sudan, May 2012. 6 the regional corridors are inordinately long and transportation costs, prohibitively high. 6 The dilapidated state of arterial and feeder roads and the absence of core road corridors remain a major constraint to realizing the potential benefits from agricultural development and regional connectivity in South Sudan. 7 Power generation and transmission networks are also sorely lacking. There is only a very small distribution network in Juba, while power networks are non- existent in the rest of the country, and power provision is limited to small-scale thermal generation. South Sudan’s ICT market is still underdeveloped, although cell phone use has been increasing. National and international backbone connectivity is limited and based on satellite technology. There is no fiber optic infrastructure in the country, making South Sudan only one of two African countries (the other being Eritrea) that will fail to meet the African Union target of connecting all capital cities with fiber optic network by the end of 2012. Table 1: South Sudan Infrastructure Measure South Sudan East Africa Classified road density (km/1,000 km2 of arable land area) 15 101 Paving ratio (% of primary network paved) 2 71.6 (LIC average) Road length in good condition (km) 6/9931 (Total/�required� pragmatic scenario) (.06%) Seats available per 100 people (air travel) 1.6 5.8 (Ethiopia) 21 (Kenya) Domestic water consumption (liter/capita/day) 20 64 Open Defecation (% population) 75 36 Access to electricity (urban) 6.67 86 (LIC average) Access to electricity (rural) 0 12.7 (LIC average) MW of Installed Generation Capacity 25 1169 MW of Capacity per Million Population 3 23 Mobile phone (Subscribers/100 people) 12* 21 * Comparison of limited data available. Source: Rangathan and Briceno-Garmendia, “South Sudan’s Infrastructure, A Continental Perspective,� World Bank Policy Research Working Paper, WPS 5814, September 2011. 19. In a context of nascent economic institutions and large oil revenues, macro- economic management has proved challenging for the government. The 2011 actual budget expenditure was South Sudanese pound (SSP) 9 billion (around US$3 billion) compared to an approved budget of SSP 5.9 billion. (See Table 2 for selected economic indicators). The government budget was supplemented by US$1 billion of development assistance and US$300 million of humanitarian assistance by donors. Over the period 2008-2011, revenue availability rather than spending ceilings set in the budget have determined public expenditure due to lax commitment controls. The GRSS currently spends around 60 percent of its budget on salaries. The large salary outlays in a country with major supply-side constraints have fed the demand for imported food and other goods. The Central Bank has maintained a fixed peg to the US dollar since the introduction of the SSP at independence. However, given the need to accumulate foreign reserves, GRSS has been unable to supply adequate foreign exchange at the official rate. This has led to the emergence of a large parallel currency market where the SSP has depreciated 6 South Sudan Corridor Diagnostic Study and Draft Action Plan, Draft Final Report, August 2012, USAID. According to the USAID study, freight costs per km for South Sudan cargo is 50 percent higher than in the East African Community and transport costs exceed 100 percent of the value of imports. 7 Agricultural Potential, Rural Roads and Farm Competiveness in South Sudan, Feb 2012, World Bank. 7 steadily, and much more acutely with the oil production shutdown in January 2012. The depreciating exchange rate has fed into consumer price inflation which reached around 80 percent (year on year) at end 2011; it surged again in April-May 2012 when the lack of oil revenues worsened the currency depreciation. At the time of its secession from Sudan, based on the “zero option� agreement, South Sudan did not inherit any of the official external debt but recent macroeconomic events have led to some accumulation of debt. Table 2: South Sudan Selected Economic Indicators, 2008-2011 South Sudan: Selected Economic Indicators, 2008-2011 2008 2009 2010 2011 Income and Economic Growth GDP (current LCU, billions) 31.9 27.4 34.5 54.2 Real GDP growth (annual %) .. 4.3% 4.2% 1.9% Oil GDP growth (annual %) 11.1% -2.1% -1.0% Non-oil GDP growth (annual %) -2.7% 11.7% 5.0% Real GDP per capita growth (annual %) .. -1.5% -0.4% -1.7% Private Consumption growth (annual %) .. 0.1% 7.1% 5.6% Gross Fixed Investment ( % of GDP) 14.0% 14.1% 10.8% 10.4% Nominal GDP per capita (current US$) 1,700.4 1,246.7 1,504.9 1,858.8 Nominal GNI per capita (current US$) 1,044.6 923.2 967.4 1,513.4 Prices and Exchange Rate Inflation, consumer prices (annual %, end of year) 12.8% 2.2% 12.8% 65.6% Inflation, consumer prices (annual %, period average) .. 5.0% 1.2% 47.3% Official Exchange Rate : LC/US$ (period average)* 2.09 2.31 2.30 2.83 Parallel Exchange Rate : LC/US$ (period average)* .. .. .. 3.78 Fiscal Revenues (% of GDP) 21.3% 15.5% 16.7% 18.8% Of which oil 20.9% 15.1% 16.3% 18.2% Expenditures (% of GDP) 17.9% 15.5% 16.2% 17.7% Current (% of GDP) 12.4% 11.8% 13.0% 14.2% of which wages 5.9% 7.2% 6.4% 6.5% Capital (% of GDP) 5.5% 3.7% 3.2% 3.5% Overall Fiscal Balance after grants(% of GDP) 3.4% 0.0% 0.5% 1.1% External Accounts (current US$ million) Merchandise Exports 10,267 7,377 9,662 12,440 of which: main export (i.e. oil) 10,086 7,176 9,409 12,222 Merchandise Imports 4,640 3,960 4,438 5,212 Services, net) -1,127 -1,064 -1,193 -1,213 Net Factor Income -5,887 -3,076 -5,347 -3,563 Source: South Sudanese Authorities and Bank staff estimates. * LC (local Currency) refers to Sudanese Pounds until July 2011 and to South Sudanese Pounds from that date 8 20. Looking ahead, the government will need to move toward a more appropriate macro-economic framework, by strictly enforcing budget spending limits, adopt the oil revenue management law (under discussion), and move to a more realistic exchange rate policy. The past macro policy mix of lax fiscal policy and overvalued exchange rate has led to high inflation, low competiveness and strong distortion in the economy. With the expected adoption of the oil revenue management law, the government will be compelled to save part of its oil revenues and invest them in productive assets, which should help stabilize fiscal policy. The government also plans to eliminate the distortions of the dual rate system, which would allow South Sudan’s non-oil economy become more competitive. The government is currently in the process of agreeing on a staff monitored program with the IMF. 21. Economic growth in South Sudan is likely to be mainly dependent on the agriculture sector, but also on services and the construction industry, as the country will have to invest its oil resources to develop a modern economic and infrastructure base. South Sudan has a huge but largely unrealized agricultural potential. Both cultivated areas and yields are extremely low. About 63 percent of the total land area in the country is covered by trees and shrubs, while cropland accounts for merely 4 percent. The areas with high to medium agricultural potential due to favorable natural conditions for crop production account for 53 percent of total land area. Reaching the level of average crop yields observed in neighboring East African countries could easily triple agricultural production. As the country invests its oil resources to improve its roads and ICT connectivity, the service and construction industry will also have a large potential for growth. As the economy modernizes, energy production will also have to be ramped up gradually from the current 22 Megawatt of installed capacity, which will require, in the short- term, the establishment of a basic institutional framework and, in the medium term, the implementation of a diverse mix of generation resources with special attention to large-scale hydropower development. 22. Not only has reliance on oil distorted South Sudan’s economy, it is also associated with poor governance, pervasive corruption, and weak institutional and human capacity. The allocation of jobs and contracts in South Sudan has been heavily influenced by ethnic balancing. While this may have been necessary for the initial political settlement and public sector employment is a key part of the social compact struck between the government and ethnic elites, the dynamic this has created carries several potential dangers: the sharpening of old grievances and a neglect of merit and efficiency standards in public service. The weak functioning of the nascent administrative structures at the central and state levels and the embryonic state of the legislative and regulatory frameworks have provided ample opportunities for the capture of a single revenue stream through corruption and the patronage-driven expansion of the public sector. Concerns about corruption have begun to color the population’s perceptions of their state. The SSDP admits that “without effective actions to tackle corruption, significant oil resources will not be invested in infrastructure, health, education, water, and agriculture. The new nation must consolidate the institutional and governance mechanisms developed during the CPA period.� If good governance consists of a combination of effectiveness, inclusiveness, and transparency, the agenda is significant. With regard to effectiveness, recent assessments show that the delivery of security and socio-economic services and the development of the government structures needed to oversee them remain severely deficient, despite important achievements 9 during the CPA period. 8 South Sudan had limited functioning institutions, administrative capacity, civil service, public financial management, economic policymaking and state-society contract at the time of the CPA and the situation has improved only marginally since. In this context, institution building for the transparent allocation and management of resources for the provision of public goods and services presents perhaps the most important priority. D. Poverty and Human Development Challenges 23. Despite South Sudan’s great resource wealth, its population is one of the most deprived due to decades of neglect and war and the distortions of the oil economy. Over half the population lives below the national poverty line. Inequities in access to services, resources and opportunities when combined with the politics of exclusion and patronage, ineffective governance and lack of transparency associated with the oil revenue could present a serious threat to physical and economic security and undermine the institutional transformation needed to secure South Sudan’s stability and legitimacy. Results from a recent innovative survey in South Sudan, a joint project of the Bank and the South Sudan National Bureau of Statistics, provide insights on citizens’ perceptions of the government’s performance. 9 While a strong majority (73%) rate the government’s performance positively on “defending the country� and on improvements in service delivery, in other areas, however, the government receives poorer ratings: “improving living standards� (21%), “creating jobs� (12%), and “fighting corruption� (9%). Almost half of the population (47%) is estimated to be malnourished and 36 percent is food insecure. 10 Despite recent gains, health and education services are extremely inadequate. As detailed in a recently completed Education Status Report by the Bank, only 27 percent are literate. 11 The net primary enrollment ratio is 41 percent, with less than one tenth of entering students completing grade 8. 12 Under five mortality is high (105/1,000 live births) 13 and tuberculosis is among the highest in the world (estimated at 325 per 100,000 people). 14 Only 44 percent of households live within a 5km radius of a health care facility unit, one of the lowest rates in the world. 15 During the CPA period, most health services were being delivered by NGOs with significant gaps in coverage. At least 30 percent of the population lacks access to safe water while a mere 7 percent has access to improved sanitation facilities. (See Annex 1, South Sudan at a Glance). 8 For example, Aiding the Peace: A Multi-donor Evaluation of Support to Conflict Prevention and Peacebuilding Activities in Southern Sudan 2005–2010, Final Report, December 2010; South Sudan At Odds With Itself (op. cit.). 9 The High Frequency South Sudan Survey is being conducted on a pilot basis in the cities of Juba, Malakal, and Wau. 10 See Food and Nutrition Security Assessment in Sudan, SSCCSE, 2011. 11 Education in the Republic of South Sudan: Status and Challenges for a New System�, September 2012, World Bank. 12 Of students completing primary school, 17 percent are girls and 30 percent boys, with differences even starker in rural areas and for secondary and higher education. 13 See South Sudan Statistical Yearbook, 2011. 14 South Sudan Household Surveys (Multiple Indicator Cluster Surveys-MICS) 2006 and 2010 15 Key Indicators for Southern Sudan, http://ssnbs.org/storage/key-indicators-for-southern- sudan/Key%20Indicators_A5_final.pdf. 10 24. Gender disparities are dramatic. According to the recently concluded country-wide Gender Assessment, 16 female headed households (29%) are among the poorest, with 56.9 percent below the poverty line compared with 48.1 percent of male headed households. The maternal mortality ratio -- 2,054/100,000 live births – is among the highest in the world. As of 2006, young women between the ages of 15 and 19 were likelier to die in childbirth than finish primary school. Only 16 percent of the female population over 15 is literate, compared to 40 percent for men. 17 Although women conduct a significant proportion of agricultural production activities and private sector trade, their ownership of land and other property is extremely restricted under prevailing customary law. The prolonged conflict has also created new security risks for women and children including disruption of community and family structures, presence of arms and vigilantes, increased alcohol consumption, and poor law and order. There are also significant gaps in capacity for human rights protection, responsiveness on the part of police and prisons agents, and enforcement of women’s and children’s rights. E. Addressing the Challenges of Moving out of Fragility 25. In summary, South Sudan faces a difficult struggle to make the transition from fragility to stability in the coming years. The people of South Sudan must build their nation with limited trained personnel, at the same time coping with a multitude of internal security, governance and socio-economic problems. Not only must the South Sudanese overcome the historical, social, cultural and economic roots of fragility as described above, they must also address what is needed for a new nation and state effectiveness – it must indeed create new institutions and consolidate the institutional and governance mechanisms developed during the CPA period. The transition to stability can be achieved by tackling those challenges and stress factors that have the greatest potential to cause physical and/or socio-economic instability. From the preceding discussion, it is clear that South Sudan’s challenges include weaknesses in macroeconomic policy, ineffective governance, wasteful and corrupt public financial management, including of oil revenues; imbalances and deficits in access to resources and services; and dangers from severe social and economic deprivation. Recognizing the Bank’s mandate, limited resources in South Sudan and proven comparative advantages in fragile environments, its efforts will therefore focus selectively on those initiatives that help begin to: build accountable national institutions that will manage sound macro and fiscal economic policy; provide effective and accountable governance; create economic opportunities; and utilize oil revenues to equitably share development gains between men and women in South Sudan. 16 Comprehensive Country Gender Assessment, Grant No: TF095120-SU, Multi Donor Trust Fund & Ministry of Gender, Child & Social Welfare, Government of the Republic of South Sudan, April 2012 17 Statistical Yearbook for Southern Sudan, 2010. 11 III. DONOR AND GOVERNMENT PRIORITIES AND FRAMEWORK FOR ACTION A. Development Partner Engagement 26. Development Partners have played a major role in South Sudan over the past seven to eight years. Their commitments totaled about US$4.2 billion, excluding US$4 billion in contributions to United Nations Mission (UNMIS) in Sudan peacekeeping for the same period. Actual expenditures have been less, averaging about 80 percent for the most recent years. 18 In 2010, 84 percent of funding was provided by 12 donors (see Figure 1 below), and this trend continues. Funding modalities have varied, with 19 percent of donor funding allocated to pooled funds through 2011. The largest donor, the US, has channeled all of its assistance bilaterally, while the other major donors, Netherlands, Canada, Norway and the UK, worked with five pooled funds, of which the Bank-administered MDTF-SS was the largest (See Table 1, Annex 2 on Donor Activity in South Sudan). 27. The aid architecture in South Sudan has been overly complex and inefficient. 19 While it did promote information sharing, it has not been well-suited to coordination or joint problem-solving. Rather than using aid provision to build government capacity and legitimacy, donors have worked mainly in a humanitarian mode employing NGOs and Project Implementation Units to deliver assistance directly to beneficiary communities. NGOs have a strong diverse presence in South Sudan and they have established service delivery mechanisms. Their reach extends to the payam 20 level where they are often the sole provider of basic services in the water and sanitation, health care, and education sectors. 21 28. Donor assistance gave inadequate attention to conflict, although a consensus is now emerging among development partners on the critical importance of addressing the conflict dimension more directly. A recent multi-donor review found that although donors committed US$4.2 billion during the CPA period, the assistance did not have the expected impact on what should have been its priority – mitigating the sources of conflict in South Sudan and building systems to ensure that oil revenues would be used to improve the population’s economic and social welfare. 22 The review attributed the uneven impact and poor sustainability of development assistance to the widely held but incorrect notion that “lack of development was in itself a cause of conflict,� and that development per se, particularly in the form of untargeted service delivery, would therefore help contain violence. The review concluded that “the key consideration should always remain: are the interventions dealing adequately with the factors that lead to conflict? All activities and sector priorities should flow from the answer.� 18 Data for donors is approximate, since actual commitments and expenditures have been difficult to determine. The South Sudan Donor Book (2011, Ministry of Finance and Economic Planning) does not include all donor funding and relies on reporting by donors, many of whom did not geographically demarcate their assistance, or certain categories of assistance until 2010 and 2011. In addition, most reporting is by DAC donors. Non-DAC countries, particularly China, provide considerable assistance as an adjunct to trade and extractive industries activities. 19 Joseph Saba, Donor Strategies and Programs, Aid Architecture, Effectiveness and Gaps, November 2011. 20 Payam is an administrative unit of a county in South Sudan. 21 In 2005, there were approximately 47 international NGOs working in Southern Sudan; in 2010 there were over 155 international NGOs registered and equally as many national NGOs. 22 Aiding the Peace, 2010, op. cit 12 Figure 1: Relative Share of Donor Support (Expenditure), 2010 USA (inc. OFDA) 16% European Union (inc. ECHO) Netherlands 1% UK 2% 33% Norway 2% Canada 3% Denmark 2% Japan 3% Sweden 4% Global Fund Spain 8% 11% Germany Other Donors 8% 7% Source: South Sudan Donor Book, 2010, Ministry of Finance and Economic Planning (MoFEP) OFDA IS THE Office of the US Foreign Disaster Assistance ECHO is the Humanitarian Aid and Civil Protection department of the EU 29. The oil shutdown and associated uncertainty led a number of donors to shift their focus towards humanitarian initiatives and put planned development activities on hold. However, since the September agreements, the focus is returning to development activities. The United States Agency for International Development (USAID) has issued a transition strategy that includes a robust development assistance program for 2013/2014 (awaiting approval by Congress), at approximately US$300-400 million per year largely for infrastructure, agriculture and public financial management. The UN has issued its Development Assistance Framework for 2012-2013 which projects a program at approximately US$1.2 billion. The European Union (EU) is undertaking a joint programming exercise for approximately €345- 378 million for their economic assistance program in rural development, health and education and capacity building activities. The UK’s Department for International Development’s (DFID) program foresees about £94 million for 2013 and 2014 on economic governance, provision of infrastructure and services. The African Development Bank has set aside approximately US$57 million for 2013- 14 under their interim strategy with a focus on infrastructure. With the move to independence a significant new partner for South Sudan has been the International Monetary Fund (IMF) which has embarked on a program of support to help the new government address its most pressing macroeconomic management challenges. 30. As a new nation, South Sudan is building its economic cooperation and ties with a range of partners. China is the predominant investor in South Sudan's oil infrastructure (in conjunction with Malaysian and Indian companies). Chinese investors are expanding their interests in South Sudan, particularly in the areas of construction and agriculture. South Sudan has submitted an application to join the East Africa Community which is under review and is keen to deepen further its economic ties with neighbors such as Uganda, Ethiopia and Kenya, through investments in regional infrastructure and expansion of trade and cooperation. 13 31. Development Partners’ approaches to capacity building, as well as their sectoral focus vary. However, all donor capacity building assistance is meant to fall under the Medium- Term Capacity Development Strategy for South Sudan (MTCDS) which was developed alongside the SSDP – discussed below -- to provide a roadmap for putting in place those capacities essential to the achievement of South Sudan’s immediate state-building goals. These include sector-specific capacities, as well as core ‘generic’ capacities needed across government. MTCDS also outlines the core principles and modalities that should be followed by both national and international actors to ensure the coherence and within the SSDP framework. These derive from the experience of other fragile states and from emerging practice in South Sudan. Regional Partnerships and mentoring are an increasingly common form of capacity building in South Sudan, for example the Regional Initiative for Capacity Building (administered by the Intergovernmental Authority on Development (IGAD) and funded by Norway through UNDP) has twinned civil servants from Ethiopia, Kenya and Uganda with South Sudanese counterparts whom they mentor and coach. The g7+ International Dialogue is another example of peer support and mentoring within the fragile states group. Examples of sectorally-focused capacity building efforts abound, for example, the Capacity Building Trust Fund which was created in 2004 in anticipation of the CPA to support the establishment of government systems and enhance government capacity to manage human, organizational and financial resources effectively. A second post-independence phase will run to 2014 supported by contributions of $48 million from Canada, Denmark, the Netherlands, Norway, Spain, Sweden and the United Kingdom. AfDB focuses capacity building support on Public Financial Management and infrastructure. B. The GRSS’ Framework for Action 32. The government’s SSDP (2011-13) provides a comprehensive account of the country’s challenges and proposes potential ways to address them. The strategy focuses on state and nation building, peace-building and rapid economic development as mutually reinforcing objectives. It articulates two guiding principles directly relevant to this ISN. The first is the mutually reinforcing importance of state and nation building, peace-building and economic development. Second, it calls for urgently devolving power to local governments and engaging civil society and the private sector in service provision. While the SSDP lays out a broad vision and identifies the country’s many needs, it does not identify priorities in the face of huge development needs, it was not costed or grounded in a clear expenditure framework. However, efforts are now underway to further prioritize and cost the SSPD. The South Sudan Development Initiative (SSDI), a joint initiative between the partner institutions of the African Union/New Partnership for Africa’s Development, United Nations Economic Commission for Africa, United Nations Development Program, Africa Capacity Building Foundation, and the Government of South Sudan, is currently working on prioritizing and costing activities in the SSDP and providing performance targets for all economic sectors for the period 2012-2020. 14 Box 1: The South Sudan Development Plan SSDP is organized under four pillars -- governance, economic development, improved access to basic social services, and security. • Priority programs under the governance pillar will address weaknesses in public administration and build the capacity of oversight institutions in a way that increases accountability, transparency and the broad participation of diverse groups in government. • The pillar on economic development calls for diversifying rural economy and improving infrastructure, particularly roads. • The pillar on social and human development calls for rapidly expanding quality health services throughout the country, increasing school enrollment (especially for girls) and teacher training, all of which will require innovative partnering arrangements with NGOs or private providers, with the government providing oversight and regulation. • The fourth pillar, conflict prevention and security, recognizes that security is a basic prerequisite for the other pillars. This pillar will include a comprehensive national program to address demobilization of ex-combatants and restructure military and security forces, and improve access to justice and dispute resolution systems. • The seven cross-cutting issues of environment, gender equality, youth employment, capacity-building, human rights, HIV/AIDS, and corruption are addressed throughout the SDDP. • It identifies three sets of quantified priorities (i) deepening peace building and improving security, (ii) rural transformation to improve livelihoods, and (iii) improving and expanding educational and health services (see Annex 3 for the SSDP priority program areas). 33. In response to shortcomings in partner support, GRSS developed an Aid Strategy as part of the South Sudan Development Plan. The Aid Strategy includes a new aid management structure, and calls for donors to promote harmonization with government procedures by providing assistance to better develop government systems and procedures and by channeling funds (including budget support for local-level development and improved public financial management) through government systems. It specifies six areas for donor support, and additionally proposes three “omnibus� pooled instruments through which the bulk of donor support should be channeled. 23 GRSS has also set up several budget sector working groups co- chaired with lead donors. To date the new structure has yet to lead to significant changes in the aid coordination process or outcomes, and progress was also impeded by the uncertainty caused by the oil shutdown. However, there is recent donor interest in developing a ‘roadmap’ to budget support to provide a basis for dialogue with GRSS for the eventual use of this instrument. 34. As a g7+ member, GRSS is undertaking a fragility assessment, and is keen to establish a New Deal compact with development partners. Such a compact could build on the Aid Strategy and provide a framework for a revitalized partnership between GRSS and its development partners, which suffered over the period of the oil shut down, and form the basis for a possible donor conference on South Sudan in 2013. The emphasis in the New Deal on trust, focus and mutual accountability and the use of peace and state-building goals provide a basis for country-led prioritization for government and donor programs. The New Deal calls for greater transparency and predictability of aid flows, more efficient capacity building and South-South learning, and has a strong focus on the progressive strengthening of country systems. 23 A Local Services Support Aid Instrument (with three windows: recurrent windows for health and education, and a capital window for infrastructure at county and community levels); a Rapid Infrastructure Development Fund (for larger-scale public infrastructure); and a Capacity-Building Trust Fund (for core governance functions). Although donors recognize the benefits of pooled instruments, a concern that the omnibus pools could become complex and unwieldy have thus far limited enthusiasm for them. 15 IV. BANK GROUP SUPPORT 2005-2012 AND LESSONS LEARNED A. Accomplishments of the CPA Period 35. Sudan's CPA mandated a Multi-Donor Trust Fund for Southern Sudan at a Donor Conference in Oslo, April 2005, which the Bank was asked to administer. By October 31, 2012, more than US$527 million had been disbursed from the US$548.6 million paid into the fund by 14 donors and the Bank (for lessons learnt from the MTDF-SS see Annex 4; for details on the MDTF-SS portfolio, see Annex 5). 36. The Bank commenced a robust program of analytical and advisory activities (AAA). It also prepared an Interim Strategy Note for Sudan 24 approved in March 2008, which outlined how the Bank would support the CPA. This support was structured around the following three pillars: • Improving governance, by i) building public sector capacity, specifically in statistics, census, introduction of a new currency, and fiscal decentralization and ii) public sector accountability, through strengthened public financial management. • Increasing access to basic services in health, education, water supply and HIV/AIDS prevention, with an emphasis on the marginalized groups. • Encouraging sustainable, diversified (non-oil), pro-poor growth by i) supporting a more enabling policy environment for private sector development and provision of credit to small entrepreneurs; ii) encouraging agricultural and livestock development; and iii) developing infrastructure, particularly in transport. 37. The MDTF-SS achieved significant progress in building basic project management capacity in ministries through the design and implementation of projects. Tangible progress was achieved in providing access to clean water and hygiene training, building schools and delivering textbooks, supporting farmer groups, and providing vocational training to microenterprises, and rehabilitating government buildings. Essential drugs have been made available in more than 70 percent of supervised health care facilities and the foundations for systematic national health coverage have been laid. A program to train teachers for the regular school system and for alternative educational programs has been launched. Over 1000 kilometers of all-weather road have been constructed. Introduction of improved technologies and training has supported improvements in agricultural productivity. MDTF-SS has provided start-up grants to women entrepreneurs to expand their economic opportunities. 38. MDTF-SS has also made some progress in building supervision and implementation capacities in core government bodies and line ministries. The result has been a better operational environment that over time, improved the performance of the MDTF-SS portfolio. This capacity was built in the Ministry of Finance and Economic Planning (MoFEP), through the MDTF-SS financed Core Fiduciary Systems Support project that included the accounting, the external audit, and procurement components. 24 IDA Interim Strategy Note for the Republic of Sudan, March 20, 2008, Report Number 43036-SD. At the time, Southern Sudan was an autonomous region within the Republic of Sudan. 16 39. A strong core of AAA contributed to strengthening public policy and sector strategy development. This included a Country Economic Memorandum 25, a Public Expenditure Review, a Poverty Profile, and several sector reports. Of particular note have been the Poverty Study and support provided to the South Sudan Centre for Census, Statistics and Evaluation on census, statistical capacity and the use of innovative techniques for opinion polling. Following the recent Country Integrated Fiduciary Assessment, the Bank is working with the government and other donors to build public finance management (PFM) systems. Some progress has been made in “upstream� areas such as planning and budgeting, underpinned by multi-stakeholder Budget Working Groups. The Education Status Report and studies in health, transport, water and agriculture have provided guidance on how to improve access to services. 40. Notable IFC work in the CPA period included establishment of all four of its Advisory Services Business Lines (Investment Climate, Access to Finance, Public Private Partnerships Advisory, and Sustainable Business Advisory). Accomplishments include an Investment Climate Assessment, and a Doing Business in Juba, 2011 report defining priorities for building a policy environment for private sector development and enhancing financial intermediation. IFC also supported the overall legal and regulatory framework through an Investment Promotion Act to establish the modern legal and regulatory framework needed to encourage private investment. IFC was instrumental in setting up a South Sudan Investment Authority and a fully functional business registry that had registered over 12,500 entities by the end of 2010. To encourage robust policy dialogue, IFC helped establish the South Sudan Business Forum, which facilitated over five key policy decisions during its first phase and set up five Working Groups within the Forum to provide a platform for the Chamber of Commerce to participate in the policy dialogue. Lastly, IFC launched a program to improve capacity and competitiveness of emerging SMEs. B. Implementation Lessons from the CPA Period 41. Despite the accomplishments outlined above, there were some significant challenges to the effectiveness of the Bank’s engagement, including its administration of MDTF-SS. As the most visible of the pooled funds established during the CPA period, the MDTF-SS, along with the Bank’s performance as trust fund administrator, prompted numerous internal and external evaluations 26. They pointed out that most of the mistakes made by the Bank resulted from the excessive expectations raised by the CPA, and the donors’ unrealistic appraisal of government capacity. 42. The Bank’s own analysis of the MDTF-SS and of the findings of other studies recognizes that the extent of the challenges was underestimated, but that there were broader managerial issues also. Annex 4 provides a consolidated summary of the findings from these studies, and notes that these included issues of expectations; communications and donor 25 Sudan: The Road Towards Sustainable and Board-based Growth. Country Economic Memorandum for Sudan and South Sudan, 2009. 26 Studies included one by Scanteam in 2007 and 2010 “Review of Post Conflict Country Multi-Donor Trust Funds, World Bank, Aiding the Peace, op. cit., “International Engagement in Fragile and Conflict States: Lesson from South Sudan�, Sara Pantuliana, ODI, November 2009, and internal evaluations by high-level Bank teams in early 2010 and early 2011 17 relations; risk management; project readiness; fiduciary requirements; implementation support; staffing; in-country capacity and logistics; political economy; and a framework for adjustments. The Independent Evaluation Group review 27 also counsels simplicity in project design and urges the Bank to adjust to the South Sudanese operating environment with designs characterized by “a few, well-defined objectives, realistic implementation schedules, and simple procedures, administrative requirements and project implementation arrangements.� Section VI below considers how these lessons have been integrated into arrangements for implementing this ISN. Box 2: Consultations with Government, Civil Society and Donors Consultations with Government: In a series of discussions with Government counterparts, the Bank has been urged to focus on the following areas in this ISN: • infrastructure, in particular, road transport and ICT, using an allocation of IDA and the convening power of the Bank to leverage resources over and above what the Bank can directly finance; • capacity building, taking a systematic approach to building the capacity of South Sudanese to run the key institutions of government rather than the largely adhoc TA-led approach that has characterized efforts to date, including management of the oil sector, debt management, public financial management and measures to tackle corruption; • productivity and jobs, focusing on providing productive opportunities for former combatants and youth, as well as linking agricultural producers to markets and creating economic opportunities for the rural population; • local government service delivery, building a national program to strengthen the capacity of local governments to deliver services and engage citizens through a community-demand-driven approach; • convening donors, implementing the g7+ New Deal, supporting the implementation of the aid strategy and preparations for a high level pledging conference to raise donor resources behind government priorities. Consultations with donors: In systematic consultations with donors the following recommendations were identified for the Bank’s strategy: • Working with the Government on key institutional questions such as as the design of decentralization policy and effective local service delivery systems; • Providing just-in-time advice on macroeconomic policy issues, strengthening budget formation and execution, public financial management and procurement systems; • Supporting the alignment between the government’s budget and strategic priorities around which the donors might align and harmonize; • Supporting the expansion of the road network and economic opportunities, particularly in agriculture, through sector studies and finance; • Staying focused and strategic in its scope, partnering and leveraging its resources wherever possible, including design of common instruments that reduce donor fragmentation. Consultations with civil society: Some of the recommendations received from participants in the civil society consultations included the following: • Inform civil society about Bank funded programs; • Support the involvement of youth, women and IDPs in small-scale business initiatives; • Make use of local institutions for research and training; • Support media so they can inform the public and hold government accountable; • Involve communities at the payam and boma levels in planning and allow the communities to spell out what support they need. 27 World Bank Group Engagement in South Sudan: Lessons from Evaluation, IEG Brief, September 12, 2011. 18 43. With MTDF-SS winding down, Implementation Completion Reports (ICRs) provide further important practical insights relevant to future engagement. 28 They single out the need for a clear evaluative framework that allows for continuous adjustment to address difficulties or respond to opportunities. The MDTF-SS experience has yielded many examples that demonstrate the importance of careful choice of interventions coupled with realistic assessment of the context, and a greater tolerance for risk. The ICRs remind us that successes should not obscure the difficulties that the Bank works under in South Sudan. C. The Transition Period 44. The CPA period ended with the Referendum of January 2011 and South Sudan’s accession to independence in July, 2011. Pending South Sudan’s membership in the World Bank Group, the Executive Directors approved creation of a South Sudan Transitional Trust Fund (SSTTF), and Governors authorized a transfer of US$75 million from IBRD surplus to the SSTTF. 29 The SSTTF has used lessons from MDTF-SS to inform the design of the three operations it funds. All three projects strike a balance between delivery of quick impact and building institutional capability. The South Sudan Rural Roads Project (US$38 million) 30 is focusing on labor-based upgrading and maintenance of rural roads and building state and national capacity for rural infrastructure management. The South Sudan Health Rapid Results Project 31 (US$28 million) supports an innovative mechanism to support GRSS finance performance-based contracts for delivery of high impact primary health services in two remote states, while building the institutional capability of the Ministry of Health in coordination of services and monitoring and evaluation. The Private Sector Development Project 32 (US$9 million) will provide grants to micro-finance providers and promote entrepreneurship while strengthening the regulatory framework and South Sudan’s Business Forum. Early experience from implementation of these SSTTF operations has reconfirmed the continuing validity of many of the findings on experience with MDTF-SS. V. PROPOSED BANK GROUP INTERIM STRATEGY FOR FY 13-14 A. Strategic Rationale and Program Overview 45. The World Bank’s comparative advantage makes it well placed to work on four of the challenges outlined in section II above, which it aims to do through two clusters of activities: (I) improving economic management and governance for effective local service delivery, and (II) expanding productive employment opportunities. Given the context and challenges outlined in Section II, the overarching focus of the Bank’s program in South Sudan is to help the country move from fragility to stability by beginning to lay the foundations for effective and accountable institutions that use the country’s own resources to respond to its 28 The Rural Water Supply and Sanitation Project (P100835), US$19 million, approved October 27, 2006; the Livestock and Fisheries Development Project (P101912), US$13.5 million and the Capacity Building, Institutional and Human Resource Development Project (P100980), US$12.2 million, both approved November 7, 2006. 29 Memorandum to the Executive Directors on the Establishment of a South Sudan Transitional Trust Fund, and the Proposed transfer of IBRD Surplus to the SSTTF, World Bank, May 25, 2011. 30 South Sudan Rural Roads Project (IDA/SecM 2012-0237; Report 65330). 31 South Sudan Health Rapid Results Project (IDA/SecM 2012 – 0203; Report 67535). 32 South Sudan Private Sector Development Project (IDA/SecM 2012-0002; Report 65802). 19 citizens’ needs and promote economic opportunities and improve livelihoods. Section II reviewed the mutually reinforcing stresses affecting South Sudan. Large oil resources, poor governance, low institutional capacities, local rivalries over resources and power, and extreme economic deprivation represent the major sources of fragility for the young infant state. While it is clear that South Sudan cannot address all of its problems at once, the road to resilience involves addressing the critical stresses through work on the following development tasks: a. Build transparent and accountable national institutions to convert oil revenues into equitably shared development gains for men and women b. Build local institutions to establish the authority and capability of the state to deliver services, represent local constituencies and resolve local conflicts c. Create an enabling environment for the private sector to generate jobs and economic opportunities, including for women and youth d. Develop the infrastructure base, and associated regulatory and institutional frameworks, particularly in roads, to establish domestic and regional connectivity as a foundation for diversifying the economy. The Bank program’s two clusters map onto these tasks as follows: Cluster I (improving economic management and governance for effective local service delivery) addresses tasks (a) and (b), while Cluster II (expanding productive employment opportunities) addresses tasks (c) and (d). Table 3 below summarizes these clusters for the Bank/IFC program, which is described in the next two sub-sections. These two clusters align closely to the “Governance� “Economic Development�, and “Social Development� pillars of the SSDP. 46. The Bank’s approach will be highly selective, based on knowledge, leveraging and convening, closely complementing and coordinating with other donors’ programs. Since the Bank has modest financial resources, it must be focused, selective and strategic in its intended scope. Selectivity has been shaped by the Bank’s mandate, comparative advantage, and ability to leverage resources to support critical areas in institutional building. The program also responds to specific requests by GRSS for support and is informed by a broad consensus among donors as to where Bank can complement their own activities. In practical terms, this means (i) developing institutional capability in areas where the Bank has a distinct comparative advantage or a strong track record to date (ii) leaving well-resourced areas to other donors 33, and (iii) focusing on areas of priority need where there has been insufficient focus of donor attention to date. The Bank will strive to leverage all lending activities. With bilateral donors and international NGOs focusing on humanitarian assistance and short-term service delivery, the Bank will focus on contributing to the longer-term institutional building agenda, while seeking to capture strategic opportunities for managing risks and achieving quick improvements in livelihoods and service delivery. This focus fits well with experience that the most successful transitions away from violence and instability in developing countries in the last 60 years have been rooted in the creation of legitimate institutions and building them is the work of a generation or more. Thus, the Bank program will help the government lay the foundations for effective and accountable institutions 33 These include Education (DFID and USAID); DDR (Netherlands, Norway, EU, Germany and DFID) and Agriculture (USAID, EU, the Netherlands, CIDA, DFID and JICA). 20 that use the country’s own resources to respond to its citizens’ needs and promote economic opportunities and improve livelihoods. Table 3: Indicative World Bank/ IFC Program CLUSTER I: Economic management and governance for effective local service delivery FOCUS AREAS Knowledge Activities Lending Activities Partnerships Macro and budget Macro-economic monitoring; Economic Statistical Capacity IMF; AfDB; Norway management, poverty Briefs; Debt Management TA; PER, SPF Development Project analysis grant on Oil Revenue Management; Poverty (US$8m); timing will I Assessment; Poverty Notes; High Frequency depend on timing and N Household Survey TA scope of a Possible S Development Policy T Operation (US$TBD) 34. I PFM, anti-corruption CIFA implementation; procurement TA; StAR IMF; USAID; UNDP; Initiative CIDA; DFID T Capacity building and Capacity Assessment of MoFEP; Governance Local Governance and Danida; ODI, SIDA; U decentralized service Review Service Delivery Project T delivery (US$50m) I Oversight institutions and Media & Parliamentary Training; Policy O Demand for Good Development Forum N Governance A CLUSTER II: L Support for Productive employment and livelihood opportunities FOCUS AREAS Knowledge Activities Lending Activities Partnerships B Economic diversification Inclusive Growth CEM, Trade Report; IFC IFC microfinance WTO, AfDB U & regional integration Investment Climate TA I Jobs & Livelihoods Job & Livelihoods Report, Social Safety Net and Skills TDRP; KfW L Livelihoods and skills for ex-combatants Development Project D (US$23m), IFC To be determined I Pharmaceutical PPP N Roads, ICT Strategic Prioritization of Transport Juba-Kenya Highway Government of G Investments; Road Maintenance TA; ICT TA (US$50m) Kenya, The Saudi Fund, EU; AfDB; (tbd) Gender – all lending and BNPP grant on Women’s Access to rights an knowledge will be resources; LOGiCA TF on gender-based gender-sensitive violence 47. Given South Sudan’s data-scarce environment and its status as both a new and fragile state, knowledge generation will be a central feature of this ISN. The approach under this ISN will be to blend and balance knowledge production, dissemination and capacity building within the broad AAA agenda, moving fluidly between the three spheres. Underlying this approach is the premise that supply-driven knowledge production needs to be avoided in South Sudan, where an inexperienced government is set with the task of making critical policy choices. The knowledge program will provide the government with solution-oriented policy options to address what they see to be their most urgent problems, based on global experience and particularly, experiences of neighboring countries and other fragile states. The approach to AAA will include an emphasis on public debate and exchanges in particular building discussion platforms which draw in neighboring governments and institutions to share their experiences 34 The DPO would be part of a coordinated approach with the IMF, which is currently considering access under the Rapid Credit Facility. 21 dealing with similar “nation building� choices. Priority will be given to knowledge; technical assistance; and lending operations that are either foundational or transformational or both. B. Cluster I: Economic Management and Governance for Effective Local Service Delivery 48. To address the challenges of effective utilization of oil revenues, this cluster supports the development of institutions for effective economic governance and improved welfare of the population. The cluster consists of interconnected components that will build transparent and competent national economic and financial institutions to manage South Sudan’s significant oil wealth and develop the government’s ability to support the delivery of basic services at the local level. 49. Under the first cluster, the Bank will help national institutions establish transparent and competent macro-economic management systems particularly in the Ministry of Finance and other central economic management agencies, through a package of TA and lending services. This focus flows from the key role these agencies will play in creating and managing a stable and sustainable economy, and has regard to the pre-existing areas of focus among donors as discussed in paragraph 31 above. A grant from the State-and Peace-Building Fund (SPF) will assist the MoFEP in establishing fiscal policy rules that recognizes South Sudan's dependence on oil revenues and assist the national Legislative Assembly to carry out its oversight responsibilities as they pertain to oil revenues; it will help improve the capacity and efficiency of the Ministry of Petroleum and Mining (MoPM) to manage South Sudan's oil resources.. The SPF grant is being closely coordinated with support provided by other donors, including ministerial capacity building by Norway, the IMF and the US. Building on the SPF grant, the Bank will prepare the groundwork for an Institutional Development Credit in FY15 to strengthen the core capacity of the MoFEP to manage resource dependence and strengthen macro-economic, fiscal and expenditure management while also building the sustainable basis for capacity development by supporting the establishment of a South Sudan Public Administration Institute. TA support will be provided to support the GRSS in preparing for membership of EITI. The Bank will continue to work with the National Bureau of Statistics, and together with DFID, UNDP, and other donors, provide a Statistical Capacity Development Credit in FY14 to help the government carry out poverty surveys, produce reliable GDP estimates, monitor progress on the millennium development goals (MDGs), and build the essential foundation for an evidence-based decision making culture in South Sudan. Improving the collection of sex-disaggregated data will be an important dimension to capacity building. The Bank will support the establishment of debt management capacity in the MoFEP and complement the activities of the IMF and Joint Donor Team to build the capability of the Bank of South Sudan. In all its capacity building activities, the Bank will maximize the use of East African resources and learning institutions. 50. The Banks’ knowledge program in this area will also focus on macro-monitoring, public expenditure management, and poverty and equity analysis. The Bank will continue to work closely with the IMF to lay the institutional foundations for a stable medium-term fiscal and macro-economic framework. The knowledge program will include regular macro-economic monitoring in the form of periodic Economic Briefs, as well as topical pieces of analytical work 22 that address the concerns of the government. The Bank will also undertake regular poverty analysis, with a particular focus on the equitable distribution of oil resources. An innovative, high-frequency household survey, developed in collaboration with the National Bureau of Statistics, will be rolled out with DFID support, and will provide strong empirical underpinnings for poverty and equity analyses and monitor public perceptions of government delivery. The IMF expects to intensify its engagement in the coming year by working with the government to build a short-term macroeconomic framework and implement a program of TA to the Central Bank on monetary and financial statistics and foreign reserves management. Box 3: South Sudan and IDA16 Priorities • Gender: Based on a review of gender issues in South Sudan, all investment projects are being and will continue to be prepared with full consideration for the unique needs and constraints of male and female participants/beneficiaries with particular attention given to interventions that contribute to reducing severe gender disparities. • Climate change and crisis response: The impact of development on the environment is not currently among South Sudan’s top priority concerns, although the potential for damage exists from unplanned urban/peri-urban growth and the commercialization of agriculture. Both these issues will be explored in Bank AAA in FY15. Droughts and floods are potential threats on South Sudan, particularly for food security. While food aid is appropriately handled through the UN system and by NGOs, crisis response preparedness is limited due to connectivity deficiencies and the generally low level of public sector capacity. • Regional projects: To facilitate participation by fragile and conflict-affected states in regional cooperation activities, IDA16 permits a reduction in the number of countries needed for access to Regional IDA to two, if one is fragile. The Bank proposes to explore regional cooperation in specific areas: transport (FY14) and ICT (FY15). • Donor coordination and the harmonization agenda: A major aspect of the Bank’s approach will be support for the development and monitoring of a g7+ New Deal Compact between government and development partners. In addition, consistent with the government’s recent Aid Strategy, the Bank will aim to use its work in public financial management and macroeconomic advice to help improve aid effectiveness through closer alignment of donor efforts with government’s priorities, budget formation and execution. Using its convening powers, the Bank will also seek to reduce fragmentation among development partners and focus on building close partnerships in key operational areas. • World Bank engagement in aid coordination in South Sudan: The International Donor Coordination Forum (IDCF) is the main donor forum in South Sudan. It includes representatives from across the development and diplomatic communities. The Bank co- hosts the IDCF monthly meetings with the UN and leads the discussion on political and economic issues. The Bank is also an active member of a G6 donor group, the main channel for information exchange and joint action on matters of collective interests. The Bank also participates in a number of Government-led fora including the monthly high level Donor Round Table chaired by the Vice President, the Quarterly Government Donor Forum chaired by the Ministry of Finance and chairs the Budget Sector Working Group on Economic Functions and Economic Development. 51. Together with the PFM donor group consisting of USAID, UNDP, DFID, CIDA and IMF, and building on the recently completed South Sudan Country Integrated Fiduciary Assessment (CIFA), the Bank will help to lay the foundations for accountable and transparent management of public funds. The Bank will support improvements in budget preparation through regular Public Expenditure Reviews undertaken both at the central and state levels. Through TA and AAA, the Bank will help clarify the legal framework in revenue administration, increase transparency and strengthen internal controls over revenue collection, and provide support for better commitment controls, cash management and budget execution and the timely production of quality annual financial statements as well as assist with budget transparency initiatives as opportunities arise. The Bank will coordinate closely with the PFM 23 support provided under an IMF-administered PFM trust fund. The Bank will also support GRSS in developing a legal framework, and build institutional capacity, for procurement. In this regard, the Bank will help put together and implement a sound procurement reform action plan. 52. Given the fundamental importance of institutional checks and balances in establishing an accountable and efficient government, the Bank will step up its support to the Audit Chamber and the Legislative Assembly Accountability Committees to carry out their external oversight functions. Using a combination of customized, structured training and South-South learning (through the platform of Associations of Public Accounts Committee in Africa), the Bank will assist parliamentarians, the Parliamentary Budget Office and its supporting staff to draw on the knowledge of neighboring countries. In addition, the Bank will provide training to South Sudan’s nascent media on the budget process from planning through procurement, contracts and implementation monitoring, to improve their capacity for PFM oversight. To promote citizen engagement and social accountability for good governance, 35 the Bank will engage academics, civil society and the media in discussions of economic and governance issues, and work with World Bank Institute (WBI) to implement initiatives promoting budget transparency. 53. The ISN program will consider the possibility of a budget support instrument to consolidate critical reforms in the areas of economic governance and accountability covered in this programmatic cluster. In particular, in view of the time-lag in resuming oil production, in September 2012, the government requested an IMF-supported financing program which could provide the basis for coordinated budget support by several international financial institutions, including the African Development Bank (AfDB). Such a coordinated program would aim to support critical macro-fiscal reforms, lock in important PFM reforms announced by the government and move ahead on the accountability and anti-corruption agenda. The Bank will also work with development partners to set the framework for a potential programmatic engagement on budget support with a view to strengthening national ownership of the development process and the use of national systems and processes. 54. Beyond the support for PFM reforms mentioned above, the Bank will continue to ensure that all its program activities support the government’s anti-corruption efforts. All forthcoming operations, and especially the Local Governance and Service Delivery Project discussed in the next paragraph, will include elements designed to promote transparency and accountability. Those elements will build from the dialogue with GRSS which emerged from the “assessment of liabilities� undertaken by the StAR Initiative 36 (Bank and UNODC) relating to the mismanagement of US$2 billion worth of grain contracts, and which laid the basis for MoFEP to clear substantial liabilities. GRSS has since asked the Bank to deepen its engagement, and the Bank will use StAR resources to assess other cases of suspected mismanagement of government funds. The Bank will also support South-South learning among government institutions dealing with anti-corruption issues. Demand for good governance has historically been weak in South Sudan. To begin addressing this weakness the Bank is promoting a number of social accountability interventions, including media and parliamentary training. The Bank will 35 The ISN will draw on the Bank's Governance and Anti-Corruption Strategy in Africa - Empowering Citizens to Hold their Governments Accountable: An AFR Strategy to Support Demand for Good Governance. 36 Stolen Assets Recovery Initiative 24 continue to support a series of public Development Policy Fora, which bring together academics and civil society to explore key development challenges. The first two such fora focused on public expenditure and corruption. Topics for future fora include the role of institutions in development; the importance of social cohesion; budget integrity and transparency; and tackling the resource curse. The Bank will also use these fora as one means among others for disseminating the knowledge being generated by our analytic work on South Sudan, including findings on governance and accountability. 55. A second component under Cluster I will help create a national community-driven development process linked directly to local government systems for service delivery. With a combination of IDA and leveraged grant resources from Denmark, Norway and Sweden, the Bank is preparing a Local Governance and Service Delivery Project (LGSDP), in response to the government’s request for a flagship national program to transition from the current largely humanitarian, donor driven service delivery approach to a more sustainable model of linking citizens to the state and its resources. LGSDP is expected to create sustainable results by building local government capacity to manage public funds for providing local infrastructure in response to community demand. LGSDP seeks to facilitate the engagement of communities in the planning, implementation and oversight of local development activities with a particular focus on the access of women and other vulnerable social groups to social and economic infrastructure. These activities will not create new, donor dependent institutions, but will reinforce sustainable government functions. The community engagement approach is being piloted in eight counties under a Swedish-financed Fast Track Initiative. Fiduciary arrangements in LGSDP, based on an assessment of financial management and procurement capacity at central, state and local government levels, will include interventions to militate against fraud and corruption while simultaneously providing support to strengthen government’s own systems for financial management and procurement. 37 Related AAA is expected to examine appropriate modalities for better supporting formal and traditional local authorities in addressing security and dispute settlement. Given the prevailing local tensions around access to land that is communally owned but administered by a mix of traditional and local governmental authorities, a AAA on land management will be carried out to identify areas for regulatory or institutional change and interventions to improve land governance. The study will use the land governance framework, a diagnostic tool developed by the Bank and others, to assess the status of land governance at country level along six key areas - rights recognition and enforcement; land use planning, land management, and taxation; management of public land; public provision of land information; dispute resolution and conflict management, large scale land acquisition. C. Cluster II: Support for Productive Employment and Livelihood Opportunities 56. This Cluster seeks to address stresses related to the underdeveloped non-oil economy and the population’s extreme economic deprivation; by developing core institutions and improving connectivity by building infrastructure, it will lay the basis for a market-based economy. Low capacity in the public and private sectors, severe poverty, growing youth unemployment and the need to reintegrate returnees and ex-combatants make the 37 These interventions include use of dedicated project bank accounts, regular financial reporting requirements to qualify for additional releases, annual external audit, social accountability mechanisms, training using the government’s Local Government PFM Manual. 25 lack of job opportunities a pressing concern. Despite the obvious centrality of agriculture to enhancing economic and social well-being, agricultural development in South Sudan is inhibited by severely limited connectivity, non-existent market facilities, low human capital and literacy. Therefore, the sector cannot be considered in isolation; ultimately only a sound regional transport system will facilitate connectivity, trade, investment and agriculture-based non-oil growth, the cornerstones of economic growth and prosperity. Given the low infrastructure base, undeveloped human resources and the Bank’s constrained resource environment, not only is a focused strategic approach required, all individual interventions for improving livelihoods need to be situated within a comprehensive approach. Thus, the Bank Group will invest considerable effort to design a robust knowledge program that will underpin employment and livelihoods interventions in Cluster II. In addition to a AAA program, this cluster also includes a highly leveraged investment operation to build a core network of roads to improve domestic and regional connectivity, a quick-delivery public works and skills development project targeting women and youth, and preparatory work for a longer term multi-sectoral operation on livelihoods and jobs. In combination, these measures appear to be the surest way for the Bank to encourage economic growth, and by implication, employment generation. 57. Bank’s knowledge outputs will help the country build the analytical basis for developing strong policies and institutions necessary for inclusive growth. The proposed first Country Economic Memorandum for South Sudan will provide the overall strategic framework for broad-based private sector-led growth, including the macro-economic incentives and core structural and regulatory policies in trade and investment. Another integrative study will identify key constraints to higher agricultural productivity and urban employment whose findings will help design a multi-sectoral lending operation in FY15 to support the government’s objective of improving livelihoods and increasing job opportunities. The AAA program will include components that explore approaches to encourage overall trade integration, unlock regional economic opportunities in agriculture and livestock, foster overall competitiveness and develop the financial sector. AAA work on cross-border diagnostics will assist the Sudan and South Sudan governments to rebuild the institutional structures for cross-border collaboration and shape peace-building activities for smoother market exchanges between the countries. 58. The Bank and IFC will continue their efforts to improve the investment climate, and market and financial institutions, to create a better enabling environment for non-oil growth and jobs 38. South Sudan’s nascent private sector includes informal, micro and small enterprises in low value sectors, largely headed by women. Through both advisory work and financing, IFC will support attraction and retention of quality investments in priority sectors, growth and formalization of enterprises and SME business development and solutions. In the banking sector, IFC will work with institutions to strengthen their capital base, expand the access of SMEs to finance and promote new products with reach to low income markets, especially to women. IFC's focus will also include areas such as health policy, leasing, business licensing, alternative dispute settlement and trade logistics. IFC will work with the government to assist in structuring public-private-partnerships and attracting private operators in key sectors with large 38 Under the MDTF-SS, the SSTTF and the IFC’s South Sudan Private Sector Development Program (SSPDP) the Bank Group continues to support the South Sudan Business Forum (a Public Private Dialogue forum) to champion and monitor development of private sector related laws and policies. The Group also collaborates to support institutions for accessing finance, skills, and markets that can be scaled up by the private sector and the government. 26 scale investments requiring external partners (e.g., health, infrastructure, including cement, power generation and ICT), IFC will also continue to work with WBI on knowledge management and research. 59. Adopting a productive safety nets approach that emphasizes skills development, could address the stress of rising unemployment, particularly for youth, women returnees and ex-combatants. At the government’s request, based on a Policy Note on Social Protection and Social Safety Nets, and achievements under the MDTF program on alternative education, the Bank will undertake a pilot program in FY13 on safety nets through public works and basic and practical skills development activities, which can help realize the potential from existing economic opportunities. The design will complement the local service delivery structure supported under LGSDP, emphasize simplicity and innovation, reflect lessons learned from the Adolescent Girls Initiative experiences in Liberia and South Sudan and build in impact evaluation. The project will potentially leverage existing implementation capacities in NGOs and will include capacity building for the government in coordination and monitoring of activities. It will also leverage KfW funding through the Bank-administered Transitional Demobilization and Reintegration Program (TDRP) specifically targeting rural and urban livelihoods options for ex- combatants, including basic numeracy and skills development needs. AAA on education and skills will build the knowledge base in the country and lay the foundation for possible future lending in this sector. 60. A BNPP-funded activity carried out by WBI will address capacity building and a knowledge exchange initiative on women's access to rights, resources, services and voice. This is expected to strengthen the operational competence and capacity of development actors on women’s issues, particularly regarding women’s ability to pursue livelihoods. A related AAA financed by the LOGiCA Trust Fund 39 will identify strategies for minimizing impacts of gender based violence (GBV) and improving women’s welfare and economic productivity. Analytical work will build on the mapping on GBV in South Sudan as initiated in reports by the UN Population Fund, UN Women, the UN Refugee Agency, and the Joint Donor Partnership. 61. Bank engagement will help lay the physical and institutional foundations for improved domestic and regional connectivity through a core network of roads. Establishing road and regional links to the main trans-African highways would better integrate this landlocked country with regional economic communities and potentially boost its agricultural export potential. Under MDTF-SS, the Bank prepared the detailed design for an important core highway from the Kenya border to Juba that would serve as a gateway to the central and north-western parts of South Sudan. Without development of such a core roads corridor, benefits from the rural roads networks to improve linkages between markets and agricultural economic activity that the Bank and others already support will not be fully realized. The South Sudan-Eastern Africa Regional Transport and Trade Facilitation Program (FY14) will leverage IDA regional resources from potential financing partners, including the Saudi Fund, African Development Bank, European Union, DFID and others. The Bank would include development of a Road Fund in its financing to support maintenance and capacity building for the Ministry of Roads and Bridges. The Bank will complement this engagement by supporting labor-based road maintenance 39 LOGiCA was created in 2009 to contribute to peace and security by supporting gender-sensitive activities related to insecurity and violence in conflict-affected and post-conflict countries in the Sub-Saharan Africa region. 27 contracting on the rural roads networks. AAA work will identify policy options for sustainable road sector development; set out a prioritized strategic framework for providing reliable, safe and affordable transport services that balance equity and growth concerns; and identify strategies for leveraging development resources to the sector and building institutional capacity. 62. Finally, support for the ICT Sector Support will enhance competitiveness and create employment opportunities in South Sudan. Progress on ICT requires issuing of licenses and regulating of operators. A new Communications Act was signed by the President in July 2012 which foresees the establishment of a new regulator, the National Communications Authority that will issue licenses to the existing mobile operators and Internet Service Providers. Through a Public-Private Infrastructure Advisory Facility-supported program, the Bank is providing technical assistance to the staff of the Ministry of Telecommunications and Postal Services (MoTPS) designated to join the regulator. Based on this engagement, a future project envisioning financing from both country and regional IDA will be explored as part of the broader Regional Communications Infrastructure Program to deepen the capacity building and training for the personnel in MoTPS. IFC will also finance and support private operators to expand network coverage and introduce new mobile enabled services such as Mobile Money. D. Towards A Results Matrix 63. In preparing this strategy, the Bank has been conscious that clear and identifiable results will take many years to achieve. There is therefore no specific Results Matrix, since that would require a level of predictability that cannot be guaranteed, and progress toward stability and development is not likely to be linear. Instead the Bank is using those results as reference points for evolving indicators which will help the Bank assess whether the strategy is on track, or needs to be recalibrated. The indicators themselves are not enough on their own to drive the results identified, but are intended to be assessed alongside the contributions of other partners. The Bank has also sought to link these indicators to the relevant Peace-building and State-building Goals (PSGs) laid out in the New Deal and linked to the SSDP goals. Data will be collected through the regular project reporting and also through the delivery of AAA and TA. Where possible, Bank interventions will support the capacity building of national monitoring and evaluation systems (e.g. Health Sector). The expectation is that experience in implementing this ISN will provide a basis for offering a concrete framework of results in future strategies for work with South Sudan. E. Recalibrating the Strategy and Program 64. It is prudent for the Bank to have a fall-back plan in case the proposed strategy cannot be implemented. The priorities set out in this document assume a relatively stable economic and security environment. If country conditions should deteriorate, as happened with the shut-down of oil production and deepening of hostilities with Sudan earlier this year, the Bank will need to reconsider both the specific interventions we pursue and also our overall positioning. The Bank will work with other development partners to take stock of the circumstances on the ground to support appropriate responses and collective action. 28 65. In this case, Bank operations would be likely to focus on: (i) sustaining key functions of the state; (ii) supporting the most vulnerable, through funding for food security and protection of basic services; and (iii) engendering governance and fiduciary reforms so as to allow for more efficient absorption of foreign aid. A number of operations currently under implementation could help provide a limited safety net for vulnerable communities even if government attention and implementation capacity are limited. An example is the Southern Sudan Emergency Food Crisis Response Project (P113586), which was financed from the Global Food Crisis Response Program (GFRP), created in response to the increase in global food prices in 2008-09. Through such operations, the Bank has established implementation models and arrangements that could be replicated more broadly in South Sudan, and make effective use of IDA resources. Recalibration within operations is further discussed in Box 4 below. Box 4: Recalibration within Operations Bank operations are based on the core assumptions of this ISN. However, implementation of the individual operations will be adapted to changing circumstances as the need arises. Some examples of what that might mean include the following. Under SSTTF: • The services to be supported under the Health Rapid Results operation remain a priority under any scenario, but the scope and agencies to deliver them may change. Staff would monitor whether the current arrangements are appropriate, or whether greater reliance on humanitarian agencies and channels of access might be needed to assure the operation’s objectives. • The Private Sector Development operation has a Business Plan Competition designed to cover all ten states but it will be launched gradually. The microfinance component will be run by an independent apex institution with all salaries paid by the project and contributions from other donors, to avoid dependence on GRSS revenues. • The Rural Roads operation is to be implemented by the Project Management Team (PMT) of the Ministry of Roads and Bridges. The PMT could be converted to a Bank financed Project Implementation Unit. Contingency funds could be used to complement government resources by ramping-up the contractors' own security. Under IDA: • The Local Government and Service Delivery operation foresees a graduated series of responses to increasing risk. These include narrowing the initial selection of counties; selecting local partners for their experience in handling instability; limiting local consultations to avoid exposing local people or staff to conflict. Where the security situation allows implementation but constrains supervision, alternative arrangements such as third party monitoring, and use of geo-referenced cameras and cell phones could be used. • The proposed Highway operation is located in an area where no more than localized banditry is expected. However, if insecurity rises, the operation could be re-phased to allow reprogramming of resources to other uses. AAA: • Besides core economic challenges much of our forward program assumes engagement with GRSS on key budgetary, policy and sector challenges involved in creating a new nation. If such engagement looks unpromising staff would plan at minimum to continue work on monitoring macroeconomic and poverty data, refining our understanding of the status of human development services, and preparing development options that can be brought forward when circumstances allow. VI. PROGRAM IMPLEMENTATION 66. This ISN is situated within the broader corporate guidelines of the Bank. It will make use of instruments laid out in the World Bank's current Africa strategy -- partnerships, knowledge and lending; recommendations made by the WDR 2011 to demonstrate rapid results while retaining flexibility; and the agreements reached during the IDA16 replenishment process. The strategy is also selective, envisaging no more than three operations per year, and a focus on 29 building a select number of institutions where the opportunity presents itself for real reform and delivery. In implementation it will draw on the lessons learned from experience with the MDTF-SS (see Annex 4). 67. Bank support for partnership will build on GRSS's Aid Strategy and the g7+ New Deal. The Bank has worked hard to foster partnerships, especially with GRSS but also with a broad range of stakeholders. The Bank will continue to deepen its outreach work. Regular communication with stakeholder groups will be a cardinal feature of the ISN period. Examples of this ongoing engagement include outreach workshops to familiarize local NGOs, media, parliamentarians and civil society with the services the Bank has to offer to new members; visiting lectures by Bank experts at local universities; support to nascent national think tanks; and newsletter and video outreach to the general public on the role of the Bank. At the project level, examples of mechanisms to enhance transparency include regular display of project related information at the payam level through local meetings, notice boards, wall paintings and radio; publication of information on budget transfers and major contracts; community and civil society oversight of subproject implementation progress; and an accessible and responsive feedback and grievance mechanism. 68. Knowledge is a critical need in South Sudan. Because of their historical experience, there are significant knowledge gaps and limited or absent data. Even where knowledge is available, government decision makers are still learning how to deploy that knowledge effectively to illuminate key policy areas. Addressing such constraints is a core competence of the Bank, including on macro-economic options in the wake of the oil shut down. The Bank will need to balance knowledge production, dissemination and capacity building. We are conscious of the need to avoid supply-driven knowledge production in South Sudan. The leadership of the country has a limited window to set priorities and make critical policy choices, many of which will affect their nation for decades to come. In this environment, the Bank will position itself as a trusted resource to help inform those choices—as they are being made. This calls for rapid and flexible response focused on providing decision makers with options and solutions and helping to stimulate informed debate among the wider population. Sustaining this level of engagement will be crucial going forward and will take place in several ways. These include deeper analytical work to build the knowledge base; building up systems for data, statistics and monitoring; bringing experts in for dialogue; taking policy makers out to get wider experience; and presentations on key issues to decision makers, civil society and the private sector. Examples of where the Bank has already been supporting a number of south-south learning initiatives include the Bank -led study tours for GRSS officials to Rwanda to learn from their experiences in budget management, aid coordination, and design of social protection operations. In 2011, the Bank facilitated learning exchanges between the South Sudan Women Entrepreneurs Network and the East Africa Women Entrepreneurs Network in Kenya and Burundi. Under the g7+ initiative, the Country Office is facilitating a ministerial level multi-country dialogue on the management of natural resources/extractive industries. Besides generating specific analytical products this work will crucially inform lending decisions. 69. South Sudan’s access to IDA has been confirmed following its membership of the Bank. An indicative IDA16 allocation for FY13 and FY14 has been set at US$131 million in total. Given the urgency and scale of the needs in South Sudan, the opportunities associated with 30 independence, the country team has been exploring additional sources of financing. These include tapping into Regional IDA funds, positioning South Sudan to benefit from reallocation of uncommitted IDA16 funds in FY14, and expanded access to both bilateral and global trust funds (in particular the Bank’s State and Peace Building Fund). Recognizing the importance of developing cohesive partnerships to support South Sudan, strategic opportunities to leverage resources from other donors are also being explored. 70. A number of external and internal reviews of MDTF-SS have identified key challenges for implementation (for details see Annex 4). These challenges include issues of expectations; communications and donor relations; risk management; project readiness; fiduciary requirements; implementation support; staffing; senior management engagement; in-country capacity and logistics; political economy; and a framework for adjustments. Early experience from implementation of the SSTTF has reconfirmed the continuing validity of many of these findings. The rest of this section considers how the Bank can manage these challenges in the context of an IDA program for a now independent South Sudan. 71. The preparation of this ISN in itself helps address a number of these challenges. The ISN provides a strategic framework laying out the expectations for the Bank’s engagement in FY13 and FY14, thereby clearly communicating the Bank’s priorities, and how the Bank with work with development partners. Over the last two years Bank management has devoted substantial resources to developing and implementing a more strategic approach to communications that addresses itself to how the Bank should work with all stakeholders, so as to ensure mutual understanding and close, effective collaboration. Regular meeting structures in Juba are an essential part of this continuing effort, which management keeps under review. This ISN also provides a framework articulating the current and likely future political economy context within which the Bank expects to work, as well as the adjustments management envisage would respond to possible changes on the ground. One constant in South Sudan has been volatility, whether in reaction to different security crises, changing market prices for oil, local conflicts, shifting political allegiances, or drought. Since progress toward stability and development is not likely to be linear, this ISN must be able to cope with volatility, by being attuned to the risks that emerge. The Bank strategy for dealing with the risk of recurrent crises has two components: (i) monitoring how stress is building or manifesting itself, while maintaining continuous engagement with counterparts to assess risks and opportunities for scaling up or holding back implementation while maintaining core visible impact; (ii) integrating risk management into design of both the overall program and each project. 72. In terms of risk management, project readiness, fiduciary requirements, implementation support, and in-country capacity and logistics, the ISN identifies four key elements for ensuring that implementation of the program provides the right balance of risk and flexibility. These are to: • Fully deploy the provisions of, as appropriate, paragraph 11 of the draft OP10.00 on Investment Project Financing, together with paragraph 48 of BP10.00, or the previous OP8.00 on Rapid Response to Crises and Emergencies, depending on which OP is in force at the time individual operational decisions are made. 31 • Plan to prepare a country-wide Environmental and Social Screening and Assessment Framework (ESSAF) for South Sudan, which would anticipate all the environmental and social screening required for all the lending and AAA operations under this ISN. • In particular, and assuming the planned ESSAF goes forward, prepare a social assessment for South Sudan on the application of OP4.10 Indigenous Peoples. • Consistent with the provisions of BP10.00, paragraph 48, apply the terms of paragraph 20 of OP11.00 on Procurement so as to allow procurement approaches which are consistent with the principles of the policy, but also appropriate to the circumstances in South Sudan. 73. Consistent with this framework, all operations for South Sudan will be prepared according to the procedures laid out in draft OP10.00, but using the flexibility that is available within that policy, in close consultation with regional staff supporting Development Effectiveness. Examples of the way these arrangements might operate include exceptional alternative legal and operational implementation arrangements, including specific capacity-building measures planned for timely transfer of implementation activities to the borrower; or the normally sequential stages of identification, preparation and appraisal may be consolidated; and the decision to authorize negotiation may be taken after a single consolidated review of a complete negotiations package. However, during the preparation of operations staff and management will also have particular regard to their readiness for implementation, recalling the challenges under the MDTF-SS, and recognizing the need to ensure operations have simple designs, with well-defined development objectives, realistic implementation schedules, and simple implementation arrangements, which the implementing agencies can deliver. 74. Support on fiduciary requirements and implementation support are both crucially linked to the development of a procurement framework in and for South Sudan. Procurement in South Sudan takes place in a low governance and non-transparent environment, seriously hampering the ability to deliver efficient and effective outcomes. A weak legislative and institutional framework, coupled with a nascent private sector and underdeveloped markets, have been exacerbated by the inadequate oversight provided by the integrity and anti-corruption institutions. These institutional weaknesses range across all stages of the procurement process from planning to contract management. This is a cause for concern as the Bank works with other development partners to strengthen GRSS’s ability to efficiently and effectively manage all its resources. It has also affected projects for which the Bank has administered the finance, leading to high transaction costs and substantial delays in the delivery of urgently needed services. 75. Work to develop a sound procurement framework is ongoing 40. In order to build institutional capacity and respond to the immediate need for early delivery on the ground, the 40 GRSS and the Bank have sought to address the procurement environment through various studies and AAAs since 2005. The Bank supported the preparation of Interim Public Procurement and Disposal Regulations, 2006, which form the basis for the country’s procurement legislative framework. However, enforcement and application have not been very successful. In order to mitigate many of the structural weaknesses, initially the Bank relied on the use of Procurement Agents. This approach was unsuccessful and each MDTF-SS project resorted to hiring individual Procurement TA while GRSS recruited and trained fresh graduates as procurement staff. The Bank retained two Senior Procurement Specialists on the ground to provide effective hands-on support to MDTF-SS projects. Higher procurement clearance authority was delegated to a Senior Procurement Specialist in Juba, which helped to speed up Regional Procurement Management level prior reviews, and facilitated the flexible use of various procurement 32 Bank team proposes to adopt a flexible approach to the existing procurement policy. The Bank will assist the GRSS to put together a procurement reform action plan. In parallel, the Bank is currently designing a country-specific procurement strategy to guide the provision of procurement support for each Bank operation covered by this ISN. This strategy will address the delivery of developmental objectives along with maintaining good procurement practices. The strategy, while based on the existing Bank procurement policy, will address requirements for flexibility by taking into account the risks, the specific market conditions and institutional capacity constraints. 76. On implementation support, Bank financing parameters for South Sudan should reflect maximum flexibility. In line with the policy framework approved by Executive Directors on April 13, 2004, governing the eligibility of expenditures in World Bank financing 41, the financing parameters for South Sudan will make development objectives the primary determinant of Bank (or Bank-administered) financing, while making sure that risks, such as those to fiscal sustainability and the use of Bank or Bank-administered funds, are appropriately addressed. As such, the parameters -- depending on specific project circumstances -- potentially allow the Bank to finance up to 100 percent of the cost of a project; set no limit on the level of recurrent costs the Bank may finance (subject to sustainability criteria); allow financing of local costs in any proportion required by individual projects; and permit the Bank to finance taxes and duties as long as they do not constitute a significant share of project costs. 77. South Sudan will continue to need strong staffing support, including from the staff of the Global Center on Conflict, Security and Development in Nairobi. WDR 2011 makes clear the need to have human resources in place that respond to the particular circumstances of fragile and conflict affected states. This conclusion is also supported by the experience with MDTF-SS. The Bank has made significant progress in recent years in responding to this challenge, and in responding to the variability of each situation. However, past experience shows that there is no room for complacency. The Global Center on Conflict, Security and Development in Nairobi has developed into a strong resource that has been heavily engaged in supporting the South Sudan country team both on day to day issues, and in helping think through the strategic challenges underlying this ISN. The resulting close working relationship has borne fruit in many ways, including refinements to the design of SSTTF operations. Going forward, this collaboration will continue to ensure that South Sudan benefits from cutting edge strategic guidance, access to the latest thinking on ways to address the challenges of a post-conflict country, and strong implementation support in adopting a risk-based approach consistent with Bank procedures. methods at higher thresholds. In parallel to the fiduciary work, the Bank also conducted a Procurement Value Chain Analysis on the MDTF-SS and completed a Country Procurement Report as part of a 2012 CIFA. 41 Eligibility of Expenditure in World Bank Lending: A New Policy Framework (R2004-0026/1). 33 VII. EXTERNAL AND INTERNAL RISKS 78. The Bank strategy must recognize the external risks of working in a volatile environment as well as risks related to the Bank’s leadership and performance. Besides the broader regional and country level risks described in section II and a description of the fall-back plan in case the proposed strategy cannot be implemented in Section V-E above, the section below outlines the key risks of working in South Sudan. 79. The risk of serious violence is appreciable in certain localities. Since the Bank’s support for local service delivery, livelihoods and jobs will focus on localities and groups at risk, avoiding such areas makes little sense. In the event of violence, Bank field-based operations in affected areas may have to be scaled back until conditions permit a return to operational normality. If the relationship between Sudan and South Sudan were to deteriorate there may be implications for the exports of oil, trade and at worst, a reigniting of conflict between the two countries. The implications of such a worsening in relations are difficult to predict precisely as was demonstrated by the events following South Sudan’s independence: closing of the border; the oil shutdown; continued activity by insurgency groups; and border disputes. All of these events were unforeseen. The implications for the Bank program would need to be assessed depending on the nature of the dispute. The continued international monitoring of the September 2012 and January 2013 agreements between Sudan and South Sudan is designed to mitigate such deterioration and both Governments have shown commitment to their implementation. 80. If serious and visible corruption by government officials is not curbed, citizens as well development partners can be expected to lose enthusiasm for the new state. The Bank’s approach to this Governance challenge of mitigating corruption rests on the principles of transparency, accountability and participation. As the supply side controls (budget planning, expenditure management) are weak and civil society lacks a coherent voice and faces limits on its freedom to operate, mitigation in South Sudan will need to focus first and foremost on capacity building: the creation of a capable and accountable public sector, a vibrant private sector and a cohesive civil society. At the project level, Bank task teams are expected to balance the need for immediate results with the need to adopt “smart project designs� that articulate how they will manage for governance, capacity and corruption risks including internal controls, oversight mechanisms and a communications program. 81. Weak Institutional Capacity is a particular challenge where the Governance environment is weak. From 2005 to 2011 GoSS had to build up its capacity to discharge the functions of government as a largely autonomous region, but since 2011 has needed to further develop these functions as an independent nation. Substantial support has been provided to help with this challenge, from the World Bank, UN and donors, and from a number of African countries, including South Africa and nations neighboring South Sudan. Looking back to 2005, the capacity that now exists is a remarkable achievement. Looking forward, very considerable capacity weaknesses still exist, and with only nascent fiduciary systems and controls in place, corruption risks are high. As the 2011 WDR points out, countries where government effectiveness, rule of law and control of corruption are weak, face a 30-45% higher risk of conflict, and significantly higher risk of extreme criminal violence. To manage this agenda, GoSS and the UN led a process in 2010, involving many development partners, to agree on the 34 essential core functions needing to be prioritized. The resulting action plan was agreed by development partners at a conference in Brussels, September 2010, and remains a core document from which partners build their engagement, including for example the Bank's support on institution building under cluster 1 of this ISN. Within this framework, the Bank has had, and will continue, a particular focus on governance and anti-corruption (GAC) issues, including supply side interventions such as financial management, accounting, audit and procurement. The recent Country Integrated Fiduciary Assessment, which the Bank and other donors supported, has help GRSS review progress made so far, and identify key governance challenges remaining, thus providing a strong basis for future action. Support for governance will remain an important component of the Bank's future engagement. 82. Given South Sudan’s severe dependence on oil revenue, market fluctuations or disruptions such as the recent pipeline shutdown will have serious fiscal and service delivery consequences for the Government. South Sudan is discussing options for oil revenue management mechanisms, including an oil price buffer fund, and a future generation fund, which if implemented consistently, should help the country weather market fluctuations in oil prices. 83. The Bank’s wish to play an important role in South Sudan should not lead to over- promising, as was the case in the CPA period. Given available resources, the Bank’s ability to directly address many of the core country risks on its own is very limited, and it must avoid the temptation to respond to every need. The Bank’s knowledge of the country is still limited; much remains unpredictable, from the evolution of a sharp and actionable national strategy, to the quality of South Sudanese governance, institutions, and security. For this reason, the Bank’s program embodies scope for program definition as events unfold and the Bank gains experience. 35 ANNEX 1: SOUTH SUDAN AT A GLANCE Sub- Key Development Indicators South Saharan Low Sudan Africa income (2010; Italics refer to 2011) Age distribution, 2010 Male Female Population, mid-year (millions) 10.3 853 796 Surface area (thousand sq. km) 644 24,243 15,551 75-79 Population growth (%) 5.1 2.5 2.1 60-64 Urban population (% of total population) 17 37 28 45-49 GNI (Atlas method, US$ billions) 15.6 1,004 421 30-34 GNI per capita (Atlas method, US$) 1,220 1,176 528 15-19 GNI per capita (PPP, international $) .. 2,148 1,307 0-4 GDP growth (%) 1.9 4.8 5.9 10 5 0 5 10 GDP per capita growth (%) -1.7 2.3 3.7 percent of total population (most recent estimate, 2004–2010) Poverty headcount ratio at nat. povety line ($1.06 a day, %) 51 .. Under-5 mortality rate (per 1,000) Poverty headcount ratio at $1.25 a day (PPP, %) .. 48 .. Poverty headcount ratio at $2.00 a day (PPP, %) .. 69 .. 200 Life expectancy at birth (years) 59 54 59 Infant mortality (per 1,000 live births) 75 76 70 150 Child malnutrition (% of children under 5) 31 22 23 100 Adult literacy, male (% of ages 15 and older) 40 71 69 Adult literacy, female (% of ages 15 and older) 28 54 54 50 Gross primary enrollment, male (% of age group) 73 104 108 Gross primary enrollment, female (% of age group) 53 95 101 0 1990 1995 2000 2005 2010 Access to an improved water source (% of population) 69 61 65 Access to improved sanitation facilities (% of population) 7 31 37 South Sudan Sub-Saharan Africa Net Aid Flows 1990 2000 2010 2011 Growth of GDP and GDP per capita (%) (US$ millions) Net ODA and official aid .. .. 974 630 5 Aid (% of GNI) .. .. 10.1 4.0 Aid per capita (US$) .. .. 98 61 0 Long-Term Economic Trends -5 Consumer prices (annual % change) .. .. 1.2 47.3 2009 2010 2011 GDP implicit deflator (annual % change) .. .. 23.4 53.1 Exchange rate (annual average, local per US$) .. .. 2.3 2.8 GDP GDP per capita Terms of trade index (2000 = 100) .. .. .. .. 1980–90 1990–2000 2000–10 (average annual growth %) Population, mid-year (millions) .. .. 9.9 10.4 .. .. .. GDP (US$ millions) .. .. 14,971 19,169 .. .. .. (% of GDP) Agriculture .. .. 15.1 .. .. .. .. Industry .. .. .. .. .. .. .. Manufacturing .. .. .. .. .. .. .. Services .. .. .. .. .. .. .. Household final consumption expenditure .. .. 36.9 34.9 .. .. .. General gov't final consumption expenditure .. .. 13.0 14.2 .. .. .. Gross capital formation .. .. 10.8 10.4 .. .. .. Exports of goods and services .. .. 64.5 64.9 .. .. .. Imports of goods and services .. .. 29.6 27.2 .. .. .. Gross savings .. .. 16.0 36.2 Note: Figures in italics are for years other than those specified. .. indicates data are not available. 36 A relatively modest economy … …but a large economy in per capita terms Kenya South Sudan Ethiopia Kenya Tanzania Rwanda Uganda Tanzania South Sudan Uganda Rwanda Ethiopia Burundi Burundi 0 10 20 30 40 0 500 1000 1500 2000 GDP, billion USD GDP per capita (current USD) Oil sector is 63% of the economy… …but oil revenues are projected to decline sharply 70 20 18 60 16 50 14 40 12 Bn SSP 10 30 63 8 20 6 10 21 4 13 3 2 0 Oil Government Agriculture Industry & 0 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 Services Government consumption is very large… ...and 98% of it is funded by oil revenues 100% South Sudan 90% Sudan 80% Kenya 70% 60% Rwanda 50% Uganda 40% Liberia 30% 20% Sierra Leone 10% Ethiopia 0% 2005 2006 2007 2008 2009 2010 2011 0 100 200 300 400 USD per Capita Oil Non-oil 37 Some quick facts… • More than half (51%) of the population is below the age of eighteen • 72% of the population is below the age of thirty • 83% of the population is rural • 27% of the adult population is literate • 51% of the population live below the poverty line • 78% of households depend on crop farming or animal husbandry as their primary source of livelihood • 60% of households own at least one mosquito net • Infant mortality rate is 75 (per 1000 live births). • Maternal mortality rate is 2054 (per100,000 live births) Source: NBS: 2009/2010. Poverty headcount is 51% at national level but varies, Low level of education (household heads) 80 75% 70 60 % of Household Heads 30 40 20 50 13% 10 7% 3% 1% 0 No Education Primary Completed Post Secondary Some Primary Some\Completed Secondary Enrollment improving but skewed towards boys Boys vs Girls Primary Secondary Post - Secondary 24 Boys Girls 23 22 21 20 19 18 17 16 Age 15 14 13 12 11 10 9 8 7 6 100 90 80 70 60 50 40 30 20 10 0 10 20 30 40 50 60 70 80 90 100 % attending Notes: General government final consumption expenditure (formerly general government consumption) includes all government current expenditures for purchases of goods and services (including compensation of employees). It also includes most expenditures on national defense and security, but excludes government military expenditures that are part of government capital formation. 38 ANNEX 2: DONOR ACTIVITY IN SOUTH SUDAN Table 2-1: Overview of donor activity (2010) Total 2010 % Funding to Commitments Number of Numbers of Pooled Funds Donor Country (US$) Active Sectors* Projects* (2010) 1 USA (inc. OFDA) 410,387,132 9 65 0% 2 European Union (inc. ECHO) 118,910,898 8 25 19% 3 Netherlands 101,937,552 6 11 68% 4 UK 102,519,606 3 5 76% 5 Norway 100,614,484 8 10 45% 6 Canada 57,400,040 9 15 37% 7 Denmark 50,252,585 4 20 10% 8 Japan 37,082,761 6 12 0% 9 Sweden 34,945,696 5 5 60% 10 Global Fund 28,030,537 1 5 0% 11 Spain 20,851,879 4 6 65% 12 Germany 20,127,454 4 5 18% 13 Other Donors 196,688,471 Total: 1,279,749,094 Figure 2-1: Distribution of Funding for Priority Sectors by Source for 2009 Security 438 12 Basic Education 99 27 Roads 184 93 Water 28 25 Production 29 47 Basic Health 52 94 0% 20% 40% 60% 80% 100% 120% GoSS Donors 39 Table 2-2: Distribution of Donor Contributions by Sector Social & Humanitarian Public Administration Economic Functions Natural Resources Accountability Infrastructure Rule of Law Education Security Health Bilateral Donors Australia X X X X Canada X X X X X X X X X Denmark X X X France X X X X X Germany X X Ireland X X X Italy X Japan X X X X X X X Netherlands X X X X X Norway X X X X X X Spain X X X Sweden X X X Switzerland X X X X X X X United Kingdom X X X X United States of America X X X X X X X X Multilateral Organizations African Development Bank X X European Union (inc. ECHO) X X X X X X X Global Fund X United Nations Development Programme X X X X X X X United Nations Children’s Fund X X X X World Bank X X X X X Multilateral Organizations Basic Services Fund X X X Capacity Building Trust Fund X X Common Humanitarian Fund X X X X X X Multi Donor Trust Fund X X X X X X X X X South Sudan Recovery Fund X X X X Key: 2011 Commitments less than US$5m X 2011 Commitments in excess of US$5m X Source: Tables and figure above are adapted from the South Sudan Donor Book, Ministry of Finance. 40 ANNEX 3: SOUTH SUDAN DEVELOPMENT PLAN: NATIONAL PRIORITY PROGRAM AREAS CORE TARGETS AND DEVELOPMENT OUTCOME OBJECTIVES Table A3-1: SSDP national priority program areas Social and human Conflict prevention and Governance Economic development development security • Executive function of the • Increased agriculture • Introducing a child • National DDR programme. Presidency. production. benefit cash transfer. • National Security • Development of • Improved and expanded • Expanding access to basic Architecture (NSA) and institutional and human road infrastructure. health. Security Sector resource capacity. • Good management of oil • Expansion of number and Transformation (SST). • Promulgation of sector resources. quality of teachers. • Legal framework. legislation and oversight • Increased livestock • Expanded access to • Community security. of the Executive. production. general education. • Criminal justice system. • Statistics. • Expanded and improved • Introducing a Payam • Economic management water and sanitation Youth Service. and resource infrastructure. mobilisation. Table A3-2: Core targets and development outcome objectives of SSDP priorities Outcome objective Indicator 2013 target Peace-building and security promotion Establishment of effective and affordable Number of organized force personnel disarmed, DDR Disarmament, Demobilization and Reintegration demobilized and reintegrated (Baseline: 11,130 completed for (DDR) program to support transformation strategies special needs groups from SPLA disarmed and 30,000 ex- for all organized forces (Sudan People’s Liberation demobilized as at 25 February 2011, of which combatants. Army (SPLA), South Sudan Police Service (SSPS), 10,760 were counseled and 8,523 were at various prisons, fire brigade and wildlife forces) and to stages of reintegration. Service delivery timelines provide ex- for DDR have varied widely and have not combatants and host communities with a sustainable provided ex-combatants with a predictable process). future, including the reintegration of women and children. South Sudan has essential legal framework befitting Number of Ministry of Legal Affairs and Constitutional 60. an independent country. Development (MoLACD) draft legal documents submitted to the Council of Ministers (CoM). (37 laws in force, transitional constitution drafting underway). Access to justice and respect for human rights Number of functional legal affairs offices at the 79. across South Sudan enhanced. county level. (32 county legal affairs offices established). Communities secure and threat posed by small arms Implement community security approach in all ten 50%. reduced. states. (County consultations conducted in 70% of counties; Conflict-sensitive development projects implemented in 25% of counties). Increase the capacity of South Sudan Legislative Number of bills submitted to SSLA, debated, and 18. Assembly (SSLA) to effectively and efficiently enacted into laws. Baseline: 12 laws passed in carry out its oversight function through review of 2010. the laws passed and increase the numbers of laws passed annually. 41 Outcome objective Indicator 2013 target Rural development To increase crop production and land/ vegetation Sustained increase in cereal crop production, and Cereal cover. overall production increase of other major food production crops. (Baseline 2010: estimated traditional sector above 1.0 cereal production was 0.695 million Mt - last five million Mt per years average was 0.744 million Mt). year. Improved interstate, trunk and feeder roads Length of asphalted trunk road network under 752 km. routinely maintained on sustainable basis and roads construction/completed. Baseline: 0 km. safety to enhance economic growth. Length of constructed engineered roads. Baseline: 2000km. 363 km of interstate and feeder roads constructed to engineered roads standard in 2010. Improved and expanded social services Reduce maternal, infant and child mortality. Percent of population with access to healthcare. 40%. Baseline: 13%. Provide qualified teachers, academic staff and a Teacher: pupil ratio. Baseline: Qualified Primary Qualified relevant curriculum for general education. 1:111 (26,658 teachers). primary 1:50 (50,060 teachers). Qualified secondary 1:24. Qualified secondary 1:16. By 2013 South Sudan is on track to achieve Gross Enrolment Rate (GER). Baseline: Total: 92%. universal access and completion of free primary 78%; Boys: 88%; Girls: 61%. education and has expanded equitable access to Net Enrolment Rate (NET). Baseline: Total: 46%; 65%. post-primary education. Boys: 53%; Girls: 39%... 42 ANNEX 4: SOUTH SUDAN: MDTF-SS: LESSONS FROM EXPERIENCE The Multi-Donor Trust Fund for Southern Sudan has been subject to a series of external and internal reviews. The earliest was undertaken in 2007-08, and there will be a final evaluative review once the trust fund closes. While the focus of these reviews has varied, there has been a large measure of agreement on the principle issues that need to be borne in mind, when implementing a multi- donor trust fund in a fragile, capacity limited environment. These lessons are captured under the following ten headings, and the final column explains how they are being addressed in this ISN. Issue: Description: How Tackled Expectations Initial pledging events and aspirational rhetoric raised expectations. MDTF-SS was Preparation of this ISN loaded with mandates to provide: quick delivery of goods and services; quick start sector (paragraphs 41, 42, 70, programs; capacity building for aid management, public financial management and 71). development of regional and local programs; an efficient pass-through for NGOs, the UN and other agencies; and a platform for dialogue and shared risk management among donors and the Government of Southern Sudan. The Bank failed to fully internalize the scale of task it had taken on, resource it adequately in the early years, or manage the expectations that had followed. Communications Good working partnerships with MDTF donors, UN, and other agencies active in- Preparation of this ISN and Donor country were essential. The Bank needed a strategic approach to communications that (paragraphs 41, 42, 70, Relations explained: how it was administering the MDTF; the Bank’s role vis à vis other players 71). (both regarding program administration and other reasons why MDTF-SS was set up); and the outcomes being achieved by the MDTF. Without this strategy, as difficulties and delays materialized, stakeholders perceived objectives differently or lost sight of some. Donor alignment and coordination became dysfunctional and discordant, thus defeating a major purpose of multi-donor trust funds – harmonization. Risk Operating procedures should exploit the full flexibility provided for in the Bank’s Flexibility within Management Operations Manual, consistent with proper risk management. A safety-first, procedurally Bank policies heavy, approach in a fragile environment did not reduce risk nor increase project success. (paragraph 71 -- 74). Rather since most risk was innate to the project environment, the result was primarily delays that increased the likelihood of project failure. Honest recognition of risks and a structured approach to managing for them was therefore essential. 43 Issue: Description: How Tackled Project During the initial stages of the MDTF-SS, there was heavy donor and government Flexibility within Readiness pressure to move ahead quickly, but this led some operations to be initiated before they Bank policies were sufficiently ready. Successful projects were those that were properly prepared, and (paragraph 42, 70, 72 - had simple designs, with well-defined project development objectives, realistic 74). implementation schedules, and simple procedures, administrative requirements and project implementation arrangements. An important complement to this was to ensure government or other implementing agencies had sufficient access to support during project preparation, e.g. through a project preparation facility. Fiduciary While all donors were aware of the potential governance challenges in Southern Sudan, Flexibility within Requirements the application of World Bank fiduciary and contracting procedures in an environment of Bank policies weak capacity has been seen as a major and unnecessary burden. However, it is not clear (paragraphs 72 – 74, that those procedures were the only relevant factor constraining performance. The key 81). was to ensure the principles underlying those procedures were observed. The use of World Bank procedures in South Sudan did successfully prevent an attempt by an international company to corruptly influence procurement under MDTF-SS-financing. Implementation The Bank could not substitute for GoSS capacity, but successful implementation of Flexibility within Support MDTF-SS required intensive support going well beyond the Bank’s normal support role. Bank policies This required: (i) Adequate face time contact between Bank staff and their local (paragraphs 73, 77). counterparts, both to explain what needed to be done, but also to build mutual trust; (ii) Intensive and proactive engagement by TTLs; (iii) A Monitoring Agent played a critical role as an extra set of eyes and ears; (iv) Continual awareness of the fiduciary challenges that Bank procedures imposed on GoSS, and willingness to be creative within the rules in helping GoSS respond. Staffing The World Bank underestimated the efforts and timing for mobilization of operational Strong regional and staff and facilities. The Bank did not invest in full and early staffing. It would have been corporate support better to over-staff initially and then reduce staffing later, than to under-staff and be (paragraph 73, 77). trying to constantly catch up. 44 Issue: Description: How Tackled In-Country Early assessments proved unrealistic regarding human resources and GoSS Flexibility within Capacity and administrative capacity, and severely underestimated logistical limitations, resource and Bank policies Logistics information deficits. Critically, program and project design assumptions on the (paragraph 73, 74). modalities and timing necessary for contracting and for access to beneficiaries did not take sufficient account of the near absence in Southe Sudan of: (i) local markets for goods and services, (ii) a private sector, and (iii) capable and willing consultants and contractors. Had these factors been considered up front, the portfolio design, implementation, procurement/contracting, fiduciary and supervision modes could have been tailored to suit the context better. Political MDTF-SS’s mandate was based on presumptions about the political process, and GoSS Preparation of this ISN Economy capacity to address development challenges. In practice, compelling political priorities (paragraph 71). severely limited the time senior Ministers and officials spent on development issues. This intermittent engagement at senior level has translated into delays in decision-making on, and in implementation of, developmental activities. The result was two-fold: uneven progress on delivering the outputs sought; and a tendency to deflect the resulting criticism onto others, including the Bank as the immediate administrator of MDTF-SS. Framework for Once implementation began and realities on the ground came to bear, the MDTF-SS Recalibration of Adjustments. should have had a clear evaluative framework for assessing progress, and agreed Program (paragraphs approach to adapting to emerging changes. Active management within such a framework 65, 66). would have allowed for adjustment to address difficulties or respond to opportunities arising, so as to meet contextual challenges and better manage expectations. This framework should have been guided by a dynamic political economy analysis in which sectors, project design, and sequencing would be prioritized according to readiness, with flexibility for the inevitable political changes. 45 ANNEX 5: SOUTH SUDAN PORTFOLIO AS OF SEPTEMBER 30, 2012 Project Grant/Project Disbursed Closing Date Amount (US$ m) MDTF-SS Portfolio Juba Rapid Impact Emergency 36.3 26.6 12/31/ 2012 Core Fiduciary Systems Support 12.4 11.3 03/31/ 2013 Umbrella Program for Health System 102 102 09/28/2012 Education Rehabilitation Project 25.5 25.5 12/31/ 2012 Agriculture and Forestry Development 30.2 30.0 12/31/2012 Water and Sanitation 30 20.9 12/31/ 2012 Gender 10 8.0 12/31/ 2012 Non MDTF-SS Grants under implementation Emergency Food Crisis Response (GFRP) 10.2 7.2 6/30/2013 Grants funded from South Sudan Transitional Trust Fund (IBRD Surplus) Private Sector Development 9 Effective 10/ 31/2014 Rural Roads 38 Effective 06/30/2016 Health Rapid Results Project 28 Effective 12/29/2013 Total 75 FY 13/14 Pipeline for IDA funding Local Governance and Service Delivery Project 50 Preparation Juba-Kenya Highway 50 Preparation Social Safety Net and Skills Development Project 23 Preparation Development Policy Operation 42 TBD Preparation Statistical Capacity Development Project 43 8 Preparation SPF Grant ( non-IDA) 3.26 IFC PROGRAM South Sudan Investment Climate Program 1.8 Completed 2005/2010 South Sudan Private Sector Development Program Effective Jan 2011/Dec 2013 Investment Climate Program 4.5 Effective SME Development 1.7 Effective SME Access to Finance(A2F) 0.6 Effective Financial Sector Support 44 Effective Health Africa Initiative Effective Gender Support (Women in Banking) Effective 42 Scope to be determined. The DPO would be part of a coordinated approach with the IMF, which is currently considering access under the Rapid Credit Facility. 43 Timing may depend on timing and scale of possible Development Policy Operation. 44 Support to Bank of South Sudan on legal and regulatory framework for leasing; trade finance; credit bureau and agribusiness. 46 28˚E 30˚E 32˚E To 34˚E This map was produced by the Map Design Unit of The World Bank. Khartoum The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. Renk 0 50 100 150 Kilometers SUDAN To To Kadugli Ed Damazin 0 50 100 150 Miles SOUTH To To Babanusa SUDAN Nyala Paloich Arab Bahr el ' 10˚N To 10˚N Nyala UPPER NILE ABYEI Kodok Abyei l Ghazal NORTHERN Ba h r e Malakal BAHR AL Bentiu Lol GHAZAL UNITY ETHIOPIA So Jur ba Aweil Nasser t f ara Raga Bahr ez Z I Meshra’ r Warab Waat o 8˚N n Ayod 8˚N s WARAB t o po o n S Wau N u b i a n Akobo e WESTERN Ak ob JONGLEI BAHR AL GHAZAL Ton o P CENTRAL go l Shambe a LAKES Pon AFRICAN t e Rumbek Pibor a REPUBLIC W u Sue hite Bor Ka Nil ng e en 6˚N SOUTH SUDAN To Djema Tambura Li Yubu WESTERN CENTRAL EASTERN EQUATORIA EQUATORIA EQUATORIA SELECTED CITIES AND TOWNS 5˚N WILAYAH (STATE) CAPITALS Maridi JUBA Kapoeta Yambio NATIONAL CAPITAL Torit t o n g RIVERS I m o M t s . D.R. OF CONGO Kinyeti KENYA MAIN ROADS 4˚N 4˚N Yei (3187 m) RAILROADS IBRD 38572 Nimule To WILAYAH (STATE) BOUNDARIES Isiro UGANDA JULY 2011 INTERNATIONAL BOUNDARIES 28˚E 30˚E 32˚E 34˚E