Document of The World Bank Report No: NCO00003608 NOTE ON CANCELLED OPERATION REPORT (IBRD-82600) ON A LOAN IN THE AMOUNT OF US$30 MILLION TO THE REPUBLIC OF LEBANON FOR A SOCIAL PROMOTION AND PROTECTION PROJECT January 2, 2015 Social Protection and Labor Global Practice MIDDLE EAST AND NORTH AFRICA CURRENCY EQUIVALENTS (Exchange Rate Effective December 21, 2015) Currency Unit = Lebanese Pound (LBP) US$ 1.00 = LBP 1,506.5 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS IGA Income Generating Activities CDD Community Driven Development CPS Country Partnership Strategy COM Council of Ministers CSD Community Social Development Program CSO Civil Society Organization GOL Government of Lebanon IBRD International Bank for Reconstruction and Development MOSA Ministry of Social Affairs MOF Ministry of Finance NGO Non-Governmental Organization NPTP National Poverty Targeting Program SDC Social Development Center SPPP Social Promotion and Protection Project SSN Social Safety Nets Vice President: Hafez M. H. Ghanem Country Director: Ferid Belhaj Senior Global Practice Director: Arup Banerji Practice Manager: Yasser El-Gammal Project Team Leader: René Antonio Léon Solano NCO Team Leader: Aissatou Maisha Dicko ii LEBANON Social Promotion and Protection Project TABLE OF CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Ratings of Program Performance in ISRs 1. Context, Project Development Objectives, and Design .............................................. 1 2. Post-Approval Experience and Reasons for Cancellation .......................................... 3 3. Assessment of Bank Performance .............................................................................. 3 4. Assessment of Borrower Performance........................................................................ 4 5. Lessons Learned.......................................................................................................... 5 Annex 1. Bank Lending and Implementation Support/Supervision Processes............... 6 MAP ................................................................................................................................ 8 iii A. Basic Information Social Promotion Country: Lebanon Project Name: And Protection Project Project ID: P124761 L/C/TF Number(s): IBRD-82600 NCO Date: 12/24/2015 GOVERNMENT OF Lending Instrument: SIL Borrower: LEBANON Original Total USD 30.00M Disbursed Amount: USD 0.00M Commitment: Revised Amount: USD 30.00M Environmental Category: B Implementing Agencies: Ministry of Social Affairs Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept 12/28/2011 Effectiveness: 05/17/2016 Review: Appraisal: 02/02/2013 Closing: 12/31/2018 12/31/2018 Approval: 05/17/2013 C. Ratings Summary Performance Rating by NCO Outcomes: Not Applicable Risk to Development Outcome: Not Applicable Bank Performance: Satisfactory Borrower Performance: Unsatisfactory D. Sector and Theme Codes Original Sector Code (as % of total Bank financing) Other social services 64 Public administration- Other social services 36 iv Theme Code (as % of total Bank financing) Income Support for Old Age, Disability & 23 Survivorship Other social protection and risk management 23 Social Protection and Labor Policy & Systems 31 Social Safety Nets/Social Assistance & Social Care 23 Services E. Bank Staff Positions At NCO At Approval Vice President: Hafez M. H. Ghanem Inger Andersen Country Director: Ferid Belhaj Ferid Belhaj Practice Yasser Aabdel-Aleem Awny Yasser Aabdel-Aleem Awny Manager/Manager: El-Gammal El-Gammal Project Team Leader: Rene Antonio Leon Solano Haneen Ismail Sayed NCO Team Leader: Aissatou Maisha Dicko F. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) Moderately Moderately 1 02/06/2014 0.00 Satisfactory Satisfactory Moderately Moderately 2 10/28/2014 0.00 Unsatisfactory Unsatisfactory Moderately Moderately 3 04/18/2015 0.00 Unsatisfactory Unsatisfactory 4 11/07/2015 Unsatisfactory Unsatisfactory 0.00 v 1. Context, Project Development Objectives, and Design 1.1. Context at Appraisal 1. In 2013, with the escalation of the Syrian conflict and the influx of Syrian refugees into Lebanon increasing exponentially (reaching close to 25 percent of its pre-crisis population), the country’s economic resilience was being challenged, and the fiscal and external balances were quickly heading towards deterioration as an urgent humanitarian situation was erupting. Indeed, the Syrian refugee crisis placed a particular burden on social service delivery, leading to a decline in both the access to and the quality of key public services, in particular health and education. The complex confession-based political system and the lack of a regionally balanced development strategy further contributed to the decline in the quality of public services provided across Lebanon. Furthermore, the socio- economic consequences of the refugee crisis led to increasingly fragile inter-communal relations and social tensions with Lebanese communities, which widely attributed the decline in their own living standards to the increasingly growing refugee presence. 2. Social Protection & Labor (SP&L) programs, and in particular Social Safety Nets (SSNs), buffer individuals from shocks and equip them to improve their livelihoods and that of their families. However, in Lebanon, existing SSNs at the time of project appraisal were fragmented, weak, and ill-prepared to play an effective role in helping populations cope with the above-referenced social and economic difficulties, or in contributing to improvements in health, and education. Government spending on SSNs was only 1.3 percent of GDP, and the effectiveness and impact on poverty was limited due to high rates of leakage to the non-poor, weak capacity and coordination among the main public institutions in charge of their implementation, as well as the lack of reliable and timely data. The National Poverty Targeting Program (NPTP), the social arm of the Government in charge of providing social assistance to the poorest and most vulnerable Lebanese households, was still nascent, displayed very low coverage (only 27 percent of the extreme poor and 7 percent of the poor), and was yet to be institutionalized and known to the country’s population (only 40 percent among the poor were aware of the program). 3. Furthermore, the Ministry of Social Affairs (MOSA), the main government entity responsible for provision of SSNs in Lebanon, was facing a number of financial, technical, and institutional constraints. For example, most of MOSA’s 218 Social Development Centers (SDCs), which are in charge of providing social services and of promoting integrated development at the individual, household and community levels, lacked capacity and infrastructure to deliver sufficient high-quality social services. The availability and quality of social services were further deteriorated following the increasing influx of Syrian refugees, particularly in the poor and lagging areas of the country. 1.2. Project Development Objective and Rationale for Bank Involvement 4. The Social Promotion and Protection Project (SPPP) intended to support the Government of Lebanon (GOL) to increase access to social development services at the community level, improve the coverage and targeting of the NPTP and strengthen the capacity of the MOSA at the central level and the SDCs at the local level. It was fully 1 aligned with two strategic goals of the 2011-2014 Country Partnership Strategy (CPS) (Report 54690-LB): Human Capital Development and Social Protection; and Local Development. Likewise, the Project was aligned with Lebanon’s MOSA National Social Development Strategy, which was developed in 2011 and highlighted that both community social development and poverty targeting were key elements of social development. 1.3. Main Beneficiaries 5. The primary target group of beneficiaries were expected to be poor and vulnerable households and community members who: (a) will have had improved access to social services provided by SDCs, as well as by Civil Society Organizations (CSOs) and municipalities – see (c) below; (b) will have received assistance through income generating activities (IGAs). Other members of the community will also have benefited through new employment opportunities or increased earnings stimulated by growth of IGAs; and (c) will have been deemed eligible to receive NPTP benefits. The second target beneficiary group was expected to be MOSA, which will have benefited from capacity building to carry out its official mandate both at the central level and through the SDCs at the local levels, as well as to manage small projects using a community-based, demand-driven, and participatory approach. Finally, the third target group of beneficiaries were expected to be CSOs and Municipalities: CSOs will have had the opportunity to improve their capacity to propose, prepare, and implement IGAs and social services, while Municipalities will have been provided the opportunity to propose, prepare, and implement social services at the community level. 1.4. Original Components and Implementation Arrangements 6. To achieve these objectives and reach these targeted beneficiaries, the Project consisted of the following four components: Component 1) sought to enhance the administrative and operational capacity of SDCs to enable them to offer social services of improved quality and relevance; Component 2) sought to establish a transparent, accountable and efficient Community Social Development Program that would finance community-based sub-projects through grants; Component 3) aimed at expanding the coverage of beneficiaries, as well as improving the efficiency of the NPTP; and Component 4) intended to finance a team which would carry out key cross-component functions (overall project coordination, fiduciary functions, etc.). To finance these activities, the project cost was expected to be US$70 million, of which US$30 million would be financed by an IBRD loan, and US$40 million were to be financed by the GOL, for a project implementation period of five years. 7. Furthermore, to foster ownership and sustainability, the project was planned to be implemented by MOSA through a combination of consultants and MOSA permanent staff. The Project was the first World Bank financed project that MOSA prepared, and was expected to implement entirely by itself. Consequently, the overall project’s implementation risk rating was substantial, and some delays were foreseen at the beginning of implementation due to general lack of experience with Bank procedures. 2 2. Post-Approval Experience and Reasons for Cancellation. 8. Following the approval of the SPPP by the Board of Executive Directors in May 2013, the Bank team notified the GOL and proposed signing of the Loan as soon as possible. Unfortunately, while strong ownership was demonstrated by the GOL during preparation and appraisal, at approval and signing stages, the GOL was unable to approve loans. Indeed, from March 23, 2013 to February 15, 2014, the GOL was in caretaker status, while the newly formed government only received the parliamentary vote of confidence on March 20, 2014. During this period, the large and growing influx of Syrian refugees into Lebanon required urgent interventions to mitigate the impact of the conflict on host communities. One such intervention is the NPTP – which is one of the components of the SPPP. On January 24, 2014, the GOL officially requested that the NPTP component of the SPPP be fast-tracked and financed from grant resources through an emergency project. This grant was declared effective on August 18, 2014 and is currently under implementation. Consequently, and before approving SPPP, the Ministry of Finance (MOF) submitted a restructuring request to the World Bank on November 7, 2014 to: (i) cancel the NPTP component from the SPPP, and reallocate its amount to Components I and II of the SPPP, keeping the same total loan amount; and (ii) revise the Project Development Objective (PDO) and amend the results framework accordingly. However, since the SPPP signing deadline was on November 14, 2014, 18 months after Bank Board approval, the GOL also requested in the same letter a three-month extension of the signing deadline, from November 14, 2014 to February 17, 2015. 9. This first extension of signing deadline was approved by the World Bank’s Regional Vice-President on November 14, 2014, while the level one restructuring was processed and approved by the Board on December 23, 2014. The amended Loan Agreement (LA) and accompanying legal documents were transmitted to the GOL on January 14, 2015, for countersignature. Unfortunately, mandatory governmental procedures for Cabinet’s approval of loans did not provide GOL sufficient time to have the legal documents signed by the deadline of February 17, 2015, despite the initiation of some steps of the signing process. As a result, the GOL requested the World Bank a second and final extension of signing deadline, which was approved by the Bank on February 17, 2015, and set the final signing deadline of the Loan for August 17, 2015. The Bank team followed closely with the GoL, especially with the Ministers of Social Affairs and Foreign Affairs and with the Judicial Council, as they all needed to issue their opinion regarding the Loan before its approval by the Council of Ministers (COM). All three Ministries issued their opinion and the Loan was put on the COM agenda. Unfortunately, despite two implementation readiness support missions and daily follow up with the MOF and MOSA counterparts to expedite the signing process, the LA was not signed by the August 17, 2015 deadline due to country's political instability. 3. Assessment of Bank Performance 10. The Bank performance is rated Satisfactory. The project preparation was informed by examples of good practices and lessons learned from projects in Lebanon and other regions. The Bank team included experts with international and local experience in the design and management of social safety nets, as well as community driven development 3 programs. The team possessed the required skills mix, expertise, and experience to prepare the project in a timely manner and through a very proactive and effective engagement with the donors’ community in Lebanon and the country team. The Task Team Leader (TTL) at approval was based in the field and was proactive at all times, developing a strong relationship with the GOL. Indeed, the Bank team addressed the GOL request to finance NPTP through grant resources in an efficient and effective manner, which further solidified Bank-GOL relations. The TTL at supervision, who was supported by the TTL at approval from the field, followed-up closely with the GOL to secure project approval, while effectively leading the Bank processing of both the project restructuring and extensions of signing deadline. 11. In all, considering the team’s sound knowledge of the sector, issues, and the country, its choice of an appropriate design and implementing agency and arrangements, as well as its strong commitment and close follow up with GOL, the team’s performance for preparation and supervision warrants the Satisfactory rating. 4. Assessment of Borrower Performance 12. The Government’s Performance is rated Unsatisfactory. During preparation, the GOL worked closely with the World Bank through the Second Emergency Social Protection Implementation Support Project (ESPISP II) in designing and implementing the NPTP, as well as in identifying options for improving service delivery in the country. As a result, the SPPP design was robust, and was the product of both strong analytical work and GOL policy directives. 13. However, the Project faced significant delays due to the spillovers of the Syrian crisis, as well as the stalemate in the executive and legislative branches, which affected not only the SPPP but also the Bank’s portfolio as a whole. The GOL planned on using the SPPP to address the rising needs for social services and IGAs of vulnerable populations in the country’s northern regions, in light of the deteriorating security situation in that part of the country due to the Syrian conflict. Nevertheless, the heavy load which the response to the Syrian refugee crisis created on the MOSA, the Ministry leading the Government’s humanitarian response to the Syrian crisis, played a particularly important role in the GOL inability to focus on project activities, despite the fact that the crisis made the Project’s PDO even more relevant. In addition, the country’s fragile political situation hindered any chances of the Loan being approved by the COM. 14. Despite strong willingness demonstrated by the GOL to start implementation, as evidenced by the identification of the Project Implementation Unit staff, as well as implementation preliminary activities, the GOL failed to sign the Loan Agreement more than two years after its approval by the Bank and despite two signing deadline extensions, which ultimately led to the proposed cancellation of the Loan and corroborates the Unsatisfactory rating of the GOL performance. 4 5. Lessons Learned 15. Continue to secure grants to complement loan financing and ensure Bank responsiveness to Government needs, especially in times of crisis, when flexibility is essential to respond to changing circumstances. The heightened political and governance instability in Lebanon, combined with strong stalemate in the executive and legislative branches of government, prevented the Government from approving the Project. The grant approval process is slightly less complex than that of loans. While both grants and loans require Council of Ministers’ approval, loans also require Parliament ratification. Therefore, grants are a good instrument to help the Government meet immediate needs. Indeed, grant financing enabled the team to implement one the most urgent components of the Project (the NPTP expansion), which is now benefiting the most underserved populations in the country. Another grant (National Volunteer Service Program) is also being implemented successfully, and is now being considered by the Government as a potential avenue to address the increasingly urgent needs presented by the impact of the Syrian crisis on the country’s most vulnerable populations. 5 Annex 1. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Haneen Sayed Human Development Coordinator, MNSSP TTL MauriziaTovo Lead Social Development Specialist AFRSP Victoria Levin Economist MNSSP Lina Fares Senior Procurement Specialist MNSPR Rima Koteiche Senior Financial Management MNSFM Specialist Mona El-Chami Senior Financial Management MNSFM Specialist Alaa Sarhan Senior Environmental Economist MNSSD Nina Bhatt Senior Social Development MNSSD Specialist Franco Russo Operations Analyst AFRSP Zeina El Khalil Public Information Associate MNAEC Mei Wang Senior Counsel LEGAM Hassine Hedda Finance Officer CTRLA Hala Ballout Program Assistant MNSSP Angela Elzir Research Analyst MNSSP Rita Faddoul Program Assistant MNC02 Non Bank Staff Name Title Tarsicio Castaneda Consultant Supervision/NCO Sr. Social Protection Specialist, Rene Leon Solano GSPDR TTL Haneen Sayed Program Leader Lina Fares Procurement Specialist GGODR Rock Jabbour Financial Management Specialist GGODR Aissatou Maisha Dicko Team Member GSPDR Alaa Ahmed Sarhan Safeguards Specialist GENDR Colin S. Scott Safeguards Specialist OPSOR Nina Bhatt Safeguards Specialist GSURR (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) 6 Lending Total: 89.96 456,892 Supervision/NCO Total: 29.09 130,775 7