75037 World Bank Group - Bulgaria Partnership Program Snapshot October 2012 1 RECENT ECONOMIC AND current account turned into a surplus of 0.9 SECTORAL DEVELOPMENTS percent of GDP in 2011 from a deficit of 1 percent in 2010 (and a deficit of close to 9 percent Growth and External Performance in 2009). Trade balance fell to historic lows, as export growth accelerated to some 30 percent, Bulgaria was among many countries impacted by reflecting robust external demand and increased the global financial crisis and the ensuing metal and oil prices, mainly in the first half of downturn in the United States and the European 2011. In the first half of 2012, however, exports Union (EU). Until the onset of the crisis in 2009, slowed to close to 3 percent year-on-year, while Bulgaria enjoyed rapid GDP growth, averaging 6 imports growth gathered speed. Thus, the current percent per year during 2004–07. After a nearly 5 percent decline in growth in 2009, Bulgaria’s economy was on the path to recovery, registering GDP Growth (percentage change, not seasonally 1.7 percent growth in 2011. The deteriorating adjusted quarterly data) outlook in the Eurozone, however, has tempered 8 this nascent recovery. Growth has decelerated 6.4 6.5 6.4 6.2 since the second half of 2011 and was only 0.9 6 percent year-on-year in the first quarter of 2012. 4 2.7 Exports that had been driving growth since 2009 1.7 2.1 1.9 2 0.9 slowed markedly and even declined in that same 0.4 0.3 quarter. Recovery in consumption remained 0 fragile, while investment picked up only recently -2 after declining for three years in a row. -4 Heightened uncertainty in the region and the still- growing unemployment in the country are likely to -6 -5.5 constrain consumption growth in 2012. With the -8 Eurozone under recession, external demand is set 2005 2006 2007 2008 2009 2010 2011 Q3-11 Q1-11 Q2-11 Q4-11 Q1-12 to weaken further, thus delaying the rebound of investment. In its interim forecasts in February 2012, the European Commission (EC) projects Source: National Statistical Institute 2012. Bulgaria’s GDP growth to slow to 1.4 percent this year. account deficit expanded to 1.2 percent of annual GDP. With overseas borrowing by banks and A rebound in exports and a further weakening of corporations diminishing, net capital inflows have private capital inflows supported a welcome remained negative since 2009. Banks were mainly adjustment of external imbalances. The external repaying debts to their parent banks that had been extended during the boom times. Similarly, External Current Account and its Financing, repayments on inter-company debt kept foreign percent of GDP direct investment (FDI) inflows relatively low— 50 net FDIs in 2011 were close to 50 percent of their 40 level in 2009. Low capital inflows contributed to a 30 further decline in external debt, which stood at 20 90.1 percent of GDP in June 2012 (103 percent at 10 end-2010). 0 With cross-border funding from parent banks -10 drying up and domestic demand still weak, credit -20 grew marginally while bank portfolios worsened. -30 Credit to the private sector grew by 4.3 percent 2005 2006 2007 2008 2009 2010 2011 year-on-year in June 2012, mainly on account of Current account balance FDI Other investments the corporate sector, while credit to households Source: Bulgarian National Bank, 2012. 2 has been declining since 2009. Deposits, especially during the boom times have been used to finance from households, grew steadily, offsetting fully the the deficits since 2009, thus keeping low public falling deposits from nonresidents. At the same debt levels. In 2011, Bulgaria’s public debt was time, demand for credit remained low and the 16.3 percent of GDP (ESA95 definition), the share of nonperforming loans increased from 6.4 second lowest debt-to-GDP ratio in the EU. percent in December 2009 to 16.9 percent in June 2012, although the pace of the increase has slowed The implementation of the 2012 budget is since the start of 2011. The existing stringent proceeding well despite the worsening outlook. prudential rules have kept banks well capitalized Prospects for achieving the planned budget deficit and liquid. The capital adequacy in Bulgaria in of 1.6 percent of GDP remain good. In July 2012, June 2012 was 16.7 percent, significantly higher the budget even showed a small surplus on than the required 12 percent in Bulgaria and the 8 account of buoyant tax revenues and the swifter percent in most of the EU countries. The absorption of EU funds compared to 2011. Grant Bulgarian National Bank (BNB) further revenues, mainly from EU funds, almost doubled strengthened banking supervision, as well as compared to the same period in 2011, which liquidity monitoring and the stress testing of translated into higher capital expenditures. Despite banks. The exchange of information with parent recent improvements, however, the absorption of bank supervisors has improved and a Financial EU funds in Bulgaria remains one of the lowest in Stability Unit has been established at the BNB. the EU. Infrastructure: Stepping up Cooperation Overall Fiscal Balance (percent of GDP) 3.0 To boost Bulgaria’s competitiveness and foster 1.9 2.0 1.7 economic growth, the Government of Bulgaria 1.2 1.0 1.0 has made it a priority to better absorb, manage, and implement EU funds, particularly for 0.0 infrastructure. This has emerged as a pressing -1.0 challenge, given that Bulgaria ranks 120 out of 139 -2.0 countries in quality of overall infrastructure -2.1 according to the World Economic Forum Global -3.0 Competitiveness Report. Bulgaria seeks to leverage EU -3.1 -4.0 funds with financing and support from -5.0 -4.3 international financial institutions (IFIs), such as 2005 2006 2007 2008 2009 2010 2011 the European Bank for Reconstruction and Source: Eurostat, 2012. Development (EBRD), the European Investment Bank (EIB), and the World Bank. In 2010, the Fiscal policy supported the exit of the excessive deficit procedures in 2012. The fiscal deficit in 2011 was reduced to 2.1 percent of GDP, close to half of its level in 2009. Revenues were severely affected by the crisis, much more in Bulgaria than in the rest of the EU. The adjustment in tax revenues was especially significant in Bulgaria, reflecting unchanged tax rates and a tax structure relying more on consumption taxes than in any other EU country. At the same time, a substantial tightening of expenditure has taken place in Bulgaria, while most of the other EU countries actually increased spending. Consolidation of World Bank signed a Memorandum of spending was broad based and supported by a Understanding (MoU) with the Government of continuing freeze on wages and pensions that has Bulgaria to step up cooperation in the been in place since 2010. Surpluses accumulated development of Bulgaria’s infrastructure, including 3 accelerating the maintenance of and investment in Competitiveness, roads and railways. The MoU seeks to build on Education, and Inclusion ongoing World Bank-supported projects, such as the rehabilitation of existing major road networks The series of World Bank reports on Better and improving the reliability and water supply Regulation focus on Bulgaria’s achievements in quality in municipalities. creating a favorable business environment, and offer recommendations on how to further Roads and Municipal Infrastructure strengthen regulatory and administrative reforms, Development including the regime of state fees. Bulgaria started retrofitting its roads infrastructure In February 2012, the to EU standards and requirements during the last World Bank launched the decade. However, the continued underfunding of report Going for Smart roads has left the country with a large backlog of Growth: How Research and road maintenance and investment. The Innovation Can Work for Government pledged to improve the road Bulgaria. The report reveals network across the country and restore troubled that Bulgaria spends only motorway programs by accelerating absorption of half a percentage of GDP EU funds and expanding cooperation with IFIs, on research and including the World Bank. The World Bank- development (R&D) supported Roads Infrastructure and Rehabilitation compared to an average of 2 percent in the EU. Project aims to reduce road transport costs by Although Bulgaria’s exports increased in absolute improving the condition and quality of the roads and in per capita terms throughout the last decade network during the first years of EU accession. (exports account for 60 percent of GDP), they Under the project, a Road Asset Management System continue to be dominated by products from was developed and extensive training provided to traditional and mature industries, the report notes. Bulgarian experts. This system helps the In fact, only 3 percent of Bulgaria’s exports are Government monitor the road network and better high-technology products—substantially below plan and prioritize road maintenance. the EU27 average of 16 percent. The report concludes that to move up the value chain, The World Bank- innovation will be critical in industries in which supported Municipal Bulgaria has a comparative advantage. Infrastructure Development Project aims to assist The Second Trade and Transport Facilitation Project local governments further builds on Bulgaria’s commitment to across the country in facilitate trade by improving the capacity, investment planning for the water sector and efficiency, and quality of services at selected EU improving the reliability and quality of water border crossings, with a particular focus on the provision in four municipalities. The project Trans-European Transport Network. The project supports the preparation of regional master plans aims to improve the physical infrastructure of the for water supply and sewerage systems and the border crossings; develop more efficient customs completion of construction work on three dams formalities, facilities, and procedures; improve that was interrupted about 20 years ago, along communications and the sharing of relevant 4 with the rehabilitation of a fourth dam. Upon border crossing data; and streamline operational project completion, more than 140,000 Bulgarians procedures at border crossing agencies. Transit in four municipalities are expected to enjoy access time for trucks improved significantly between to secure and reliable supplies of quality water. 2010 and 2012; it now takes 23 minutes for a truck to exit Bulgaria at the border with Serbia, compared to 57 minutes in 2010. 4 Sweeping decentralization reform of the education system in 2007–08 introduced per capita funding and delegated school budgets, produced impressive efficiency gains, and set the foundation for better adjustment to local education needs. The next step is to strengthen welfare by using early involvement mechanisms, accountability, quality, and safeguarding their health and education relevance in the education opportunities, and working with parents before system. The deeper involvement the children reach school age. The project is of parents and municipalities in school decisions is expected to contribute to the sustainability of the seen as crucial to building on recent gains in school readiness program by supporting integrated education and ensuring stronger accountability social inclusion services that will subsequently be mechanisms. These are the main conclusions of financed through the European Social Fund. the World Bank report A Review of the Bulgaria School Autonomy Reforms. The report records reform Bulgaria faces achievements and highlights outstanding the most challenges, focusing on the need to improve dramatic quality, equity, and accountability for results. population decline among The World Bank-supported Social Inclusion Project the new EU aims to improve the chances of children with member marginalized backgrounds, including Roma states. It is set children. The project will help children below the to lose a age of seven from poor and disadvantaged staggering 18 families, as well as percent of its children with population, or disabilities, to prepare 1.5 million for school. Because of people, their social situation, between 2000 many vulnerable and 2025. This will have major implications for children reach school the labor market and lead to increased demand for age and go to school long-term care services. This is made doubly without the necessary challenging because there are fewer potential preparation. They are caregivers to care for more dependent people, thus not on equal while at the same time, a decreasing working-age footing with their population has to finance higher public peers and tend to drop expenditures on long-term care. Universal long- out early. The project term care and better coordination are critical for seeks to improve their aging countries, according to the World Bank 5 study Long Term Care Policies for Older Populations in The World Bank’s program in Bulgaria to date new EU Member States and Croatia: Challenges and comprises 45 International Bank for Opportunities. Reconstruction and Development (IBRD) The 2009–10 global economic crisis hit Bulgarian operations, with a total original commitment of families mainly through the labor market, roughly US$3 billion equivalent, consisting of 15 increasing unemployment and reducing working adjustment loans (US$1.73 billion), 23 investment hours and wages for a large segment of the projects (US$1.12 billion), one debt reduction loan population. While the crisis also led to a (US$125 million), four World Bank-managed significant drop in GDP in 2009, Bulgaria was Global Environment Facility (GEF) grants, and able to mitigate the crisis’ most severe impact on two World Bank-managed Prototype Carbon living standards, thanks to an adequate social Fund (PCF) operations. protection policy. These are some of the conclusions in the World Bank report “Bulgaria: As of September 2012, the active portfolio of Household Welfare during the 2010 Recession and World Bank-financed projects consisted of four Recovery,� presented in February 2012. The report operations, with original commitments totaling shows that the impact of the crisis has not US$351.1 million equivalent. In addition, two substantially changed the poverty profile. Institutional Development Fund (IDF) grants Households with a higher risk of poverty are those totaling US$0.6 million are being implemented. (i) with unemployed or inactive heads; (ii) whose heads have no or only primary education; (iii) that As of September 2012, the International Finance are female-headed; (iv) with many children and/or Corporation (IFC) had 37 projects (completed and of large size; and (v) of the Roma and Turkish ongoing) in Bulgaria with total commitments of minorities. over US$895 million. The single biggest IFC investment in the country is in renewable energy WORLD BANK GROUP in the form of a loan for the construction of the PROGRAM IN BULGARIA largest photovoltaic park in Bulgaria. The 60 megawatt peak (MWp) park will help the country Program to Date to achieve its goal for 16 percent renewable energy output of the total production of power by 2020. Bulgaria joined the World Bank Group in 1990, The IFC is also involved in a number of sizable resulting in an engagement on a wide range of investments in various projects in the reforms. The World Bank supported government manufacturing sector, oil and gas, financial reforms that have: remedied past environmental markets, and agriculture. damage; reduced the population’s health risks; The Multilateral Investment Guarantee Agency mitigated some of the costs of the transition and (MIGA) provided 10 guarantees between 1994 the 1995–96 crisis; supported a reduction in the and 2006, for a total of US$232 million. The last fiscal costs of public debt, thus freeing resources MIGA guarantee year was in infrastructure (AES to support spending in social sectors; and Maritza East 1 Power Plant) in 2006 for US$117.8 improved the business climate. Government-led million. AES Maritza 1 is a major FDI project of reforms have also helped increase the annual €1.1 billion, which started in 2005 and is an inflows of FDI from less than US$100 million integral part of Bulgaria’s energy sector strategy. (per year) before 1997, to an average of over US$6 billion per year in 2003–08. The privatized Going Forward banking sector is now well capitalized, well supervised, and profitable, providing better Building on Bulgaria’s achievements, the World services for businesses. The insurance sector is Bank Group has adapted its business model to also entirely privatized, while reforms in revenue support the country’s goal of EU convergence. administration resulted in improved revenue Its partnership with Bulgaria is based on a flexible collection and lower compliance costs to firms. framework that takes into account Bulgaria’s priorities as an EU member state. 6 World Bank Portfolio: Bulgaria Government’s interest in forging a knowledge Net Commitments by Sector (USD million) partnership focused on innovation. It is (As of September 3, 2012) complemented by a modest lending program that will concentrate on complex reforms and on activities that are not eligible for financing through grant resources under EU structural funds or lending by European institutions and IFIs. While the World Bank Group will provide global and regional knowledge and good practice in a tailored manner, it will also innovate and learn with and from Bulgaria for the benefit of other countries. To achieve this objective, the CPS proposes a three-pillar framework of support. The first pillar will aim to provide knowledge and advisory Source: World Bank. support for policy reforms to implement select areas of the National Reform Program. Under the Accelerating EU integration and the convergence second pillar, the World Bank will seek to deliver of living standards are the Government’s key knowledge and advisory support to strengthen medium-term goals. Bulgaria’s 2010–2015 institutions and capacity to accelerate the National Reform Program maintains an absorption of EU funds. The third pillar envisages overarching focus on boosting competitiveness to the complementary and selective provision of achieve the Europe 2020 strategy goals of smart, financing. In addition, the Bank’s existing sustainable, and inclusive growth. The National portfolio of lending operations is being realigned Reform Program has four key priorities: boost to expand support for Bulgaria’s EU funds growth, including through better infrastructure; absorption priority. promote competitive youth; create the best business environment in the EU; and build higher confidence in state institutions. In addition, the Government has identified the efficient utilization of EU funds as an opportunity to finance public investments and accelerate EU integration. The Country Partnership Strategy (CPS), endorsed by the World Bank’s Board in May 2011, Knowledge and advisory services will increasingly aims to support be provided through fee-based service Bulgaria in arrangements. A MoU between the Government strengthening of Bulgaria and the World Bank (see below) institutions and provides a framework for these arrangements. policies to achieve These fee-based services would focus on sector sustainable and strategies and on strengthening institutional inclusive capacity in the areas of transport, water, and social development. The inclusion, among others, to improve EU funds CPS is tailored to Bulgaria’s unique challenges management and implementation in the current within the European context and is firmly financing cycle of 2007–13. They would scale up anchored in the National Reform Program goal of World Bank-financed knowledge and advisory implementing the Europe 2020 strategy. The services and also support preparation for the next World Bank program is dominated by knowledge financing period of 2014–20. and advisory services, in response to the 7 In sum, the CPS proposes a new business Bank will deliver, on a cost-recovery basis, paradigm, tailored to Bulgaria’s unique challenges knowledge and advisory services in the areas of within the European context. It consists of a large roads, water, railways, innovation, business program of knowledge and advisory services, regulation, and social inclusion. intended to be increasingly delivered through fee- based services, complemented by a modest The first two service agreements for the provision lending program. of World Bank advisory services in the development of the National Strategy for Water A major milestone was marked in the Supply and Sanitation and the upgrading of implementation of the CPS with the signing of the Bulgaria’s national innovation system were signed MoU on January 22, 2012. The MoU represents on July 26, 2012. The agreement for the provision an important shift in the 20-year partnership of fee-based knowledge and advisory services for between Bulgaria and the World Bank toward a the road sector is under preparation. greater focus on knowledge and advisory services to boost Bulgaria’s absorption of EU funds and The IFC will comprise an important element of support the National Reform Program. By the World Bank Group strategy in Bulgaria. It will coordinating closely with the EC and partnering focus its private sector investments on renewable with other IFIs such as the EIB and EBRD, the energy and climate change-related infrastructure World Bank not only supports Bulgaria’s reform and industries and social sector private priorities, but also aims to accelerate the investments, and selectively in agriculture. In the absorption of some €7 billion in EU grants that short-term, the IFC will address the impact of the Bulgaria has at its disposal in the current EU crisis in Bulgaria by supporting the recovery of the programming cycle. In the first phase, the World private sector and reducing job losses. Map of Bulgaria 8 BULGARIA: MUNICIPAL INFRASTRUCTURE DEVELOPMENT PROJECT Approved: November 24, 2009 Effective: April 30, 2010 Closing: December 31, 2015 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 118.7 5.0 113 Government of Bulgaria 29.6 Total Project Cost 148.3 * As of August 31, 2012 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. As an EU member since January 1, 2007, Government priorities include the rehabilitation and construction of water supply and sewerage networks to improve service delivery and reduce health risks, as well as waste water treatment systems in line with the EU directives. The project supports the objectives of the current National Strategy for Water Supply and Sewerage Management and Development, which foresees as priority investments the completion of eight water supply dams that were under construction but stopped due to lack of funds. Three of the eight dams (Luda Yana, Neikovtsi, and Plovdivtsi) are included in this project, and the fourth (Studena) is included for rehabilitation. At the end of the project, more than 140,000 Bulgarians in four municipalities will have a secure and reliable supply of quality water. The Project Development Objective: The long-term development goal of the project is to provide an uninterrupted supply of water to the communities in the project area. The specific project objectives are to: (a) improve the reliability and quality of water provision to the communities in selected settlements in the project area; and (b) assist municipalities in improving investment-planning capacity. These objectives are in line with Bulgaria’s National Strategy on the Environment (2005–2014), which has a goal to “provide good quality and sufficient quantity of water for various purposes.� Key Expected Results and Current Achievements: There are three components to the project: (i) project implementation support and consultant services associated with project implementation; (ii) preparation of regional master plans for water supply and sewerage systems (ViK systems) to cover the territory of Bulgaria, except the territory of Sofia; and (iii) completion and rehabilitation of water treatment plants and water supply dams in Luda Yana, Neikovtsi, and Plovdivtsi dams, and rehabilitation of the Studena dam that is currently operational and supplies water to the town of Pernik. The regional Master Plans and the prioritization of short- to medium-term sector investment plans will lead to investments (funded by the EU and other sources) that will help Bulgaria meet EU directives in the water and wastewater sector and facilitate Bulgaria’s economic and social integration into the EU. Thus, the project will significantly assist Bulgaria in meeting its commitments made under the acquis on environment. Project implementation got off to a slow start, as the project’s scope and implementation arrangements were changed and restructured in May 2011. All contracts under Project Implementation Support are expected to be awarded by end-2012. The Master Plans Component (contracts for the preparation of Master Plans were signed in December 2011) is being effectively supervised and is proceeding well. Sixteen percent of project funds have now been committed, but disbursement is still very low. Construction for the first dam and water supply system (Plovidtsi) is expected for June 2013, with the start of Studena Dam rehabilitation to be followed shortly thereafter. Project Components after Restructuring (completed in May 2011) (EUR million with VAT) Component 1: Project Implementation Support 7.78 Component 2: Preparation of Master Plans 16.20 Component 3: Completion and Rehabilitation of Dams and Water Treatment Plants 77.02 Total 101.00 Key International Partners: Close collaboration on sector dialogue is maintained with the European Commission (EC), the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD), and JASPERS (Joint Assistance to Support Projects in European Regions). 9 BULGARIA: ROAD INFRASTRUCTURE REHABILITATION PROJECT Key Dates: Approved: June 26, 2007 Effective: December 13, 2007 Closing: June 30, 2013 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 122.5 79 40.1 Government of Bulgaria 73.5 Total Project Cost 196 * As of August 31, 2012. Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. Bulgaria has a road network of over 41,000 kilometers that reaches all communities, including 19,000 kilometers classified as national republican roads and more than 21,000 kilometers of municipal roads. Only 36 percent of the country’s population lives in large cities. The rest live mainly in medium- and small-sized towns or in rural areas, often separated by sparsely populated mountainous areas, and are therefore very dependent on road transport for their livelihoods. About one-third of the national road network is estimated to be in poor condition; the poorest conditions are found on the secondary roads. Furthermore, a considerable portion of the core national road network still needs to be upgraded to European technical and safety standards. Each year, nearly 1,000 people die and roughly 10,000 are injured in road accidents, and some may be permanently disabled. With close to 140 deaths per one million inhabitants, Bulgaria’s road fatality risk is two times higher than the EU average. The Project Development Objective is to assist Bulgaria in reducing road transport costs by improving the condition and quality of its road network during the first years of EU accession. The project objectives will be achieved by: improving the condition of selected roads in the national road network; enhancing the capacity of the Roads Infrastructure Agency (RIA) to adopt efficient planning policies and effective management of maintenance, rehabilitation, and construction programs; and assisting Bulgaria in articulating a road safety strategy that identifies priority activities to improve road safety. Key Expected Results and Current Achievements:  Road rehabilitation component: The rehabilitation and repair of selected Class I, II, and III roads across the country, totaling about 307 kilometers. Construction work has been completed on 245 kilometers, and is ongoing on about 62 out of a total 307 kilometers. At the end of the project, the rehabilitation will cover roughly: 117 kilometers of Class I roads, 127 kilometers of Class II roads, and 63 kilometers of Class III roads.  Road asset management system: Bulgaria now has a functioning Road Management System—developed under the project—with all the key elements: software, hardware, data, and, more importantly, trained Bulgarian experts in the road laboratory and in RIA’s headquarters. The road management and data systems are used to develop budget-constrained programs for the maintenance and rehabilitation of roads for the entire national road network using up-to-date data, to evaluate the efficiency and effectiveness of road programs, and transparently monitor the condition of road infrastructure. In particular, the Road Asset Management System was developed and extensive training provided to Bulgarian experts. Pilot performance-based maintenance contracts were also prepared. International experience shows that the cost to maintain and preserve road infrastructure could be reduced by 15–40 percent if the road agency had technical systems in place to monitor the condition and level of usage of road infrastructure, and if performance-based maintenance contracts were used.  Roads safety: The Government, with support from the Word Bank, conducted a Road Safety Management Capacity Review and developed a Road Safety Improvement Action Plan. In addition, the project provided extensive training to Bulgarian experts on road safety. The Roads agency has hired consultants to design solutions to improve traffic safety at 25 “black spot� locations and the work, envisaged under the this activity is expected to start soon.  Support for increased absorption of EU funds: A highway adviser has been hired to provide advice and assistance for the full and timely utilization of EU funds in the road sector in Bulgaria. Key Partners: The Road Infrastructure Agency (RIA), which is the project implementing entity; the Ministry of Regional Development and Public Works (MRDPW), which is the parent ministry of RIA; the Ministry of Transport (MOT), which is responsible for transport policy. Road safety dialogue involves the following stakeholders, in addition to RIA, MRDPW, and MOT: the Traffic Police (Ministry of Interior), the Ministry of Health, and the Ministry of Education. Key International Partners are the European Commission (EC), the European Investment Bank (EIB), and the European Bank for Reconstruction and Development (EBRD). 11 BULGARIA: SOCIAL INCLUSION PROJECT Key Dates: Approved: November 04, 2008 Effective: April 16, 2009 Closing: October 31, 2013 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 59 11.7 38.9 Gov’t of Bulgaria/ESF 108.4 Communities 34.4 Total Project Cost 201.8 * As of September 4, 2012. Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. Bulgaria entered the EU with a per capita income at only 37 percent of the EU average. Since analyses showed that one of the main sources of poverty is intergenerational transfer, and in order to speed up the convergence of living standards and provide equal opportunities for children, the Government, with World Bank support, launched the Social Inclusion Project. The project aims at the early-age inclusion of children from disadvantaged and poor families. The Project Development Objective is to help children below the age of seven from poor and disadvantaged families, as well as children with disabilities, to prepare for school. Because of their social situation, many vulnerable children reach school age and go to school without the necessary preparation. They are therefore not on an equal footing with their peers and frequently drop out of school early. The project will improve their welfare by using early involvement mechanisms, safeguarding their health and education opportunities, and working with parents before the children reach school age. The project will target low-income and marginalized families (including children with a disability and other special needs), and will contribute to the sustainability of the school readiness program by supporting the absorption of European Social Fund financing. Key Expected Results and Current Achievements:  Improvements in the school readiness of children under age seven from low-income backgrounds and with a disability, measured through improvements in cognitive skills, as assessed by gains in school-readiness assessment tools. (?)  Improvements in child welfare, measured by the increased enrollment of children under age seven from low-income and marginalized households (including children with a disability) in mainstream preschool, kindergarten, and child care centers in participating municipalities. Improved coverage and quality of child care services to low-income children and children with a disability below the age of seven, measured by increases in (i) the number of parents having completed parenting skills sessions, (ii) the number of children newly placed into kindergarten or child care facilities through the project interventions (including children with disabilities), (iii) the rate of inflow of children from poor and marginalized families into institutional care, (iv) the number of new child care places created through the project, and (v) the number of kindergarten and child care facilities staff having received training. A few months after project effectiveness, a change of the project management mechanism was required, so actual project implementation was delayed. However, implementation has recently gained speed, evidenced by increased disbursement. Seventy municipal microprojects have been approved for financing with construction work on the required social inclusion infrastructure underway or completed in most locations. The active implementation of services for these microprojects will begin later in 2012, with the full-fledged implementation of services expected to take place by mid-2013. Key Partners: The World Bank team works closely with (i) the Ministry of Labor and Social Policy of the Republic of Bulgaria, which is responsible for overall policy setting as well as for project management; (ii) Ministry of Finance of the Republic of Bulgaria, which is the main partner on all World Bank loans; and (iii) the Ministry of Education, Youth and Science, Ministry of Health, the State Agency for Child Protection, the Social Assistance Agency, and other institutions and nongovernmental organizations that are stakeholders in the early inclusion and child care policies and process. Key International Partners include the European Union, through its respective offices responsible for overseeing the financing from the European Social Fund. 12 BULGARIA: SECOND TRADE AND TRANSPORT FACILITATION PROJECT Key Dates: Approved: March 21, 2007 Effective: June 05, 2007 Closing: December 31, 2013 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 50.9 25.5 25.6 Government of Bulgaria 17.7 Total Project Cost 68.6 * As of September 05, 2012. Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. The Second Trade and Transport Facilitation Project builds on Bulgaria’s commitment to facilitate trade by improving the capacity, efficiency, and quality of services at selected EU border crossings, with a particular focus on the Trans-European Transport Network. The Project Development Objective The project promotes the improved physical infrastructure of the border crossings; more efficient customs formalities, facilities, and procedures; improved communications and sharing of relevant border crossing data; and the streamlining of operational procedures of the border crossing agencies. The project is divided into four components: Component 1: Improvement of the physical capacity of, and the working conditions at, selected EU external border crossings Component 2: Construction of the access road to the border crossing point at Kapitan Andreevo Component 3: Enhanced sharing of border crossing data and streamlined operational procedures of border crossing agencies Component 4: Capacity building and support to project implementation Key Expected Results and Current Achievements:  Border crossing time for trucks at the key border crossing points reduced by about 39 percent over the past year compared to the revised 2010 baseline  Improved physical infrastructure of selected border crossings  More efficient customs formalities due to modern equipment, facilities, and procedures  Improved access to Kapitan Andreevo border crossing point, and less heavy traffic in the village of Kapitan Andreevo due to construction of new access road to the border  Improved communications and sharing of relevant border crossing data, and streamlining the operational procedures of the border crossing agencies  Stakeholders’ capacity building Key Partners: The World Bank team works closely with (i) Ministry of Finance (MoF), where the project implementing team is located; (ii) National Customs Agency (NCA); (iii) Border Police Directorate (BPD), which has an active role in the project, especially on selected Border Crossing Points (BCP); (iv) Road Infrastructure Agency (RIA), in particular with regard to all matters concerning the access road to Kapitan Andreevo BCP; and (iv) Ministry of Regional Development and Public Works (MRDPW), the parent ministry of RIA. Key International Partners: The European Commission (EC). 13