For Official Use Only CAS and ISNCR Review 68754 Independent Evaluation Group 1. CAS and ISN Data Country: Mongolia CAS Year: FY05-FY08; ISN Year: FY09 CAS and ISNCR Period: FY05 – FY10 CAS and ISNCR Review Period: CY05-CY11 Date of this review: May 9, 2012 2. Executive Summary i. This review examines the implementation of the FY05-FY08 Mongolia Country Assistance Strategy (CAS) of FY04 covering the period FY05-08, and the Mongolia Interim Strategy Note (ISN) of FY09 covering the period since, and evaluates the “CAS and ISN Completion Report� (CAS and ISNCR). The CAS and the ISN were joint strategies between IDA and IFC. The ISN was also joint with MIGA. This review covers the FY2005-11 program as implemented by the different institutions. ii. Within the CAS, the WBG sought to support Mongolia in a set of objectives organized around three pillars: (i) consolidating the transition, (ii) reducing vulnerabilities, and (iii) aligning policies and resources with intended development results. Under the ISN, the WBG sought to help Mongolia in three strategic areas: (i) improving macro and fiscal sustainability in a mineral-based economy, (ii) protecting the poor and vulnerable, and (iii) encouraging transparent and prudent mining investments and a more competitive and stable medium term investment climate. In addition, the ISN had as a cross-cutting theme building better transparency and accountability mechanisms. iii. IEG rates overall outcome of the WBG’s strategy during the CAS and ISN periods as moderately satisfactory. Mongolia made progress in improving the transparency of the budget, including by improving the information systems, and approved a fiscal stability law. Yet fiscal sustainability remains to be strengthened, because Mongolia has yet to implement the law in line with its spirit, move towards a medium-term anti-cyclical fiscal framework, improve the quality and efficiency of expenditures and limit these in line with sustainability. The country improved the quality of its infrastructure and became more competitive during the CAS period, providing a better environment for investors. The Extractive Industries Transparency Initiative (EITI) Board designated Mongolia as EITI Compliant in 2010. Mongolia’s banking system is perceived as more sound by external observers, but the fast rate of credit growth raises questions about its sustainability. Mongolia recently adopted a new system of targeted social transfers that will only become effective in June 2012, replacing transferring mining revenues to citizens as a fixed cash amount to every citizen. There is no statistical information on targeted groups, such as rural dwellers or vulnerable populations in Ulaanbaatar. However, Mongolia is providing its herder population with electricity and risk coverage through insurance, and its urban population with better potable water coverage and expanded access to information and communications technology (ICT). The country also adopted new environmental laws and standards, but the degree of implementation is not known. Environmental impact assessments are now published. Two strategy areas lacking sustained commitment by the government are the WBG’s recommended system of revenue transfers to the population and the Economic Growth Support and Poverty Reduction Strategy (EGSPRS). The change in the revenues transfers system is very recent and Mongolia dropped the EGSPRS. Mongolia has only recently begun to play a stronger role in coordinating its external development partners. IEG notes that the recent approval of the new system of targeted social transfers is a significant development that has yet to be implemented outside the review period, but assumes that it has been for the purposes of the rating. iv. IEG stresses three points. First, the WBG could ground its strategies in a deeper understanding of the political environment and the constraints that it entails. Neglecting these CAS and ISNCR Reviewed by: Peer Reviewed by: CASCR Review Coordinator Mauricio Carrizosa Michael Lav Jaime Jaramillo-Vallejo Consultant, IEGCC Consultant, IEGCC Lead Economist, IEGCR Surajit Goswami Albert Martinez Consultant, IEGCC Consultant, IEGCC For Official Use Only CAS and ISNCR Review 2 Independent Evaluation Group constraints may lead to unrealistic objectives, as was the case with Mongolia’s medium-term strategy or the system of transfers. Second, to ensure their development effectiveness, strategies should call for their frequent monitoring and evaluation, so that adjustments and corrections can be made on a timely manner. Adopting objectives that cannot be monitored due to the absence of a results framework or unavailable data, places the country team at a disadvantage to deliver effective development results. Third, an ISN as a strategy instrument needs to be justified by something different than a global economic crisis, because ISNs are meant to help the WBG move forward with client countries in cases of transition from conflict or political crisis, countries going through an unusually uncertain period, and countries where the Bank is reengaging after a prolonged hiatus. Mongolia’s ISN could have validly discussed more clearly the reasons for using this strategy instrument. 3. WBG Strategy Summary Overview of CPS Relevance: Country Context: 1. As a mineral resource-based economy, Mongolia’s GDP growth has been vulnerable to commodity price swings. Driven by rising export prices, GDP growth increased from an average of 3.2 percent per year during 1997-02 to 8.8 percent per year during 2003-08, with exports increasing from 50.7 percent of GDP in 2002 to an average of 59.6 percent during 2004-07. Growth reduced the poverty rate considerably, from 61.1 percent in 2002/03 to 35.2 percent in 2007/08. Mongolia’s terms of trade deteriorated with the global financial crisis of 2008, bringing GDP growth down from 8.9 percent in 2008 to -1.3 percent in 2009. Growth picked up again to 6.1 percent in 2010, when the global crisis subsided and commodity prices recovered. Meanwhile, Mongolia’s banking system weakened significantly between 2005 and 2009, when the regulatory Tier I capital to risk-weighted assets ratio declined from 15.8 to 2.3. The ratio has increased to over 12 in recent years, but credit has been expanding at a faster pace than the ratio of broad money to GDP raising concerns about the external leveraging of domestic banks. 2. Mongolia’s government has gone through several successive changes since 2004, when no party achieved a clear majority to form a government. Four different prime ministers have held office during this time. More importantly, the country has been deeply divided on important issues, with elections turning increasingly contentious and, in the case of the latest one in 2008, leading to violent street protests. With the changes in governments, the WBG went through a draft of a CAS Progress Report (CASPR) in 2007, which evolved into a draft Country Partnership Strategy (CPS) at the request of the new government, and then into the ISN discussed by the Executive Board in April 2009. The ISN focused primarily on a subset of the draft CPS. 3. As a result of the divided political environment, the coalition governments have successively adjusted the country’s own objectives to adapt them to what was needed to keep the coalition together. However, there are three main topics that have appeared repeatedly. The first one is maximizing Mongolia’s flow of resources stemming from mining its huge reserves of gold, copper and coal, by pursuing the development of two important mines (Oyu Tolgoi, gold and copper, and Tavan Tolgoi, coal). The second is to maintain a relatively stable macroeconomic framework. And the third is to have a politically acceptable way of distributing the mining wealth across the population and the generations. Objectives of the WBG Strategy: 4. Within the CAS, the WBG sought to support Mongolia in a set of objectives organized around three pillars: (i) consolidating the transition, in the transformation from a command to a market economy, (ii) reducing vulnerabilities, and (iii) aligning policies and resources with intended development results. Under the ISN, the WBG sought to help Mongolia in three strategic areas: (i) improving macro and fiscal sustainability in a mineral-based economy, (ii) protecting the poor and vulnerable, and (iii) encouraging transparent and prudent mining investments and a more competitive For Official Use Only CAS and ISNCR Review 3 Independent Evaluation Group and stable medium term investment climate. In addition, the ISN had as a cross-cutting theme building better transparency and accountability mechanisms. Relevance of the WBG Strategy: 5. Congruence with Country Context and Program: Both the CAS and the ISN were congruent with the fundamental thrust of the country’s priorities, with the CAS being more general in scope. The broad objectives of the two strategies are similar. Nevertheless, the CAS followed closely the 2005 Economic Growth Support and Poverty Reduction Strategy (EGSPRS), which was left aside by the government shortly after its adoption and was substituted by an MDG-focused strategy with support from UNDP. Moreover, both the CAS and ISN had within their objectives changing Mongolia’s system of transferring mining revenues to citizens, where results show low country buy-in. 6. Relevance of Response to Market: In the beginning of the review period, IFC investment operations mainly supported banks and provided advisory services (AS) on the financial sector, biodiversity, renewable energy, business inspections, corporate governance, and mobile banking. As the economy improved IFC invested in a mixed-use hotel, a dairy, and a venture capital fund to support local SMEs. 7. Relevance of Design: The strategies had design weaknesses, particularly the ISN. In one dimension, IEG wonders why an ISN was needed in circumstances that were not disruptive, such as conflict, and that are not uncommon in other client countries—a difficult political environment and the impact of the global financial crisis. On another dimension, the link between objectives and policies and actions to achieve them was weak. For instance, the WBG’s aim of fiscal sustainability hinged for the most part on a fiscal stability law that Mongolia has yet to fully implement and adopt in spirit. Similarly, the CAS objective of protecting the poor could not be achieved with only preparatory steps for targeting social transfers, in a situation where there was no political agreement on how to proceed. In addition, the monitoring and evaluation framework of the strategies was weak, with objectives about which there is but scant information, and others where the framework was lacking, as was the case with the cross cutting theme of governance. 8. Risk Identification and Mitigation: The CAS included as risks Mongolia’s commitment to the strategy, judged as minor, the macroeconomic risks, and weak governance. Mitigation measures included regular monitoring in the case of the macroeconomic risks and the program itself to address governance failures. In the event the two first risks materialized, with the first one having a major impact on the implementation of the strategy. The WBG dealt with the weakening of the external macroeconomic environment by changing the strategy. In the case of the ISN, instead of identifying a set of well-defined exogenous events that could threaten the strategy if they happened and that could call for mitigation, the ISN saw as risks the normal conditions of commodity-dependency and weak local policy capacity, ownership and governance. Accordingly, the mitigation measures were part of the program to be implemented in the hope that there would be improvements in capacity, ownership, governance and commodity-dependency during the ISN period. A true exogenous event that was not identified and was likely to happen and did in fact materialize was the resurgence in world commodity prices. Identifying this exogenous event would have led to explicitly defining the elements of an exit strategy from the ISN as the crisis subsided and global market conditions for commodities stabilized. There is no direct evidence on the governance risk identified in the CAS and treated as a crosscutting theme in the ISN. Nevertheless, Mongolia was designated as EITI compliant and improved the transparency of its budget, according to the International Budget Partnership. Overview of CAS and ISN Implementation: Lending and Investments: 9. IDA approved seven new projects amounting to US$ 68.3 million during the CAS period, as well as new loans for US$108.7 million during the ISN period. Most of the ISN financing was in the form of two For Official Use Only CAS and ISNCR Review 4 Independent Evaluation Group development policy credits (DPC1, FY09, and DPC2, FY11) (US$69.7 million) supporting the three pillars of the transition strategy. Also included were a TA project that complemented the fiscal and financial aspects of the DPCs (US$12 million), a mining infrastructure investment loan (US$25 million), and a small loan to strengthen Mongolia’s statistical system (US$2.0 million). IDA approved additional financing of US$33 million covering three existing projects on index-based livestock insurance, energy, and rural sustainable livelihoods, as well as additional financing of US$6.7 million in grants. 10. Three IFC investment projects were being implemented at the inception of the review period, for US$8 million of net commitment. IFC committed another US$159 million for 21 projects in the financial sector, a hotel, and a dairy. IFC provided two banks with fresh equity through rights issues as well as subordinated debt that was treated as Tier II Capital. In addition, IFC developed these banks’ trade finance facilities. 11. MIGA had one operation that guaranteed a US$ 20 million investment in FY06, which was canceled in FY07. 12. IDA’s portfolio has performed well overall, with only three percent of the commitments at risk in 2010 and 2011, up from none in 2005-07, but a lower share than East Asia and the rest of the World Bank. IEG rated eight projects which exited during the CAS and ISN periods as moderately satisfactory or better. 13. Only one of the projects of the IFC portfolio has been reviewed by IEG and the development outcome was rated mostly successful. Analytic and Advisory Activities and Services 14. IDA delivered 29 AAAs during the CAS period, 11 of which were planned, and 22 during the ISN period, 10 of which were planned. Most AAA addressed issues related to fiscal sustainability and protection of the poor. 15. IFC had a biodiversity AS operation approved in the pre-review period, and seven new AS operations approved during the review period. The financial sector TA was rated moderately unsuccessful in a self-evaluation, because it was did not succeed in addressing sector-level challenges (credit bureau, leasing regulations, and secured transactions). Three other AS that closed during the review period were rated as moderately successful or better in self-evaluations. Partnerships and Development Partner Coordination 16. CAS and ISN design and implementation relied strongly on coordination with development partners, particularly with the IMF, the ADB, and Japan. The ISN followed an IMF Stand-By Arrangement (SBA, US$224 million). At a donor conference hosted by the government and IDA in mid-March 2009, the ADB, Japan and IDA pledged US$160 million in budget support. IDA also collaborated with the ADB in helping the government on the social assistance system and with the IMF on macro and fiscal issues. Safeguards and Fiduciary Issues 17. The Completion Report did not identify any safeguards or fiduciary complaints that may have affected the CAS and ISN implementation. IEG is not aware of any issues related to safeguard policies or any cases taken before the Inspection Panel. In 2007, the INT received a procurement complaint and uncovered false claims and improper consultant substitution on the part of a company that received resources under the Mongolia Economic Capacity Building Technical Assistance (ECTAC) Project and the Mongolia Governance Assistance Project (GAP). For Official Use Only CAS and ISNCR Review 5 Independent Evaluation Group Objectives under the FY04-08 CAS 18. The objectives and outcomes of the FY05-08 CAS were reviewed by the Executive Board at the time of the discussion of the FY09 ISN. However, the country team did not prepare a CAS Completion Report at that time. 19. Under the WBG FY05-08 CAS, the WBG sought to support Mongolia in consolidating the transition, in the transformation from a command to a market economy, reducing vulnerabilities, and aligning policies and resources with intended development results. Pillar 1: Consolidating the Transition 20. Consolidating reforms for a more performance-based public sector. Over the CAS period budget disclosure and management improved, while the reforms on aligning the budget with policies, public sector efficiency and institutions lagged behind. The Open Budget Index tracked by the International Budget Partnership improved from a score of 18.0 percent in 2006 (providing the public with scant or no budget information) to 36.0 percent in 2008 (providing the public with minimal budget information), with further progress achieved during the ISN period. Mongolia also made some progress on financial management by establishing a Government Financial Management Information System (GFMIS) in 2005. But Mongolia achieved little or no progress towards establishing a medium term expenditure framework (MTEF), rationalizing public sector salaries and social transfers, or applying rigorous procedures for project selection. In the same vein, over the period of 2006-2008 the World Economic Forum (WEF) ratings showed a deterioration or no change in the indicators on public sector efficiency: favoritism in decision making of government officials worsened slightly from 2.3 over 7.0 to 2.2, wastefulness of government spending remained at 2.3, and diversion of public funds deteriorated from 2.6 to 2.4. Meanwhile, the WEF’s overall indicator on institutions remained at 3.1. 21. IDA provided assistance through the Fiscal Accounting TA Project (FY98), Economic Capacity Building TA Project (FY03), Government Assistance Project, Development Policy Credits I (FY99). AAA included a Public Expenditure and Financial Management Review (FY08) and a Public Expenditure Tracking Survey Education (FY07). 22. Establishing a sound enabling environment for the private sector. From 2006 to 2008 Mongolia improved its competitiveness ratings only marginally, as reported by the WEF. The overall index improved from 3.60 over 7.00 to 3.65. This reflected marginal improvements in efficiency enhancers (e.g., goods market efficiency) and innovation and sophistication factors, with the basic requirements index (institutions, infrastructure, macroeconomic stability, and health/education) deteriorating as a result of the adverse changes in macro performance. Moreover, the banking system’s soundness weakened, with the ratio of total regulatory capital to risk-weighted assets declining from 18.2 in 2005 to 11.6 in 2008. 23. IDA provided support through Financial Capacity Project (FY02), Legal and Judicial Reform Project (FY02), Enhanced Justice Sector Services Project (FY08), Private Sector Development Credit II (FY05), and Index-Based Livestock Insurance Project (FY05). The Financial Capacity Project focused on two banks. IDA delivered several pieces of AAA. IFC participated in the privatization of a bank with an extensive network, particularly in the rural area. IFC initiated another investment in the financial sector, and provided fresh capital to its investees. 24. Supporting reforms to improve the efficiency and distributive impact of infrastructure investments. The WEF index of infrastructure quality deteriorated from 2.1 over 7.0 in 2006 to 1.7 in 2008, despite increases in the country’s overall rate of capital formation. The deterioration reflects weak prioritization of public investments and management in the energy, roads, and water sectors. Nevertheless, the information and communication technologies (ICT) infrastructure improved, as evidenced by the increase in internet use, from 7.9 per 100 people in 2004 to 12.5 in 2008, as well as the increase in For Official Use Only CAS and ISNCR Review 6 Independent Evaluation Group telephone lines, from 5.8 per 100 people in 2004 to 7.5 in 2008.Both herder access to electricity, including through solar panels, and Ulaanbaatar’s peripheral population access to water improved. 25. IDA assisted Mongolia through the Energy Sector Project (FY01), the Renewable Energy for Rural Access Project (FY07), and the Information and Communications Infrastructure Development Project (IDA Grant, FY06). These were additional to two projects from the previous strategy period—the Transport Development Project (FY01) and the Second Ulaanbaatar Services Improvement Project (FY04). Also, IDA delivered two AAAs. 26. Strengthening institutional capacity to support human development. Social transfers, which until the end of the review period were a fixed cash distribution to every citizen along the model used in the State of Alaska, increased as a share of GDP. Primary and secondary net school enrollment changed little, from 86.8 percent and 79.9 percent, respectively, in 2004 to 86.5 percent and 82.9 percent in 2008. Health expenditures declined, from 4.5 percent to 3.8 percent of GDP. Nevertheless, indicators for maternal and infant mortality improved. Meanwhile, the financial sustainability of the pension system did not improve. 27. IDA supported through the Rural Education and the Development Project (FY06), as well as Education for All-Fast Track Initiative (FY07) Trust Fund (TF). IDA delivered several pieces of AAA. 28. IEG rates the outcome of the WBG strategy under Pillar1 of the CAS as moderately unsatisfactory. Mongolia made progress in improving the transparency of the budget, including by improving the information systems. However, Mongolia’s progress was slow in moving towards an MTEF, and improving the efficiency of public spending and the prioritization of its investments. Mongolia’s competitiveness suffered with the worsening in the fiscal stance and the deterioration of infrastructure. The country made little progress in strengthening its social development programs. Pillar 2: Reducing Vulnerabilities 29. Addressing key sources of rural development. The percentage of herders in targeted districts that took actions to mitigate pastoral risk (i.e., pasture land management and risk response plans) increased by 54 percent between 2002 and 2006. About 14 percent of targeted herders of three districts received livestock insurance coverage in 2008. Moreover, the total electrification rate for herders increased from 15 percent in 2006 to 25 percent in 2009. 30. IDA supported Mongolia through the Sustainable Livelihoods Project 1 (FY02), the Sustainable Livelihoods Project 2 (FY07), and Index-Based Livestock Insurance Project (FY05). 31. Improving environmental management and governance of natural resources. The ISN and the CAS and ISNCR do not report on outcomes in this area. Mongolia did adopt new environmental laws and standards, but the degree of implementation is unclear. Nevertheless, all environmental impact assessments are now published. 32. IDA supported Mongolia through Mining Sector TA Project (FY08) and Sustainable Livelihoods Project 2 (FY07). Also, there were two Netherlands trust funds, one for the Environment in Mongolia (FY05) and another one for Environmental Reform (FY08). 33. Improving municipal service delivery for vulnerable populations in peri-urban areas. The urban population with access to improved water continued increasing, from 94 percent in 2005 to 97 percent in 2008. Access to improved sanitation remained unchanged at 64 percent, and, as mentioned above, telephone lines and internet access increased. 34. IDA provided assistance through Ulaanbaatar Services Improvement Project 2 (FY04), and one piece of AAA. For Official Use Only CAS and ISNCR Review 7 Independent Evaluation Group 35. Analyzing the viability of regional development options. There were no expected outcomes associated with this sub-objective. 36. IDA provided Mongolia with a Regional Development Policy Note ESW (FY06). 37. IEG rates the outcome of the WBG strategy under Pillar 2 of the CAS as moderately satisfactory. Mongolia is providing its herder population with electricity and risk coverage through insurance, and its urban population with better potable water coverage and expanded access to ICT. The country also adopted new environmental laws and standards, but the degree of implementation is not known. Environmental impact assessments are now published. Moreover, there also is no information on progress in assessing regional development options. Pillar 3: Alignment of Policies and Resources with Intended Development Results 38. Strengthening the national institutional framework for further developing, implementing and monitoring the Economic Growth Support and Poverty Reduction Strategy (EGSPRS). The government did not implement the EGSPRS. Instead, the new coalition government in 2005 formulated a country-owned, non-legally binding, MDG-based development strategy and action plan and produced yearly MDGs implementation reports jointly with UNDP. The government introduced a better method of measuring poverty in 2008. It also put in place a mechanism to engage civil societies’ participation in monitoring progress in MDGs. 39. IDA meant to provide support to the EGSPRS through some components of its projects, as well as through several pieces of AAA. 40. Facilitating the development and implementation of sector strategies linked with the EGSPRS. This sub-objective became irrelevant with the government’s decision to abandon the EGSPRS. 41. Strengthening the Government’s Ability to Coordinate Aid and Harmonize Donor Procedures. Donor coordination started strengthening in 2006, when the government initiated semi- annual technical meetings with donors. These have not resulted yet in an improved alignment of donor resources or harmonization of practices. Only in the ISN period did Mongolia adopt a more active role in donor coordination. 42. IDA provided support to Mongolia in this sub-objective through AAA. 43. IEG rates the outcome of the WBG strategy under Pillar 3 of the CAS as unsatisfactory. Mongolia did not seem to own the EGSPRS, and embarked instead in the design and implementation of an alternative development plan with the support of UNDP. Mongolia has only recently started to play a stronger role in coordinating its external development partners. Overview of Achievement by Objective under the CY09-10 ISN 44. Under the ISN, the WBG sought to help Mongolia in three strategic areas: (i) improving macro and fiscal sustainability in a mineral-based economy, (ii) protecting the poor and vulnerable, and (iii) encouraging transparent and prudent mining investments and a more competitive and stable medium term investment climate. In addition, the ISN had a cross-cutting theme: building better transparency and accountability mechanisms. Pillar 1: Improving Macro and Fiscal Sustainability in a Mineral-based Economy 45. Under this pillar, IDA was to help strengthen fiscal sustainability and bolster confidence in the banking sector. For Official Use Only CAS and ISNCR Review 8 Independent Evaluation Group 46. Strengthening fiscal sustainability. The structural balance of general government operations (which the IMF calculates by smoothing mineral prices) improved from -11.0 percent of GDP in 2008 to -2.7 in 2010, and worsened to about -5.8 percent of GDP in 2011. Improved fiscal outcomes through 2010 reflected a rebound of mineral export revenues from their low in 2009. Current expenditures have been in an upward trend primarily as a result of increased cash transfers to the population, which together with wages and salaries account for about two-thirds of current expenditures. The Fiscal Stability Law adopted in June 2010 has yet to be fully implemented, in line with its spirit, and the 2011/12 budget remains highly pro-cyclical and expansionary. Nevertheless, the Open Budget Index produced by the International Budget Project reveals a further improvement in budget transparency, from a score of 36 percent (providing minimal budget information) in 2008 to a score of 60 percent (providing some information to the public in its budget documents during the year) in 2010. 47. IDA supported Mongolia’s efforts on fiscal sustainability through components of each of the two Development Policy Credits (DPC1, FY09, and DPC2, FY11), the FY11 Multi-Sectoral Technical Assistance Project, and non-lending services. These complemented an 18-month IMF Stand-By Arrangement (April 2009). Under these operations, short term actions covering budget and investment planning and capital maintenance expenditures, and medium term actions covering fiscal, budget, and social transfers legislation were to achieve sustainable fiscal outcomes. In the event, expenditures declined initially (2009) but then increased (2010 and 2011). In addition, IDA, through the Governance Partnership Facility (GPF), provided a grant in FY10 to support the reforms of DPC2 (FY11). 48. Bolstering confidence in the banking sector. Moody changed the outlook for the ratings of Mongolia’s bonds and foreign currency denominated deposits in domestic banks (without changing the ratings) from “possible downgrade� to stable in May 2011. In addition, the IMF reports that indicators of banking system soundness had improved by end-2010, but were likely to deteriorate with the application of tighter regulations. Credit and market risks of bank portfolios are likely to be high in light of the recent high credit growth rates (25.4 and 72.8 percent respectively in 2010 and 2011). These high growth rates also raise concerns on the stability of the liabilities of the banks that are underlying the fast expansion of credit on their assets side—the ratio of broad money to GDP only increased from 55.6 percent in 2010 to an estimated 61.8 percent in 2011. 49. In July 2009, IDA and the IMF completed a financial sector assessment (FSAP). IDA supported actions under the DPC1 (FY09) and DPC2 (FY11). Additional support was provided through a component of the Second Private Sector Development Credit (FY05, restructured in FY09), and one piece of AAA on bank restructuring. IFC provided two investee banks with fresh equity through rights issues as well as subordinated debt that was treated as Tier II Capital. In addition, IFC developed these banks’ trade finance facilities. 50. IEG rates the outcomes of the WBG strategy under Pillar 1 of the ISN as moderately unsatisfactory. Mongolia has increased the transparency of its budget and approved a fiscal stability law. Fiscal sustainability remains to be strengthened, because the law has yet to gain traction, with current expenditures growing beyond the set limits and the overall fiscal stance still being pro-cyclical. Mongolia’s banking system is perceived as more sound by external observers, but the fast rate of credit growth raises questions about its sustainability. Pillar 2: Protecting Poor and Vulnerable People 51. Under this pillar, IDA was to help improve the targeting of social transfers, reduce rural vulnerability, and help the vulnerable populations in Ulaanbaatar. 52. Retargeting social transfers to the poorest. In January 2012, Mongolia adopted a new system of targeted social transfers, which will only become effective in June of this year. Throughout the ISN period, Mongolia maintained its policy of transferring mining revenues to citizens as a fixed cash amount to every citizen, roughly similar to the model used in the State of Alaska. For Official Use Only CAS and ISNCR Review 9 Independent Evaluation Group 53. IDA’s DPC1 (FY09) and DPC2 (FY11) supported actions to target presently universal social transfers towards the poor, including a draft reform of transfers that was submitted to parliament. 54. Reducing rural vulnerability. Rural poverty declined as a result of economic growth, from 69.7 percent (headcount ratio) in 2002/3 to 46.6 percent in 2007/08. A different statistical series shows rural poverty declining from 47.8 percent in 2010 to 33.3 percent in 2011—the two series, though, are not comparable because they use a different methodology. In the absence of reliable and comparable statistical information, it is difficult to draw conclusions about poverty dynamics during the ISN period. Nevertheless, available data shows that Mongolia achieved a total herder electrification rate of 54.4 percent by the end-2011, above the 15.0 percent observed in 2006. 55. IDA contributed to reduce the vulnerability of poor herders, as noted above, through the interventions that started under the CAS. In addition, with support from the Japan Social Development Fund (JSDF), IDA financed a community-led infrastructure development project (FY11). 56. Assisting vulnerable populations in Ulaanbaatar. There is no statistical information available on changes in the living conditions in ger areas in Ulaanbaatar. 57. IDA provided support through the additional financing for the FY01 Energy Project, aimed at improving the reliability of electricity distribution in Ulaanbaatar. The latest internal evaluation shows that the intervention has yet to improve the standard of living of Ulaanbaatar vulnerable populations. The FY04 Second Ulaanbaatar Services Improvement Project continued to help improve access to water by Ulaanbaatar’s peripheral population, albeit with increased losses for the water company. IDA also delivered two AAAs. 58. IEG rates the outcome of the WBG strategy under Pillar 2 of the ISN as moderately satisfactory. Mongolia recently adopted a new system of targeted social transfers that will only become effective in June 2012, replacing transferring mining revenues to citizens as a fixed cash amount to every citizen. There is no statistical information on rural poverty or targeted vulnerable populations in Ulaanbaatar, but there is evidence that herders have better access to electricity and peripheral dwellers of Ulaanbaatar have more access to potable water. Pillar 3: Encouraging Transparent and Prudent Mining Investments and a More Competitive and Stable Medium-term Business Investment Climate 59. Under this pillar, IDA was to support Mongolia in encouraging sustainable and efficient mining investments, managing large investments in supporting infrastructure, and providing a stable medium- term business investment climate. 60. Encouraging sustainable and efficient mining investments. Mining investments increased following Mongolia’s agreements with foreign investors to develop Oyu Tolgoi, the country’s largest copper and gold deposit expected to account for one third of GDP by 2020, as well as Tavan Tolgoi, a coal deposit with estimated reserves of 6.4 million tons. On October 19, 2010, the EITI Board designated Mongolia as EITI Compliant. 61. IDA’s DPC1 (FY09) supported, among other things, the development of the model agreement for exploitation used for Oyu Tolgoi. IDA’s DPC2 (FY11) followed up on mining development issues, including mineral licensing, EITI compliance, and dissemination of environmental impact assessments. 62. Managing large investments in supporting infrastructure. The WEF reports some improvement in the quality of Mongolia’s overall infrastructure from 1.7 over 7.0 in 2008-09 to 2.5 in 2011-12. The improvement reflects Mongolia’s increased public investment from 2.7 percent of GDP in 2001-05 to 6.7 percent in 2006-10. For Official Use Only CAS and ISNCR Review 10 Independent Evaluation Group 63. IDA provided support to Mongolia through the Mining Infrastructure Support Project (FY11); the project was approved in May 2011, and not enough time has elapsed to show results. IDA also delivered two pieces of AAA. 64. Providing a stable medium-term business investment climate. From 2008 to 2011, Mongolia improved its WEF competitiveness ratings, with the overall index increasing from 3.7 over 7.0 to 3.8. The change reflected improvements in basic requirements (institutions, infrastructure, macroeconomic stability, and health/education) as well as in efficiency enhancers (e.g., goods market efficiency), and less so innovation and sophistication factors. 65. IDA prepared a Corporate Governance ROSC in 2009. There are three ongoing IFC AS projects, but there are no outcomes associated with them yet. Two of these advisory services were in corporate governance and in business inspections. 66. IEG rates the outcome of the WBG strategy under Pillar 3 of the ISN as satisfactory. The EITI Board designated Mongolia as EITI Compliant in 2010. Moreover, Mongolia improved the quality of its infrastructure and became more competitive, providing a better environment for investors. Pillars IEG Rating Pillar 1 of the CAS: Consolidating the transition Moderately Unsatisfactory Pillar 2 of the CAS: Reducing vulnerabilities Moderately Satisfactory Pillar 3 of the CAS: Alignment of policies and resources with Unsatisfactory development results Pillar 1 of the ISN: Improving macro and fiscal sustainability in Moderately Unsatisfactory a mineral-based economy Pillar 2 of the ISN: Protecting the poor and vulnerable people Moderately Satisfactory Pillar 3 of the ISN: Encouraging transparent and prudent mining investments and a more competitive and stable Satisfactory medium-term business investment climate 4. Overall IEG Assessment Overall Outcome: Moderately Satisfactory Bank Performance: Moderately Satisfactory IFC Performance: Moderately Satisfactory MIGA Performance: Moderately Unsatisfactory Overall outcome: 67. IEG rates overall outcome of the WBG’s strategy during the CAS and ISN periods as moderately satisfactory. Mongolia made progress in improving the transparency of the budget, including by improving the information systems, and approved a fiscal stability law. Yet fiscal sustainability remains to be strengthened, because Mongolia has yet to implement the law in line with its spirit, move towards a medium-term anti-cyclical fiscal framework, improve the quality and efficiency of expenditures and limit these in line with sustainability. The country improved the quality of its infrastructure and became more competitive during the CAS period, providing a better environment for investors. The Extractive Industries Transparency Initiative (EITI) Board designated Mongolia as EITI Compliant in 2010. Mongolia’s banking system is perceived as more sound by external observers, but the fast rate of credit growth raises questions about its sustainability. Mongolia recently adopted a new system of targeted social transfers that will only become effective in June 2012, replacing transferring mining revenues to citizens as a fixed cash amount to every citizen. There is no statistical For Official Use Only CAS and ISNCR Review 11 Independent Evaluation Group information on targeted groups, such as rural dwellers or vulnerable populations in Ulaanbaatar. However, Mongolia is providing its herder population with electricity and risk coverage through insurance, and its urban population with better potable water coverage and expanded access to information and communications technology (ICT). The country also adopted new environmental laws and standards, but the degree of implementation is not known. Environmental impact assessments are now published. Two strategy areas lacking sustained commitment by the government are the WBG’s recommended system of revenue transfers to the population and the Economic Growth Support and Poverty Reduction Strategy (EGSPRS). The change in the revenues transfers system is very recent and Mongolia dropped the EGSPRS. Mongolia has only recently begun to play a stronger role in coordinating its external development partners. IEG notes that the recent approval of the new system of targeted social transfers is a significant development that has yet to be implemented outside the review period, but assumes that it has been for the purposes of the rating. IDA Performance: 68. IEG rates IDA’s performance as moderately satisfactory. IDA responded in a flexible and timely manner to help Mongolia overcome the effects of the global financial crisis and helped Mongolia become EITI compliant. The performance of IDA’s portfolio in Mongolia, as measured by commitments at risk, was better than the averages for EAP region and the World Bank. IDA also coordinated well with other development partners and paid adequate attention to safeguard and fiduciary issues. IDA’s strategy was broadly in line with Mongolia’s. However, there are two areas where there was a clear and substantive difference of view—the medium-term vision of the country’s development and the system of transferring mining revenues to citizens. Only very recently has Mongolia moved on the system of transferring revenues. The relevance of design of the strategy was lessened because the link between objectives and policies and actions to achieve them was weak, as was the case with fiscal sustainability and the adoption of a fiscal responsibility law with no traction. In addition, the monitoring and evaluation framework of the strategies was weak, with objectives about which there is but scant information, and others where the framework was lacking, as was the case with the crosscutting theme of governance. IFC Performance: 69. IEG rates IFC performance as moderately satisfactory. On the investment side, during the financial crisis, IFC kept its investee banks capitalized, and helped maintain the flow of trade financing. On the advisory services side, the results have been mixed, judging by the self-evaluations. The financial sector reform effort was moderately unsuccessful, as could be expected from the broad coverage built into it from the start. IEG has no information on the potential conflict of interest stemming from policy advice on the banking system and the investments that IFC made in that sector. MIGA Performance: 70. IEG rates MIGA performance as moderately unsatisfactory. Except for one operation in FY06 that was canceled in FY07, MIGA’s facilities remained unutilized during the review period. By contrast, public and private insurers provided investment insurance coverage amounting to US$ 101.2 million in the 2009-11 period. 5. Assessment of CAS and ISN Completion Report 71. The CAS-ISNCR provides an informative account, but failed to include essential information, such as the recent adoption of a new system of targeted social transfers or the contribution of some interventions to some objectives. Moreover, it could have provided a fuller analysis of results of the ISN objectives. For example, on improving macro and fiscal sustainability, the CAS and ISNCR could have discussed the relationship between ISN benchmarks and actual fiscal sustainability trends. In some areas covered by the ISN, the CAS and ISNCR did not provide analysis or information. Finally, For Official Use Only CAS and ISNCR Review 12 Independent Evaluation Group the CAS and ISNCR could have substantiated better its overall rating, given the low level of achievements in the CAS period. 6. Findings and Lessons 72. IEG stresses three points. First, the WBG could ground its strategies in a deeper understanding of the political environment and the constraints that it entails. Neglecting these constraints may lead to unrealistic objectives, as was the case with Mongolia’s medium-term strategy or the system of transfers. Second, to ensure their development effectiveness, strategies should call for their frequent monitoring and evaluation, so that adjustments and corrections can be made on a timely manner. Adopting objectives that cannot be monitored due to the absence of a results framework or unavailable data, places the country team at a disadvantage to deliver effective development results. Third, an ISN as a strategy instrument needs to be justified by something different than a global economic crisis, because ISNs are meant to help the WBG move forward with client countries in cases of “transition from conflict or political crisis, countries going through an unusually uncertain period, and countries where the Bank is reengaging after a prolonged hiatus� (OPCS Guidance website). Mongolia’s ISN could have validly discussed more clearly the reasons for using this strategy instrument. Annexes CAS and ISNCR Review 13 Independent Evaluation Group Annex Table 1a: Mongolia Planned and Actual Lending, FY05-11 Annex Table 1b: Grants and Trust Funds Active in FY05-11 Annex Table 2: Planned and Actual Analytical and Advisory Work, FY05-11 Annex Table 3a: IEG Project Ratings for Mongolia, FY05-11 Annex Table 3b: IEG Project Ratings for Mongolia and Comparators, FY05-11 Annex Table 4: Portfolio Status for Mongolia and Comparators, FY05-11 Annex Table 5: IDA Net Disbursements and Charges Summary Report for Mongolia FY05-11 Annex Table 6: Total Net Disbursements of Official Development Assistance and Official Aid, 2005-2009 Annex Table 7: Economic and Social Indicators for Mongolia and Comparators, 2005 - 2010 Annex Table 8: Mongolia - Millennium Development Goals Annex Table 9: List of IFC’s investments in Mongolia that were active during FY05- 11 (US$’000) Annex Table 10 List of IFC’s Advisory Services in Mongolia, FY05-11 Annex Table 11: List of MIGA’s Operations in Mongolia, FY05-FY11 Annex Table 12: Summary of Achievements of the ISN Objectives Annexes CAS and ISNCR Review 15 Independent Evaluation Group Annex Table 1a: Mongolia Planned and Actual Lending, FY05-11 Approval Proposed Approved Project ID Project Proposed FY FY Amount Amount Programmed projects PRSC-II: PSD Issues 2005 Dropped 10 P088816 Index-Based Livestock Insurance Project 2005 2005 5 7.75 P088992 Private Sector Development Credit-II 2005 2005 4 10.57 PRSC-III: HD Issues 2006 Dropped 10 PRSC-IV 2007 Dropped 9 P096439 Second Sustainable Livelihoods Project 2007 2007 8 19.8 P101446 Judicial and Public Sector Reform TA 2007 2008 3 3.35 PRSC-V 2008 Dropped 9 Infrastructure Project 2008 Dropped 8 Land Administration and Management Project/ Forestry Project 2008 Dropped 6 P113160 MONSTAT (Statistical Development) 2009 2009 2 2 P115737 Development Policy Credit 1 (DPC1) 2009 40 40.0 P119825 Multi-Sectoral TA Project 2010 28 12 P117421 Development Policy Credit 2 (DPC-2) 2011 20 29.7 Total Programmed projects CAS-ISN FY05-11 162.0 125.2 Non-programmed projects P098426 Governance Assistance Project 2006 14.0 P099321 Renewable Energy for Rural Access Project (REAP) 2007 3.5 P108768 Mining Sector TA Project 2008 9.3 Additional Financing for Index-Based Livestock P115119 Insurance 2010 10.0 P116166 Additional Financing for Energy Sector 2010 12.0 P118109 Mining Infrastructure Investment Support Project 2011 25.0 Second Sustainable Livelihoods Project Additional P125504 Financing 2011 11 Total Non-programmed projects 84.8 Total programmed and non- programmed projects CAS-ISN FY05-11 162.0 210.0 Closing Approved On Going Projects During CAS Period Approval FY FY Amount P049789 Private Sector Development Credit Project 1999 2005 12.0 P068071 Mongolia Financial Sector Adjustment Credit 2000 2005 32.0 Mongolia Fiscal Accounting Technical Assistance P051855 (c 3081) 1998 2005 5.0 P067770 Sustainable Livelihoods Project 2002 2008 18.7 P056200 Transport Development Project 2001 2008 34.0 P074001 Legal and Judicial Reform Project 2002 2008 5.0 P071023 Financial Capacity Development Project 2002 2009 5.0 P077778 TA : Economic Capacity Building TA 2003 Active 0.0 P074591 Second Ulaanbaatar Services Improvement Project 2004 Active 18.0 P040907 Energy Sector Project 2001 30 Total On Going projects CAS-ISN FY05-11 159.7 Total projects CAS-ISN FY05-11a/ 369.7 Source: Mongolia 2004 CAS, 2009 ISN and WB Business Warehouse Tables 2a.1, 2a.4 and 2a.7 as of 8/15/2011. a/ Excluding Grants and Special Financing Projects. Annexes CAS and ISNCR Review 16 Independent Evaluation Group Annex Table 1b: Grants and Trust Funds Active in FY05-11 Proposed Approval Proposed Approved Project ID Project Product Line FY FY Amount Amount Biodiversity Loss and Permafrost Melt in Lake P072391 Hovsgol National Park Project Global Environment Facility 2001 0.83 P068108 Stove Improvement Project Global Environment Facility 2001 0.75 Institutional Development P078023 TF051049 Fund 2002 0 Strengthening Capacity of the State Audit and Institutional Development P079000 Inspection Committee Project Fund 2002 0 Strengthening Env Mgmt Capacity at National and Institutional Development P078358 Local Levels Fund 2002 0 Strengthening the Accounting Capacity of the Institutional Development P082624 Budget Entities in MongoliaP051855 Fund 2003 0 Institutional Development P084717 Improvement Efficiency of Public Procurement Fund 2003 0 Strengthening Expenditure Management in Mongolia: Building Institutional Capacity for Wage Institutional Development P084345 Bill and Establishment Control Fund 2004 0 Mongolia: Strengthening Expenditure Management Institutional Development P088221 Capacity in Ulaan Baatar Municipality Fund 2004 Netherlands Trust Fund for the Environment in P092609 Mongolia Recipient Executed Activities 2005 4.02 International Development P096328 Rural Education and Development Project Association Grant 2006 2006 3 5 International Development P092965 ICT Infrastructure Development Project Association Grant and Japan 2006 2006 13 10 Strengthening the Capacity of Mongolia National Institutional Development P099496 Audit Office Fund 2006 0 Institutional Development P099411 Standardization of Administration Regulations Fund 2006 0 International Development P096439 Second Sustainable Livelihoods Project Association Grant 2007 13.2 P084766 GEF Renewable Energy for Rural Access Project Global Environment Facility 2007 3.5 Mongolia: Updating the Statistical Master Plan and P108935 preparing financing strategy Recipient Executed Activities 2007 0.07 P102488 Mongolia Universal Access to Telecom OBA Recipient Executed Activities 2007 0.26 P104025 Strengthening Institutional Statistical System Recipient Executed Activities 2007 0.2 Mongolia: Education For All Fast Track Initiative P108776 (EFA-FTI) Catalytic Trust Fund Recipient Executed Activities 2007 8.2 International Development P101446 Judicial and Public Sector Reform TA Association Grant and Japan 2008 2.6 P099936 Mongolia-EITI Recipient Executed Activities 2008 0.3 P104867 Preparation for Assistance to Mongolia on AHI". Recipient Executed Activities 2008 4 Netherlands-Mongolia TF for Environmental Reform P110253 (RE) Recipient Executed Activities 2008 2.44 Capacity Building for Development and P118572 Implementation of Carbon Finance Projects Recipient Executed Activities 2008 0.48 Grant to Business Talent Mongolian Women's P115005 Incubator Recipient Executed Activities 2009 0.05 P117011 Mongolia Phase II: EITI Implementation Recipient Executed Activities 2009 0.28 P115448 Value Chain Development for Textile Products Recipient Executed Activities 2009 0.2 P117011 Mongolia Phase II: EITI Implementation Recipient Executed Activities 2009 0.28 Technical Assistance to Government to support P118170 policy reforms for DPC2 Recipient Executed Activities 2010 0.5 MONSTAT: Strengthening the National Statistical P122953 System of Mongolia Recipient Executed Activities 2011 0.65 Community-led Infrastructure Development for the P125863 Urban Poor in Ulaanbaatar Phase 2 Recipient Executed Activities 2011 2.77 Solid Waste Management Demonstration Project for P122966 the Urban Poor in Ulaanbaatar Recipient Executed Activities 2011 2 Total Grants and Trust Funds CAS-ISN FY05-11 16.0 62.6 Source: Mongolia 2004 CAS, 2009 ISN and WB Business Warehouse Table 2a.1, 2a.4 and 2a.7 as of 8/15/2011. Annexes CAS and ISNCR Review 17 Independent Evaluation Group Annex Table 2: Planned and Actual Analytical and Advisory Work, FY05-11 Project ID Proposed Delivered to Economic and Sector Work Output Type FY Client FY Planned (CAS-ISN FY05-11) P090388 Poverty Assessment 2005 2006 Report P097366 Public Expenditure Tracking Survey 2005 2007 Report P085018 PSD Strategy (Investment Climate Assessment/Supply Chains) 2005 2006 Report P088898 Integrated Infrastructure Strategy 2005 2007 Report Social Sector Strategy 2005 Dropped P087981 Regional Development Policy Note 2005 2006 Report P085062 Financial Sector Mid-term Review 2005 2006 Policy Note Environment Monitor 2005 Dropped Country Procurement Assessment Report 2006 Dropped Country Financial Accountability Assessments 2006 Dropped P096227 Country Economic Memorandum/Development Policy Review (Sources of Growth) 2006 2007 Report Decentralization Study 2006 Dropped Livestock Support Services Study 2006 Deferred Social Sector AAA 2006 Dropped Judicial Reform Review 2006 Dropped Social Monitor 2006 Dropped Environment and social development AAA Dropped P100967 Public Expenditure and Financial Management Review 2007 2008 Report Natural Resource Use Strategy 2007 Dropped ICT Strategy 2007 Dropped Infrastructure AAA 2007 Dropped Environment Monitor 2007 Dropped Investment Climate/Private Sector Assessment 2008 Dropped P105284 Financial Sector Assessment 2008 2007 Report Human Development Assessment 2008 Dropped Social Monitor 2008 Dropped P111498 Ulaanbaatar Air Pollution Discussion Note 2009 Report P114995 Banking Sector Vulnerabilities 2009 Policy Note P114155 Civil Service Policy Note 2009 Policy Note P114833 Corporate Governance ROSC Assessment 2009 Report P113933 Ger Area Development Strategy 2009 Report P108777 ROSC Accounting and Auditing Review 2008 Report P096442 Livestock Sector Study 2009 Report P107688 Policy Notes on Pension Reforms 2008 Policy Note P115739 Poverty Assessment 2010 Policy Note Public Expenditure and Financial Management Review Deferred P110258 South Gobi Infrastructure & Environment AAA 2011 Report Non-Planned P091204 Enabling Environment for Social Accountability in Mongolia 2005 Report P087538 Gender Assessment 2005 Policy Note P085584 Health Policy Note 2005 Report P096567 Poverty-Focused Policy Notes 2005 Policy Note P097368 MN-Evaluation of Poverty-targeted program, Dev of M&E System of social program 2006 Policy Note P095076 Migrants Remittances to Mongolia 2006 Report P090232 Review of the Environment & Social Policies in Mining 2006 Report P101259 Mongolia Monitors (for GOM-External Partners Technical Meetings) 2007 Policy Note P108781 MN - Mongolia Quarterly FY08 2008 Policy Note P113165 FY09 Quarterly Report 2009 Policy Note P117101 Meat Sector Policy Note 2009 Policy Note P113761 Policy Note on Higher Education 2010 Policy Note P116097 Public Investment Planning 2010 Policy Note P118704 Enhancing Policies and Practices for Ger Area Development 2010 Report P115380 Health Results-Based Financing 2010 Knowledge-Sharing Forum P117100 Mongolia Meat Sector Policy Note 2010 Policy Note Technical Assistance Planned (CAS-ISN FY05-11) P118644 Strengthening Parliament, Media & Civil Society 2006 2011 "How-To" Guidance P111114 Trade Facilitation and Integration 2007 2009 Institutional Development Plan Non-Planned P079705 Support to the Association of Mayors 2005 "How-To" Guidance P085596 Dialogue and Support of Master Plan & Fast Track Initiative 2006 Knowledge-Sharing Forum P095234 MN-Dialogue & Support of Master Plan & Fast Track Initiative 2006 Institutional Development Plan P097428 Mining Policy Dialogue/Regulatory Reforms 2006 Knowledge-Sharing Forum P097427 Mongolia: Mining Policy Dial/TA Reg Reform 2006 Client Document Review P086260 Secondary Cities Development Strategy 2006 Institutional Development Plan P102914 Financial Sector Technical Assistance 2008 "How-To" Guidance P118869 Capacity Building for Dev and Implementation of Carbon Finance Projects 2008 "How-To" Guidance P099764 Mongolia - Rural Energy Project 2008 "How-To" Guidance P100209 Mongolia Urban Heat Pricing & Regulation 2009 "How-To" Guidance P110814 Support of Mongolian Public Procurement Reform 2009 Knowledge-Sharing Forum P110077 MN - Energy Efficient Heating in Poor Peri Urban Areas of Ulaanbaatar 2009 Model/Survey P100112 Mitigation Sector Reform and Tariff Adjustment 2010 "How-To" Guidance P115785 AML/CFT Capacity Building 2011 "How-To" Guidance Source: Mongolia 2004 CAS, 2009 ISN and WB Business Warehouse Table 8.1.4 as of 8/15/2011 . Annexes CAS and ISNCR Review 18 Independent Evaluation Group Annex Table 3a: IEG Project Ratings for Mongolia, FY05-11 Total IEG Risk to Exit Project Project Evaluated IEG Outcome Development FY Name ID (US$M) Outcome * MN-Priv. Sec. P049789 2005 Devt CR 11.1 Moderately Satisfactory # MN-Fiscal Technical P051855 2005 Assistance 5.3 Moderately Satisfactory # MN-Financial Sector P068071 Adjustment 2005 Credit 33.3 Moderately Satisfactory # MN-Transport P056200 2008 Development 34.4 Moderately Satisfactory Significant MN - Sustainable P067770 2008 Livelihoods 22.0 Satisfactory Moderate MN-Mongolia P074001 2008 Legal Reform 5.9 Satisfactory Negligible to Low MN-Financial Capacity Dev. P071023 2009 Project 4.3 Moderately Satisfactory Moderate MN- Development P115737 2010 Policy Credit 0.0 Moderately Satisfactory Moderate Source: WB Business Warehouse Tables 4a.5 and 4a.6 as of 9/7/2011. * With IEG new methodology for evaluating projects, institutional development impact and sustainability are no longer rated separately. Annex Table 3b: IEG Project Ratings for Mongolia and Comparators, FY05-11 Total Total RDO % Outcome % Outcome RDO % Moderate Region Evaluated Evaluated Moderate or Sat ($) % Sat (No) or Lower ($) * ($M) (No) Lower (No) * Mongolia 116.47 8.00 100.00 100.00 48.42 80.00 Kazakhstan 409.33 6.00 100.00 100.00 100.00 100.00 Cambodia 158.73 9.00 82.03 44.44 29.31 14.29 Vietnam 1,822.45 23.00 100.00 100.00 88.62 76.19 Kyrgyz Republic 242.08 13.00 68.05 69.23 7.43 10.00 EAP 17,508.30 199.00 93.07 85.35 90.97 73.19 World 87,648.42 1,432.00 84.20 77.28 72.59 61.64 Source: WB Business Warehouse Tables 4a.5 and 4a.6 as of 9/7/2011. * With IEG new methodology for evaluating projects, institutional development impact and sustainability are no longer rated separately. Annexes CAS and ISNCR Review 19 Independent Evaluation Group Annex Table 4: Portfolio Status for Mongolia and Comparators, FY05-11 Fiscal year 2005 2006 2007 2008 2009 2010 2011 Mongolia # Proj 9 12 14 13 14 14 13 # Proj At Risk 0 0 0 1 0 1 1 % At Risk 0 0 0 8 0 7 8 Net Comm Amt 137 163 203 160 197 191 198 Comm At Risk 0 0 0 18 0 5 5 % Commit at Risk 0 0 0 11 0 3 3 Kazakhstan # Proj 8 10 10 12 11 14 14 # Proj At Risk 0 2 3 2 3 2 3 % At Risk 0 20 30 17 27 14 21 Net Comm Amt 518 653 568 618 2,598 3,663 2,666 Comm At Risk 0 124 94 59 83 48 67 % Commit at Risk 0 19 17 10 3 1 2 Kyrgyz Republic # Proj 16 17 20 17 19 19 19 # Proj At Risk 3 0 2 1 1 0 4 % At Risk 19 0 10 6 5 0 21 Net Comm Amt 244 232 268 196 206 238 359 Comm At Risk 60 0 40 8 7 0 102 % Commit at Risk 25 0 15 4 3 0 28 EAP # Proj 229 229 223 232 248 258 267 # Proj At Risk 14 14 24 29 41 45 52 % At Risk 6 6 11 13 17 17 19 Net Comm Amt 20,193 19,453 18,927 19,757 24,875 27,721 29,281 Comm At Risk 842 804 1,626 1,722 2,203 2,535 3,359 % Commit at Risk 4 4 9 9 9 9 11 World # Proj 1,455 1,468 1,485 1,525 1,552 1,590 1,595 # Proj At Risk 233 199 243 276 344 366 337 % At Risk 16 14 16 18 22 23 21 Net Comm Amt 95,704 95,194 100,357 106,762 131,076 158,287 168,249 Comm At Risk 12,698 11,000 15,354 18,428 19,930 28,186 22,979 % Commit at Risk 13 12 15 17 15 18 14 Source: WB Business Warehouse Table 3a.4 as of 9/7/2011. Annexes CAS and ISNCR Review 20 Independent Evaluation Group Annex Table 5: IDA Net Disbursements and Charges Summary Report for Mongolia, FY05-11 (in US$) FY Disb. Amt. Repay Amt. Net Amt. Charges Fees Net Transfer 2005 40,908,321.46 1,820,661.75 39,087,659.71 1,968,169.45 331,293.98 36,788,196.28 2006 11,270,081.03 1,954,562.85 9,315,518.18 2,060,731.37 272,423.18 6,982,363.63 2007 19,965,030.43 2,722,081.83 17,242,948.60 2,246,493.26 175,943.52 14,820,511.82 2008 21,570,674.39 3,546,679.74 18,023,994.65 1,178,798.72 1,368,360.36 15,476,835.57 2009 23,100,975.45 3,508,138.89 19,592,836.56 0.00 2,512,728.94 17,080,107.62 2010 69,690,745.64 3,829,949.06 65,860,796.58 0.00 2,765,361.36 63,095,435.22 2011 59,761,592.98 5,010,887.44 54,750,705.54 0.00 2,982,580.82 51,768,124.72 Total (05-11) 246,267,421.38 22,392,961.56 223,874,459.82 7,454,192.80 10,408,692.16 206,011,574.86 Source: WB Loan Kiosk, Net Disbursement and Charges Report as of 9/7/2011. Annexes CAS and ISNCR Review 21 Independent Evaluation Group Annex Table 6: Total Net Disbursements of Official Development Assistance and Official Aid, 2005-2009(in US$ million) 2005 2006 2007 2008 2009 2005-2009 Bilaterals Australia 1.52 1.98 2.96 1.74 7.65 15.85 Austria 3.26 0.45 0.7 0.88 1.14 6.43 Belgium 0.11 0.05 6.43 .. 0.07 6.66 Canada 1.49 1.32 2.09 1.75 2.66 9.31 Denmark 0.28 0.49 0.42 0.81 0.6 2.6 Finland 0.25 0.21 0.53 0.58 1.02 2.59 France 1.24 1.4 0.74 0.89 2.07 6.34 Germany 28.17 29.73 30.31 32.36 25.39 145.96 Greece .. .. 0.01 0.01 0.01 0.03 Ireland 0.06 0.02 .. 0.29 .. 0.37 Italy 0.06 14 0.21 0.18 0.86 15.31 Japan 56.48 46.92 51.55 60.7 74.68 290.33 Korea 4.66 5.4 12.9 16.47 32.26 71.69 Luxembourg 0.3 0.54 1.58 2.75 1.45 6.62 Netherlands 7.49 8.02 11.14 6.55 9.62 42.82 New Zealand 0.33 0.33 0.27 0.29 0.38 1.6 Norway 1.73 1.08 0.97 1.21 1.28 6.27 Spain .. 0.89 8.96 4.05 -1.27 12.63 Sweden 2.46 2.62 2.24 1.24 1.31 9.87 Switzerland 2.68 3.71 5.33 8.18 10.37 30.27 United Kingdom 0.27 0.44 1.17 1.18 0.71 3.77 United States 18.53 12.42 12.7 35.38 34.93 113.96 DAC Countries, Total 131.37 132.02 153.21 177.49 207.19 801.28 Czech Republic 3.04 2.72 4.04 6 6.81 22.61 Hungary 0.02 0.01 0.41 0.04 0.11 0.59 Israel 0.06 0.02 0.02 0.01 .. 0.11 Poland 0.19 0.04 0.27 0.4 0.12 1.02 Slovak Republic 0.82 0.64 0.29 .. 0.08 1.83 Thailand .. 0.1 0.13 0.16 0.03 0.42 Turkey 10.32 10.22 10.51 5.33 6.96 43.34 United Arab Emirates 6.89 4.48 0.9 -0.72 -0.62 10.93 Arab Countries 8.36 6.08 5.37 0.44 5.91 26.16 Other Donor Countries, Total .. .. .. .. 2.69 2.69 Non-DAC Countries, Total 29.7 24.31 21.94 11.66 22.09 109.7 Multilaterals AsDF (Asian Dev. Fund) 25.82 23.35 17.14 17.27 65.15 148.73 EBRD .. 0.06 0.34 0.44 .. 0.84 GEF .. .. 10.7 .. 2.87 13.57 GAVI .. .. 0.31 0.95 0.56 1.82 Global Fund 2.43 1.7 3.01 4.42 6.2 17.76 IAEA .. 0.59 0.34 0.58 0.4 1.91 IDA 11.91 11.48 21.15 17.14 61.06 122.74 IFAD 3.44 2.08 2.58 2.06 1.42 11.58 IMF (SAF,ESAF,PRGF) -5.92 -5.95 -6.58 -5.04 -6.51 -30 Nordic Dev. Fund 2.56 2.92 3.26 1.72 0.22 10.68 UNAIDS 0.08 0.03 0.23 0.38 .. 0.72 UNDP 1.41 1.84 2.3 2.44 2.45 10.44 UNFPA 1.02 1.4 2.1 1.91 1.49 7.92 UNHCR 0.05 .. .. 0.09 0.21 0.35 UNICEF 1.13 0.94 1.16 1.15 0.78 5.16 UNTA 3.2 2.38 3.2 1.2 1.2 11.18 EU Institutions 6.36 3.11 2.24 10.6 5.4 27.71 Multilateral Agencies, Total 53.49 45.93 63.48 57.31 142.9 363.11 All Partners, Total 214.56 202.26 238.63 246.46 372.18 1,274.09 Source: OECD DAC Online database, Table 2a. “Destination of Official Development Assistance and Official Aid – Disbursements�, as of 9/7/2011. Annexes CAS and ISNCR Review 22 Independent Evaluation Group Annex Table 7: Economic and Social Indicators for Mongolia and Comparators, 2005 - 2010 Kyrgyz Mongolia Mongolia Kazakhstan EAP World Series Name Republic 2005 2006 2007 2008 2009 2010 Average 2005-2009 Growth and Inflation GDP growth (annual %) 7.25 8.56 10.25 8.90 -1.27 6.14 6.64 6.80 3.57 4.02 2.53 GDP per capita growth (annual %) 5.87 7.01 8.55 7.15 -2.88 4.43 5.02 5.34 2.67 3.31 1.36 GNI per capita, PPP (current international $) 2,800 3,120 3,450 3,750 3,630 3,630 3,397 9,423 1,992 8,230 10,160 GNI, Atlas method (current US mil. $) 2,264.23 2,857.21 3,640 4,725 4,782 5,106 3,896 84,465 3,591 12,644,528 54,890,298 Inflation, consumer prices (annual %) 12.72 5.10 9.05 25.06 6.28 10.15 11.39 9.75 9.91 .. .. Composition of GDP (%) Agriculture, value added (% of GDP) 22.06 19.62 20.46 21.41 19.63 18.09 20.21 6.05 31.25 c/ 3.66 c/ 2.94 c/ Industry, value added (% of GDP) 36.21 43.02 41.89 34.38 33.02 36.84 37.56 41.47 20.26 c/ 32.65 c/ 27.67 c/ Services, etc., value added (% of GDP) 41.73 37.36 37.65 44.21 47.35 45.07 42.23 52.48 48.48 c/ 63.65 c/ 69.37 c/ Gross fixed capital formation (% of GDP) 27.94 33.30 35.11 36.22 28.89 37.59 33.17 28.85 21.40 25.97 b/ 21.16 b/ Gross domestic savings (% of GDP) 32.69 41.84 40.05 30.40 27.11 32.64 34.12 43.40 -9.08 29.27 b/ 21.39 b/ External Accounts Exports of goods and services (% of GDP) 58.77 59.44 59.61 54.02 50.28 56.81 56.49 49.70 47.38 32.36 b/ 27.57 b/ Imports of goods and services (% of GDP) 63.61 53.49 58.27 67.18 57.54 66.38 61.08 37.57 78.80 29.63 b/ 27.71 b/ Current account balance (% of GDP) 3.34 6.53 4.06 -12.27 -7.46 -14.57 -3.40 -1.38 -6.25 .. .. External debt (% of GDP) 58.85 46.61 43.88 35.75 55.75 .. 48.17 99.41 b/ 70.43 b/ .. .. Total debt service (% of GNI) 1.73 1.44 1.34 1.48 2.55 .. 1.71 28.90 b/ 5.58 b/ .. .. Total reserves in months of imports 2.45 4.23 4.58 1.99 5.58 6.10 4.16 4.20 4.36 14.27 11.84 Fiscal Accounts b/ Revenue (% of GDP) .. 23.35 23.21 25.46 26.46 .. 24.62 15.69 17.37 e/ Expenditure (on a commitment basis) (% of GDP) .. 16.81 30.65 16.60 26.06 .. 22.53 31.84 26.46 e/ Overall Balance (% of GDP) .. 6.54 -7.44 8.86 0.40 .. 2.09 -16.15 -9.09 e/ Total Public Debt (% of GDP) 50.49 43.51 59.51 .. 51.17 6.83 54.6 e/ Social Indicators Health Life expectancy at birth, total (years) a/ 66.05 66.58 67.06 67.49 67.86 .. 67.01 66.81 68.22 72.55 68.88 Immunization, DPT (% of children ages 12-23 months) a/ 99.00 99.00 95.00 96.00 95.00 .. 96.80 97.40 94.80 89.86 80.81 Improved sanitation facilities (% of population with access) a/ 49.00 .. .. 50.00 .. .. 49.50 97.00 93.00 61.90 59.95 Improved water source (% of population with access) a/ 73.00 .. .. 76.00 .. .. 74.50 95.50 88.50 87.92 86.09 Mortality rate, infant (per 1,000 live births) a/ 35.20 33.20 31.40 29.60 27.80 26.20 30.57 31.18 35.47 21.10 43.55 Population Population, total (in millions) 2.55 2.58 2.62 2.67 2.71 2.76 2.65 15.64 5.26 2,165.40 6,648.89 Population growth (annual %) 1.30 1.43 1.55 1.62 1.64 1.62 1.53 1.39 0.87 0.69 1.16 Urban population (% of total) 56.70 56.86 57.02 57.18 57.34 57.50 57.10 57.80 36.20 46.83 49.79 Education School enrollment, preprimary (% gross) 45.42 52.90 53.43 57.35 59.01 .. 53.62 39.69 b/ 15.26 b/ 46.21 b/ 42.78 b/ School enrollment, primary (% gross) 95.77 98.79 98.08 101.51 110.09 .. 100.85 106.80 95.09 b/ 109.89 b/ 105.88 b/ School enrollment, secondary (% gross) 92.17 90.55 .. .. 92.25 .. 91.65 94.72 85.63 b/ 74.79 b/ 66.43 b/ a/ The data for these indicators are available with the same frequency over the period of 2005-2010 as in case of Mongolia. b/ 2010 data are not available. c/ 2009 and 2010 data are not available. d/ 2005, 2008-2010 data are not available. e/ 2005 data are not available and the total public debt includes only external debt. Source: WB World Development Indicators for all indicators excluding those noted . Annexes CAS and ISNCR Review 23 Independent Evaluation Group Annex Table 8: Mongolia - Millennium Development Goals 1990 1995 2000 2009 Goal 1: Eradicate extreme poverty and hunger Employment to population ratio, 15+, total (%) 50 52 51 52 Employment to population ratio, ages 15-24, total (%) 39 42 39 35 Income share held by lowest 20% .. 7.3 7.4 7.1 Malnutrition prevalence, weight for age (% of children under 5) .. .. 11.6 .. Poverty gap at $1.25 a day (PPP) (%) .. 5 4 0 Poverty headcount ratio at $1.25 a day (PPP) (% of population) .. 19 15 2 Prevalence of undernourishment (% of population) 28 33 27 26 Vulnerable employment, total (% of total employment) .. .. 57 .. Goal 2: Achieve universal primary education Literacy rate, youth female (% of females ages 15-24) .. .. 98 97 Literacy rate, youth male (% of males ages 15-24) .. .. 97 93 Persistence to last grade of primary, total (% of cohort) .. .. 89 95 Primary completion rate, total (% of relevant age group) .. 74 90 93 Total enrollment, primary (% net) .. 86 97 99 Goal 3: Promote gender equality and empower women Proportion of seats held by women in national parliaments (%) 25 8 8 4 Ratio of female to male primary enrollment (%) 102 105 102 99 Ratio of female to male secondary enrollment (%) 114 137 122 108 Ratio of female to male tertiary enrollment (%) 189 232 176 157 Share of women employed in the nonagricultural sector (% of total nonagricultural employment) .. 47.9 50.4 53.1 Goal 4: Reduce child mortality Immunization, measles (% of children ages 12-23 months) 92 85 92 94 Mortality rate, infant (per 1,000 live births) 73 61 49 24 Mortality rate, under-5 (per 1,000) 101 82 63 29 Goal 5: Improve maternal health Adolescent fertility rate (births per 1,000 women ages 15-19) .. .. 10 16 Births attended by skilled health staff (% of total) .. .. 97 99 Contraceptive prevalence (% of women ages 15-49) .. 65 67 55 Maternal mortality ratio (modeled estimate, per 100,000 live births) 130 110 93 65 Pregnant women receiving prenatal care (%) .. .. 97 100 Unmet need for contraception (% of married women ages 15-49) .. .. .. .. Goal 6: Combat HIV/AIDS, malaria, and other diseases Children with fever receiving antimalarial drugs (% of children under age 5 with fever) .. .. .. .. Condom use, population ages 15-24, female (% of females ages 15-24) .. .. .. .. Condom use, population ages 15-24, male (% of males ages 15-24) .. .. .. .. Incidence of tuberculosis (per 100,000 people) 210 210 210 210 Prevalence of HIV, female (% ages 15-24) .. .. .. .. Prevalence of HIV, male (% ages 15-24) .. .. .. 0 Prevalence of HIV, total (% of population ages 15-49) .. .. .. 0 Tuberculosis case detection rate (all forms) 36 60 63 83 Goal 7: Ensure environmental sustainability CO2 emissions (kg per PPP $ of GDP) 2.9 2.3 1.8 1.2 CO2 emissions (metric tons per capita) 4.5 3.5 3.1 4 Forest area (% of land area) 7 7 7 6 Improved sanitation facilities (% of population with access) .. 49 49 50 Improved water source (% of population with access) 58 59 66 76 Marine protected areas (% of total surface area) .. .. .. 0 Terrestrial protected areas (% of total surface area) .. .. .. 13.9 Goal 8: Develop a global partnership for development Debt service (PPG and IMF only, % of exports, excluding workers' remittances) 0 10 6 .. Internet users (per 100 people) 0 0 1.3 12.5 Mobile cellular subscriptions (per 100 people) 0 0 6 67 Net ODA received per capita (current US$) 6 92 91 93 Telephone lines (per 100 people) 3 3 5 8 Other Fertility rate, total (births per woman) 4.2 2.9 2.2 2 GNI per capita, Atlas method (current US$) 1170 400 410 1630 GNI, Atlas method (current US$) (billions) 2.6 0.9 1 4.4 Gross capital formation (% of GDP) 35.6 31.7 29 50.2 Life expectancy at birth, total (years) 61 62 64 67 Literacy rate, adult total (% of people ages 15 and above) .. .. 98 97 Population, total (millions) 2.2 2.3 2.4 2.7 Trade (% of GDP) 71.7 97.2 127.2 118.5 Annexes CAS and ISNCR Review 24 Independent Evaluation Group Table 9: List of IFC’s investments in Mongolia that were active during FY05-11 (US$’000) Project Approval Closure Project IFC Sector Project Total Net IFC Sector Explntry Net Loans Net Equity ID FY FY Status Primary Size Commitment Investments approved in the pre-review period, but active during the review period 10500 01 11 Closed Financial Mkts Microfin. 400 400 400 10728 04 11 Closed Financial Mkts Comm. Bank 5,000 3,500 1,500 5,000 11710 04 Active Financial Mkts Comm. Bank 3,000 1,800 1,200 3,000 Subtotal 8,400 5,700 2,700 8,400 Investments approved in the review period 25425 06 11 Closed Financial Mkts Trade line 5,000 5,000 5,000 26771 08 10 Closed Financial Mkts Trade line 2,500 2,500 2,500 25137 07 Active Financial Mkts Comm. Bank 5,000 5,000 5,000 25443 07 Active Financial Mkts Comm. Bank 400 400 400 25170 08 Active MAS Multi, inc. Soft Drinks 67,000 30,000 30,000 25836 08 Active Financial Mkts Comm. Bank 15,000 15,000 15,000 26348 08 Active Financial Mkts Comm. Bank 2,484 2,484 2,484 26649 08 Active Financial Mkts Trade line 2,500 2,500 2,500 26697 08 Active Financial Mkts Comm. Bank 911 911 911 27427 08 Active Financial Mkts Comm. Bank 2,066 2,066 2,066 27577 09 Active Financial Mkts Leasing 1,000 1,000 1,000 27878 09 Active Financial Mkts Comm. Bank 279 279 279 28921 10 Active Financial Mkts Comm. Bank (Xac) 1,325 1,325 1,325 26353 10 Active Financial Mkts Trade line 500 500 500 27113 10 Active Financial Mkts Trade line 1,000 1,000 1,000 29819 10 Active Financial Mkts Tier II Cap. 5,000 5,000 5,000 28546 11 Active MAS Mixed Use & Hotel 123,300 50,000 50,000 29310 11 Active Financial Mkts Venture Cap. 75,000 7,500 7,500 29215 11 Active MAS Dairy 8,600 2,000 2,000 30358 11 Active Financial Mkts Comm. Bank 4,042 4,042 4,042 30395 11 Active Financial Mkts Tier II Cap. 20,000 20,000 20,000 Subtotal 342,907 139,500 19,007 158,507 Grand Total 351,307 145,200 21,707 166,907 Source: IFC, July 2011- The list does not cover the regional projects. MAS: Manufacturing, Agriculture, and Services Annexes CAS and ISNCR Review 25 Independent Evaluation Group Table 10: List of IFC’s Advisory Services in Mongolia, FY05-11 Project Start End Project Primary Business Total Funds Project Name ID FY FY Status Line US$ Advisory Services operations approved in the pre-review period, but active during the review period Conservation of the Eg-Uur 503476 Watershed 2004 2009 Closed Sus. Business Advisory 1,180,000 Subtotal: 1,180,000 Advisory Services operations approved in the review period Newcom Group LLC (Renewable 537046 Energy) 2006 2008 Closed Sus. Business Advisory 38,377 CATCO Meat Quality Assurance 537784 Program 2006 2006 Closed Sus. Business Advisory 235,000 Study on Private Sector Opportunities 540725 for Oil, Gas & Chemicals Sector 2008 2009 Closed Sus. Business Advisory 170,626 551965 Mongolia FS (Financial Sector) TA 2008 2011 Closed Access to Finance 568,956 565508 Mongolia Business Inspection Reform 2009 2013 Active Investment Climate 2,211,502 Mongolia Corporate Governance 570828 Project 2010 2014 Active Sus. Business Advisory 2,734,976 574747 M-Banking Mongolia 2010 2013 Active Access to Finance 283,880 Subtotal: 6,243,317 Grand Total 7,423,317 Source: IFC, April 2011 Table 11: List of MIGA’s Operations in Mongolia, FY05-11 Project ID FY Project Status Sector Amount, US$ 5165 2006 Cancelled Banking 20,007,000 Grand Total: 20,007,000 Source: MIGA, 2011 Annexes CAS and ISNCR Review 26 Independent Evaluation Group Annex Table 12: Summary of Achievements of the ISN Objectives ISN 09-10: Pillar 1 Actual Results (as of current month year) Comments Improve Macro and Fiscal Sustainability in a Mineral-based Economy Objectives 1. Strengthen fiscal sustainability 2. Bolster confidence in the banking sector Major 1. Strengthen fiscal sustainability Outcome Measures Implement 2010 budget in accordance with The 2010 budget was not Source: CAS-ISNCR. quantitative fiscal limits set in the Fiscal implemented in accordance with all Responsibility Law, including framework for the guidelines of the Fiscal managing mining resources Responsibility Law. The 2010 Fiscal Stability Law (FSL) was the centerpiece of these reforms and its implementation is currently being phased in. The 2011 budget available for current expenditures is already based on smoothed-out mineral prices, with the balance being saved in a stabilization fund. However, the structural balance rule that caps the deficit to a certain level of GDP will only start being applied in 2013. Ensure rigorous procedures for project selection No data available. Source: CAS-ISNCR. and appraisal adopted by MOF, including improved cost estimation and sustainable The 2009 and 2010 capital budgets excluded funding for maintenance and repair numerous projects without feasibility studies. Ensure Mongolia becomes EITI compliant On 19 October 2010, the EITI Source: CAS-ISNCR. Board designated Mongolia as EITI Compliant. 2. Bolster confidence in the banking sector Restructure failed banks expeditiously Most of the banks, including the Source: CAS- ISNCR. three largest ones, have been able to bring in new capital required to absorb past losses. The system- wide CAR is above the legally required 12%. The official NPL rate has fallen to less than 10%, although this figure masks the large volume of restructured loans. The growth of both deposits and credit has resumed by mid-2010. The enforcement of tightened prudential norms has lagged behind due to insufficient political will to confront the powerful bank owners. In particular, a number of banks remain in chronic violation of exposure limits on lending to related parties and large borrowers. Various diagnostic exercises indicate that the proper enforcement of prudential norms is expected to put severe strains on the ability of several banks to comply with capital requirements. Ongoing pre ISN 09-11 P077778 Economic Capacity Building TA Approved FY03. Active. Latest internal rating: Moderately Satisfactory, Support 02/22/2011. New Lending Support P088992 Private Sector Development Credit 2 Approved FY05. Closed FY11. Latest internal rating: Satisfactory, 05/17/2011. P098426 Governance Assistance Project Approved FY06. Active. Latest internal rating: Satisfactory, 02/24/2011. P115737 Development Policy Credit 1 Approved FY09. Closed FY10. IEG rating: Moderately Satisfactory. P117421 Development Policy Credit 2 Approved FY10. Closed FY11. Annexes CAS and ISNCR Review 27 Independent Evaluation Group ISN 09-10: Pillar 1 Actual Results Comments Improve Macro and Fiscal Sustainability in a Mineral-based (as of current month year) Economy New non- None lending Support (Grants and Special Financing Projects) Planned AAA P116097 Improving Public Investment Planning Delivered to Client FY10. and Budgeting Additional P115785 Anti Money Laundering/ Combating AAA Financial Terrorism (AML/CFT) Capacity Building Delivered to Client FY11. TA Annexes CAS and ISNCR Review 28 Independent Evaluation Group ISN 09-10: Pillar 2 Actual Results Protect the Poor and Vulnerable (as of current month year) Comments Objectives 1. Retarget social transfers to the poorest 2. Reduce rural vulnerability 3. Help vulnerable populations in Ulaanbaatar Major 1. Retarget social transfers to the poorest Outcome Measures NA 2. Reduce rural vulnerability Increase percentage of herder population with There are an estimated 160,000 Source: CAS-ISNCR. access to reliable energy from 55% in 2007 to herder families (about 900,000 70% in 2011 herders) in Mongolia. By 2005, before the Bank financed Renewable Energy for Rural Access Project (REAP) began, 32,922 solar home systems has been provided to herders, with an access rate of about 20 percent. As of July 2011, REAP met its project target with 51,188 solar home systems sold to herders as a part of the project, leading to a total herder electrification rate of nearly 50 percent. Ensure 300 soums disburse Community As of 2011, the Community Source: CAS-ISNCR. Initiatives Fund Initiatives Fund (CIF) is active in every soum in the country (329), and also in every urban duureg. Improve M&E indicators and framework for MECS has improved the timeliness Source: CAS-ISNCR. education sector agreed with Ministry of of its educational indicators and has Education, Culture and Science (MECS). published education statistics annually. However, data quality remains a concern. Also, some important data at the school level (such as dropout rates by grade, student and teacher absence) are not aggregated upwards to provide a bigger picture of the soum or aimag level about how pervasive the issues have been and allow for the design of policies to address them. Student assessment also needs to be improved Ensure 300 soums disburse Community As of 2011, the Community Source: CAS-ISNCR. Initiatives Fund Initiatives Fund (CIF) is active in every soum in the country (329), and also in every urban duureg. 3. Help vulnerable populations in Ulaanbaatar Source: CAS-ISNCR. Ensure cost-benefit analysis of ger area future No data available. development scenarios carried out The ESW “Managing Urban Expansion in Mongolia: Best Practices in Scenario-based Urban Planning� (FY09), aimed to help policy makers and citizens of Ulaanbaatar to improve their understanding of the consequences of their choices and practices by providing clear cost and benefit implications of three different development paths. The report was widely disseminated to various stakeholders, including Parliament members, policy makers, practitioners at the national and the municipal governments, district and sub-district governors, professional associations, NGOs, donors, and ger area residents. Fourteen community consultation meetings were conducted with total participants of more than 1,000. The event attracted considerable of media attention. Develop and adopt air pollution abatement No data available. Source: CAS-ISNCR. Annexes CAS and ISNCR Review 29 Independent Evaluation Group ISN 09-10: Pillar 2 Actual Results Protect the Poor and Vulnerable (as of current month year) Comments options The ESW, “Mongolia: Air Pollution in Ulaanbaatar: Initial Assessment of Current Situation and Effects of Abatement Measures� (FY09) aimed to present preliminary findings for dissemination to initiate discussion on the short- term and long-term emission reduction strategies for reducing Ulaanbaatar’s air pollution. “Mongolia: Heating in Poor, Peri- urban Ger Areas of Ulaanbaatar� (FY09) summarized several activities funded by the Asia Sustainable and Alternative Energy Program (ASTAE). The findings lead to the conclusion that it is possible to develop a program aiming to provide cleaner, affordable heating to ger areas in Ulaanbaatar, but that there remain significant technical and financial barriers to an immediate successful rollout. Improve reliability and financial sustainability of No data available. Source: CAS-ISNCR. electricity distribution companies Ongoing pre P074591 Ulaanbaatar Services Improvement ISN 09-11 Approved FY04. Active. Latest internal rating: Satisfactory, 06/03/2011. Project 2 Support New non- lending P096328 Rural Education and Development Latest internal rating: Moderately Approved FY06. Active. Support Project Satisfactory,06/17/2011 (Grants and Special P125863 TF Community-led Infrastructure Financing Approved FY11. Active. Development for the Urban Poor (JSDF) Projects) Planned AAA P090388 Poverty Assessment Delivered to Client FY06. P113933 Ger Area Development Strategy Delivered to Client FY09. P111498 Ulaanbaatar Air Pollution Discussion Delivered to Client FY09. Note P096442 Livestock Sector Study (FY09) Delivered to Client FY09. Additional AAA P091204 Enabling Environment for Social Delivered to Client FY05. Accountability P088898 Infrastructure Strategy Delivered to Client FY07. P110077 Heating in Poor, Peri-urban Ger Areas Delivered to Client FY09. of Ulaanbaatar Annexes CAS and ISNCR Review 30 Independent Evaluation Group ISN 09-10: Pillar 3 Encourage Transparent and Prudent Mining Investments and a Actual Results (as of current month year) Comments More Competitive and Stable Medium-term Business Investment Climate Objectives 1. Encourage sustainable, efficient mining investments 2. Manage large investments in supporting infrastructure 3. Provide stable medium-term business investment climate Major 1. Encourage sustainable, efficient mining Outcome investments Measures Review mining law and clarify policy including No data available. Source: CAS-ISNCR. taxation Mining Law review is nearing completion. A new draft Mining Law has been prepared and it is anticipated that it will be considered by Parliament in the spring session of 2011. TA for taxation is underway. The review of the VAT regime for mining is currently ongoing. Royalty review was carried out with an innovative result which is not fully consistent with best practice and likely to become obsolete with changing mining costs. Adopt standard investment agreement No data available. Source: CAS-ISNCR. A draft Standard Investment Agreement has been adopted based on the Oyu Tolgoi Agreement. Ensure Erdenes arrangements are consistent No data available. Source: CAS-ISNCR. with OECD corporate governance principles This is still ongoing process. Consultancies by McKinsey and PWC have been provided to introduce corporate accounting and reporting systems consistent with OECD Principles of Corporate Governance. 2.Manage large investments in supporting Infrastructure Ensure key infrastructure, social, environmental The Bank examined the various Source: CAS-ISNCR. trade-offs and options for southern Mongolia options being considered by the development identified and costs estimated government to deliver infrastructure The strategy was well received by government to the region and looked at their officials, Parliamentarians, and NGOs. The economic implications. Specifically, national planning agency (NDIC) used it as a it identified social implications of basis to carry out its planning activities for various models for township Southern Mongolia, and as a result of the development, economic tradeoffs of strategy, the Minister of Finance asked the railway development, options for Bank to prepare a follow-on project to facilitate delivering power to support mining development/investment in mining operations, and environmental infrastructure, which resulted in the Mining implications of building major Infrastructure Investment Support Project. infrastructure systems, especially on the movement of wildlife in the region. 3. Provide stable medium-term business investment climate Ongoing pre ISN 09-11 NA Support Annexes CAS and ISNCR Review 31 Independent Evaluation Group New Latest internal rating: Moderately Satisfactory, P108768 Mining Sector TA Project Approved FY04. Active. Lending 06/17/2011 Support Latest internet rating: Moderately Satisfactory, P098426 Governance Assistance Project Approved FY06. Active. 02/24/2011. P115737 Development Policy Credit 1 Approved FY09. Closed FY10. IEG rating: Moderately Satisfactory New non- lending Support N/A (Grants and Special Financing Projects) Planned AAA N/A Additional AAA P090232 Review of the Environment & Social Delivered to Client FY06 Policies in Mining Annexes CAS and ISNCR Review 32 Independent Evaluation Group ISN 09-10: Pillar 4 Build Better Transparency and Accountability Mechanisms Actual Results (as of current month year) Comments Objectives 1. Strengthen vertical accountability by broadening engagement and by encouraging more transparent policy analysis and monitoring by civil society across the extractive industry value chain 2. Build on core public sector reforms to strengthen institutional accountability Major 1. Strengthen vertical accountability by Outcome broadening engagement and by encouraging Measures more transparent policy analysis and monitoring by civil society across the extractive industry value chain NA 2. Build on core public sector reforms to strengthen institutional accountability NA Ongoing pre ISN 09-11 NA Support New Lending NA Support New non- lending NA Support (Grants and Special Financing Projects) Planned AAA NA Additional AAA NA