PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: 74737 Project Name Yemen Public Finance Modernization Project - Additional Financing Region MIDDLE EAST AND NORTH AFRICA Country Yemen, Republic of Sector Public administration- Financial Sector (80%); General public administration sector (18%); Sub-national government administration (2%) Project ID P133637 Parent Project ID P117363 Borrower(s) REPUBLIC OF YEMEN Implementing Agency Supreme National Authority for Combating Corruption (SNACC) Environment Category [ ] A [ ] B [X] C [ ] FI [ ] TBD Date PID Prepared October 11, 2012 Date of Appraisal November 2, 2012 Authorization Date of Board Approval February 14, 2013 1. Country and Sector Background After almost a year of crisis, in the wake of the Arab Spring movement, Yemen has embarked on a political transition. During the transition the government is expected to host a National Dialogue, draft a new constitution, and reform the army and security establishments. The Government has recently taken some hard policy decisions to enhance transparency and combat corruption. The Government continues to lay strong emphasis on improving the public financial management. The World Bank had approved a Grant of $12 million for the Yemen Public Finance Modernization Project on December 20, 2010. Soon thereafter, a political turmoil started in the country, as a consequence of which, the Bank had to suspend disbursements. However, notwithstanding the political turmoil and suspension of disbursements, the Project Management Unit (PMU) under the Ministry of Finance was able to carry out most of its planned activities to- date. All targets have been achieved and the implementation progress of Accounts and Financial Management Information System (AFMIS) and Loans and Grants Management Information System (LGMIS), which represent 71% of the project, has been highly satisfactory. 2. Objectives The objective of proposed Additional Financing is to improve accountability in the management of public finances, by providing decision support systems and building capacity of two accountability institutions – Supreme National Authority of Combating Corruption (SNACC) and Civil Society Coalition Against Corruption (CCAC). The original project was aimed at improving the ‘efficiency’ and ‘transparency’ in the management of public finances. 3. Rationale for Bank Involvement The Project has thus far focused narrowly on certain aspects of the expenditure management agenda without taking into account independent oversight and third-party monitoring activities. The Project also did not include issues of efficiency and transparency in revenue management. The additional financing aims at closing these gaps. 4. Description The additional financing of US$ 5 million would: (i) finance two new Components (6 and 7) to the project as follows:  Component 6 (US$2,100,000) - This component would contribute to establishing core systems and enhancing the institutional capacity of Supreme National Authority for Combating Corruption (SNACC) in implementing the national anti-corruption strategy in 6 pilot sectors of education, health, water, social protection, civil service and judiciary. The support to SNACC would include conducting a diagnostic study of causes and forms of corruption in six pilot ministries; establishing Data-base Management System for the Asset Declaration Unit; establishing Management Information System for the Investigations department; and capacity building of SNACC and other law enforcement agencies.  Component 7 (US$1,000,000 ) - Supporting the ‘Yemen Civil Societies Coalition Against Corruption Coalition (CCAC)’ in enhancing the demand for good governance by identification, and recording, documentation and dissemination of case studies of victims of corruption; coordination and mediation with Authorities; and capacity building of 16 civil societies under the CCAC. (ii) finance three new sub-components to be included under Component 1 on strengthening the decision making mechanisms of the Budget Management as follows:  Sub-component 1 on Strengthening National Accounts System (US$300,000): The new sub-component would support in (1) upgradation of outdated National Accounts System to the System of National Accounts (SNA) 2008 classification, which is the latest version of the international statistical standard for the national accounts, adopted by the United Nations Statistical Commission (UNSC); (2) Providing Personal Digital Assistants (PDAs) for improved data collection by saving time, reduced errors, economies of scale, ease of use and saving paper.  Sub-component 2 on Internal Audit System (US$50,000): This sub component would provide Technical Assistance to the Ministry of Finance in (1) establishing an appropriate institutional mechanism for the internal audit system; and (2) developing adequate internal audit procedures. (iii) finance the scaling up of ongoing activities:  Component 1 on improving budget preparation and budget execution systems (US$150,000).  Component 2 on strengthening information systems (US$570,000). The additional financing would support in installing AFMIS in all the 22 treasuries under Central Bank of Yemen to provide a comprehensive control to the Ministry of Finance over budget execution.  Component 3 on strengthening public procurement institutions and capacity (US$ 680,000). The additional finance would support the implementation of the institutional strategy of High Authority on Tender Control and comprehensively cover all the government staff in the ongoing training on the executive bylaws of the nation procurement law.  Component 4 on building capacity of Central Organization for Control and Audit (COCA) (US$150,000). The Reengineering Plan of COCA prepared with support from the Bank-funded Civil Service Modernization Project (CSMP) has recently been approved by the President. The additional financing would help in the implementation of that reengineering plan for improving COCA’s audit manual and methodology. The additional financing would support the training of all the government staff comprehensively. 5. Financing Source: ($m.) BORROWER/RECIPIENT 0 International Development Association (IDA) 5 Total 5 6. Implementation A new Project Management Unit (PMU) has been established within SNACC to manage the two new components. A Steering Committee of this PMU has also been established to supervise, coordinate and monitor the activities of the SNACC and CSCAC respectively. 7. Sustainability The Government of Yemen already has in place a National Anti-Corruption Strategy which is based on the principles of strengthening prevention, investigation and education about corruption. It has recently approved a Transparency and Anti-Corruption Action Plan, which includes amongst other things, a provision of statutory investigation authority to SNACC, independence of COCA, greater transparency in budget and public procurement. The Government plans to issue enabling Decrees and make amendments to existing laws to make the regulatory environment for transparency and anti corruption stronger. Thus, the present set of policies and proposed legislative changes reflect a strong political will on the part of the government to intensify its fight against corruption and enhance transparency. 8. Safeguard Policies (including public consultation) The proposed additional financing will not change the environmental category (C) of PFMP or the nature of the possible safeguards issues. There are no risks of the project triggering any new safeguard policies. 9. Contact point Contact: Arun Arya Title: Senior Public Sector Management Specialist Tel: +1-(202) 458-4569 Email: aarya@worldbank.org 10. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: pic@worldbank.org Web: http://www.worldbank.org/infoshop