Documentof The World Bank FOROFFICIAL USEONLY ReportNo: 37721-KM PROJECTPAPER ONA PROPOSEDADDITIONAL FINANCINGGRANT INTHEAMOUNT OF SDR 3.4 MILLION(US$5.0MILLIONEQUIVALENT) TO THE UNION OF THE COMOROS FORA SERVICES SUPPORTPROJECT November9,2006 HumanDevelopmentI11 CountryDepartment5 Africa RegionOffice This documenthas arestricteddistributionandmaybeusedbyrecipientsonly inthe performanceoftheir official duties. Itscontents maynot otherwisebe disclosedwithout World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective October 30,2006) Currency Unit = Comorian Franc (CF) CF350 = US$1 US$1.48 = SDR 1 FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS AFD vlc Franqaise de LDP Local Development Plan De'veloppement (French Development Agency) CDP Community Development Plan LICUS Low Income Countries Under Stress CF Comorian Franc M&E Monitoringand Evaluation DO Development Objective MTR MidTermReview EU EuropeanUnion SDR StandardDrawingRights FADC Fonds d'Appui au SSP Services Support Project De'veloppement Communautaire (Fundto Support Community Development) FMR Financial ManagementReport UNDP UnitedNations Development Programme IBRD International Bank for UNFPA UnitedNations Population Fund Reconstruction andDevelopment IDA International Development UNICEF UnitedNations Children's Fund Association I-PRSP Interim Poverty Reduction WHO World HealthOrganization Strategy Paper I S N InterimStrategyNote Vice President: Gobind T. Nankani Country Director/ Program Coordinator: ColinBruce /Geoffrey Bergen Sector Directormanager: Yaw Ansu/Laura Frigenti Task Team Leader: Marvanne Sham COMOROS SERVICES SUPPORT PROJECT ADDITIONAL FINANCING CONTENTS ProjectPaperDataSheet ............................................................ 1 I. Introduction............................................................................................... 1 I1 BackgroundandRationalefor AdditionalFinancing . ............................ 1 I11 ProposedChanges . ..................................................................................... 5 I V. SpecificGovernanceIssues ...................................................................... 10 V . Consistency with CAS or CPS .................................................................. 11 VI .AppraisalofRestructuredor Scaled-upProjectActivities ................12 VI1. ExpectedOutcomes ................................................................................... 12 VI11 Benefitsand Risks . ..................................................................................... 13 I X . FinancialTermsAnd ConditionsFor The AdditionalFinancing .......14 X . CreditConditionsand Covenants ............................................. 14 ScheduleA .......................................................................... 15 ScheduleB .......................................................................... 16 Schedule C .......................................................................... 18 ScheduleD .......................................................................... 19 ScheduleE ........................................................................... 23 COMOROS SERVICES SUPPORT PROJECT ADDITIONAL FINANCING PROJECTPAPERDATASHEET Date: November 9,2006 Team Leader: Maryanne Sharp Country: Comoros Sector DirectorManager: Yaw Ansunaura Project Name: Additional Financing- Frigenti Comoros Services Support Credit Country Director: ColinBruce Project ID: PO100804 Environmental Category: B Borrower: Unionof the Comoros Responsibleagency: Fonds d 'Appui au De'veloppement Communautaire (FADC) FY 07 08 09 Annual 2.0 2.5 0.5 Cumulative 2.0 4.5 5.0 Does the restructuredor scaled-up project require any exceptions from Bank o Yes 0 No policies? Have these beenapprovedby Bank management? o Yes o No I s approval for any policy exception sought from the Board? o Yes 0 No Revisedproject development objectives/outcomes[Ifapplicable] The developmentobjectives ofthe project havenot been revised. Does the scaled-up or restructured project trigger any new safeguardpolicies? No For Additional Financing [ ] Loan [ 3 Credit [XI Grant For Loans/Credits/Grants: Total Bank financing (US$m.): US$5.0 million Proposedterms: IDA Grant Financing Financing Plan (US$m.) Source Local Foreign Total Borrower 0.00 0.00 0.00 IBRD/IDA 4.00 1.oo 5.00 Others 0.00 0.00 '0.00 Total 4.00 1.oo 5.00 i COMOROS SERVICES SUPPORT PROJECT ADDITIONAL FINANCING PROJECTPAPER I. INTRODUCTION 1. This Project Paper seeks the approval o fthe Executive Directors to provide an additional SDR 3.4 million (US$5.0 millionequivalent) to the Uniono fComoros for the Comoros Services Support Project (P084315), Cr. 3868-COM. It is also proposedto extendthe closing date o fthe project by one year and a halffiom November 30,2008 to June 30,2010. The additional financing i s the centerpiece o fthe Comoros InterimStrategy Note (ISN), to be discussed by the Board on December 14,2006, with the proposedproject. 2. The proposed additional grant would finance the costs associated withthe scaling upo f the activities to enhance the impact o fthe Services Support Project (SSP), including (i) extendingthe community development process to a greater number o fcommunities and integrating the communal levels into the process, resulting inan increase inthe number o f communityand local development plans; (ii) improvingthe quality ofthe community development process andrelated activities; (iii) widening eligibility ofprojectsto include more environmentalprotection and conservation activities; and (iv) increasingmonitoring and evaluation activities as well as operating costs and audits to cover the additional implementation period o f 19 months. The SSP has been successful indeliveringvisible results on the ground despite the political instability plaguing the country inrecent years. After almost two years o f implementation, the project i s well on track to meetingits development objectives. 3. The project's development objectives would remainunchanged, butthree o fthe project components would be modified to better reflect ongoing and scaled up project activities. The proposed project would finance the productiono f 60 additional community and local development plans through a scaled up process to better integrate women, vulnerable groups as well as local authorities; support three pilot communal sub-projects; integrate a small environmental and conservation component into each o fthe community-based infrastructure projects; introduce watershed management pilots onthe islands o f Anjouan and Moheli; and scale up monitoring and evaluation activities linkedto the increased number o f development plans. Targets for the existing project performance indicators will be increased to reflect these new activities. Although there have beenno indications o f governance problems inthis project, the additional financing proposalnonetheless tightens fiduciary riskmanagement procedures in accordance with the enhanced emphasis on ensuringgood governance inthe InterimStrategy Note. 11. BACKGROUND RATIONALEFORADDITIONAL FINANCING AND 4. The Services Support Project (SSP) was approvedon March 11,2004, andbecame effective on September 29,2004. The closing date is currently November 30, 2008. The total amount o fthe credit i s SDR 9 million (US$13.3 equivalent). The objectives o fthe project are to (i)maintainbasic social and economic infrastructure for a significant number of disadvantaged communities and specific vulnerable groups; and (ii) contribute to buildingthe basic capacity o f 1 communities and local actors to conduct a local development process. The midterm review (MTR)o fthe project was heldinSeptember 2006, the mainrecommendations o fwhich have been integrated into the implementationof the SSP and form the basis for the proposed additional financing activities. 5. The project finances five components: Component 1: Communipbased Subprojects: This component finances small-scale social and economic sub-projects identifiedby communities, including classrooms and schools, small scale water supply and sanitation, and feeder roads. Component 2: Capacitv Buildinn: This component supports capacity buildingand social capital formation for communities and other local development actors, including information and education campaigns; related strategic capacity building for civil society; and capacity building o fFADC and various stakeholders. Component 3: Health Services: The project finances on-going training o f selected medical personnel inComoros (identifiedinthe now closed Healthproject) andthe maintenance of medical equipment. Component 4: Urban Water Supplv: These activities were already identifiedunder the Infrastructure, Water and Environment project and include rehabilitation and extension o fwater supply intwo towns, one inAnjouan and one inMohCli. This component also finances capacity buildingo fwater management committees andinformation, education and communication campaigns on water management, sanitation and hygiene. Component 5: Project Monitoring & Evaluation (M&E), and Audits: FADC's operating costs andtechnical assistance to undertake the audits are includedunderthis component. Inaddition, this component supports M&Eactivities, includingthe creation ofaparticipatorymonitoring and evaluation system, an impact evaluation and implementationo fvarious beneficiary assessments and other studies. 6. The SSP i s implementedbythe Fonds dYppui au De'veloppement Communautaire (FADC), an organization with 13 years o f experience and an excellent track record in implementingcommunity based development projects. Therehave beenno changesto the original objectives and designo f the project. The legal agreement has been amended once to reflect a reallocation o f credit proceeds betweencategories approved inFebruary 2006. Status of ProjectImplementation 7. The Services Support Project has beensuccessful indeliveringresults on the ground despitethe unstable and fragile operating environment. Boththe development objective and implementation progress are currently rated satisfactory. Inspite o f initial delays inproject implementation, the project i s well on track to meet its first developmentobjective (DO) which i s to maintain basic social and economic infrastructure for a significant number o f disadvantaged communities andvulnerable groups. By testing and investingimportant efforts inits capacity 2 buildingcomponent, the project is progressing well with achieving its second D O which is to buildthe basic capacity o fcommunities and local actors to conduct a local development process. 8. Implementationprogress continues to be good despitethe turbulent country circumstances. As o f October 25,2006,45% o fthe credit has beendisbursed. Underthe component 1, 19 community-based sub-projects were completed inYear 1,benefiting 26 communities. Elevencommunities out o fthe 26 have never benefited from financing by the FADC (compared to a target o f seven communities). With respect to component 2 on capacity building, the local development process for Year 1was completed in44 communities withthe production o ftheir community development plans (CDPs). Participation o fwomen and vulnerable groups inthe community development process has beenstrengthened and lessons learned from the first year were integrated into this year's process. InYear 2,24 community projects are beingfinanced based on the priorities identifiedinthe CDPs versus a target of 20 projects. Out o fthe 24 communities, 16 have never benefited from FADC financing (compared to a target o f 9). Moreover, the local development process i s underway in25 communities compared to a target o f 20. 9. Underthe health services component, bothpreventive and correctivemaintenance o f medical equipment inthe hospitals o fthe three islands is being performed through a performance based contract with a regional firm. Inaddition, out o fthe 21 scholarship students financed by FADC, ten have completed their studies and have beenreintegratedinto the public health system. An additional six will complete their studiesby endDecember 2006. 10. The urbanwater component suffered from a series o fdelays, due inlarge partto the lack o f interest from international enterprises following two publications o fthe biddocuments for the works, inall likelihood due to the uncertainpolitical environment prior to the presidential elections heldinMay 2006. Giventhe failure to attract international enterprises, the works were broken down into three lots per site and are beingbiddedout to regional and local enterprises withthe requisite capacity and experience to complete the works. These works were launchedat the beginningo f October 2006. Inthe meantime,water user associations, beneficiary populations andthe municipalities have demonstrated their commitmentto the operations and maintenance o fthe system. Training has beenundertaken and an initial deposit equivalent to six months o f maintenance o fthe network has beenmade into each committee's account. 11. Monitoring and evaluation (M&E) activities continue to improve with a participatory community-based M&E system inplace providing data to the project's Management Information System. The project beneficiaries actively participate inthe monitoring o fthe execution o f sub- projects. The project co-financed the national Household Survey anda preliminary report is available. All financial audits are upto date and the project i s incompliance with its covenants. Rationale andReasonsfor theAdditional Financing 12. Comoros is emergingfrom a significant period o f turmoil andpolitical instability. Progress towards national reconciliation was marked by the election o f a newPresident, on an anti-corruption platform, inMay 2006. Nonetheless, Comoros continues to face major governance challenges as years o fpolitical instability have significantly eroded the legitimacy 3 and accountability o fthe state. Entrenched poor governance, as a result o f repeated cycles o f political crisis and instability, weak capacity o fpublic institutions, and limited scope for public dialogue on policy or participationincivic life characterize Comoros as a L o w Income Country Under Stress (LICUS). InLICUS countries such as Comoros, conventional channels of government provision o fbasic social services have broken down, with both weak political accountability for policies andperformance as well as technical and institutional weaknesses in public service providers. Attemptingto increase the flow o ffinance throughthese channels is unlikely to be effective, and there is little immediate prospect o f significant institutional improvement. Insuch situations, the use o f "alternative" and nongovernmentalchannels is often the only source for the provision o fmuch-needed health, education, and other basic services in the short-term. Moreover, they can demonstrate more effective andefficient service provision as well as buildbottom-up demand for end-useraccountability and increased client "voice." 13. Within this fragile context, the rationale for additional financing is that it would reinforce and expandthe project's overall development impact, buildinguponthe bottom-up approach that has proved the most effective conduit for poverty reducing assistance inComoros. As detailed in the ISN, the additional financing would allow the project to continue as the main financing vehicle for the Bank's Comoros program, and the foundation for its ongoing country dialogue. Based on current disbursements, which have begunaccelerating as the works for the urban water component have recently beenlaunched, with the projected commitments for next year's annual action plantaking into account the needfor financing o f implementation o f the midterm recommendations, it i s expected that the credit will be fully disbursedone year ahead o f time. An alternative consideredwas the preparationo f a repeater project. However, the country team felt that timing was critical interms o f demonstrating support to the new Government. Moreover, giventhe visibility and demand for the services o fthe project throughout Comoros as well as the satisfactory performance o fthe project interms o foutcomes onthe ground, additional financing was deemedto be the most appropriate instrument inthe current context. 14. Giventhe strong performance ofthe project, the additional financing will scale upthe activities o fthree components: community based sub-projects, capacity building, and M&E and project management. Implementationexperience relatedto these components demonstrates that there i s a muchhigher than expected demand for both community-based activities through capacity buildingandthe community development process. With the recent change in Government inMay 2006, local authorities are currently beingput inplace or beingconfirmed. Therefore there i s a needto integrate these levels o f government into the process to ensure longer term sustainability and to support increased transparency and accountability. 15. The project's community development approach was considerably improved duringthe first year's test period, including: (i) increased training activities, for bothbeneficiaries and project staff, including more time, an increased number o f themes, sessions and participants, and recycling o f training; (ii)increased participation o f local women intraining, inlocal decision making bodies and inthe community development survey; and (iii) increased involvement o f other traditionally underrepresented community members (e.g. youth, vulnerable people, female headedhouseholds) inthe community development process. These improvements have resulted inanincreased awarenessanddemandbylocal communities andlocal andcommunal authorities to be involved inthe community development process. Inaddition, the MTRresultedina 4 numberofrecommendations to enhance the quality o fcommunity developmentprocess, including ensuringwider participation o f women andvulnerable groups, placing more emphasis on environmentalprotection and conservation, developinga marketing strategy for local development plans, and enhancing the role o f community-based organizations inbasic health service delivery. The proposed changes o fthe project components address these recommendations. 111. PROPOSED CHANGES 16. Although the project's development objectives would remainunchanged, three o fthe project components would be modified to better reflect ongoing and scaled up project activities. The proposed changes will mainly imply a significant scale-up o f the ongoing activities o fthe three components: community based sub-projects, capacity building, and monitoring and evaluationandproject management. The other original project components (health services and urban water supply) would remain unchanged. 17. The scaling up would support the following main strategic elements: (a) enhanced quality ofthe community and local development process; (b) piloting o f communal sub-projects to ensure integration o f local authorities inthe development process; (c) enhanced protection o fthe environment and conservation activities; and (d) monitoring and evaluation andproject management support. (a) Enhanced quality of community and local developmentprocess 18. The capacity building component would be scaled up both interms o f numbers o f beneficiary communities and to improve the quality o f community development process. Under component 2, the proposedadditional financing would increase the number o f CDPs targeting a greater number o f beneficiary communities, and would also extendthe process to the local level withthe objective ofproducing a few pilot local development plans (LDPs) inan effort to move toward an integrated communal or local development mechanism. This work would complement the financing o fthe EuropeanUnion (EU) for a Decentralized CooperationProgram which will support the decentralization dialogue, strengthening o f democracy and good governance, and support to local development initiatives. The original project i s covering the community development process andthe elaboration o f CDPs as well as basic community infrastructure in 80 communities. The proposed additional financing would support 54 additional communities withthe introductiono fthe community development process through the capacity building component and six communes though capacity building, elaboration o f LDPs andpilot projects. 19. Interms ofquality o fthe process, the scalingupwould inparticular focus onthe current important improvements as well as the MTRrecommendations related to: a) expansion o ftraining activities (time, numbero fparticipants and sessions), andto allow recycling o fthe most important training themes; b) introduction ofnew/expanded themes intraining activities for other relevant project stakeholders, including; (i)technical and maintenance training for memberso fthe community management committees, including those benefiting from sub-projects in FADC's previous project phases; (ii) training on good governance, development and 5 participatory approaches targeting relevant decision and policy makers at local, regional and national levels, (iii) intensified training o fthe most relevant o f the country's technical enterprises and contractors; (iv) gender training to project staff and other relevant stakeholders; (v) role o f vulnerable groups incommunity development; and (vi) environmentalmanagement and conservation; c) greater promotion o fthe significant involvement o f women and other disadvantaged community members (youth, disabled, women) inthe project's training activities, indecision making bodies relatedto the project, andinthe participatory community development survey; and d) capacity buildingo fproject staffinthe relevant areas o fexpertise. 20. Itwould also further buildthe capacities at project, local and community level to ensure improved project implementation, involvement of all stakeholders, including disadvantaged persons, inthe development process. 21. Sustainability o fthe community development process also impliesthat the community and local development plans become living documents usedby other partners to ensure that community priorities are understood and addressed by a wide range of actors. While efforts have beenput into disseminating priorities withinthe communities bymobilizing community membersand postingthe plans inpublic places, additional efforts needto be undertaken inorder to reach out to a wider number o f actors: mainly local authorities, other donors andthe Diaspora. With respect to the sustainability issue, following the MTR recommendations, the project will develop a comprehensive marketing program with the relevant tools to assist communities to seek financing from Government, other development partners and the Diaspora. The additional financing will also help to create awareness and promote discussion and reflection among regional and local authorities, civil society, community representatives and development partners on community and local development mechanisms. 22. Finally, community-basedorganizations and civil society play a dynamic andproactive role inthe management o f basic health services. Around 90 percent o fthe financing for basic health services are financed out-of-pocket by the patients andthe communities. Revenues generated inthe health posts and centers are usedfor operational costs o fthe structures and to paythe salaries o fmedical personnel hiredon a contractual basis. Patients are requiredto pay for medicines directly. However, these basic services are not generally o f highquality. The additional financing will support, on a pilot basis on each island, strengtheningo fthe organizationand logistics o f a network o fhealth posts and centers, and capacity buildingo fthe management committees to increase efficiency andimprove quality o f service. (b) Piloting of communal sub-projects 23. The principal objective o fthis pilot is to buildthe capacity o fvarious players at the localkommunal level to improve their effectiveness inidentifying,preparing, implementingand evaluating sub-projects that bring sustainable and broad-based impact to communities. Thus the pilot communal sub-projects will further buildthe capacity o f communal authorities through day- to-day management o fthe pilots through the "learning by doing" methodology o fthe project. This approach includes hands-on training, participatory studies and development o fcommunal 6 andlocal development plans (based onthe community development plans)to allow for an integrated road-map for development o f the country's regions. 24. The additional financing will therefore support the piloting o fthree communal sub- projects. Identifiedcommunes will be targeted for capacity buildingand incorporatedinto the local development planning process to buildtheir capacity to undertake their functions ina participatory andtransparent manner. The supervision o fthe pilot projects will strengthen authorities' technical skills and give them experience inimplementingsmall-scale projects. (c) Enhanced environmentalprotection and conservation activities 25. The continued rate o f environmental degradation on all three islands, demonstrates the urgent needfor the project to reorient the local development planning process to: (a) give appropriate consideration to including and maintaining strategic environmental assets on these fiagile ecological systems; (b) improve extension and disseminationo f environmentally sound methods; (c) address resource tenure issues and community based natural resources management; and (d) shift economic systems from exploitation of natural biological assets to production (aquaculture, plantations, properly managed woodlots, etc). 26. Furthermore, consideringthe ecological fragility o f both Anjouan and MohCli islands, the project will support micro-investments at the community level to promote community-based natural resources management which will include, but i s not limited to, activities such as forestation programs usingwell studied and economically important species, development o f methods to arrest soil and gully erosion, and preparation o fwell-designedenvironmental education programs. Such an approach will promote partnerships and collaborative arrangementsinbiodiversity and conservation management and such community based natural resources management will also provide a people-centered framework for respondingto priority environmental problems. It will also help mobilize communities, enable them to become more effective players inenvironmental and conservation decision making processes, andempower themto improve their access to natural resources and support other important objectives such as participatory appraisal processes. To do so, the menu o f eligible community-based sub-projects o f component 1will be widenedto include micro-conservation activities. 27. The MTR recommended strengtheningenvironmental protectionactivities for category B type sub-projects. As a result, under component 1, the additional financing will support small scale-environment studies for feeder roads and water projects. Inaddition, a more significant budgethas beenallocated to all types o f sub-projects for measures to ensure the protection o fthe environment and to create more awareness among the infrastructuremanagement communities responsible for maintenance and management o f the relevant community based infrastructure. Giventhe water activities inAnjouan andMohCli, the proposed additional financing will support the development and implementation o f a watershed management plan. (4Monitoring and evaluation andproject management support 28. Additional financing for the M&Ecomponent will allow the project to intensify its participatory M&Eactivities, inparticular at local community levels, as well as to support 7 beneficiary assessments and additional technical assistance inthe analysis o f data for policy- makingpurposes. Financingwill also be allocated to cover the operational costs ofthe project for the extended period of 19 months and the additional necessary financial and technical audits. ProjectCost and Financing 29. The total project cost, including taxes andduties, is estimated at US$5 million. The breakdown o f estimated costs i s shown inSchedule A. Schedule B lays out the project's financing planand disbursement schedule. A summaryo fprocurement arrangements i s givenin Schedule C. ProjectImplementation,FinancialManagement,DisbursementandProcurement Arrangements 30. Implementationmechanisms. They would be the same under the additional financing as for the ongoing project, as they are working well. The FADC was established as a non-profit association for public service ("association d but non lucratifreconnue d'inte`rztpublic") and i s financially and administrativelyautonomous. FADC will continue to operate on a decentralized basis through its three regional offices overseen by the national office inaccordance with the provisions o fthe Operational Manual and Framework Agreement (Convention) betweenFADC andthe Government. The OperationalManual clearly defines the modalities o fexecutionand procedures for implementationo f each component. Beneficiaries are expected to contribute a percentage o fthe cost o f each sub-project inkind(materials and labor) or incash. The Manual i s currently being updated to include some modifications inthe community development process and environmentalactivities linked to the community-based projects, following the MTR recommendations. The project's implementation capacity was assessedduringpreparationand the activities andtargets were agreedupon based on the self-assessed capacity o f each island, reflecting realities on the ground. The project will continue to providecapacity enhancement support to project staff to support the scale-up activities, including training and short term technical assistance as required. 31. Financial management arrangements: Inaccordance with Bank policy and procedures, the financial management arrangements o fthe FADC have beenreviewedto determine whether they are acceptable to the Bank. This review is rather an update since the financial management system ofthis entity has already been assessedinthe context o fthe ongoing SSP. The overall conclusion from this review i s that the FADC financial management i s acceptable. However, to further strengthenthe system, the current accounting manual ofprocedures needs to be updated to reflect agreed changes inthe project organizational structure/procedures, andprovide the models o f quarterly Financial Management Reports (FMRs) and other periodic reporting requiredunderthe additional financing. The computerizedaccounting and reporting system in place i s adequate and allows for timely productiono f financial information required for managing and monitoring project activities. It will be maintained as definedinthe current Manual o fProcedures. To ensure efficient use o f credit funds for the purposes intendedand consistent application o f policies andprocedures, an internal auditor has beenrecruited. The internal auditor's contract will be extended untilthe end o fthe project. Inaddition, FADC has a qualified and trained accounting staff well versed inBank procedures. Independent auditors 8 acceptable to IDA will audit the project accounts under the Additional Financing. An ImplementationCompletion Report will be prepared within six months after Credit closing. The same special account will be used as for the original credit with an authorized allocation amount o f CF 400 million, which i s equivalent to US$1.1million. Statements o f expenditures would be used for all expenditures under contracts below the Association's prior review limits. 32. Procurement arrangements under the proposed additional financing will be the same as the arrangements under the Services Support Credit; however, the updated Guidelines o f 2004 will apply. Procurement o fgoods and works requiredfor the project andto be financed out o f the proceeds o fthe grant shall be governed bythe "Guidelinesfor Procurementunder IBRD Loans and IDA Credit" publishedby the Bank inMay 2004. Procurement o f consultants' services shall be governed by the "Guidelines for the Selection andEmployment o f Consultants by World Bank Borrowers" publishedby the Bank inMay 2004. Community Participation inProcurement would be based on the Africa Region's Guidelines - Simplified Procurement and Disbursement Procedures for Community-Based Investments. For each contract to be financed by the Grant, the differentprocurement methods or consultant selection methods, the need for pre- qualification, estimated costs, prior reviewrequirements, and time frame are outlined inthe Project Agreement, the Operational Manual and the Procurement Plan. 33. A separate procurementplan for the additional financing has beenpreparedandapproved bythe Bank procurement team. Itwill be integrated into the Global Procurement Plano fthe Services Support Credit and will be updated at least annually or as required to reflect the actual project implementation needs and improvements ininstitutional capacity. 34. The closing date will be extendedby one year and a halffrom November 30,2008 to June 30,2010. 35. Giventhe high-risknature of the country, a set of specific anti-corruption safeguards has beenbuilt into the Bank's strategy inthe Comoros, and will therefore apply to the supervision of the additional financing: 0 Introduction of risk-based auditing; 0 Regular (annual) project performance review; 0 Increasing transparency inmonitoring o fproject outcomes and audit results, including training for civil society actors inmonitoring techniques; Ensuringfulltransparency o fprocurement via publicationo f allprocurement transactions; and 0 Ensuringenforcement o f fiduciary standards, by followingup systematically on cases o f non-compliance, integrity issues and audit findings, and use of strong remedial measures whennecessary. 36. Inaddition, the project is closely andregularly supervised the Bank team, especially with respect to fiduciary and environmental safeguards. More details on the risk assessment can be found inSchedule D. 9 37. Since IDA'SGeneral Conditions were changed in2005, the additional financing is being extendedthrough new grant andproject agreements andthe legal agreements for the original Comoros Services Support Credit have been amended. IV. SPECIFIC GOVERNANCE ISSUES 38. As with any public program implementedthrough a decentralized government structure, involving donor resources, the SSP requires strong checks and balances to protect it from manipulationfor personal ends or special interests. Targeting o fthe most disadvantaged communities usinga clear andtransparent strategy andfinancing o f community projects on the basis o fneeds identifiedby the communities themselves are two key elements o fthe project. Moreover, followingthe 2004 World Development Report (WDR) andthe LICUS principles o f engagement, capacity-building approaches incommunity development projects can provide opportunities to foster better governance environments through increasing "client voice"; emphasizing buildingbottom-up demand for end-useraccountability and service provision which i s inclusive, participatory, and effective; and fostering conditions for deeper and more favorable long-term change inthe governance environment. Box 1:PortfolioAnti-corruptionSafeguards At time of projectdesign Governance review o f project anti-corruption environment, involving financial management and procurement staff. Applying fiduciary risk analysis as a standard part o fproject designmanagement procedures. Duringsupervision Increased disclosure o fproject information. Introduction o f risk-based auditing. Regular (annual) project performance review. Increasing transparency in monitoring o f project outcomes and audit results, including training for civil society actors inmonitoring techniques. Ensuring full transparency o f procurement via publication of all procurement plans and transactions. Ensuringenforcement o f fiduciary standards, by following up systematically on cases o f non- compliance, integrity issues and audit findings, and has taken and will continue to take strong remedial measures. Independentlymonitoredcomplaints mechanism. 39. Recent independent reviews have indicated that the SSP i s largely operating ina fair and accountable manner. Nevertheless, a series o f anti-corruption safeguards are being built into the on-going portfolio, including the SSP (see Box 1above). 10 V. CONSISTENCY WITH CAS 40. InOctober 2005, the Government completedits InterimPovertyReductionStrategy Paper (I-PRSP) and it was presentedto the Board of Directors o fthe World Bank on May 16, 2006. The I-PRSPis the first comprehensive economic and social strategy document prepared through a wide participatory process. The I-PRSP centers around three main objectives: (i) sustained economic growth; (ii) improvedhuman capital development; and (iii) improved governance andpolitical stability. 41. The Bank's strategy inComoros i s beingupdated with the preparation o fthe ISN, which i s beingpresented to the Board at the same time as the proposed additional financing. The I S N i s based on the government's I-PRSP with two main objectives for the next 18 months (FY07- 08): (i) continue to provide basic services to the most disadvantaged communities with a focus on community and local capacity building; and (ii) consolidate the national reconciliation through buildingstate capacity and increasingaccountability. The proposed additional financing for the SSP supports the first objective and allows for an enhancement of the project's activities through the broadening of community interventions. Of the seven axes o fthe I-PRSP, this project thus directly supports the education, health, water and sanitation, transport and environment axes. Complementaritiesof Donor Activities 42. Giventhe small number of donors anddevelopment partners active inComoros, close coordination on project activities i s critical to ensure maximum impact and leverage additional sources of financing. The SSP has worked closely with partners ina number o f ways. As mentioned above, the SSP i s coordinating closely with the EUon its Decentralized Cooperation Program. With respect to the EU's program on education, discussions are underway to coordinate the construction and/or rehabilitation of school-related infrastructure, including latrines. Inaddition, the project will provide capacity buildingfor those school management committees that the EUproject i s supporting. France i s financing health, ruraldevelopment, public finance management andjustice reform. The Agence Franpise de De`veloppement (AFD) i s currently preparinga health sector support project focused on, among others, institutional capacity building, support to the national hospital, and strengtheningo f access and quality o f services inAnjouan. Duringthe MTR, discussions were heldwith the preparation mission on the creationand support to equipment maintenance inthe major hospitals o fthe country, which i s partially beingfinanced under the SSP. Moreover, the AFD and the Services Support Project have created synergies incommunity development. Incommunities where AFD financed small water projects, the SSP undertook the community development process to ensure the sustainability and maintenance of investments. 43. Currently a proposal for financing o f community-based management of environmental assets i s underpreparationby the government and its partners inthe sector, and will be submitted to the Global Environmental Facility. Day-to-day management o fthese activities will be undertakenby the SSP, underthe auspices o fthe Ministryo f Environment. These activities will complement the existing environmental and conservation activities to be supported under the additional financing. Finally, the SSP i s coordinating closely with UNICEF, UNDP, UNFPA 11 and WHO on critical health, water and sanitation issues to be integrated into the capacity buildingcomponent ofthe community development process. VI. APPRAISALOF SCALED-UPPROJECTACTIVITIES 44. Although the project i s being scaled up, the program remains as originally designed and appraised. The economic, financial, technical, institutional, fiduciary, and social aspects o fthe activities to be undertaken with the additional financing remain the same as inthe original project. Environmental analysis 45. The scaled up activities do not raise the environmental category o fthe project, which is already category Bynor trigger any new safeguard policies. An Environmental and Social Management Framework and a Resettlement Policy Framework were prepared and disclosed on December3,2003. They were also disseminated inComorosthrough a series o fworkshops on each island and permanently located in strategic places inComoros where they can be accessed by interested parties and beneficiaries. The objectives o fthese documents were to (i) the assess environmental andsocial impacts o fthe expected sub-projects; (ii) environmental outline management procedures and provide the requisite tools, including a screening process with sub- project assessmentforms and guidelines for mitigating impacts; and (iii) integrate environmental considerations into each phase o fthe sub-project cycle. Both frameworks and their screening processes were incorporatedinthe project's manual o fprocedures. 46. The additional financing would fund community and local development plans as well as pilot communal subprojects similar inscale and scope to those implementedunder the original project. However, the midterm review, heldinSeptember2006, recommended the following measuresto strengthenthe protection o fthe environment: (i) allocation o f a more significant budgetinthe designandpreparationo f sub-projects to betterprevent environmental impacts, rather thanto mitigate them; (ii) additional capacity buildingo fproject staff and relevant partners, including communities and communal authorities; and (iii) recruitment o f periodic technical assistanceas needed. These activities will be undertaken under the additional financing. 47. The scale-up does not involve any exceptions to Bank policies. VII. EXPECTED OUTCOMES 48. Discussions were heldduringthe MTR on the needto include more intermediate outcome indicators to measure the success o fthe project. At the time o fproject design, giventhe LICUS context, most o f the performance indicators identifiedwere relatedto outputs. To addressthis issue, and following on the work o fthe project on strengthening its monitoring and evaluation system, a set o fkey intermediate outcome and output indicators for the project have beendefinedalong with targets. These indicators andtargets have beenestablished based on capacity and giventhe realities o f implementation ina still fragile environment. Certain indicators are beingincluded inthe Project Agreement and are presentedinSchedule E. 12 VIII. BENEFITSAND RISKS 49. Benefits. Benefits remain as described inthe original Project Appraisal Document. The project will support improving the living conditions o f disadvantaged communities through the financing o f community identified projects such as classrooms and schools, small scale water supply and sanitation, feeder roads, andenvironmentalprotection and conservationmicro projects. The number o f projects implementedthrough the direct financing of communities will also be scaled up. These projects are expected to increase productivity and income over the mediumand long-term, as economic investmentsininfrastructure, such as feeder roads improve the profitability o f agriculture and as social infrastructure inhealth and education improve labor productivity. 50. The project will also contribute to buildingthe basic capacity o f a larger numbero f communities and local actors to conduct a local development process, and to plan, implement andmanage development projects. This process is beingscaled upto provide support to the new communal authorities recently put inplace. A number o fprojects will be piloted at the inter- community and communal levels to enable lessons learned for future scaling up by other development partners. 51. Risks. The risk assessment matrix presentedinSchedule D outline specific risks as well as mitigating measures. Moreover, some o fthe risks mentioned inthe PAD with respect to the achievement o fthe project development objectives remain valid: Continuing and/or newpolitical tensionsinterfere withproject implementation (substantial risk). Although anewGovernment is inplace andhas confirmed its commitment to the project objectives and independence o f project implementationmechanisms following the midterm review,this risk continues to be substantial. The Bank will continue to monitor the political situation and closely supervise implementationo f the project, especially giventhe highrisk country environment, and inaccordance withthe Project OperationalManual and the project's annual operationalplans. Technicalministries do not comply with their commitmentstoprovide additional inputs (such as teachers) to ensurethe satisfactory operation of the completedcommunal infrastructure (moderate risk). Duringthe first two years o f implementationo fthe project, technical ministries have consistently complied with their commitments to provide additional inputs. Inaddition, the Government has signedanagreement withthe CentralBanko fthe Union o f Comoros to ensure the regular payments to civil servants. This will go a longway to improving the situation o fteachers, healthworkers and others. FADC will also continue to coordinate closely and regularly with line ministries. Creditproceeds may not be usedfor their intendedpurposes,financial transactionsmay not beproperly accountedfor, and control andprocurementproceduresmay not be properly applied (moderate risk). Mitigationmeasures have beentaken, includingthe recruitment o f external and internal auditors. Close supervision o f financial management and accounting practices o f the project will continue. 13 Ix. FINANCIAL TERMSANDCONDITIONSFORTHEADDITIONALFINANCING 52. The additionalfinancingwill beprovidedas a grant. x. CREDIT CONDITIONSAND COVENANTS i)ConditionsForEffectiveness 0 RevisionofProjectOperationalManual;and 0 Revisionof Administrative andAccountingProceduresManual. ii)Covenants 0 FADC shall maintainrecordsandaccounts inaccordance with soundaccounting practices; 0 Projectfinancial statementswill be auditedby independentauditors acceptableto IDA; and 0 FADCwill produceFMRson a quarterly basis. 14 SCHEDULE A Page 1or 1 UNIONOF COMOROS ADDITIONAL FINANCING FOR THE SERVICES SUPPORT PROJECT ESTIMATED PROJECT COSTS (in US$million equivalent) Category Local Foreign Total Foreignas YO Oftotal Grants 0.60 0.60 Works 0.45 0.50 0.95 52.63 Goods and Vehicles 0.25 0.25 100.00 Consultants' services, including audits 1.30 0.6 1.90 31.58 Training 0.20 0.05 0.25 20.00 Incremental operating costs 0.90 0.90 Unallocated 0.15 0.15 Total IDA-supportedProject Costs 3.60 1.40 5.00 28.00 SOURCE OF FINANCING (in US$million equivalent) Local Foreign Total Percentageof ForeignExpenditures IDA 3.60 1.40 5.00 COMMUNITIES/BENEFICIARIES 0.10 0.10 0.00 Total 3.70 1.40 5.10 15 SCHEDULEB Page 1of2 UNIONOF COMOROS ADDITIONAL FINANCING FOR THE SERVICES SUPPORT'PROJECT FINANCINGPLAN(by ProjectComponent) (in US$million equivalent) ProjectCost By Componentand/or Activity Local Foreign Total Component 1:Community-based Subprojects 1.5 0.0 1.5 Component2: Capacity Building 1.3 0.5 1.8 Component 5: Project Monitoring& 0.8 0.4 1.2 Evaluation, and Audits Total Baseline Cost 3.6 0.9 4.5 Contingencies 0.0 0.5 0.5 TotalProjectCosts 3.6 1.4 5.0 Interest during construction Front-end Fee TotalFinancingRequired 3.6 1.4 5.0 DISBURSEMENTSCHEDULE (in US$million equivalent) IDA FY 2007 2008 2009 Annual 2 2.5 0.5 Cumulative 2 4.5 5.0 16 SCHEDULE B Page 2 o f2 ALLOCATION AND DISBURSEMENT OFADDITIONAL FINANCING (in SDR) CreditAmount TOTAL I 9,000,000I 3,400,000I * asof reallocation of February 2006 17 SCHEDULE C Page 1of 1 UNIONOF COMOROS ADDITIONAL FINANCING FOR THE SERVICES SUPPORT PROJECT PROCUREMENT ARRANGEMENTS (in US$million equivalent) Total N.I.F. =Not IDA-financed. Figuresinparenthesisarethe amountsto be financed bythe IDA AdditionalFinancing. Slight differences may result from roundingoffigures. 18 f L: "j- c K c 0 I .g E .- c I E c 2 E H x SCHEDULEE Page 1o f 2 UNIONOF COMOROS ADDITIONAL FINANCINGFOR THE SERVICES SUPPORTPROJECT PERFORMANCEINDICATORS Community-BasedSubprojectsand CommunalPilotProjects Intermediate Outcomes: 0 By the end o f the Project, at least 70 percent o f the beneficiary communities and communes have maintainedtheir sub-project after the implementation. outputs: 0 By the end o f the second Project Year, at least 39 Subprojects have been completed, and by the endo fthe Project, at least 70 Subprojects have beencompleted. 0 By the end o f the second Project Year, at least 42 different communities have benefited from at least one Grant, and by the end o f the Project, at least 78 different communities have benefited from at least one Grant. 0 By the end o f the Project, at least 90 percent o f beneficiary communities have respected the deadline relatedto mobilizing their financial and/or in-kindcontribution for their sub- project. 0 By the end o f the Project, at least 90 percent of beneficiary communities and communes have applied the environmental mitigation measures defined inthe sub-project document. CapacityBuilding Intermediate Outcomes: 0 By the end o f the Project, at least 40 communities have executed activities not supported bythe Project intheir development plan. outputs: By the end o f the Project, at least 90 percent of the beneficiary communities and communes have a development planthat has beenvalidated by the community/commune. 23 SCHEDULE E Page 2 o f 2 0 By the end o f the Project, at least 60 percent of the population o f the community has participatedindeveloping a community or local development plan. Health Services Intermediate Outcomes: 0 Bythe end o fthe - Coject, at least 90 percent o fhealthpersonnel who havebenefited from scholarships under the Project are usingthe knowledge gained from such training. 0 During implementation o f the project, hospital-related medical equipment supported underthe Project i s operationaland maintained ina satisfactory manner. Urban Water Supply Intermediate Outcomes: 0 By the end o f the Project, at least 75 percent o fthe population inthe Project intervention areas has access to drinking water withinless than 100meters. outputs: 0 By the end of the Project, at least 50 percent of those people inthe Project intervention areas having access to drinking water are knowledgeable about water management, hygieneand sanitation. By the end o f the Project, at least 50 percent of those households in the Project interventionpay for the water withinthe agreeddefined deadline. ProjectMonitoring and Evaluationand Audits 0 The monitoring and evaluation system allows for an annual review o f the activities o f the project and progress on achieving development objectives. 0 By the end of each Project Year, financial audit reports demonstrate satisfactory management o f credit funds. By the end of the Project, the Incremental operating costs have not exceeded 15 percent ofthe amount o fthe Credit. 24 MAP SECTION 43°30'E 44°00'E COMOROS INDIAN OCEAN Bangoua Kouni SELECTED CITIES AND TOWNS Mitsamiouli ADMINISTRATIVE SEATS Chézani Djomani NATIONAL CAPITAL Ntsaouéni MAIN ROADS 11°30'S Mbéni Mbéni 11°30'S Grande Hahaîa Comore 44°30'E Itsikoudi N J A Z I D J A Koimbani Chamoni Ntsoudjini Sidjou MORONI Le Kartala Tsangadjou Ikoni (2360 m) COMOROS Boboni Pidjani Mitsoudjé Kourani Dembén Dembén Foumbouni Chindini 12°00'S 12°00'S Mozambique Channel Jimilimé Anjouan Hajoho Ouani Mutsamudu Bimbini Bambao Moheli Sima Hoani N Z WA N I Ntingi Domoni 0 5 10 15 Kilometers Fomboni Moya (1595 m) Miringoni M WA L I Djoyézi Pomoni 0 5 10 15 Miles Ouallah Ziroudani Hagnamouda Mramani This map was produced by the Map Design Unit of The World Bank. Nioumachoua Itsamia Salapouni DECEMBER Sambia The boundaries, colors, denominations and any other information Méa Hamavouna shown on this map do not imply, on the part of The World Bank Magnougni IBRD Group, any judgment on the legal status of any territory, or any Kanzoni Chandzi endorsement or acceptance of such boundaries. Ouénéfou 33389 2004 43°30'E 44°00'E 44°30'E