Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-39270) ON A CREDIT

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1 Public Disclosure Authorized Document of The World Bank Report No: ICR Public Disclosure Authorized Public Disclosure Authorized IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-39270) ON A CREDIT IN THE AMOUNT OF SDR 8.2 MILLION (US$ 12.0 MILLION EQUIVALENT) TO BOSNIA AND HERZEGOVINA FOR A SECOND EMPLOYMENT SUPPORT PROJECT Public Disclosure Authorized South East Europe Country Unit Human Development Sector Unit Europe and Central Asia Region September 29,

2 CURRENCY EQUIVALENTS (Exchange Rate Effective July 1, 2009) Currency Unit = KM 1.00 KM = US$ 0.66 US$ 1.00 = 1.51 KM FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS ALMPs BH CAS DEF ECA EMSAC FBH IDB ILO LIP MTDS OECD PAD PES PERLP PRSP PSAC PTAC RS SITAP SESER SESP SOSAC SOTAC QAE QAG Active Labor Market Programs Bosnia and Herzegovina Country Assistance Strategy Development and Employment Fund Europe and Central Asia Economic Management Structural Adjustment Credit Federation of Bosnia and Herzegovina Investment and Development Bank Economic Management Structural Adjustment Credit Local Initiatives Project Medium Term Development Strategy Organization for Economic Cooperation and Development Project Appraisal Document Public Employment Services Pilot Emergency Labor Redeployment Project Poverty Reduction Strategy Paper Programmatic Structural Adjustment Credit Privatization Technical Assistance Credit Republika Srpska Social Insurance Technical Assistance Project Socio Economic Support, Education and Redeployment Unit Second Employment Support Project Social Sector Adjustment Credit Social Sector Technical Assistance Credit Quality at Entry Assessment Quality Assurance Group Vice President: Philippe H. Le Houerou Country Director: Jane Armitage Sector Manager: Kathy A. Lindert Project Team Leader: Maniza B. Naqvi ICR Team Leader: Zorica Lesic 2

3 BOSNIA and HERZEGOVINA Second Employment Support Project CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring (if any) I. Disbursement Profile 1. Project Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annex 1. Project Costs and Financing Annex 3. Economic and Financial Analysis Annex 4. Bank Lending and Implementation Support/Supervision Processes Annex 5. Beneficiary Survey Results Annex 6. Stakeholder Workshop Report and Results Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Annex 9. List of Supporting Documents MAP IBRD 33375R 3

4 A. Basic Information Country: Bosnia and Herzegovina Project Name: Employment Support 2 Project Project ID: P L/C/TF Number(s): IDA ICR Date: 09/30/2009 ICR Type: Core ICR Lending Instrument: SIL Borrower: Original Total Commitment: Revised Amount: XDR 8.2M Environmental Category: C GOVERNMENT OF BOSNIA AND HERZEGOVINA XDR 8.2M Disbursed Amount: XDR 8.2M Implementing Agencies: The RS IDB-Development and Employment Fund PIU SESER - Ministry of Labor FBH Cofinanciers and Other External Partners: B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 02/12/2004 Effectiveness: 12/17/2004 Appraisal: 04/01/2004 Restructuring(s): Approval: 06/15/2004 Mid-term Review: 10/30/ /30/2006 Closing: 09/30/ /31/2009 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Borrower Performance: Moderately Satisfactory Moderate Moderately Satisfactory Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Satisfactory Performance: Performance: i

5 C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Performance (if any) Potential Problem Project No at any time (Yes/No): Problem Project at any No time (Yes/No): DO rating before Closing/Inactive status: Satisfactory D. Sector and Theme Codes Sector Code (as % of total Bank financing) Quality at Entry (QEA): Quality of Supervision (QSA): Original Rating Moderately Unsatisfactory None Actual Central government administration Other social services Sub-national government administration 5 5 Theme Code (as % of total Bank financing) Education for the knowledge economy Improving labor markets Social risk mitigation Social safety nets E. Bank Staff Positions At ICR At Approval Vice President: Philippe H. Le Houerou Shigeo Katsu Country Director: Jane Armitage Orsalia Kalantzopoulos Sector Manager: Kathy A. Lindert Hermann A. von Gersdorff Project Team Leader: Maniza B. Naqvi Maniza B. Naqvi ICR Team Leader: ICR Primary Author: Zorica Lesic Zorica Lesic F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) Provision of employment services for an estimated 10,000 people who are either recently retrenched and above 45 years of age and/or those who are actively seeking jobs for two or more years in Republika Srpska (RS) and Federation of Bosnia and Herzegovina FBH); and ii

6 Further reform agenda to bring behavioral change and business change in the employment services by focusing the Public Employment Services (PES) on providing effective job brokerage services; employment assistance programs including counseling services; programs to assist the unemployed; analytical and information services including disseminating labor market information. The Second Employment Support Project (SESP) would use its financial resources to leverage significant non financial outcomes of change in focus and approaches for the employment services. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Indicator 1 : Job brokerage services and ALMP measures for 10,000 persons Less than 1000 persons Value employed through quantitative or ALMPs by the Qualitative) Employment services 10,000 10,836 Date achieved 12/31/ /31/ /31/2009 Fully achieved and slightly exceeded its primary development objective by Comments providing job counseling and employment services to 10,836 persons in the (incl. % target group of 40 years of age and above, who were actively seeking jobs and achievement) were socially vulnerable. PES expenditures, revenues, procedures, databases for registered unemployed; Indicator 2 : labor market information; and staffing would indicate a shift to primarily focusing on effective employment services measures. Value quantitative or Qualitative) No systematic criteria or policy for selection of beneficiaries. Lack of networked data bases amongst EIs nationwide. Low allocation of financing for ALMP and job brokerage Accurate registeration of unemployed. Focus of EIs on job brokerage. Networked databases. Demand driven services in ALMPs and job brokerage Formal registration of farmers/workers as employed persons Rule book on registration of unemployed and employed by employers Standardized operations of the PESs Private sector job brokers participation through subcontracting for the provision of iii

7 ALMP Date achieved 12/31/ /31/ /31/2009 Partially achieved. Comments PES expenditures, revenues, procedures, databases for registered unemployed (incl. % and labor market information indicate a shift to primarily focusing on effective achievement) employment services measures. (b) Intermediate Outcome Indicator(s) Indicator Indicator 1 : Value (quantitative or Qualitative) Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Adoption and implementation of job brokerage and ALPMs by employment services. 10,836 active job seekers placed in PES beneficaries in jobs and income ALPMs and credit earning programs in year ,000 oportunities, 70% less than 4,000 of which remained individuals. in their jobs one year after being placed. Date achieved 12/31/ /31/ /31/2009 Comments (incl. % Fully achieved. achievement) Indicator 2 : Development and delivery of transparent small grants programs based on annual minimum wage index, instead of credit scheme. Reduced usage of Value (quantitative or Qualitative) Not availabe Not available non transparent loans by employment services. Date achieved 12/31/ /31/ /31/2009 Comments (incl. % achievement) Indicator 3 : Value (quantitative or Qualitative) Substantionaly achieved. PESs have adopted project approach to transparent ALPMs and job brokerage, costs for job brokerage and ALPMs show decrease in costs annualy. Recognition of all legal income earning opportunities (such as farming and agribusiness) as jobs. Workers in agricalture not recognized as employed. Farming not recognized as employment. Not available The Law on Agriculture has has been drafted in the FBHand has been adopted in the RS. Date achieved 12/31/ /31/ /31/2009 Comments (incl. % Partially achieved. There is an evident interest amongst people working in agriculture, and listed as iv

8 achievement) unemployed in the employment service records, to be registered (more than 1,000 persons in the first two years of the project implementation). Indicator 4 : PES expenditures reflect primary focus on employment services and not on other tasks. Value More than 60% of (quantitative expenditures on nonemployment Not available. Not available. services. or Qualitative) Date achieved 12/31/ /31/ /31/2009 Partially achieved. Comments Although there is no figure provided in the Bank or PIUs documents to evidence (incl. % the achievement of this indicator related to stated baseline - there is an evidence achievement) of achievement based on number of client served by PESs Indicator 5 : Social Insurance Benefit payments such as Health Insurance Benefits/Pension Benefits and cash benefits transferred to an appropriate agencies. Value (quantitative or Qualitative) Not available Not available Although the project provided evidence that unless health insurance benefits were delinked from unemployment benefits - the numbers of persons registered as unemployed would remain high; this was not done due to political reasons. Date achieved 12/31/ /31/ /31/2009 Comments Not achieved. (incl. % achievement) Indicator 6 : Updated Research and Information Data base on Labor Markets. Value (quantitative or Qualitative) Date achieved Comments (incl. % achievement) G. Ratings of Project Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (USD millions) 1 06/30/2004 Satisfactory Satisfactory /16/2004 Satisfactory Satisfactory 0.00 v

9 3 03/02/2005 Satisfactory Satisfactory /03/2005 Satisfactory Satisfactory /03/2005 Satisfactory Satisfactory /09/2006 Satisfactory Satisfactory /08/2006 Satisfactory Satisfactory /03/2007 Satisfactory Satisfactory /09/2007 Satisfactory Satisfactory /09/2008 Satisfactory Satisfactory /24/2008 Satisfactory Satisfactory /26/2009 Satisfactory Satisfactory H. Restructuring (if any) Not Applicable I. Disbursement Profile vi

10 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal Country and sector issues Destruction and displacement caused by war as well as transition have led to the high rates of unemployment in Bosnia and Herzegovina (BH). In addition, the necessary reforms of state owned enterprises, public sector and corporate restructuring, and privatization led to retrenchment of employees and therefore additional short to medium term unemployment. Pre-war industry in the region, as well as in BH, was organized around heavy metal enterprises, mining, construction and other industries that primarily fed into the defense industry of the former Yugoslavia. Employees held jobs for life and worked five days a week. However, the mainstay or second job of the mostly rural population was in agriculture. With the loss of jobs in the formal sector, most of the population has returned to agriculture not as a primary source of income but as a safety net. The agribusiness sector also provides viable income generation opportunities. At the time of Project design, the formal labor force in BH which was listed as employed in the state run enterprises was in the age group of 40 and above, while the younger population was employed mainly in the unregistered firms in the informal sector, which included agriculture. Retrenchment envisaged therefore affecting the older population and their households, making them vulnerable given that they were less likely to find new employment. The slow pace of job creation in the formal sector due to a lack of new investments in the country continued to affect younger job seekers and provide them with a disincentive to remain in the country. Remittances from family members working abroad constituted a significant share of households income. The Medium Term Development Strategy (MTDS/PRSP), adopted by the Government of BH in 2004, recognized that an increase in employment could be expected mainly in the private sector and that employment would be best generated through measures for encouraging entrepreneurship and reform across all sectors including in the provision of employment and job brokerage services. The MTDS set its context for the labor market in the implementation of vital reforms in the public sector between 2004 and 2007 which would, in the short term, cause a reduction of jobs. In support of this strategy the World Bank 2004 Country Assistance Strategy (CAS, Report No: BA) focused its support on reforming the public sector, furthering privatization, revitalizing enterprises, improving corporate governance, while at the same time reforming social protection and labor market policies. This was to be achieved through the adjustment and technical assistance operations of: the Second Social Sector Adjustment Credit (SOSACII; Credit 3926 BOS); the Economic Management Structural Adjustment Credit (EMSAC; Credit 3925 BOS); the Social Insurance Technical Assistance Project (SITAP; Credit 3778 BOS); the Privatization Technical Assistance Credit (PTAC; Credit 3531 BOS); as well as investment lending operations such as the Second Employment Support Project (SESP). 4

11 Major findings of the labor market study and the experience of earlier Bank supported projects, such as the Pilot Emergency Labor Redeployment Project (PELRP) which successfully provided cost effective job brokerage services to 8,000 ex-soldiers, confirmed that the country s labor markets remained distorted due to continued and accumulating institutional and administrative imbalances caused by the war and transition as well as residual rigidities of the previous system. Key findings included: Data on registered unemployment vastly exaggerated true prevalence of unemployment. The actual unemployment rate was estimated more likely to be in the range of percent. According to the 2001 labor force survey, out of the total registered unemployed in BH, only slightly less than a quarter qualified as unemployed under the standard definition of the Economic Management Structural Adjustment Credit and the Organization for Economic Cooperation and Development (ILO-OECD). The rest were either employed (another quarter) or inactive (51 percent). The main reason for unemployment registration appeared to be access to free health services upon registration. Job creation and reallocation of jobs in the formal sector was slow, particularly in Republika Srpska (RS), and the formal sector workforce had become considerably older, while young workers were denied access to formal sector jobs. This contributed to a large informal sector in BH with most of informal employment, including for the young and women, taking place in small-scale agriculture/farming (47 percent), construction (17 percent) and manufacturing (9 percent). The majority of informal workers were employed by private employers, 28 percent were self-employed, and about one-fifth were contributing family members. Workers in agriculture were not considered as employed. Worker mobility was modest due to constraints in relocation within and between entities and restructuring of state enterprises and housing availability. Despite the overall context of a stagnant labor market, private firms and agribusiness were much more dynamic in all aspects of job flows, including net employment growth. A rigid wage determination system stood in the way of job creation and worker mobility. Taxes and contributions accounted for 69 percent of labor costs in the Federation BH and 52 percent in the RS which were a disincentive for registering as employed. The number of persons registered as unemployed with the Public Employment Services (PES) in 2004 did not and still does not reflect the actual number of unemployed persons in BH. The PES main function is the usage of unemployment insurance contributions and the provision of health insurance benefits and other cash benefits for those registered as unemployed. This still provides a key incentive for persons to remain registered as unemployed. Persons registered as unemployed with PESs (2004) 5

12 Regions Population (estimate) Registered Unemployed Informal Estimate of Active Job Seekers Informal Estimate of Most Vulnerable RS 1,400, , ,000 29,119 Federation BH 3,015, , ,442 70,000 Expenditures of PESs indicated that job brokerage services and Active Labor Market Programs (ALMPs) were not the primary function of these public agencies. ALMPs constituted over 50 percent of expenditures by the PES in the RS and less than 30 percent of the PES expenditures in the Federation BH. A major portion of expenditures was on the provision of health insurance to the registered unemployed. Graduates upon completion of secondary or university education were eligible to register and receive health insurance. In addition, the PES in the Federation BH allocated a major portion of funds for credit programs. A functional review of the PES in the Federation BH concluded that these credit programs were non-poor targeted, lacking in transparency, and ad-hoc in client identification. Credit programs, health insurance and cash benefits constituted the major portion of the PES operations while job brokerage and ALMPs were negligible or non-existent. Income earning activities such as agricultural work or agri-business/farming were not considered as a job or as employment. Farmers were therefore registered as unemployed. This was due to the employment services orientation which, to a large extent, remained geared towards a pre-transition economy of supplying labor to state owned enterprises. Rationale for Bank involvement Starting in 2004, the BH was likely to experience, as a result of adjustment, privatization and corporate restructuring, significant movements in its labor market which included substantial job shedding in the corporate and government sectors (the latter including, but not exclusively, defense). The Bank played an important role in labor market policy formulation, based on its analytical and operational work on labor markets, including ALMPs, and labor redeployment in BH and in South Eastern Europe. The Bank had gained experience addressing such issues through its work on: (i) the Pilot Emergency Labor Redeployment Project (PELRP) which constituted a significant portion of all ALMP experiences in BH; (ii) the functional review of the PESs conducted under the Social Sector Technical Assistance Credit (SOTAC) and the reform policy dialogue furthered by the Second Social Adjustment Credit (SOSAC II); and (iii) the microfinance operations under the first and the second Local Initiatives Projects (LIP I and LIP II). The Bank s involvement, through the SESP, in furthering the reform agenda of transforming the PES and of mitigating the affects of retrenchment was highly relevant with respect to both timing and substance. Addressing labor markets and the poor performance of institutions active in them was an important objective of the CAS and this project was consistent with this objective.. As such, the Project sought to build on the experience of the PELRP and to contribute to the formulation and implementation of social risk mitigation policies, which the Government was under high pressure to establish. The SESP envisaged furthering the reform and changing the employment 6

13 services towards effective job brokerage and ALMPs. The likely wave of retrenchments was planned as a direct or indirect result of policies supported by other Bank operations: - Economic Management Structural Adjustment Credit (EMSAC) supporting reform of public administration to reduce its share in the economy; - Privatization Technical Assistance Credit (PTAC) to facilitate transparent privatization of selected state owned enterprises; - Business Environment Adjustment Credit (BAC) in the context of strengthening the business environment by facilitating business entry, operation and exit - Second Social Sector Adjustment Credit (SOSACII) supporting the establishment of better targeted and more efficient safety nets. - Programmatic Structural Adjustment Credit (PSAC) facilitating enterprise restructuring and improved corporate governance. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The SESP development objectives, as defined in the Project Appraisal Document (PAD), were: (i) provision of employment services for an estimated 10,000 people who were either recently retrenched and above 45 years of age and/or those who were actively seeking jobs for two or more years; and (ii) furthering reform agenda to bring behavioral and business changes in the employment services by focusing the PES on providing: effective job brokerage services; employment assistance programs including counseling services; programs to assist the unemployed; analytical and information services including disseminating labor market information. The SESP was expected to use its financial resources to leverage significant non financial outcomes of change in focus and approaches for the employment services. SESP key indicators included the following outcome indicators: 1. The successful delivery of ALMPs and job brokerage services to an estimated 10,000 active job seekers and the most vulnerable groups of unemployed; 2. PES expenditures, revenues, procedures, databases for registered unemployed; labor market information; and staffing would indicate a shift to primarily focusing on effective employment services measures. As well as intermediate results per components: 1. Adoption and implementation of job brokerage and ALMPs by employment services. 2. Development and delivery of transparent small grants program based on annual minimum wage index, instead of credit scheme; 3. Recognition of all legal opportunities (such as farming and agribusiness) as jobs; 7

14 3. PES expenditures reflect primary focus on employment services and not on other tasks; 4. Social Insurance Benefit payments such as Health Insurance Benefits/Pension Benefits and cash benefits transferred to appropriate agencies; and 5. Updated Research and Information Data base on Labor Markets. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification There were no changes in the Project Development Objectives or key indicators during the implementation of the Project. 1.4 Main Beneficiaries The SESP s target group of beneficiaries included individuals who were: (i) registered as unemployed with the PES; (ii) active job seekers for more than two years; (iii) over the age of 45 (this threshold was lowered during the course of the project to 40 due to a flexible approach which re-assessed annually the demand and vulnerability criteria); (iv) had no other income earning family member; and (v) were unskilled. These criteria largely eliminated the so-called creaming off effect when the most employable job seekers may be selected into the programs. In particular, 34 percent of beneficiaries had primary or lower education level; 31 percent graduated secondary school with three-year course, and 30 percent with four-year course; 61 percent of beneficiaries were males and 39 percent were females. 1.5 Original Components (as approved) Active Labor Market Programs and Job Brokerage Services (US$9.0 million equivalent) The objective of this component was to focus the PES on matching employers with job vacancies to appropriately skilled active job seekers; and on providing, through private sector service providers, income earning opportunities to active job seekers and to the hardcore unemployed based on the experience of the PELRP. Activities under this component included: counseling services; on the job training; support for self employment in agriculture, agribusiness, small businesses; job fair and public works; business advisory services and skills enhancement training. Institution Building and Technical Assistance to the PES (US$1.5 million equivalent) This component aimed to upgrade and strengthen the PES capacity to provide and outsource job brokerage services through the development of effective procedures, clear guidelines and regulations, staff training and the piloting of analytical labor market 8

15 information systems including introducing labor market research units in the Ministries of Labor. Project Management (US$1.5 million equivalent) The objective of this component was to support project implementation and coordination between all partners in the SESP. The Project was to be managed by the Project Implementation Units (PIUs) and included supervision and monitoring of all components under the Project as well as the knowledge transfer to and training of participating agencies (PES). 1.6 Revised Components The Project components were not revised during implementation. 1.7 Other significant changes There were no significant changes during project implementation. The Development Credit Agreement for the Project was signed on July 21, 2004, and the Project became effective in December The Project was scheduled to close on September 30, However, in response to a Government request to extend the Closing Date for an additional six months, the closing date of the Project was extended until March 31, The reason for the extension was that project effectiveness had been delayed by six months, due to the lengthy procedures of ratification of the Credit Agreement and Subsidiary Credit Agreements by the state and entities parliaments. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry The Project was identified on the basis of a consultation workshop held in September 2003 with key partners from the employment services and was based on the experience and lessons learned from two previous employment support projects, including the PELRP, as well a technical assistance loan which covered in depth the functional review of the PESs (SOTAC). However, these lessons were not adequately analyzed and project design did not include an alternative approaches to providing employment services to different groups. In addition, there was no detailed description of what the employment services were doing and how the expected institutional change was going to be carried out. Project design suffered from a short preparation time. Initially, the Project was expected to replicate successful approaches related to training and job placement that had been developed under the PELRP. Following the suggestions of reviewers who participated in the Project Concept Note review and the Quality at Entry Review, the team agreed to expand the Project s objectives beyond the originally proposed scope. The final project 9

16 design contained several new and ambitious institutional reform objectives and a completely new target group and selection criteria, which were not articulated in detail in the PAD. Although, there was no evidence of active consultation with other donors, the Project appeared to be in line with activities pursued by other donors. The Bank s Quality Assurance Group (QAG) reviewed the Project in This was a two stage assessment. The first stage review was conducted in May 2005 and was rated as moderately unsatisfactory, due to: technical aspects, appropriateness and realism of the institutional capacity building measures, and arrangements for monitoring and impact evaluation. Both the sector and the country management in the ECA Region differed from QAG s assessment, considering the Quality at Entry Assessment (QEA) for the SESP to be satisfactory. In particular, the Region differed from QAG on their assessment of the technical, financial and economic aspects and the implementation arrangements for the Project. The second stage review was conducted in July The panel reviewed the shortcomings identified by the Stage 1 panel, the response from the task team and the subsequent comments in the final assessment. After considering the Region s comments and the additional information presented during the interview the panel found no basis for changing the write-up or ratings of the previous panel. 2.2 Implementation Although project effectiveness was delayed due to lengthy process of parliamentary ratification of international agreements (including International Development Association credits) which at the time included an adjustment credit (SOSAC II) and a technical assistance credit (PTAC), this did not have a negative effect on the SESP implementation and performance in terms of achieving its development objectives. Project implementation was smooth with disbursements on target. Both implementing agencies, the Socio Economic Support, Education and Redeployment Unit (PIU SESER) in the FBH and the Development and Employment Fund (DEF) in the RS, had sufficient capacity. Project teams in both entities were experienced and did not have any turnover of staff; therefore the performance of the implementation teams including financial management and procurement remained satisfactory throughout project implementation. Project ownership and the close cooperation of PIUs staff and line Ministries were key factors leading to a smooth implementation despite the changes of Ministers. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization The Results Framework and Monitoring in the Project Appraisal Document (PAD) are assessed as moderately satisfactory. While the indicators for monitoring progress toward PDOs are considered adequate baseline information and target values were missing. 10

17 In terms of implementation, the ICR team noted a discrepancy between the second outcome indicator listed in the PAD and the indicator monitored during implementation and reflected in the Implementation Status and Results Reports (ISRs). Furthermore, the PAD includes several intermediate indicators that were not included and/or monitored in the ISRs. Fortunately, regular PIU reports and the Monitoring and Evaluation system for the overall project activities included indicators from the original results framework, thus providing the ICR team with the data required to evaluate Project outputs and outcomes 1. Despite the poor information included the ISRs, the overall M&E implementation and utilization are assessed as moderately satisfactory given that the PIUs and Monitoring and Evaluation systems were able to produce the data to monitor progress toward achieving PDOs. As previously mentioned the system was based on the originally designed results framework in the PAD and regularly monitored those indicators. 2.4 Safeguard and Fiduciary Compliance The environmental category for this project was C. There were no major environmental issues during the project implementation; furthermore, it is likely that the Project affected the environment positively through the activities that included short term public works such as garbage collection, particularly alongside the rivers. As mentioned earlier, the Project was managed by the Socio Economic Support, Education and Redeployment Unit (PIU SESER) in the Federation BH and the Development and Employment Fund (DEF) in the RS. After October 2007, the DEF became an integral part of the newly established RS Investment and Development Bank (IDB). The financial management arrangements have been transferred to the accounting department of the IDB and continued to be supervised by the previous financial management specialist. Both implementation units had appropriately experienced staff, capable to maintain up to date accounting records and prepare financial management reports on time. The financial manuals for the Project were regularly updated in order to reflect recommendations given by the Bank team. 1 Specific to the outcome indicator mentioned above, the second PAD indicator was: PES expenditures, revenues, procedures, databases for registered unemployed; labor market information; and staffing would indicate a shift to primarily focusing on effective employment services measures. The corresponding Results Indicators for the Component 2 included: (i) Recognition of all legal income earning opportunities (such as farming and agribusiness) as jobs; (ii) PES expenditures reflect primary focus on employment services and not on other tasks; (iii) Social Insurance Benefit payments such as Health Insurance Benefits/Pension Benefits and cash benefits transferred to an appropriate agencies; and (iv) Updated Research and Information Data base on Labor Markets. However, the corresponding indicator in the ISR is: Strengthening of institutional capacity of employment offices for job brokerage. The corresponding Results Indicator monitored in the ISRs was (i) Employment Institutes capacity for job brokerage and ALMPs. 11

18 The Project s financial statements were audited on an annual basis by independent auditors and all audit reports were unqualified. Procurement and financial management activities performed under the project were done in accordance with agreed procurement methods and were considered of satisfactory quality during implementation. 2.5 Post-completion Operation/Next Phase The Project has played a significant role in moving policy direction on employment services towards a focus on job brokerage and job counseling. The SESP supported legislative changes in encouraging even more active involvement of private sector in the provision of labor market services such as training and job brokerage as an integral part of PES reform. In the RS the usage of private brokerage firms has been adopted, while in the Federation BH the project supported drafting of legislation which is currently under consideration by the Government. Additionally, the Project supported an extensive training for PESs staff in both entities, including training for counselors to apply techniques for active job seeking, general computer literacy training for the employment offices staff, and training on monitoring and evaluation. The capacity for implementation built under the SESP has been instrumental in the work underway on social safety nets and the rationalization of non insurance social benefits. Finally, The Social Safety Net and Employment Project currently under preparation will include a component to further support job brokerage and ALMPs. As proposed, this component would support provision of job brokerage services to 15,000 vulnerable unemployed persons. The proposed Project would also facilitate further improvements of efficiency, effectiveness, and targeting of job brokerage services by the PESs; while at the same time promoting the role of private job brokerage agencies. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation The Project objectives of direct delivery of services and institutional development were and remain highly relevant and consistent with the country s development priorities, as well as the PRSP objectives of improving livelihood opportunities for the citizens of BH, and the 2004 CAS objectives, and (social sustainability, fostering private sector led growth and strengthening institutions and governance), the current Country Partnership Strategy (CPS FY08 - FY11, Report No BA) approved in 2007 (improving the quality of public spending and the delivery of public services for the vulnerable). Addressing labor market deficiencies and the poor performance of institutions active in them was an important objective at the time of project preparation, as stated in the CAS, and the Project fitted in well with this theme and other efforts in the sector. Project objectives responded to the problems of large scale unemployment resulting from demobilization, displacement, and economic restructuring. They also responded to the 12

19 longer term needs to rebuild and restructure the employment services infrastructure so as to respond to the challenges of the developing economy and the EU Employment Strategy, as well as rebuilding networks disrupted by the conflict. The SESP has made a significant contribution in strengthening capacity of the PESs in the country. Transparent and well targeted ALMPs became an integral part of the PESs activities. The SESP took a flexible approach and focused its activities on the provision of ALMPs (on the job training and employment; self employment; job counseling, public works, skills enhancement) to the most vulnerable groups in the labor market. The SESP also provided evidence and demonstrated to the Government the administrative, legislative and institutional bottlenecks, contradictions and complexities which made it next to impossible to reduce registered unemployment numbers without introducing legislative and institutional changes. For example: unless health insurance benefits were removed from the PES and delinked from unemployment benefits - the numbers of persons registered as unemployed would remain high. Unfortunately, the political climate was not in favor of eliminating these bottlenecks. 3.2 Achievement of Project Development Objectives Project objectives were: Objective I: Provision of employment services for an estimated 10,000 people who were either recently retrenched and above 45 years of age and/or those who were actively seeking jobs for two or more years. The achievement level of this objective is satisfactory, as evidenced by fully achieved first outcome indicator (Job brokerage services and ALPM measures for 10,000 persons), as well as fully achieved intermediate indicator 1 (Adoption and implementation of job brokerage and ALPMs by employment services) and substantially achieved intermediate indicator 2 (Development and delivery of transparent small grants programs based on annual minimum wage index, instead of credit scheme). The Project slightly exceeded its primary development objective by providing job counseling and employment services to 10,669 persons in the target group of 40 years of age and above, who were actively seeking jobs and were socially vulnerable and low skilled persons. Of these, 3,524 persons were in the RS and 7,145 persons in the Federation BH. In the Federation BH, PIU SESER received financing from the entity budget to provide SESP type employment services to 167 disabled persons. All these brought the total number of beneficiaries under the project to 10,836. A summary of project activities in provision of ALMPs is presented in the Table below: 13

20 Activity Federation BH RS BH BH No. of No. of No. of Costs per beneficiary (KM) beneficiaries beneficiaries beneficiaries On-the-job training 5,225 2,038 7,263 2,407 Skills enhancement ,240 Self-employment 1,478 1,478 2,756 2,934 Public works Job counseling Services to disabled 167 persons Total 7,312 3,524 10,836 2,474 Objective II: Furthering reform agenda to bring behavioral and business changes in the employment services by focusing the PES on providing: effective job brokerage services; employment assistance programs including counseling services; programs to assist the unemployed; analytical and information services including disseminating labor market information. The achievement level of this objective is moderately unsatisfactory. This objective is closely related to the second outcome indicator in the PAD: PES expenditures, revenues, procedures, databases for registered unemployed; labor market information and staffing would indicate a shift to primarily focusing on effective employment services measures. This outcome indicator was partially achieved as evidenced by progress made against the following indicators intermediate indicators: Partially achieved indicator 3 - Recognition of all legal income earning opportunities (such as farming and agribusiness) as jobs. There was an evident interest amongst people working in agriculture, and listed as unemployed in the employment service records, to be registered (more than 1,000 persons in the first two years of the project implementation), however the law on Agriculture was only adopted in Republika Srpska, while in the federation of BH the Law has been drafted but not yet adopted. Partially achieved indicator 4 - PES expenditures reflect primary focus on employment services and not on other tasks. Although there is no concrete figure provided in the documents produced by the Bank team or PIUs to evidence the achievement of this indicator, there is a clear evidence of number of persons served by PES. Not achieved indicator 5 - Social Insurance Benefit payments such as Health Insurance Benefits/Pension Benefits and cash benefits transferred to appropriate agencies. Although the project provided evidence that unless health insurance benefits were delinked from unemployment benefits - the numbers of persons registered as unemployed would remain high; this was not done due to political reasons. 14

21 Not achieved indicator 6 - Updated Research and Information Data base on Labor Markets. RS initiated development of employment services management information system. Employer survey has been piloted for the first time to obtain information on labor demand. However, the Public Employment Services in BH still need to develop a system which will provide data on labor markets. Given that the Project fully achieved its first PDO indicator, and partially achieved its second PDO indicator, its overall achievement is rated as Moderately Satisfactory. 3.3 Efficiency The SESP's demonstration effect for cost effective job brokerage services and ALMPs is yielding positive results. A comparison of costs between the SESP financed and other services by the PES in the Federation BH shows that the average cost per beneficiary/placement was KM 5,343 for general programs while for those employed through the SESP was KM 2,810. Within the contingent of job seekers served by the SESP, employment sustainability of Project beneficiaries is also considered satisfactory. A beneficiary survey of 1,763 persons whose SESP brokered 12 month contracts had expired was conducted in In the Federation BH, 77 percent remained in their jobs after their SESP contracts had expired and remained off the list of the registered unemployed. In the RS, 89 percent of people kept their jobs while 11 percent returned to the lists of unemployed. 15

22 3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory The overall outcome is rated moderately satisfactory for the following reasons. First, at the time of design the Project was highly relevant in terms of country priorities, including the Government s overall strategy and objectives and the CAS. Additionally, the Project has maintained high strategic and substantive relevance throughout implementation, particularly during the recent and current crisis context. Second, the Project has contributed to institutional capacity building. However, in terms of achieving its stated objectives, Project performance was moderately satisfactory. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development As already stated, the Project successfully reached its target group: registered active job seekers over the age of 45, later lowered to 40 years of age, and within this category considered the most vulnerable and hard core unemployed because they had been unemployed for a period of more than 6 months. In particular, 34 percent of beneficiaries were with primary or lower education level; 31 percent graduated from secondary school with a three-year course, and 30 percent with a four-year course; 61 percent of beneficiaries were males and 39 percent were females. (b) Institutional Change/Strengthening The SESP has made a major contribution in strengthening of the employment services in the country. Capacities of the PESs in both entities have been significantly strengthened under the Project; transparent and well targeted ALMPs became an integral part of PES s activities. In the Federation BH, for example, after much publicized non-transparent and poorly targeted activities in the previous period, the PES has had unqualified audit reports for 2006, 2007 and However, given the current labor market situation in BH, an unfinished agenda of further reforms in employment and labor market policies still remains. (c) Other Unintended Outcomes and Impacts The Project has played a significant role in moving the policy agenda on employment services towards a complete focus on job brokerage and job counseling. 16

23 The Ministries of Labor agreed that reform of the employment services was a key issue for improving the employment situation in the country. In partnership with the SESP, the PES in the Federation BH was able to remove 130,000 persons off the lists of registered unemployed due to their non eligibility and inactivity. However, these actions were overturned in the Federation BH when incentives were provided by the Government to re-register as unemployed demobilized soldiers. The new legislation provided new cash benefits for demobilized soldiers and prescribes that a condition to obtain other non-cash benefits requires confirmation by the PESs that a demobilized solider is registered as unemployed. Providing additional co-financing of 44 percent in the FBH and 28 percent in RS, the Project was able to finance job coverage and employment services to a slightly larger group than originally anticipated. It also supported the introduction of sustainable employment approaches in ALMPs for unemployed persons who belong to vulnerable categories with lower cost per capita grants, thus replacing the non transparent loans which were earlier provided by the PES. The Project also supported the implementation of the following activities which were not part of the original project scope but had a direct impact in achieving PDOs: PESs have piloted new and cost effective labor market interventions, such as vacancy and job fairs. The implementation of new standards, procedures and processes in provision of employment services in compliance with ISO 9001:2000 in the Federation BH. 4. Assessment of Risk to Development Outcome Rating: Moderate There is strong evidence that priorities supported by the Project will remain government priorities in the future. Indeed, some of the key project benefits have already been mainstreamed to legislation adopted during project implementation, as outlined above. However, the PESs in BH still need to develop a fully-fledged Performance Information and Management System (PIMS) to evaluate and assess the impact of ALMPs. The PIMS should provide real time information on key performance indicators, such as (i) program enrollment by client characteristics, (ii) expenditures by program category, (iii) job placement rates after program participation, (iv) cost per participant, and (v) cost per placement, in regional disaggregation. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 17

24 The Bank s performance in ensuring quality at entry is rated as moderately satisfactory. On the positive side, the Bank s team had extensive experience in social protection and related areas in Bosnia and Herzegovina via investment and adjustment lending. The team was also broad based, incorporating needed expertise. At the same time, the ICR team found some shortcomings in preparation. The ICR team believes that the project development outcomes and indicators could have been better developed to be more consistent and more directly linked to the activities supported by the project. Additionally, project preparation should have included a solid evaluation of the results of the Pilot Emergency Labor Redeployment project (PERLP); and a clearer path of how the employment services should change. Finally, once the original project proposal was changed as the result of recommendations made by the QER, the team should have further developed the new component that was added to the project and related baseline standards against which to monitor progress. As mentioned before, the quality at entry was reviewed by the World Bank internal Quality Assurance Group (QAG) in 2005 and was rated as Moderately Unsatisfactory. Both the sector and country management in the ECA Region considered that the quality at entry of the SESP was satisfactory. The Region s perspective on the quality at entry was based on the fact that (i) there was a history of employment projects in BH which, compared to other experience in BH and globally, had been both effective in placing people and relatively cost-effective; (ii) under previous projects, employment services were provided on a pilot basis for hundreds of the target group identified under the SESP, and there was every reason to believe the flexible menu of support options would be successful; (iii) the monitoring systems for beneficiaries was rigorous, and would enable tracking over several years; and (iv) the Project had high ownership within the PES, which was key to introducing and institutionalizing reform within the services. The Region considered that the technical aspects of the Project were well prepared, particularly in regards to labor markets and employment. (b) Quality of Supervision Rating: Satisfactory Bank s performance in ensuring quality of supervision is rated as satisfactory. During Project supervision, the team assured a smooth implementation, including maintaining a high level of policy dialogue in the social sector in general and its impact on the labor market in particular. Supervision inputs and processes were adequate. Supervision visits were undertaken at least 4 times a year and ISRs prepared twice a year. Regular procurement and financial management reviews were carried out. There was an adequate support from Bank procurement and financial management specialists, which resulted in quick turnaround time and responses to the requests. The continuity of team members, in particular of the Team Leader, as well as permanent presence of the team member in the World Bank 18