1

Document of

The World Bank

Report No. 82586-TN

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED GRANT

FROM THE MENA TRANSITION FUND

IN THE AMOUNT OF US$4.70 MILLION

TO THE

REPUBLIC OF TUNISIA

FOR A

SOCIAL PROTECTION REFORMS SUPPORT PROJECT

November 5, 2013

This document has a restricted distribution and may be used by recipients only in the

performance of their official duties. Its contents may not otherwise be disclosed without World

Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate as of October 9, 2013)

TND 1 = US$ 0.61

US$ 1 = 1.65 TND

FISCAL YEAR

January 1 - December 31

ABBREVIATIONS AND ACRONYMS

AAA Analytical and Advisory Activities

AfDB African Development Bank

CFAA Country Financial Accountability Assessment

CNSS Caisse Nationale de Sécurité Sociale / Pension Fund (Private Employment)

CNAM Caisse Nationale d’Assurance Maladie / National Medical Insurance Fund

CNRPS Caisse Nationale de Retraite et de Prévoyance Sociale / Pension Fund (Public

Employment)

CPAR Country Procurement Assessment Review

CRES Centre de Recherche et d’Etudes Sociales

CSO Civil Society Organization

DPL Development Policy Lending

FMS Financial Management Specialist

FSAP Financial Sector Assessment Program

FHC Free Health Cards

GBO Gestion du budget par objectif (Performance-based Budgeting)

GDP Gross Domestic Product

GOJ DPL Governance, Opportunity and Jobs Development Policy Loan

IFI International Financial Institution

IFRS International Financial Reporting Standards

ILO International Labor Organization

INS Interim Strategy Note

IMF International Monetary Fund

INS Institute Nationale de la Statistique / National Statistics Office

ISN Interim Strategy Note

M&E Monitoring and Evaluation

MDGs Millennium Development Goals

MENA Middle East and North Africa

MIC Middle Income Country

MICI Ministry of Investment and International Cooperation

MOF Ministry of Finance

MOH Ministry of Health

MOSA Ministry of Social Affairs

3

MPDR Ministry of Planning and Regional Development

MTEF Medium-Term Expenditure Framework

MTFF Medium-Term Financial Framework

NEF National Employment Fund

PAYG Pay-As-You-Go

PIM Project Implementation Manual

PNAFN Program National d’Aide aux Familles Nécessiteuses (National Program for Poor

Households)

PROST Pensions Reform Options Simulation Toolkit

SHC Subsidized Health Cards

UCT Unconditional Cash Transfers

TND Tunisian Dinars

Vice President:

Country Director:

Sector Director:

Sector Manager:

Task Team Leader:

Inger Andersen

Simon Gray

Steen Lau Jorgensen

Yasser El-Gammal

Heba Elgazzar

4

REPUBLIC OF TUNISIA

SOCIAL PROTECTION REFORMS SUPPORT PROJECT

TABLE CONTENTS

I. STRATEGIC CONTEXT ................................................................................................. 9

A. Country Context .................................................................................................................. 9

B. Sectoral and Institutional Context ..................................................................................... 10

C. Higher Level Objectives to which the Project Contributes .............................................. 13

II. PROJECT DEVELOPMENT OBJECTIVES .............................................................. 14

A. Proposed Development Objective(s) ................................................................................ 14

B. PDO Level Results Indicators ........................................................................................... 14

III. PROJECT DESCRIPTION ............................................................................................ 15

A. Project Components .......................................................................................................... 15

B. Project Financing .............................................................................................................. 17

Financing Instrument .......................................................................................................................... 17

Project Cost and Financing ................................................................................................................. 18

C. Lessons Learned and Reflected in the Project Design ...................................................... 18

IV. IMPLEMENTATION ..................................................................................................... 20

A. Institutional and Implementation Arrangements .............................................................. 20

B. Results Monitoring and Evaluation .................................................................................. 21

C. Sustainability..................................................................................................................... 21

V. KEY RISKS AND MITIGATION MEASURES .......................................................... 22

A. Risk Rating Summary ....................................................................................................... 22

B. Overall Risk Explanation .................................................................................................. 22

VI. APPRAISAL SUMMARY .............................................................................................. 23

A. Economic and Financial Analyses .................................................................................... 23

B. Technical ........................................................................................................................... 25

C. Financial Management ...................................................................................................... 25

D. Procurement ...................................................................................................................... 26

E. Social (including Safeguards) ........................................................................................... 27

F. Environment (including Safeguards) ................................................................................ 27

ANNEX 1: RESULTS FRAMEWORK .................................................................................... 28

ANNEX 2: DETAILED PROJECT DESCRIPTION .............................................................. 31

ANNEX 3: IMPLEMENTATION ARRANGEMENTS ......................................................... 37

ANNEX 4: OPERATIONAL RISK ASSESSMENT FRAMEWORK (ORAF) ................... 46

ANNEX 5: IMPLEMENTATION SUPPORT PLAN ............................................................. 49

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6

PAD DATA SHEET

Republic of Tunisia

Social Protection Reforms Support Project (P144674)

PROJECT APPRAISAL DOCUMENT .

Middle East and North Africa Region

Human Development Department

.

Basic Information

Date: October 11, 2013 Sectors: Social Protection (50%); Public Finance (50%)

Country Director:

Simon Gray Themes: Human Development and Social Protection,

Public Sector Governance, Economic Dev

Sector Manager/Director: Yasser El-Gammal / Steen Lau

Jorgensen

EA Category: C

Project ID: P144674

Lending Instrument: IPF Team Leader(s): Heba Elgazzar

Joint IFC: .

Borrower: Republic of Tunisia

Responsible Agency: Ministry of Finance

Contact: Mr. Kais Rzigua Title: Director

Telephone No.: (+216) 71 241 767 Email: krziga@finances.tn .

Project Implementation Period: Start Date: November 1, 2013 End Date: December 31, 2016

Expected Effectiveness Date: October 15, 2013

Expected Closing Date: June 30, 2017 .

Project Financing Data(US$M)

[ ] Loan [ X ] Grant [ ] Other

[ ] Credit [ ] Guarantee

For Loans/Credits/Others

Total Project Cost : 5.7 Total Bank Financing : 4.7

Total Co-financing : 1.0 (Government of Tunisia contribution)

Financing Gap :

.

Financing Source Amount(US$M)

RECIPIENT (Government of Tunisia contribution) 1.0

IBRD

IDA:

IDA:

Others (MENA Transition Fund) 4.7

Financing Gap

Total 5.7

7

.

Expected Disbursements (in USD Million) pertaining to Transition Fund financing only

Fiscal Year 2014 2015 2016 2017

Annual 1.2 2.0 1.0 0.5

Cumulative 1.2 3.2 4.2 4.7 .

Project Development Objective(s)

The proposed project development objective (PDO) is to strengthen institutional capacity to design social protection reforms and improve targeting of safety net programs. .

Components

Component Name Cost (USD Millions)

pertaining to Transition Fund financing only

Subsidy and Safety Net Reform Support 3.78

Strengthening Social Security Analysis and Planning 0.4

Project Management and Monitoring 0.4

Reserve (Miscellaneous) 0.12 .

Compliance

Policy

Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ] .

Does the project require any waivers of Bank policies? Yes [ ] No [ X]

Have these been approved by Bank management? Yes [ ] No [ ]

Is approval for any policy waiver sought from the Board? Yes [ ] No [ X]

Does the project meet the Regional criteria for readiness for implementation? Yes [X] No [ ] .

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment OP/BP 4.01 X

Natural Habitats OP/BP 4.04 X

Forests OP/BP 4.36 X

Pest Management OP 4.09 X

Physical Cultural Resources OP/BP 4.11 X

Indigenous Peoples OP/BP 4.10 X

Involuntary Resettlement OP/BP 4.12 X

Safety of Dams OP/BP 4.37 X

Projects on International Waterways OP/BP 7.50 X

Projects in Disputed Areas OP/BP 7.60 X

.

Legal Covenants

Name Recurrent Due Date Frequency

Description of Covenant

8

.

Team Composition

Bank Staff

Name Title Specialization Unit UPI

Heba Elgazzar Senior Economist Human Development MNSHD

Hala Ballout Program Assistant Human Development MNSHD

Christina Wright Operations Officer Human Development MNSHD

Gustavo Demarco Lead Economist Human Development MNSHD

Diego Angel-Urdinola Senior Economist Human Development MNSHD

Fanny Missfield-Ringus Senior Economist Sustainable Development MNSSD

Isabelle Huynh Senior Operations Officer ICT and Development TWICT

Besma Saadi Refai Team Assistant Operations MNCO1

Paolo Verme Senior Poverty Specialist Poverty Reduction MNSED

Antonio Nucifora Lead Country Economist Country Economist MNSED

Jean-Charles de Daruvar Senior Counsel Legal LEGEM

Hassine Hedda Finance Officer Loan Operations CTRLA

Non Bank Staff

Name Title Office Phone City

.

Locations

Country First Administrative

Division

Location Planned Actual Comments

.

9

REPUBLIC OF TUNISIA

SOCIAL PROTECTION REFORMS SUPPORT PROJECT

I. STRATEGIC CONTEXT

A. Country Context

1. The challenges faced by Tunisia following the January 2011 popular uprising

in terms of high unemployment and regional disparities have called for a new vision

of economic growth and the social contract since 2011. The effectiveness and

efficiency of Tunisia´s social sector expenditures have greater urgency in the context of

the economic slowdown and increasing budget constraints.

2. With the election in October 2011 of a Constituent Assembly and the

formation of a new interim Government of Tunisia (Government), Tunisia

completed the first phase of its political transition to a multi-party democracy. National elections under the new Constitution are expected to take place during 2014.

3. The most immediate challenge for Tunisia is to ensure economic and social

stability in a situation where the short-term economic outlook remains uncertain.

Economic growth started to recover in 2012 but the economic outlook remains uncertain

and external financing needs are expected to remain large in the near term. Gross

domestic product (GDP) growth is projected at 4.0 percent for 2013 based on

Government estimates at the time of writing, but the pace of recovery will depend on the

Government’s ability to manage the social and political tensions in Tunisia, the execution

and effects of the large fiscal stimulus, the impact of the increase in international food

and fuel prices, and the extent to which the European recession will affect tourism,

exports and foreign direct investment (FDI).

4. The increased fiscal pressure with lower revenue is increasing the urgency

for rationalizing public spending, including the main component, social expenditure.

Social expenditure accounts for approximately 60 per cent of total public expenditure or

an estimated 20 percent of GDP. Similar to other countries in the Middle East and North

Africa (MENA) region, safety net expenditure, a component of total social spending, is

dominated by subsidies in Tunisia that primarily benefit wealthier households.

5. Overall, given the increasing constraints to both monetary and fiscal policies,

the authorities envisage that the future macroeconomic stance will gradually

become more conservative and have therefore initiated social protection reforms

supported by the proposed project. The Ministry of Finance (MOF) has prepared its

medium term fiscal framework (MTFF) based on a relatively cautious approach to public

investment spending which reflects a vision to controlling the wage bill and rationing

food and fuel subsidy expenditure. Implementing such reforms against the backdrop of

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continuing social pressures and in the run up to the 2013 elections will require significant

efforts by the authorities. This project will support priority areas of policy reform in line

with the economic and social challenges facing Tunisia.

B. Sectoral and Institutional Context

6. The interim Government has initiated a package of economic and social

reforms which seeks to pave the way for stronger economic growth and job creation,

particularly in lagging regions. A key pillar of this strategy includes strengthening

human capital through programs to promote quality in education and health services,

consolidate and improve active labor market programs, improve coverage of social safety

nets for vulnerable households, and improve the sustainability of the pension and health

insurance funds. The Government also aims to increase labor force participation and

reduce social disparities reinforcing accountability, quality and effectiveness in the social

sectors. Policies and programs for targeted public expenditures and social transfers can

enhance opportunities for economic participation and mitigate poverty.

7. Given lagging economic growth, a relatively high informal labor force and

growing fiscal pressure, Tunisia’s spending on universal subsidies for food and fuel

and its social security system are considered unsustainable in the medium-term. While Tunisia compares to other MENA countries in terms of revenue, expenditure and

public debt as a percentage of GDP in 2010, there has been a relative decrease in revenue

and increase in debt pressure. With less robust GDP and revenue projections, the

imbalance will require the Government to increase the efficiency of public expenditure.

The ratios of total revenue to total expenditure for Tunisia and for MENA alike averaged

approximately 1.0 in 2010. However, expenditure in Tunisia is projected to exceed

revenue through at least 2017, whereas MENA countries on average will have revenue to

expenditure ratios greater or equal to 1.0 over the same period, indicating relatively lower

fiscal pressure in other MENA countries as compared to Tunisia.

8. Subsidy expenditure, which is regressive and high, could be reallocated to

other programs that have a more direct welfare impact and lower fiscal burden. Tunisia´s social expenditure mainly comprises education (accounting for 20 percent of

total public expenditure), followed by consumption subsidies (12.9 percent), health (8.3

percent), direct cash transfers and in-kind social assistance (1.3 percent, of which direct

cash transfers accounts for nearly 0.5 percent) and active labor market programs (3.9

percent). Nearly 3000 million Tunisian dinars (TND) were spent on fuel, food and

transport subsidies, accounting for 4 percent of GDP as of 2012, projected to account for

8 percent in 2013. Of this spending, fuel subsidies account for 1500 million TND and

1200 million TND goes towards subsidizing food and basic products. Universal

subsidies, particularly for fuel, are regressive, with approximately 70 percent of the

subsidy bill benefitting the wealthiest 20 percent of the population. In this respect,

subsidy expenditure represents a priority area of reform in terms of fiscal sustainability

and social equity.

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9. Tunisia has in place a direct cash transfer program providing a social safety

net (SSN) for vulnerable households, the “Programme National d’Aide Aux Familles

Nécessiteuses” (PNAFN). PNAFN, created in 1986 and managed by the Ministry of

Social Affairs (MOSA), is a non-contributory program that provides unconditional cash

transfers to approximately nine percent of the population considered vulnerable, or

235,000 households as of 2012.1 Eligibility is based on a combination of categorical

criteria and a variation of community-based targeting, determined by social worker

interviews and local MOSA committees that are required to involve representatives from

the National League on Human Rights. Eligibility criteria include declared revenue (with

those falling below the national poverty line given priority), household size, incapacity to

work, and presence of a disability. Beneficiary households receive a cash transfer

allocation of 100 TND per month plus child supplements of 10 TND per child for up to

three children. 27 percent of the population also receives health care insurance cards

through this program for free or subsidized services. However, targeting, information

and monitoring of PNAFN is considered relatively weak. An estimated 60 percent of

beneficiaries are not considered poor2, using a standard definition of consumption

poverty and analysis of the 20053 household survey data from the National Institute of

Statistics. This degree of leakage suggests that the program is relatively inefficient and is

inadequately targeted to the poor, requiring targeting and monitoring reforms to improve

coverage.

10. Regarding social security, the Government has initiated analysis on scenarios

for reform of the publicly-managed pension and health insurance funds in order to

assess options for improving sustainability in the medium-term. The publicly-

managed pension schemes for public sector and private sector workers are financially

unsustainable, with a larger deficit facing the public sector regime, Caisse de la Retraite

et de la Prévoyance Sociale (CNRPS), than the private sector regime, Caisse de la

Sécurité Sociale (CNSS). Expected income flows of the two funds are not enough to

cover expected expenditures and a combined deficit is expected to reach 2 percent of

GDP in the absence of reforms by 2018. Current pension expenditures in Tunisia

represent approximately 5 percent of GDP, with a contribution rate of 37 percent of the

working age population.

1 Since February 2011, MoSA has also extended social assistance benefits to Tunisian nationals fleeing

Libya. The assistance includes a one-time cash transfer of 400 TND per single beneficiary and 600 TND

per household. Beneficiaries should provide evidence of hardship and having resided in Libya for a period

of at least 6 months prior to repatriation. More than 50,000 Tunisians fled Libya between February and

August 2011, most of whom remain unemployed. 2 Many beneficiaries are still considered vulnerable, since 42 percent are considered poor (below a poverty

line of approximately $2 per day) and 29 percent are considered vulnerable (falling just above the poverty

line). 3 The analysis will be updated once the National Institute of Statistics publicly releases the data from the

2010 Household Budget and Consumption Survey.

12

11. While the private sector pensions regime (CNSS) faces less deficit, fiscal

pressures are expected to emerge as early as 2014. CNSS has not yet depleted its

reserves and not all its schemes are facing deficits yet. However, they are projected to

appear as soon as 2014 and the accounts will have an uncovered deficit. The sources to

finance these deficits are still unclear, since the MOF is not expecting to have to attend

CNSS financing needs.

12. The national health insurance fund also faces a pending deficit due to rising

expenditures, estimated to amount to 50 million TND by 2015. Health insurance for

active workers has been administered by a single fund since the merging of multiple

schemes in 2007, Caisse Nationale d’Assurance Maladie (CNAM). CNAM is financed

by mandatory contributions from employees and public/private employers; the

contribution rate is 6.75 percent for employees and nearly 15 percent for employers.

CNAM provides health insurance through social security contributions for 3.3 million

civil and private sector employees in addition to their dependents as of 2011, which is

estimated to account for 80 percent of the population. Nearly 13 percent of the

population remains uninsured as of 2011.

13. Despite the aforementioned deficits, the level of social contributions is

relatively high, which negatively affects the growth of formal employment. From the

perspective of the labor market, there are two issues related to social security reform that

need attention. First, the high level of pay-roll taxes and social security contributions that

have increased the tax-wedge to close to 39% -- high enough to reduce incentives to

create formal jobs. Second, the high fragmentation of the social insurance system, which

has different schemes to cover different groups of workers. This can affect labor

mobility and, in the case of the very generous scheme for civil servants, provide

incentives to cue for public sector jobs. Nearly 55 percent of the labor force is informal

and therefore not covered by social insurance, and there is weak protection for workers

who become unemployed.4

14. Taken together, a reform of social protection programs is seen as a priority

by the Government as evidenced by its ongoing social dialogue and its request for

the proposed project to prepare the way for consensus on reforms. In May 2012, the

Government launched a social dialogue process which reached a significant milestone in

January 2013 with the signing of a new “Social Pact”. The Social Pact sets in place

principles for launching dialogue on key areas of reform involving social protection,

regional development, employment and skills, and governance of social dialogue, namely

among the Government, the labor unions [as represented by Union Generale des

Travailleurs Tunisiens (UGTT) and other bodies] and the private sector [as represented

4 Only permanent workers laid off for economic reasons are entitled to unemployment assistance. In 2009,

only 5.6 % of laid-off workers received the benefit. The potential benefit duration is 12 months, and the

level of the benefit is equal to the minimum wage. Workers are poorly protected against the risk of

unemployment: (i) severance payment for layoffs are low for international standards (one day salary per

month of service; it cannot exceed three months of salary), (ii) advance notices for dismissals are short for

international standards (30 days), and (iii) the current unemployment support system in Tunisia only covers

a minority of the workforce.

13

by Union Tunisienne de l'Industrie, du Commerce et de l'Artisanat (UTICA) and other

bodies]. Furthermore, MOSA, specifically the Centre de Recherche et d’Etudes Sociales

(CRES), is leading an assessment of social protection programs, including social

assistance and social security, and preparing an integration strategy for social protection

systems which this project supports.

C. Higher Level Objectives to which the Project Contributes

Alignment with the Objectives of the MENA Transition Fund

15. The objective of the Transition Fund is to improve the lives of citizens in

transition countries, and to support the transformation currently underway in several

countries in the region (the “Transition Countries”) by providing grants for technical

cooperation to strengthen governance and public institutions, and foster sustainable and

inclusive economic growth by advancing country-led policy and institutional reforms.

16. The proposed project is aligned with the objectives of the MENA Transition Fund

in terms of: (i) Enhancing Economic Governance; and (ii) Inclusive Development. The

revolution of January 14, 2011 revealed that Tunisia’s economic growth over the

previous decades has hidden great disparities in regional development and in the

distribution of wealth among the various segments of Tunisian society. It also revealed a

deficit in social cohesion and exposed the true extent of poverty and marginalization.

Today, Tunisian civil society and the Government view social justice as a national

priority in order to promote fair and inclusive development. In the context of Tunisia’s

transition to democracy, major reforms are required to achieve this objective, including

an overhaul of the subsidies system to ensure they reach those who truly need them,

thereby relieving pressure on the national budget and liberating funds to more

economically and socially worthwhile programs. Improving the targeting of price

subsidies, coverage of safety net programs and strengthening capacity to develop a

consensus around social protection reforms are essential to improving equity,

transparency, and good governance of public revenues.

Alignment with the Country Assistance Strategy

17. The proposed operation directly supports the Bank’s interim country

strategy for Tunisia during the transition period as described in the World Bank’s

2013-2014 Interim Strategy Note (ISN) 5

, discussed in July 2012. The ISN responds

to the country challenges and government priorities and is designed to support the

transition phase until a new government is elected under a new constitution. The ISN

focuses on three main areas: (i) Laying the Foundation for Renewed Sustainable Growth

and Job Creation, (ii) Promoting Social and Economic Inclusion, and (iii) Strengthening

Governance. By seeking to improve the efficiency of public expenditure and coverage of

5 World Bank (2012). Tunisia Interim Strategy Note. Report No. 67692-TN. Washington DC: World

Bank.

14

social protection schemes, the proposed operation directly supports pillars (i) and (ii) of

Tunisia’s ISN. The proposed operation is also linked to the Bank’s ongoing

programmatic Governance, Opportunity and Jobs (GOJ) Development Policy Loan

(DPL) series (2011-2014) and the Governance in Social Sectors Technical Assistance

Program (2011-2014). The project is fully consistent with the DPL series by supporting

measures to implement a conservative fiscal framework while addressing social

disparities and improving the effectiveness of social spending. The activities supported

by this project, being fully aligned with the DPL, will facilitate the design and

implementation of reforms led by the Government and supported in coordination with

key development partners, namely the African Development Bank and the European

Union. In addition, the project is also aligned with MNA’s Regional Strategy and

contributes to the pillars of social inclusion, growth and governance.

II. PROJECT DEVELOPMENT OBJECTIVES

A. Proposed Development Objective(s) and Project Beneficiaries

18. The proposed project development objective (PDO) is to strengthen institutional

capacity to design social protection reforms and improve targeting of safety net

programs. The main beneficiaries would include the poor and near-poor households,

including female-headed households who comprise 51 percent of beneficiaries, who are

vulnerable to rising food and fuel prices; in addition, middle-income households who

face similar risks including impinging pensions and health insurance benefits as a result

of growing deficits. It is expected that the project will benefit approximately 7 million

beneficiary households, plus up to 3 million beneficiaries, who would receive a new

identification number in order to improve targeting accuracy and strengthening

governance of safety net and social security programs. In addition, beneficiaries include

governmental representatives whose technical and operational capacity to design reforms

and manage social protection systems will be strengthened.

B. PDO Level Results Indicators

19. At the PDO level, the project is expected to strengthen institutional capacity as

indicated by:

a. Indicator 1: Direct project beneficiaries (number), of which female

(percentage), in terms of total beneficiaries for institutional capacity

building and registration in unified population database (Core Sector

Indicator)

b. Indicator 2: Citizens registered in new unified database (number), of

which are female (percent), of which are vulnerable (percent)

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c. Indicator 3: Number of Safety Net Beneficiaries (Core Sector Indicator),

of which are poor, of which are female.

d. Indicator 4: Subsidy and safety net reform plan prepared and

disseminated

e. Indicator 5: Integrated social security reform plan prepared and

disseminated

III. PROJECT DESCRIPTION

A. Project Components

20. The project has three components: (a) Subsidy and Safety Net Reform Support;

(b) Strengthening Social Security Analysis and Planning; and (c) Project Management

and Monitoring.

Component 1: Subsidy and Safety Net Reform Support (US$3.78 million)

21. This component will finance consultant services, workshops and goods to support

the reform process and includes the following sub-components and associated activities:

Sub-Component 1.1: Technical Assistance to Inter-ministerial Working Group

(US$0.82 million):

22. This sub-component would finance consultant services and workshops to provide

technical assistance and capacity-building to the Inter-ministerial Working Group that

builds upon analysis completed during 2012 on the distribution and potential impact of

energy subsidy reforms. This component will therefore focus on technical assistance to

the design of a food and fuel subsidy reform implementation plan and subsidy-

compensation program for households, including: (i) evaluation of economic and social

impact of potential reforms for energy and food subsidies; (ii) evaluation of reform

options for automatic fuel price adjustment mechanisms; and (iii) development of an

implementation plan and operational manual for a subsidy-compensation program for

households. To help sustain social stability during the design and implementation of

reforms, the existing cash transfer program for the poor (PNAFN) will be maintained by

the Government. The communication and redress mechanisms supported by this project

will help to ensure that vulnerable households affected by reforms are informed and

involved in the preparation of the compensation program in advance of the

implementation of reform measures.

16

Sub-Component 1.2: Development of a Unified Database and Targeting System

(US$2.12 million)

23. This sub-component would finance consultant services, workshops and goods to

provide technical assistance for the creation of a unified population database to identify

households by expanding the unique identifier number (UIN) database developed by

MOSA’s Centre de Recherche et d’Etudes Sociales (CRES) for all social transfer

programs, including: (i) development of proxy-means testing formula and questionnaire

for targeting compensation; (ii) assessment of various payment options for delivering

household cash transfers under the subsidy-compensation program; (iii) assessment of

options for implementing a UIN based on an evaluation of identification systems

currently used by other programs; (iv) information technology support for the creation of

a national MIS for the unified database; and (v) enhancement of the MOSA MIS for

managing current social protection programs. The unified database will be created

through consolidation of existing databases (including those hosted by MOSA) linked to

revenue collection, national identification numbers used by the Ministry of Interior

(MOInt), the database administered by the National Gas and Electricity Company

[(Societe Tunisienne de l'Electricite et du Gaz (STEG)], and various identification

numbers used for social programs administered by MOSA. Specialist consultants would

provide international best practice and input to the architecture of a unique identification

system and coordination with other national databases, such as the social security system

and national identification number.

24. This activity will be supported by an additional contribution of US$1.0 million

from the Government’s budget to MOSA to consolidate and develop a “smart card”

system for social security beneficiary registries, including reducing fragmentation among

registries for CNSS, CNRPS, CNAM, PNAFN and the subsidized health card program.

MOSA conducted a feasibility assessment for the development of a new MIS in 2012, to

which the Government has allocated funding to launch a MOSA MIS project for its

development.

Sub-Component 1.3: Consensus-Building and Communication (US$0.84 million):

25. This sub-component will finance consultant services, workshops and goods to

provide technical assistance for consensus-building and communication, including: (i)

evaluation of the economic and social implications for different stakeholders; (ii)

improving access to information on subsidy and social protection expenditure analyses

through traditional and social media in advance of reforms for internal (including

governmental agencies, Council of Ministers and National Constituent

Assembly/Parliament) and external (public) stakeholders; (iii) developing a public

consultation mechanism on reform options in advance of reforms; and (iv) enhancing

existing grievance redress mechanisms for social protection beneficiaries.

26. This sub-component would therefore support greater social accountability

through both public disclosure of relevant administrative information, new types of

consultative mechanisms, and improving grievance redress for ensuring the poor and

17

vulnerable have access to social support during reforms. The tasks described above

would help to inform and involve the public in the assessment, planning and design of

reforms throughout the process. During this activity, the PIU in the MoF would track,

measure and support reporting on program-related dialogue and communications. The

work would finance consulting firms and consultants to support the development and

dissemination of key information on data and reforms, develop public participation

mechanisms, and liaise with radio, television, newspapers and social media in

implementing a communication strategy in advance of and during the reform process.

Component 2: Strengthening Social Security Analysis and Planning (US$0.4

million)

27. This component would finance consultant services, workshops and goods to

provide technical assistance for building institutional capacity to analyze and develop

consensus on an integrated reform plan for pensions and health insurance. This

component includes the following activities: (i) training of Recipient’s staff on policy

analysis of pension and health insurance reform options; (ii) training on economic and

social impact analysis of various scenarios for social contributions and protection for

workers who become unemployed; (iii) training on policy analysis of labor legislation in

relation to social security; and (iv) preparation, coordination and dissemination of

information policy reform options among social dialogue partners.

Component 3: Project Management and Monitoring (US$0.4 million)

28. This component finances consultant services and goods to support the PIU in

managing the project and monitoring project-related activities and outcomes. This

component would also entail support to ensure i) all project activities and tasks are

executed, ii) coordination among all actors involved in project implementation, iii)

fulfilling and monitoring of procurement and fiduciary requirements and audits, and iv)

monitoring and evaluation of project outcomes and intermediary results.

B. Project Financing

Financing Instrument

29. The financing instrument is an investment financing grant in the amount of

US$4.7 million, which will be financed through trust fund financing. The project was

submitted by the Ministry of Development and International Cooperation (MDCI) to the

MENA Transition Fund for financing and approved on May 15, 2013. The project will

be financed through a recipient-executed grant agreement for US$4.7 million.

18

Project Cost and Financing

30. The total project budget is estimated to be US$5.7 million over a three-year

period, of which US$4.7 million will be financed by the MENA Transition Fund. The

Government of Tunisia will contribute US$1.0 million from its own funds to the project

budget.

Project Component

Transition

Fund

(USD)

Country Co-

Financing

(USD)

Other Co-

Financing

(USD)

Total

(USD)

Component 1. Subsidy and Safety

Net Reform Support 3.78 1.0 0 4.78

Component 2. Strengthening Social

Security Analysis and Planning 0.4

0 0

0.4

Component 3. Project Management

and Monitoring 0.4 0 0 0.4

Reserve (Miscellaneous

expenditures) 0.12 0 0 0.12

Total 4.7 1.0 0 5.7

C. Lessons Learned and Reflected in the Project Design

31. Since 2011, the Bank has supported Tunisia’s transition period through technical

assistance on social protection reforms led by the Government and supported by the

Governance and Opportunity (GO) DPL (P126094) in 2011and the Governance,

Opportunity and Jobs (GOJ) DPL in 2012 (P128251). The Bank is currently supporting

two safety net workfare pilot projects in Tunisia; (a) the Participatory Service Delivery

Project (P127212), financed through a US$5m State and Peace-Building Fund (SPF)

grant in two southern governorates, and (b) the Community Works Project (P128427),

financed through a US$3m Japan Social Development Fund (JSDF) in a northern

governorate. Through these operations, the Bank has been providing support in

analyzing options for reforms, such as accountability in social services and targeting for

safety net programs to improve coverage for the poor. However, implementation has been

slow due to a lack of technical capacity to assess the impact of different reform scenarios,

assess stakeholder interests and political economy barriers to reforms, involve the public

in decision-making and build consensus, and ensure resources are available to execute

reforms.

32. International experience also demonstrates the importance of managing technical

and political economy considerations in implementing social protection reforms.

Previous Bank-supported lending and technical assistance projects on social protection in

MENA and elsewhere have demonstrated the importance of focusing on both the

technical and political dimension to the design of social protection reforms and their

implementation. Three of the Bank’s recent Independent Evaluation Group (IEG)

19

assessments6

7

8 provide extensive assessments of the performance of previous lending

and technical assistance operations show the importance of key lessons for reforms on

subsidy, safety nets, pensions and health insurance, including social protection responses

during periods of economic crisis similar to that currently witnessed in Tunisia.

33. The proposed project has been designed to incorporate lessons learned from past

projects in the following ways:

a. Strong government capacity is needed to accurately analyze and plan subsidy

and social protection reform options together with civil society partners. The

Bank provided technical assistance to assess targeting of social assistance

programs provided in 2011 through analysis of PNAFN’s targeting efficiency in

comparison to international benchmarks. Given the complex nature of subsidy

reform, the project design focuses on supporting capacity building to conduct

simulations and multi-dimensional analysis of the economic and social impact of

food and fuel subsidy reforms.

b. Broad social dialogue among government and civil society stakeholders is

needed to introduce social protection reforms and ensure implementation.

Reforms implemented successfully on subsidy and safety nets in countries

mentioned above were accompanied by strong communication and grievance

redress mechanisms, which helped to improve confidence and credibility of the

Government’s reform program. The project thus responds to this by dedicating

resources to ensure technical assistance for supporting social dialogue and

communication based on sound evidence.

c. A high degree of transparency is critical to ensuring credibility of social

protection programs and garnering the trust of intended beneficiaries during

reforms. In advance of subsidy and social security reforms, this project was

designed to ensure there are dedicated resources to improving transparency in

targeting through a unified database and in ensuring access to information needed

for the public to be informed and involved in the reform process.

d. Specifically for countries such as Tunisia embarking on social protection

reform amidst economic and political transition, strong monitoring and

evaluation of poverty and economic impacts is critical. The project therefore

includes technical assistance to establish a well-developed monitoring and

evaluation framework for assessing the poverty, social and economic impact of

reforms during the reform process. This framework will help to identify and

6 World Bank (2012). “Chapter 6: Support to Social Protection during the Global Financial Crisis” in The

World Bank Group’s Response to the Global Economic Crisis: Phase II. Washington DC: World Bank. 7 World Bank (2006). Pension Reform and the Development of Pension Systems. An Evaluation of World

Bank Assistance. Washington DC: World Bank. 8 World Bank (2009). Improving Effectiveness and Outcomes for the Poor in Health, Nutrition, and

Population. An Evaluation of World Bank Group Support Since 1997. Washington DC: World Bank.

20

mitigate the impact of reforms for vulnerable groups such as the poor, low-

income workers as well as key industries such as agriculture and transport.

IV. IMPLEMENTATION

A. Institutional and Implementation Arrangements

34. The MOF has established a Project Implementation Unit (PIU). The PIU has

been created and includes the Project Director, a technical specialist, a procurement

specialist and a financial management specialist.

35. Implementation and coordination responsibilities: The PIU will implement

project activities with oversight provided by the Technical Steering Committee (TSC).

The TSC will be overseen by the Head of Government and is organized along two

Thematic Groups, including Subsidy Reform (coordinated by MOF) and Social

Assistance and Social Security reform (coordinated by MOSA, notably CRES). The

TSC was formed in 2012 and will provide implementation guidance and monitor progress

through routine meetings and monthly monitoring reports. The TSC includes

representatives from the Head of Government, Ministry of Finance, Ministry of Social

Affairs, Ministry of Development and International Cooperation, Centre of Social

Research and Studies (Ministry of Social Affairs), Ministry of Commerce and Ministry of

Industry. The project will finance consultant services, workshops and goods to provide

technical assistance and capacity-building to the Inter-ministerial Working Group, a

group formed in 2012 whose role is to design subsidy and social security reform plans

through consensus-building among key civil society stakeholders. The Inter-ministerial

Working Group comprises representatives from the Head of Government and the

Ministries of Development and International Cooperation, Social Affairs, Center of

Social Research and Studies (Social Affairs), Finance, Commerce, Industry, Health,

Transportation, Vocational Training and Employment, and Agriculture.

36. Project Stakeholder Assessment: The main government stakeholders are:

MOSA, MOF, Ministry of Commerce (MOC) and the Ministry of Industry (MOI) as well

as the Ministries of Transport, Agriculture, Health and Employment and Vocational

Training. The Inter-ministerial Working Group has been instrumental in the preparation

of the proposed operation through extensive consultations supported by Bank technical

assistance over the course of 2012.

37. Role of civil society and non-governmental stakeholders: The main civil

society stakeholders include the public at large, current beneficiaries of social protection

programs, labor and trade unions and associations involved in supporting economic and

social development. The precise role of these stakeholders will be to: (i) engage in active

consultation with the Government during the analysis and preparation of reform plans

through the Inter-ministerial Working Group meetings, roundtables and fora, and (ii) to

support dissemination and communication of reform options, subsidy-compensation

program implementation, and monitoring and evaluation of the impact of reforms.

21

38. Implementation Support by the World Bank: Implementation Support will be

provided by the Bank, notably by country-based staff, which will allow the Bank to

continue providing policy advice and technical assistance to Government and civil

society during implementation of the project. The Bank will continue to maintain

dialogue with the relevant government counterparts and civil society groups and will

conduct regular reviews of progress to identify in advance potential solutions to technical

or administrative constraints to project implementation.

B. Results Monitoring and Evaluation

39. The monitoring and evaluation of the program and its expected results will be

based on the Government’s regular monitoring and evaluation (M&E) activities and in

consistency with the results framework of this project (Annex 1). The PIU will carry out

the M&E function. The PIU will provide quarterly monitoring tables and progress

reports. All reports will be submitted to the World Bank during regular implementation

support missions. M&E indicators will be closely reviewed by the Technical Steering

Committee and by the World Bank team. The Bank team will closely monitor progress

and identify strategies to advance progress for under-performing components.

40. A mid-term review will be carried out to assess, draw lessons from the project and

provide an opportunity to adopt any corrective action that may be required to ensure that

the project meets its development objectives. An Implementation Completion Report

(ICR) will be prepared at the end of the project.

C. Sustainability

41. The project directly supports the enhancement or reform of existing social

protection programs identified by the Government as key priorities of its interim

economic and social program of reforms and the activities are therefore expected to

continue after the end of the project. The Prime Ministry has already publicly

announced, in advance of the project, its intention to target subsidies. The Government

has recently increased petrol prices (in September 2012) and has announced plans for an

additional increase. MOSA has also adopted a policy Circulaire dated October 2012 to

begin with consolidation of beneficiary identification of social programs administered by

MOSA, and many beneficiaries of the two public pensions funds have already been

enrolled in the new MOSA identification system. Given that the national cash transfer

program for the poor has been running since 1986 irrespective of Bank financing, Tunisia

has an established track record of delivering safety net benefits and will likely continue to

do so, albeit in an improved manner, following the project’s conclusion. Although

political uncertainties may delay the implementation of full fuel and food subsidy

reductions, the investment in technical and communication capacity among government

and civil society envisioned by the project will help sustain the government’s activities

supporting evidence-based and transparent reforms.

22

V. KEY RISKS AND MITIGATION MEASURES

A. Risk Rating Summary

Risk Category Rating

Stakeholder Risk High

Implementing Agency Risk

- Capacity High

- Governance Moderate

Project Risk

- Design Moderate

- Social and Environmental Low

- Program and Donor Low

- Delivery Monitoring and Sustainability Moderate

Overall Implementation Risk High

B. Overall Risk Explanation

42. There are high risks to the successful execution of the overall project,

stemming mostly from the nature of the reforms which will require strong

consensus-building and communication. First, from the need to implement subsidies

reform in parallel to the improvement in the equity and efficiency of cash transfer

programs. On the pensions, risks derive from the careful communication of the details of

the reform and the actual impact on workers and employers. The reform of the health

insurance system faces other kinds of challenges resulting from the need to improve the

management and the health insurance systems. It is particularly important to adequately

sequence the reforms and conduct the dialogue with the beneficiary groups.

43. The ongoing period of political transition may affect the timing and

implementation of reforms. Financial and political support from the international

community will help mitigate these risks.

44. There are high risks related to the uncertainty of the economic outlook. In

addition to domestic social tensions, uncertainty about the economic outlook related to

the impact of the Eurozone crisis and the stabilization process in Libya, as well as the

pressure on the fiscal deficit and the balance of payments resulting from the recent spike

in international food and fuel prices, all pose significant risks to economic and political

developments in Tunisia. Lower economic growth and additional pressure in the labor

market could lead to renewed social tensions and reinforce a sense of lack of economic

opportunity. A recurrence of instability might lead to a renewed loss of foreign investors’

confidence, which will in turn affect industrial production and exports, further depressing

domestic consumption and slowing down economic recovery sending Tunisia into a

negative spiral. To mitigate these risks, the authorities have adopted a supplemental

budget to accelerate public investments, notably in lagging regions, to scale up social

23

interventions and support enterprises during this transition. The measures supported by

this operation also aim to facilitate both public and private investments (through

simplification of procurement procedures, and removal of red-tape), introduce reforms to

progressively improve the quality and provision of social services, particularly in

underserved regions, and to help reestablish social stability by providing greater voice

and accountability to the population.

45. There are high risks related to the implementation of the proposed operation

given the political transition. First, while the Constitutional Assembly Government has

been elected in a general election and has full popular legitimacy, some key stakeholders

may deem it inappropriate to address politically sensitive issues before a new government

is elected under the new Constitution. Second, there is a risk that the next Government

could reverse the reform agenda, and/or adopt policies that may hinder long-term growth.

All of the above risks can be mitigated by consensus-building both within and outside of

the current government. The Bank’s technical assistance to the Government on

consultations with civil society and key stakeholders during the preparation and

implementation of the operation should help reduce these risks. The Bank is working

with the Government to support evidence-based dialogue on the various reforms and

ensure there is broad consensus-building on reforms.

46. Stakeholder Risks: There is also a relatively high degree of stakeholder-related

risks unless managed well, given uncertainty regarding public perceptions on reforms that

impact welfare and economic growth. Popular opinion may be against subsidies and

pensions reforms. Reform experiences in other countries on those areas have triggered

demonstrations and Governments have, in some cases, postponed the reforms. In order to

mitigate the risk, the project places a special emphasis on the management of the

dialogue and the communication within the Government, key external stakeholders and

civil society.

VI. APPRAISAL SUMMARY

A. Economic and Financial Analyses

47. The economic and financial benefits accruing from the proposed project are

expected to be high. In terms of fiscal impacts of safety net and subsidy reform,

improved targeting of public expenditure improves equity and creates fiscal space needed

for critical public investments. The current universal food and fuel subsidy bill is

equivalent to nearly TND 4000 million as of 2012, or 8 percent of GDP. On average, at

least 50 percent of this expenditure accrues to the wealthiest 20 percent of the population,

or at least TND 2000 million. By more efficiently targeting at least 50 percent of subsidy

expenditure to lower-income households who are more vulnerable to economic shocks,

equity and efficiency of public spending may be improved.

48. In terms of social impacts of targeting subsidies including gender-related

effects, the subsidy-compensation program for vulnerable households would

24

improve welfare by improving purchasing power and protecting against rising food

and fuel prices. The impact on poverty may be high, given that the poor will benefit

disproportionately from a redistribution of subsidy expenditure from wealthy to

vulnerable households. Previous results from subsidy reform in other countries such as

Indonesia, Brazil and the Dominican Republic have demonstrated that redistributing fuel

subsidy expenditure to the poor and vulnerable populations can reduce poverty, whether

in terms of the intensity and/or headcount. Taking the example of household benefits

from subsidized liquid petroleum gas (LPG) in Tunisia as of 2005, redistributing subsidy

expenditure would result in the lowest quintile receiving a subsidy-compensation cash

transfer of approximately TND 45 per capita year, or nearly 3.6 percent of household

expenditure, which is higher than the amount currently accruing to the poor, (TND 32 per

capita per year, 2.6 percent of household expenditure). Given that 51 percent of the

poor who receive cash transfer assistance under PNAFN are women (as of 2012),

redistribution would also benefit poor women. Previous analyses also suggest positive

externalities associated with delivering cash transfers to female heads of households, who

are more likely to invest this expenditure into human capital than male counterparts.

Furthermore, the creation of a unified database will help improve equity of the existing

cash transfer program for the poor, PNAFN. Currently, the program has high leakages

and many of the poor are not covered. Approximately 40 percent of benefits go to the

non-poor and 12 percent of the poor are enrolled in PNAFN, as of 2005. Thus, subsidy

reform, accompanied by a subsidy-compensation program and improved targeting, would

help in reducing poverty and improving welfare for poor women in particular.

49. Improvements in the sustainability and solvency of the pensions and health

insurance funds will also have, over the medium and long-term, a strong impact in

ensuring coverage and reducing poverty among pensioners and achieving universal

health care coverage. The current deficit projected over the next five years for Tunisia’s

pension funds is equivalent to 2 percent of GDP and the health insurance deficit is

expected to rapidly grow due to a growing dependency ratio, putting welfare at risk for

pensioners. Approximately 57 percent of PNAFN beneficiaries are above the age of 60

years, receiving TND 100 per month, which is higher than the average pensions benefit

for approximately 30 percent of pension fund beneficiaries as of 2012. Insufficient health

insurance coverage can be impoverishing, and 14 percent of Tunisia’s population pays

catastrophically high out-of-pocket health payments as of 2006. Further deficits to the

pension and health insurance funds can increase poverty. By building consensus on

reform options as supported by this project, the needed reforms will reduce the social

security deficit and ensure coverage for maintaining welfare in the long-term.

50. Therefore, the project’s investments would yield relatively high returns in

terms of equity and sustainability. The pace and depth of the reforms envisioned, as

well as the quality of the technical assistance delivered in this operation, will determine

the ultimate economic and financial benefits of this project.

25

B. Technical

51. The project is technically sound, is consistent with the local economic and

political context, and directly supports activities led by the Government. The

introduction of capacity-building on evidence-based policy reform, unified database,

targeting system, participatory communication, and access to information before and

during reforms are considered best practices from a number of countries that have

reformed safety nets and subsidy expenditure. The existing Inter-ministerial working

group has been functioning and has begun to prepare a calendar of reforms which

provides a sound foundation for targeted technical assistance provided under the project.

The unified database has been discussed by the Government and MOSA has taken steps

to begin unifying its own databases for social programs, which will provide a basis for

further consolidation and creation of a unified system linking databases from other

concerned ministries, coordinated by a central body at the MOF for improved governance

and transparency. The activities of the project have been adequately tailored to respond

to the local economic, social and political context and support the government-funded

program to improve MIS.

C. Financial Management

52. An evaluation of the financial management capacity of the proposed PIU was

conducted on January 30, 2013, and confirmed its capacities to be adequate for

project implementation, provided that additional technical capacity-building on

Bank-specific procedures is provided to the implementing agency. A series of

meetings were held to assess financial management capacity at the MOF with the

Director of the State Budget Administration General Committee (Comité Général

d’Administration du Budget de l’Etat / CGABE), Director of the General Directorate of

Resources and Equilibrium (Direction Générale des Ressources et de l'Equilibre),

Director of the Directorate of Financial Affairs Equipment and Material (Direction des

Affaires Financières, des Equipements et du Matériel / DAFEM), and Directors of units

responsible for budget management and procurement, including the Sous-Direction de

l’Ordonnancement, Sous-Direction du Budget and Sous-Direction des Achats.

53. The financial management will be implemented by the PIU within the MOF, who

will use the existing skills and human resources within this department and coordinate

with the DAFEM. The Project expenditures will be managed as part of the MOF

operating budget.

54. Project accounting will cover all sources and uses of project funds, including

payments and expenditures. The assessment of financial arrangements including the

accounting system and accounting policies and procedures, budgeting system, reporting,

staffing, internal controls policies and procedures, external auditing arrangements of the

project under the MOF reflected that these arrangements are satisfactory and meet the

Bank’s minimum requirements (see Annex 3).

26

55. The assessment identified the following risks and mitigating measures: (i) PIU

Staff capacities: The PIU has been created and will have a financial management

specialist (FMS) dedicated to the project and an additional FMS recruited to support

project activities by effectiveness; (ii) PIU Fiduciary management capacities: The PIU

will maintain analytical accounting logs, integrated in the general accounting, allowing

identification of expenditures according to categories and project components. The PIU

has adopted a Project Implementation Manual (use the PIM) for guiding administrative

and financial procedures. The PIM highlights the need for all procedures to be

documented well and applied by all concerned parties. As a result, the overall financial

management risk is deemed to be high given the lack of experience with Bank

procedures. The PIM has been adopted to guarantee systematic management of the

project from a financial and procurement perspective.

56. The PIU should mitigate the highlighted risks in order to establish acceptable

financial management arrangements. Key mitigating measures will be to: (i) ensure

implementation according to the PIM, which has been adopted; (ii) ensure at least one

dedicated support to the project’s FMS within the PIU; and (iii) maintain the financial

information in an excel spreadsheet which should be controlled and validated by the

director of the PIU.

D. Procurement

57. An assessment of the capacity of the MOF for the purpose of the project was

carried out on January 30, 2013, and on the basis of the types and amounts of Goods

and Services to be procured under this Grant, has been found to be adequate. The

overall procurement risk for the project is rated as moderate and an appropriate set of

mitigation measures will be carried out to minimize it (see Annex 3). Procurement will

be carried out in accordance with the World Bank’s (i) “Guidelines on Preventing and

Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits

and Grants”, dated October 15, 2006 and revised in January 2011; (ii) “Guidelines:

Selection and Employment of Consultants under IBRD Loans and IDA Credits and

Grants by World Bank Borrowers” dated January 2011; and (iii) “Guidelines:

Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA

Credits and Grants by World Bank Borrowers” dated January 2011.

58. A procurement assessment with mitigation measures and appropriate

monitoring arrangements has been prepared to help reduce the risks associated

with procurement. To the extent possible, the Requests for Proposal (RFP) will be

launched in advance of project approval for contracts greater than US$200,000 through

Quality- and Cost-Based Bidding System (QCSBS), notably for a firm to manage the

technical preparation of the reforms and a firm to manage communication strategies.

59. A Procurement Plan, dated September 18, 2013 and terms of reference for

consultants for the first 18 months of project implementation was prepared. The

procurement plan will be updated on a quarterly basis or as required to reflect actual

project implementation needs.

27

E. Social (including Safeguards)

60. The project is expected to have positive social impacts by improving equity

through enhanced targeting of social safety nets and sustainability of the social security

system. The primary goal of the project is to implement economic reforms by

strengthening Government’s capacity. The project provides financial resources for

technical assistance for well-defined, time-bound activities that include permanent

improvements in the Borrower’s institutional framework and capacity. These changes are

expected to translate into significant positive impacts on economic governance and the

population, including vulnerable groups and women who make up a considerable

proportion of safety nets, pensions and health insurance beneficiaries. The project will

specifically monitor the involvement and identification of vulnerable populations and

females during implementation. The population will be consulted during implementation

of the project and in particular as new methods for targeting various levels of

vulnerability are developed as a result of the project (i.e., such as proxy-means testing

approaches used to target social safety net programs).

F. Environment (including Safeguards)

61. The project is expected to have minimal or no adverse impacts on the

environment and hence is considered as a category “C” project as per World Bank

Operational Policy 4.01 Environmental Assessment. The project will mostly finance

technical assistance, analytical work and institutional capacity building and no direct or

indirect physical investment is envisaged.

28

ANNEX 1: RESULTS FRAMEWORK

TUNISIA: Social Protection Reforms Support Project

Indicators by

Component Unit Baseline

Cumulative Target Values Frequency Data Source/

Methodology

Responsibility

for Data

Collection

Description

(indicator

definition etc.)

2014 2015 2016 2017

PDO LEVEL RESULTS INDICATORS:

The proposed project development objective (PDO) is to strengthen institutional capacity to design social protection reforms and improve targeting of safety net programs.

Indicator 1: Direct project

beneficiaries (Core Sector

Indicator)

Monthly Project M&E

Database

PIU Total number of

beneficiaries

from all

components of

the project

combined (a) Of institutional

capacity

building

Number 0 50 100 300 500

(b) Of registration

in unified

population

database

Number 0 0 7

million

10 million 10 million

(c) Total Number 0 50 0 7.3

million

10.5

million

(d) Of which are

female

Percentage 0 50 50 50 50

Indicator 2:

Citizens registered in new

unified database

Monthly Project M&E

Database

PIU Citizens that

have received a

unique

identification

number (UI)

(a) Total Number 0 0 7

million

10 million 10 million

(b) Of which are

female

Percentage 0 50 50 50 50

(c) Of which are

vulnerable

Percentage 0 50 50 50 50

29

Indicators by

Component Unit Baseline

Cumulative Target Values Frequency Data Source/

Methodology

Responsibility

for Data

Collection

Description

(indicator

definition etc.)

2014 2015 2016 2017

Indicator 3:

Number of Safety Net

Beneficiaries (Core

Sector Indicator)

Yes/No No No Yes Yes Yes Bi-annual Project M&E

Database

PIU Heads of

households

registered in

subsidy

compensation

program, based

on 235,000 poor

and vulnerable

households

currently

registered in

PNAFN and an

increase of at

least 10% as part

of subsidy

compensation.

(a) Total Number 235,000 235,000 235,000 258,500 258,500

(b) Of which are

poor

Percentage 60 60 60 80 80

(c) Of which are

female

Percentage 51 50 50 50 50

Indicator 4:

Subsidy and safety net

reform plan prepared and

disseminated

Yes/No No Yes Yes Yes Yes Once Project

Implementation

Reports

PIU Report

disseminated

Indicator 5:

Integrated social security

reform plan prepared and

disseminated

Yes/No No Yes Yes Yes Yes Once Project

Implementation

Reports

PIU Report

disseminated

INTERMEDIATE RESULTS INDICATORS:

COMPONENT I. SAFETY NET AND SUBSIDY REFORM SUPPORT

Participants involved

consultation activities

during project

implementation

Number

0

200

1000

5000 10000 Quarterly Project

implementation

reports

PIU Citizens having

received

information or

provided

feedback through

various channels

30

Indicators by

Component Unit Baseline

Cumulative Target Values Frequency Data Source/

Methodology

Responsibility

for Data

Collection

Description

(indicator

definition etc.)

2014 2015 2016 2017

Government staff and

civil society

representatives trained to

evaluate subsidy and

social expenditures

Number 0 50 100 300 500 Annual M&E Database PIU Training

delivered

Unified database

Operations Manual

developed

Yes/No No No Yes Yes Yes Once Project

Implementation

Reports

PIU Manual designed

on use and

access of unique

identifier system

Targeting Operational

Manual developed for

subsidy-compensation

program

Yes/No No No Yes Yes Yes Once Project

Implementation

Reports

PIU Manual designed

on targeting

mechanism for

subsidy-

compensation

program

COMPONENT 2. STRENGTHENING SOCIAL SECURITY ANALYSIS AND PLANNING

Joint social security-labor

code assessment

conducted with

stakeholders as part of

social dialogue process

Yes/No No Yes Yes Yes Yes Once Project

Implementation

Reports

PIU Report prepared

on the basis of

social dialogue

with government

and civil society

Poverty and social impact

analysis of social security

reform options completed

and disseminated

Yes/No No Yes Yes Yes Yes Once Project

Implementation

Reports

PIU Reports

published

Feasibility study to

explore options to finance

unemployment insurance

completed and

disseminated

Yes/No No No Yes Yes Yes Once Project

Implementation

Reports

PIU Reports

published

Annual reports on updates

of pensions and health

insurance actuarial

analyses completed and

disseminated

Yes/No No Yes Yes Yes Yes Annual Project

Implementation

Reports and

Documents

PIU Report published

on simulations

and assessment

of policy options

31

ANNEX 2: DETAILED PROJECT DESCRIPTION

TUNISIA: Social Protection Reforms Support Project

Project Context

1. The challenges faced by Tunisia following the January 2011 popular uprising

in terms of high unemployment and regional disparities have called for a new vision

of economic growth and the social contract since 2011. The effectiveness and

efficiency of Tunisia´s social sector expenditures has greater urgency in the context of the

economic slowdown and increasing budget constraints. The proposed project

development objective (PDO) is to strengthen institutional capacity to design social

protection reforms and improve targeting of safety net program.

Detailed Project Costing

2. The following table outlines key activities, resources and the estimated budget.

To the extent possible, individual consultants and firms will be recruited that can support

more than one task and/or component to improve coordination and reduce fragmentation.

DETAILED PROJECT COSTING BY COMPONENT AND ACTIVITY

COMPONENT UNIT

TRANSITIO

N FUND

(US$)

COUNTRY CO-

FINANCING (US$)

TOTAL

(US$)

COMPONENT 1. SAFETY NET AND SUBSIDY REFORM SUPPORT

(a) Sub-Component 1.1 820,000

Analytic support

2 Experts

(senior and

junior)

250,000 250,000

TA and workshop support to

the dialogue and

coordination within the GOT

and the Steering Committees

for the Reform

Firm 500,000 500,000

TA to Support to the

preparation of new

legislation

1 Consultant 70,000 70,000

(b) Sub-Component 1.2 3,

120,000

Management of information

systems and setting up a new

database

1 IT/ICT Firm 2, 120,000 1, 000,000 3,

120,000

(c) Sub-Component 1.3 840,000

Design and implementation

of an information and

Communicati

on Firm, 400,000 400,000

32

COMPONENT UNIT

TRANSITIO

N FUND

(US$)

COUNTRY CO-

FINANCING (US$)

TOTAL

(US$)

communication strategy Media

Technical support 3 Consultants 150,000 150,000

Workshops 100,000 100,000

Conduct assessments Surveys 80,000 80,000

Training and Capacity

Building 110,000 110,000

Sub-Total Component 1 3, 780,000 4,

780,000

COMPONENT 2. STRENGTHENING SOCIAL SECURITY ANALYSIS AND PLANNING

Analytic support and training

2 Experts

(senior and

junior)

200,000 200,000

Design and implementation of

an information and

communication strategy

Communicati

on/Media

Firm

200,000 200,000

Sub-Total Component 2 400,000 400,000

COMPONENT 3. PROJECT MANAGEMENT AND MONITORING

Support to the economic

reform Unit 4 Consultants 270,000 270,000

Training and Capacity

Building 2 Consultants 100,000 100,000

Financial and procurement

audits 1 Consultant 30,000 30,000

Sub-Total Component 3 400,000 400,000

Sub-Total All Components 4,580,000 5,580,000

Reserve (miscellaneous

expenditures) 120,000 120,000

TOTAL 4,700,000 1,000,000 5,700,000

Component 1: Safety Net and Subsidy Reform Support (US$ 4.78 million)

3. This component finances consultant services, workshops and goods to support

the reform process and includes the following sub-component activities:

Sub-Component 1: Technical Assistance to Inter-ministerial Working Group (US$

0.82 million):

4. This sub-component would finance consultant services and workshops to provide

technical assistance and capacity-building to the Inter-ministerial Working Group that

33

builds upon analysis completed during 2012 on the distribution and potential impact of

energy subsidy reforms. This component will therefore focus on technical assistance to

the design of a food and fuel subsidy reform implementation plan and subsidy-

compensation program for households, including: (i) evaluation of economic and social

impact of potential reforms for energy and food subsidies; (ii) evaluation of reform

options for automatic fuel price adjustment mechanisms; and (iii) development of an

implementation plan and operational manual for a subsidy-compensation program for

households. To help sustain social stability during the design and implementation of

reforms, the existing cash transfer program for the poor (PNAFN) will be maintained by

the Government. The communication and redress mechanisms supported by this project

will help to ensure that vulnerable households affected by reforms are informed and

involved in the preparation of the compensation program in advance of the

implementation of reform measures.

Sub-Component 1.2: Development of a Unified Database and Targeting System

(US$ 2.12 million)

5. This sub-component would finance consultant services, workshops and goods to

provide technical assistance for the creation of a unified population database to identify

households through expanding the unique identification number (UIN) database

developed by MOSA’s Centre de Recherche et d’Etudes Sociales (CRES), including: (i)

development of proxy-means testing formula and questionnaire for targeting

compensation; (ii) assessment of various payment options for delivering household cash

transfers under the subsidy-compensation program; (iii) assessment of options for

implementing a UIN based on an evaluation of identification systems currently used by

other programs; (iv) information technology support for the creation of a national MIS

for the unified database; and (v) enhancement of the MOSA MIS for managing current

social protection programs. The unified database will be created through consolidation of

existing databases (including those hosted by MOSA) linked to revenue collection,

national identification numbers used by the MOInt, the database administered by the

National Gas and Electricity Company [(Societe Tunisienne de l’Electricite et du Gaz

(STEG)], and various identification numbers used for social programs administered by

MOSA. Specialist consultants would provide international best practice and input to the

architecture of a unique identification system and coordination with other national

databases, such as the social security system and national identification number.

6. This activity will be co-financed by the Government through a budget of US$ 1.0

million to MOSA to consolidate and develop a “smart card” system for social security

beneficiary registries, including reducing fragmentation among registries for CNSS,

CNRPS, CNAM, PNAFN and the subsidized health card program. MOSA conducted a

feasibility assessment for the development of a new MIS in 2012, to which the

Government has allocated funding to launch a MOSA MIS project for its development.

7. This sub-component would therefore establish a new management information

system (MIS) within the MOF and the creation of a unified database. In a first phase,

consultants will exhaustively list existing SSN programs managed by different ministries

34

in Tunisia, identifying their type (price subsidies/ration cards, conditional cash transfers,

fee waivers, etc.), the agency responsible for running the program, the targeting method,

the number of beneficiaries and the related expenditures. For the main programs, the

consultants will describe the main MIS components (governance and organizational

structure, information management, application management, infrastructure)9. Based on

this exhaustive chart, the consultants will work towards consolidating the beneficiary

registries through the setting of a unified registry hosted by MOF, relying on system

integration and interoperability. For each MIS component, the program process will aim

at assessing the optimal approaches for the underlying functions:

Beneficiary identification: targeting, registration and graduation

Registry: database, validation, updates, smart card

Conditions: collection, verification, penalization

Payment: eligibility, payment, reconciliation

Control: grievances, processes, impact

Sub-Component 1.3: Consensus-Building and Communication (US$ 0.84 million):

8. This sub-component will finance consultant services, workshops and goods to

provide technical assistance for consensus-building and communication, including: (i)

evaluation of economic and social implications for different stakeholders; (ii) improving

access to information on subsidy and social protection expenditure analyses; (iii)

developing a public consultation mechanism on reform options in advance of reforms;

and (iv) enhancing existing grievance redress mechanisms for social protection

beneficiaries.

9. This sub-component would therefore support greater social accountability through

both public disclosure of relevant administrative information, new types of consultative

mechanisms, and improving grievance redress for ensuring the poor and vulnerable have

access to social support during reforms. The tasks described above would help to inform

and involve the public in the assessment, planning and design of reforms throughout the

process. During this activity, the PIU in the MoF would track, measure and support

reporting on program-related dialogue and communications. The work would finance

consulting firms and consultants to support the development and dissemination of key

information on data and reforms, develop public participation mechanisms, and liaise

with radio, television, newspapers and social media in implementing a communication

strategy in advance of and during the reform process.

10. This sub-component would therefore support greater social accountability

through both public disclosure of relevant administrative information on expenditures

and reform options and the introduction of a grievance redress mechanism for ensuring

the poor and

9 MIS in social safety net programs: A look at accountability and control mechanisms – C. Baldeon, M. D.

Arribas-Banos, 2008, SP Discussion Paper no. 0819, World Bank.

35

11. This component will therefore help the Government coordinate with internal and

external stakeholders and public by informing, communicating and advocating for the

reform process. It will facilitate the implementation of the reforms by identifying

obstacles, supporting the effective management of expectations and minimizing potential

resistance to change by anticipating, capturing and elevating public concerns to

concerned authorities.

Component 2: Strengthening Social Security Analysis and Planning (US$ 0.4

million)

12. This component would finance consultant services, workshops and goods to

provide technical assistance for building institutional capacity to analyze and develop

consensus on an integrated reform plan for pensions and health insurance. This

component includes the following activities: (i) training of Recipient’s staff on policy

analysis of pension and health insurance reform options; (ii) training on economic and

social impact analysis of various scenarios for social contributions and protection for

workers who become unemployed; (iii) training on policy analysis of labor legislation in

relation to social security; and (iv) preparation, coordination and dissemination of

information policy reform options among social dialogue partners.

13. This activity will also develop a poverty and social impact assessment to quantify

the impact of social security reforms (notably of changes in social security contributions)

on labor market outcomes and will explore options to (i) assure fiscal sustainability of the

social security system based on various scenarios for social contributions and (ii) assess

the fiscal and operational feasibility of introducing unemployment insurance schemes.

14. This sub-component would therefore help to introduce annual updates of pensions

and health insurance actuarial analyses and reform options, taking into account changes

in the macroeconomic context; the monitoring of public pension expenditure flows; and

support to instituting a framework for ensuring routine and updated information is

publicly disclosed to promote social accountability.

Component 3: Project Management and Monitoring (US$ 0.4 million)

15. This component finances consultant services and goods to support the PIU in

managing the project and monitoring project-related activities and outcomes. This

component would also entail support to ensuring all project activities and tasks are

executed, coordination among all actors involved in project implementation, fulfilling

and monitoring procurement and fiduciary requirements and audits, and monitoring and

evaluation of project outcomes and intermediary results.

16. Key activities supported by this component are shown in the table below.

36

COMPONENT 3: KEY PROJECT MANAGEMENT AND MONITORING ACTIVITIES

Activity Output Frequency

Development of Project Implementation Manual

and Procurement Plan

Project

Implementation

Manual

Once; updated monthly

Preparation and management of Procurement Plan Procurement Plan Once; updated monthly

Management of day-to-day work plan, including

recruitment and management of all goods and

consultants, including preparation of terms of

reference and ensuring completion of all project

deliverables and milestones

Project Work Plan Once; updated montly

Establishment of M&E database and data collection

plan Database Once; updated monthly

Interim audits and reports completed Reports Quarterly

Mid-term and final project evaluation Reports Annual

37

ANNEX 3: IMPLEMENTATION ARRANGEMENTS

TUNISIA: Social Protection Reforms Support Project

Project Institutional and Implementation Arrangements

1. The MOF has established a Project Implementation Unit (PIU). The PIU has

been created and includes the Project Director, a technical specialist, a procurement

specialist and a financial management specialist.

2. Implementation and coordination responsibilities: The PIU will implement

project activities with oversight provided by the Technical Steering Committee (TSC).

The TSC will be overseen by the Head of Government and is organized along two

Thematic Groups, including Subsidy Reform (coordinated by MOF) and Social

Assistance and Social Security reform (coordinated by MOSA, notably CRES). The

TSC was formed in 2012 and will provide implementation guidance and monitor progress

through routine meetings and monthly monitoring reports. The TSC includes

representatives from the Head of Government, Ministry of Finance, Ministry of Social

Affairs, Ministry of Development and International Cooperation, Centre of Social

Research and Studies (Ministry of Social Affairs), Ministry of Commerce and Ministry of

Industry. The project will finance consultant services, workshops and goods to provide

technical assistance and capacity-building to the Inter-ministerial Working Group, a

group formed in 2012 whose role is to design subsidy and social security reform plans

through consensus-building among key civil society stakeholders. The Inter-ministerial

Working Group comprises representatives from the Head of Government and the

Ministries of Development and International Cooperation, Social Affairs, Center of

Social Research and Studies (Social Affairs), Finance, Commerce, Industry, Health,

Transportation, Vocational Training and Employment, and Agriculture.

3. The Project Implementation Manual (PIM) describing guidelines for

implementing project components has been adopted by the PIU. The PIM specifies

guidelines for: (i) roles and responsibilities of the PIU and TSC, including supervision

and reporting arrangements; (ii) procurement; (iii) financial management; and (iv) project

monitoring and evaluation.

4. The PIM includes a negative list of expenditures which the project should not

include, e.g., activities and items which could harm the environment, cause involuntary

resettlement, promote child labor, cause conflict, etc. A screening process using criteria

developed by the Bank will be used to ensure that activities financed by the Project grant

will not trigger World Bank environmental or social safeguards. Activities that entail

potential environmental or social impacts will not be approved.

5. Grant Agreement arrangements: The Grant Agreement will be established

directly between the World Bank and Republic of Tunisia, accompanied by a request for

38

a letter of endorsement from the Government for MOF to be the implementer and

recipient of the grant.

6. The PIU will be responsible for day-to-day management of the project and

for monitoring project performance. The institutional structure of the PIU and the

main roles and responsibilities of each actor are described in the PIM.

7. The PIU will:

manage all funds and procurement for activities

open a Designated Account into which funds from the World Bank will be

deposited

organize regular steering committee meetings to provide operational guidance

appoint staff and recruit consultants where necessary for project implementation

(PIU)

maintain and, where necessary, update the PIM

monitor implementation

ensure proper financial management of funds and compliance with World Bank’s

procedures

ensure proper and appropriate procurement procedures

submit regular reports and disseminate findings.

Financial Management, Disbursement and Procurement

Financial Management

8. The public financial management (PFM) system in Tunisia is governed by a

comprehensive legal and regulatory framework that includes safeguards to enhance

accountability. This system is based on the principle of the separation of the functions of

authorizing officers and finance officers, as well as on internal controls rules governing

ex-ante expenditure as well as internal and external auditing rules. The PFM system also

relies upon high quality, administrative structures and well-equipped human resources

and financial support. Overall, the public expenditure system in Tunisia poses as low

budgetary and financing risks in terms of regulation.

9. The PFM controls operate within a complete legal and authorization framework in

coordination with line ministries and audit and control bodies. A full panoply of audit

arrangements is in place (internal and external audit, ex-ante and ex-post), ensuring

effective PFM auditing within the public sector.

10. Under the proposed Project, the MOF will oversee implementation of the project

through the establishment of a Project Implementation Unit (PIU) as part of the MOF.

The Bank has prior experience with the MOF through Bank-financed lending operations,

the Export Development Project I and II, which include a component implemented by the

Direction Générale des Douanes (DGD), a department within the MOF.

11. The PIU will be responsible for planning, execution and monitoring and

evaluation of project activities. The PIU FMS and procurement specialist will also

coordinate with staff within the main department responsible for financial and

39

procurement procedures for the MOF, the Direction des Affaires Financières, des

Equipements et du Matériel (DAFEM).

12. The PIU will maintain project bookkeeping and will produce annual Project

Financial Statements (PFS) and Unaudited Interim Financial Reports (IFR) within 45

days of the end of each calendar semester. The PIU will be responsible for maintaining

financial management arrangements in a manner acceptable to the Bank.

13. The assessment identified the following risks and mitigating measures: (i) PIU

Staff capacities: The PIU has been created and includes a FMS dedicated to the project

and an additional FMS recruited to support project activities by effectiveness; (ii) PIU

Fiduciary management capacities: The PIU will maintain analytical accounting logs,

integrated in the general accounting, allowing identification of expenditures according to

categories and project components. Moreover, the PIU requires a PIM for guiding

administrative and financial procedures. The PIM highlights the need for all procedures

to be documented well and applied by all concerned parties. As a result, the overall

financial management risk is deemed to be high given the lack of experience with Bank

procedures and a PIM and implementation support is needed to guarantee systematic

management of the project from a financial and procurement perspective.

14. The PIU should mitigate the highlighted risks in order to establish acceptable

financial management arrangements. Key mitigating measures will be to: (i) ensure

implementation according to the PIM, which has been adopted; (ii) ensure

implementation support to the project’s FMS within the PIU; and (iii) maintain the

financial information in an excel spreadsheet which should be controlled and validated by

the director of the PIU.

Inherent Risks

Risk Risk After Mitigating Measures (MM)

Country level

The public finance management

system (PFM) is governed by a

comprehensive legal and regulatory

framework with reliability and

transparency safeguards.

The public expenditure management

system presents a low budgetary and

financing risk factor.

Low n/a Low

Project level

40

Risk Risk After Mitigating Measures (MM)

Lack of experience by PIU in

managing projects financed by World

Bank financing.

Substantial

Recruit additional FMS dedicated

to the project and build the

capacity of DAFEM staff

members responsible for the

financial management of the

project, with qualified specialists

and tailored training programs on

project financial management

(FM) procedures.

Close supporting mission of Bank

FM staff to provide advice to the

project.

An administrative and financial

procedures manual for the project,

which clearly describes TORs of

each actor as well as the flow of

information and funds.

Moderate

Inherent Risk Before MM Substantial Inherent Risk after MM Moderate

Control Risks

Risk before MM Risk After MM

Budgeting

The MOF presents an annual budget

for financial commitments. The

budget should be approved by the

Parliament/National Constituent

Assembly by December 31st of each

year. Budgetary control is

implemented through an IFMIS

Système d' Aide à la Décision

Budgétaire (ADEB).

Low

n/a

Low

Accounting

The MOF accounting, based on the

public accounting, is maintained at the

central level based on ADEB.

The public accounting system of the

MOF does not allow for the automatic

generation of the financial reporting

necessary for project management.

Low

Substantial

n/a

Maintain at the PIU a parallel

bookkeeping log system based on

independent accounting software

or Excel sheet to produce IFRs

and PFS, which will be reviewed

and validated by the PIU director.

Low

Moderate

Financial Reporting

41

Risk before MM Risk After MM

The accounting system does not allow

producing IFR and PFS. Substantial

IFR and PFS will be produced on

a separate accounting system and

will be validated by the PIU

director before submission.

Moderate

Flow of funds

Funds will be managed by the Central

Bank of Tunisia (CBT) based on the

foreign finance management system

SIADE.

Low

Funds will be disbursed

according to the World Bank

guidelines

A designed account will be

opened at the CBT in order to

facilitate the management of

funds and disbursement

procedures for eligible expenses.

Low

Internal control

Sufficient seggregation of duties.

Functions of ordering, receiving,

accounting for, and paying for goods

and services appropriately segregated.

Verification of payment procedures is

weak.

Budgetary control is implemented

through ADEB.

Fund management is done through

SIADE.

Financial and administrative

procedures manual of the MOF is still

under preparation.

Moderate

A PIM for the project was

prepared, which clearly describes

TOR of each actor as well as the

flow of information and funds.

Low

Auditing

MOF is subject to the supreme audit

control (Court des Comptes) and to

the control of Contrôle Générale des

Finances (CGF).

Low

External audit will be conducted

in accordance with International

Standards on Auditing by CGF.

External audit TOR should be

acceptable to the Bank ex-ante.

Low

Control Risk Before MM Substantial Control Risk after MM Moderate

15. Budgeting System. The MOF prepares an annual budget. In terms of funding

sources, the overall budget relies on contributions from the central government as well as

funds made available by various donors in order to carry out specific projects. The budget

should be approved by the Parliament/National Constituent Assembly by December 31st

of each year and passed as an appropriation bill. Budgetary control is implemented

42

through an IFMIS system (ADEB).

16. Information system. The information system relies on public accounting and is

based upon retracing the execution of the public expenditures; it does not allow for the

production of the project Unaudited Interim financial reports (IFRs). A separate

accounting log on excel sheet will be used for the project and will be reviewed and

validated by the PIU director before submission to the Bank.

17. Transactions will be registered in the accounting system by the PIU financial

management specialist who will be responsible for preparing the IFRs before their

transmission to the PIU director for approval. Periodical reconciliation between

accounting statements and IFRs is also done by the FMS.

18. The general accounting principles for the Project are as follows: (i) Project

accounting will cover all sources and all uses of Project funds including payments made

and expenses incurred. All transactions related to the Project will be entered into the

expenses accounting system and the appropriate reports. Disbursements made from the

project Designed Accounts (DA) will also be entered into the Project accounting system;

(ii) Project transactions and activities will be distinguished from other activities. IFRs

summarizing the commitments, receipts, and expenditures made under the Project should

be produced every semester using the templates established for this purpose and sent to

the PIU; and (iii) The Project chart of accounts will be compliant with the classification

of expenditures and sources of funds indicated in the Project documents (Project

appraisal document, COSTAB) and the general budget breakdown. The chart of accounts

should allow for data entry to facilitate the financial monitoring of Project expenditures

by component and sub-component, expenditure classification, disbursement category and

source of funds.

19. Internal control. The internal control system in place within the MOF was deemed

satisfactory by the World Bank. Indeed, the MOF guarantees the separation of duties

through several controls. SPRSP will be implemented by a PIU to be created within

CGADE within the MOF. PIU staff has no experience with donors project financial

management and controls and do not include financial specialist.

20. To strengthen FM capacity, a PIM for the Project was prepared. The PIM clearly

defines the role, function and responsibilities of every responsible staff, the flows of fund

and information, the chart of accounts and include the form of the dashboards to be used.

The PIU should also be equipped with accounting software for the project bookkeeping,

assets management and financial reporting. Project commitments will be managed

through ADEB information system and use of funds will be managed through SIADE

information system.

21. Project reporting. The project financial reporting will include unaudited Interim

Financial Reports (IFR) and yearly Project Financial Statements.

(i) IFR should include data on the financial situation of the project. These reports should

include: (a) a statement of funding sources and uses for the period covered and

cumulative figures, including a statement of the bank project account balances; (b) a

statement of use of funds by component and by expenditure category; (c) a reconciliation

statement for the DA; and (d) a budget analysis statement indicating forecasts and

43

discrepancies relative to the actual budget. The PIU should produce the IFRs every

semester and send them to the World Bank within 45 days after the end of each semester.

(ii) PFS should be produced annually. The PFS should include (a) a cash flow statement;

(b) a closing statement of financial position; (c) a statement of ongoing commitments;

and (d) an analysis of payments and withdrawals from the grant account.

(iii) PFS should be produced on an excel spreadsheet, validated by the PIU director and

and should be submitted to CGF audit.

22. External Audit. The Project’s financial statements, including the reconciliation of

the designated account (DA) will be audited annually by an auditor, acceptable to the

Bank, in accordance with internationally accepted auditing standards. The audit will

cover all project aspects, all operations implemented under the project and sources and

uses of funds. It will also relate to financial operations and internal control, and financial

management system.

23. The auditor will produce: (i) an annual audit report including his opinion on the

project annual financial statements, and (ii) a report on internal control weaknesses

checked while performing his task. The reports will be addressed to the Bank within six

months starting from closing date of each fiscal year subject to the audit. The auditors’

terms of reference (TORs) will be prepared by the PIU at the MOF and cleared by the

Bank before the engagement of the auditor. TORs will include both the audit of the

financial transactions and an assessment of the internal control.

Disbursement

24. The proceeds of the grant will be disbursed in accordance with the World Bank

guidelines and will be used to finance project activities through the disbursement

procedures currently in use: i.e. withdrawal application for direct payment and/or

reimbursement accompanied by appropriate supporting documentation or using

Statement of Expenditures (SOEs) for amounts less than predefined thresholds for each

expenditure category, in accordance with the procedures described in the Disbursement

Letter and the World Bank's disbursement manual. Following World Bank standard

disbursement procedures, disbursements will end four months after the project closure

date.

25. Designated Account (DA). To ensure that funds are readily available for project

implementation, the MOF will open, maintain, and operate one designated account (DA)

at the Central Bank of Tunisia (CBT). It will finance the activities of the project.

26. An authorized ceiling of DA will be established covering an estimated four

months of eligible expenditures financed by the grant. The CBT will be responsible for

electronically submitting replenishment requests on a monthly basis, accompanied by

appropriate supporting documentation for expenditures made and reconciled bank

statements.

27. Statements of expenditures. All requests for withdrawal of the grant funds will be

fully documented, except for: (i) expenditures under contracts below an estimated value

established for goods; (ii) for consulting firms; and (iii) for individual consultants or

44

training programs, which will be claimed on the basis of statement of expenditures.

Documentation of the expenditures listed above will be maintained and will be made

available for review by Bank supervision missions and by project auditors.

28. Counterpart funds will be available from the Government budget or autonomous

executing agencies budget. Payments from the budget will be made under the

responsibility of the MOF; and in a timely manner so as to ensure appropriate execution

of the project.

Supervision Plan: The frequency and scope of World Bank supervision missions will be

adapted to the needs of the Project. Supervision missions will take place every six

months, but may be more frequent, if needed.

Allocation of Grant Proceeds

Category

Amount of the Grant

Allocated

(expressed in US$)

Percentage of Expenditures to be Financed

(inclusive of taxes)

(1) Goods, consultants’

services, Training and

Incremental Operating

Costs

4,700,000 100%

TOTAL AMOUNT 4,700,000

Procurement

29. The project will provide technical assistance to strengthen the Government’s

capacity to more rapidly identify, prepare and formulate new regulation in coordination

with a broad array of stakeholders from different ministries and civil society. The project

will thus finance consulting services to provide technical assistance and support the

creation of an economic reforms implementation unit at the MOF to coordinate the

implementation of high-profile and reforms that involve multiple stakeholders, to be

overseen by the Prime Minister’s Office.

30. The capacity of the MOF to carry out procurement to implement the project was

assessed on January 30, 2013, and was deemed adequate. The assessment was carried

out with the Directeur Général Ressources et Equilibres, the President of the CGABE; the

Direction Administrative et Financiere, including the Directeur Général des Affaires

Financières et Equipements (DAF), the President of the Commission Départementale des

Marchés of MOF; the Sous-Directeur des Achats, Sous-Directeur du Budget et

Ordonnancement and Directeur at DAF. The assessment takes into consideration the

foreseen nature of the expenditures and the likely size of the contracts.

31. Capacity assessment. The PIU at the MOF, with the support of DAF, will be the

Unit administering all procurement-related transactions to be financed under the project.

Overall, the procurement capacity assessment concluded that in the Tunisian country

45

context, together with the MOF capacity to be developed under the new project activities,

the PIU is likely to adhere to applicable procurement procedures. The assessment

concludes that the units involved have experience in budgeting and can implement the

applicable procurement procedures of this project. The overall assessment of

Procurement Risk is moderate (see following table, “Simplified Procurement Risk

Assessment of Implementing Agency”).

Environmental and Social (including safeguards)

9. The project poses no environmental risk and is a category “C” project. The

project comprises mainly institutional capacity building and technical assistance activities

for sector reforms. There is no direct or indirect physical investment. The Proposed

project has no environmental impact. The concept stage PID and ISDS were disclosed on

March 4, 2013.

10. The project is expected to have positive social impacts through improving equity

through an improved targeting of safety nets and sustainability of social security. The

primary goal of the project is to implement economic reforms by strengthening

Government’s capacity. The project provides financial resources for technical assistance

for well-defined, time-bound activities that include permanent improvements in the

Borrower’s institutional framework and capacity. These changes are expected to translate

into significant positive impacts on economic governance and the population.

Monitoring & Evaluation

11. The PIU will be required to provide project reports on implementation

progress on a quarterly basis to the Bank and during routine supervision missions

according to guidelines described in the PIM. Project reports will describe status of

implementation and progress on outputs and intermediate outcomes. Key components of

project reporting include: (i) Financial information; (ii) Procurement information; and

(iii) Intermediate outputs and outcomes as per the Results Matrix.

46

ANNEX 4: OPERATIONAL RISK ASSESSMENT FRAMEWORK (ORAF)

TUNISIA: Social Protection Reforms Support Project

Project Stakeholder Risks Rating High

Description: (i) Political instability : a new government reshuffle could challenge

consensus-building from the main stakeholders (MOF, MOSA, MOI, MOC);

(ii) Unions: there could be tension with the labor and business unions, resulting in

delays in project implementation.

(iii) General Public: The biggest risk is posed regarding public readiness and

perceptions of the reform process and decisions taken. given political uncertainty,

there may be a lack of support for substantive governmental reforms that are seen to

impact welfare.

Risk Management: The Government will monitor the country environment closely and

engage with stakeholders across the political and civil society spectrum.

The Bank will support the Government through technical assistance and communication

support with a focus on: (i) improving equity in subsidy expenditure, (ii) improving

sustainability of pensions and health insurance.

Resp: Government Stage: Prep/Impl. Due Date :

Status:

In

progress

Implementing Agency Risks (including fiduciary)

Capacity Rating: High

Description: The PIU has limited experience with Bank procurement and financial

management procedures and standards.

Risk Management: Financial Management: Key mitigating measures will be to: (i) ensure

project is implemented according to PIM; (ii) ensure at least one dedicated FMS for the

project within the PIU; and (iii) maintain the financial information in an excel spreadsheet

which should be controlled and validated by the director of the PIU.

It is recommended that the PIU designate a Project Coordinator and make implementation

arrangements clear in the legal agreement and in PIM.

The Bank will carry out training to brief and update the staff involved in project

implementation on the main Bank’s procurement procedures -- expected to be used under the

project -- before its start; and the project will provide for outside technical assistance from a

procurement specialist to help in the preparation of the documents for the procurement and

selection of consultants.

The Bank will ensure that instructions and training are given to ensure that project-specific

files are kept for all procurement and related transactions and recorded on a contract-by-

47

contract basis.

The PIU should : (i) finalize the project detailed Action Plan (or PIP) with full costing and

(ii) periodically update the procurement plan.

The PIU should confirm that the Project Coordinator will be responsible for the reporting

and ensure the OM clearly defines the content of the report and the contribution of other

units involved in the project.

Resp: Government/Bank Stage: Prep/Impl. Due Date :

Status:

In

progress

Governance Rating: Moderate

Description: The PIU will be based at MOF and will work closely with a technical

steering committee representative of all key line ministries and unions, but there

remains a lack of access to information and social accountability measures.

Risk Management: The Bank supervision team will continue to provide guidance on

transparency and public participation through improved communication tools during project

implementation, and the PIU will ensure that access to key information on expenditures and

benefits be made available.

Resp: Bank Stage: Prep/Impl. Due Date :

Status: In

progress

Project Risks

Design Rating: Moderate

Description: The implementation of the project components may be difficult due to

delays in procuring required consultants and coordination across the main concerned

ministries (Finance, Cooperation, Social Affairs, Commerce, Industry and Prime

Ministry)

Risk Management: The PIU and the Technical Steering Committee have prepared roles

and responsibilities during project preparation, although some residual risk remains given it

is likely the first of its kind in Tunisia. A series of workshops were organized during

preparation with the multi-stakeholder working group to help build capacity and agree on

steps needed for implementation of the project. The Bank will also provide regular

supervision on the ground using Country Office and HQ staff during project implementation.

Resp: Government/Bank Stage: Prep./Impl. Due Date :

Status: In

progress

Social & Environmental Rating: Low

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Description: Project activities will not result in any adverse environmental and

social impacts.

Risk Management: Not applicable; there are no adverse impacts associated with the

project.

Resp: Stage: Due Date : Status:

Program & Donor Rating: Low

Description: Several donors are active in the area of analysis and support to social

protection reform (notably the African Development Bank, the International Labor

Organization, and the European Union), which will require donor coordination and

support.

Risk Management: The Bank and the donor community in Tunis have well-established

donor coordination in place, which will be enhanced as part of regular coordination meetings

during project implementation. The Bank routinely consults with donors, the private sector

and civil society and is also coordinating with the IMF on subsidy and social security reform

dialogue.

Resp: Bank Stage: Prep/Impl. Due Date :

Status: In

progress

Delivery Monitoring & Sustainability Rating: Moderate

Description: The design of the subsidy-compensation program and the reform

plans for subsidies and social security will need to be institutionalized to ensure

sustainability.

Risk Management: The project components are well-integrated in the Government’s plans

to reduce public deficit and improve the functioning of social protection schemes, as

evidenced by the signing of a new social contract in January 2013 and a circular for

improving targeting and information systems for social safety nets in October 2012. The

Government has allocated financing to contribute to the project cost and the Bank will

provide technical assistance as part of supervision.

Resp: Government/Bank Stage: Prep/Impl. Due Date :

Status: In

progress

Overall Implementation Risk Rating High

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ANNEX 5: IMPLEMENTATION SUPPORT PLAN

TUNISIA: Social Protection Reforms Support Project

Strategy and Approach for Implementation Support

The World Bank’s implementation support to the project will comprise of technical,

fiduciary and evaluation assistance as follows:

1. Policy guidance: The Bank’s technical assistance has been integral to the

preparation of earlier analysis and the proposed operation. During implementation, the

Bank will continue to draw upon national and global specialists to provide technical

assistance on all components to ensure that the project achieves its intended objectives.

2. Technical assistance to implementation: The Bank team will coordinate closely

with the implementing agencies on the design and execution of the activities.

a. Component 1: The Bank team will provide policy and strategic guidance, input

to TOR preparation, and oversight on training and technical assistance on food

and fuel benefit incidence analysis (BIA) using household surveys and

administrative databases; on monitoring and evaluation of food and fuel subsidy

expenditure across economic sectors; modeling of macroeconomic, budgetary and

welfare effects of differential price adjustments; access to information on social

expenditures; options for pricing reform, supporting the drafting and/or revision

of legislation on fuel and food pricing policy, and helping to facilitate multi-

stakeholder discussions of substantive issues affecting key energy consumption

sectors, such as transport, industry, and agriculture/food with a view to

developing mitigation measures, if deemed necessary, and effective

communication strategies; and creation of a unified population database to

improve targeting of social expenditures more broadly, and in the near-term,

safety net compensation for subsidy reform.

b. Component 2: The Bank team will provide technical assistance, oversight and

input to TOR preparation on pensions and health insurance actuarial analyses and

reform options and coordination between the three funds (pension fund for

private-sector workers, pension fund for public-sector workers and health

insurance), taking into account changes in the macroeconomic context; the

monitoring of public pension expenditure flows; and support to instituting a

framework for ensuring routine and updated information is publicly disclosed to

promote social accountability.

c. Component 3: The Bank team will provide training to the PIU and guidance on

project management, monitoring and fiduciary management guidelines, described

below.

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3. Fiduciary management support: The World Bank team will include fiduciary

management staff to provide routine supervision of FM and procurement activities. This

will include review and clearance of the TORs of local procurement and financial

management officers, the implementation manual, interim financial reports, withdrawal

requests, and other procurement actions. The Bank fiduciary staff will also provide

guidance to the local procurement and FM officers on procurement issues, preparation of

the first IFRs, compliance with the Bank guidelines and other issues as they arise during

the implementation.

4. Monitoring and impact evaluation support: In addition to the M&E integrated

into the project, the Bank will provide day to day supervision and expertise on overall

design of the M&E system, the data collection strategies including the design of the data

collection system for day to day monitoring, TORs for the beneficiary rapid assessments,

quality of the project monitoring reports that will be prepared by the implementing

agencies, and most importantly, provide technical expertise to guide the design of the

evaluation which will guide the nature and scope of baseline data to be collected.

Implementation Support Plan

Calendar Support Responsible Team

Year 1

Support training and design of the subsidy and

safety net analyses and policy dialogue and

establish project monitoring database

- TTL

- Economists

- Social Protection Specialist

- M&E Specialist

Monitor design/implementation of unified

database

- Social Protection Specialist

- ICT Specialist

- Operations Officer

Monitor capacity building on actuarial training - Social Protection Specialists

Monitoring the design and implementation of

public communication, access to information and

grievance redress

- Social Protection Specialist

- Communication Specialist

- Governance Specialist

- Operations Officer

Financial management and Procurement training - FM specialist

- Procurement specialist

Year 2

FM, disbursement and procurement support and

review and report FM and Procurement specialists

Technical inputs TTL, Economists, ICT, Social Protection

Specialist, Operations Officer

Monitoring and Evaluation (Interim Assessment) TTL, M&E

Project implementation progress TTL, Operations Officer

Year 3

FM, disbursement and report FM specialist

Procurement review Procurement specialist

Technical inputs TTL, Economists, ICT, Social Protection

Specialist, Operations Officer

Monitoring and Evaluation (Final Assessment) TTL, M&E

Project implementation progress TTL, Operations Officer