Document of. The World Bank FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT

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1 Public Disclosure Authorized Public Disclosure Authorized Document of FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF EUR 30.1 MILLION (US$ 35 MILLION EQUIVALENT) TO THE REPUBLIC OF MOLDOVA Report No: PAD2666 Public Disclosure Authorized FOR A LAND REGISTRATION AND PROPERTY VALUATION PROJECT August 3, 2018 Public Disclosure Authorized Social, Urban, Rural and Resilience Global Practice Europe and Central Asia Region 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.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective June 30, 2018) Currency Unit = EUR US$1 = EUR US$1 = XDR US$1 = MDL FISCAL YEAR January 1 - December 31 Regional Vice President: Cyril E Muller Country Director: Satu Kristiina J. Kahkonen Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager: Jorge A. Muñoz Task Team Leader(s): Olivera Jordanovic, Aanchal Anand

3 ABBREVIATIONS AND ACRONYMS ALRC BAFO CALM CORS CPF DA DFIL ECA EMP ESMF ESMP EU FA FEA GPS GRM GRS IA IBRD ICT IDA IFR INDC IPF IRR ISP LAC LPA M&E MFD MOLDLIS NPV NSDI PAC PC PDO PIU POM PP Agency for Land Relations and Cadastre Best and Final Offer Congress of Local Authorities of Moldova Continuously Operating Reference System Country Partnership Framework Designated Account Disbursement and Financial Information Letter Europe and Central Asia Environment Management Plan Environment and Social Management Framework Environment and Social Management Plan European Union Fixed Asset Financial and Economic Analysis Global Positioning System Grievance Redress Mechanism Grievance Redress Service Implementing Agency International Bank for Reconstruction and Development Information and Communication Technology International Development Association Interim Financial Reports Intended Nationally Determined Contributions Investment Project Financing Internal Rate of Return Implementation Support Plan Latin America and the Caribbean Local Public Authority Monitoring & Evaluation Maximizing Finance for Development Moldova Land Information system Net Present Value National Spatial Data Infrastructure Public Awareness and Engagement Campaign Project Council Project Development Objective Project Implementation Unit Project Operational Manual Procurement Plan

4 PPA PPP PPSD PSA SEC SMP SoPs SORT STEP ToR TS UNDP WB WG Public Property Agency Purchasing Power Parity Project Procurement Strategy for Development Public Services Agency State Enterprise Cadastru Social Management Plan Standard Operating Procedures Systematic Operations Risk-rating Tool Systematic Tracking of Exchanges in Procurement Terms of Reference Technical Specifications United Nations Development Program World Bank Working Group

5 BASIC INFORMATION BASIC_INFO_TABLE Country(ies) Moldova Project Name Land Registration and Property Valuation Project Project ID Financing Instrument Environmental Assessment Category P Investment Project Financing B-Partial Assessment Financing & Implementation Modalities [ ] Multiphase Programmatic Approach (MPA) [ ] Contingent Emergency Response Component (CERC) [ ] Series of Projects (SOP) [ ] Fragile State(s) [ ] Disbursement-linked Indicators (DLIs) [ ] Small State(s) [ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country [ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster [ ] Alternate Procurement Arrangements (APA) Expected Approval Date 30-Aug-2018 Expected Closing Date 30-Jun-2024 Bank/IFC Collaboration No Proposed Development Objective(s) To improve the quality and transparency of the land administration and property valuation systems. Components Component Name Cost (US$, millions) First Property Registration Property Valuation 5.80 Page 1 of 67

6 SUMMARY-NewFin1 DETAILS-NewFinEnh1 Land Administration System Strengthening 9.00 Capacity Building and Project Management 2.40 Organizations Borrower: Implementing Agency: Ministry of Finance Public Service Agency, Department of Cadastre PROJECT FINANCING DATA (US$, Millions) Total Project Cost Total Financing of which IBRD/IDA Financing Gap 0.00 World Bank Group Financing International Development Association (IDA) IDA Credit IDA Resources (in US$, Millions) Credit Amount Grant Amount Total Amount National PBA Total Expected Disbursements (in US$, Millions) WB Fiscal Year Annual Cumulative Page 2 of 67

7 INSTITUTIONAL DATA Practice Area (Lead) Social, Urban, Rural and Resilience Global Practice Contributing Practice Areas Governance Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks Gender Tag Does the project plan to undertake any of the following? a. Analysis to identify Project-relevant gaps between males and females, especially in light of country gaps identified through SCD and CPF b. Specific action(s) to address the gender gaps identified in (a) and/or to improve women or men's empowerment Yes Yes c. Include Indicators in results framework to monitor outcomes from actions identified in (b) Yes SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating 1. Political and Governance High 2. Macroeconomic Moderate 3. Sector Strategies and Policies High 4. Technical Design of Project or Program Moderate 5. Institutional Capacity for Implementation and Sustainability High 6. Fiduciary Substantial 7. Environment and Social Substantial 8. Stakeholders High 9. Other Page 3 of 67

8 10. Overall High COMPLIANCE Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [ ] No Does the project require any waivers of Bank policies? [ ] Yes [ ] No Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 Performance Standards for Private Sector Activities OP/BP 4.03 Natural Habitats OP/BP 4.04 Forests OP/BP 4.36 Pest Management OP 4.09 Physical Cultural Resources OP/BP 4.11 Indigenous Peoples OP/BP 4.10 Involuntary Resettlement OP/BP 4.12 Safety of Dams OP/BP 4.37 Projects on International Waterways OP/BP 7.50 Projects in Disputed Areas OP/BP 7.60 Legal Covenants Sections and Description Schedule 2, Section I. A.1. Project Implementation Unit Covenant: The Recipient shall not later than one month after the Effective Date, through PSA s Cadastru, establish and thereafter maintain, throughout Project implementation, a Project Implementation Unit under terms and conditions acceptable to the Association, with a project director, a financial management specialist, a procurement specialist, a monitoring and evaluation specialist, an environmental specialist, a social specialist and other technical and fiduciary staff, as needed, with terms of reference, qualifications and experience satisfactory to the Association, all as set forth in the POM, as needed. Page 4 of 67

9 Sections and Description Schedule 2, Section I. A.2. Project Council Covenant: The Recipient shall not later than one month after the Effective Date establish and thereafter maintain throughout Project implementation, a council with composition, terms of reference and resources satisfactory to the Association to advise on policy decisions concerning Project implementation and overall Project supervision, and powers to approve the annual work plans, training plans and Project Reports; all as set forth in the POM. Sections and Description Schedule 2, Section I. A.3. Supporting Agencies Covenant: The Recipient shall not later than one month after the Effective Date, enter into a implementation agreement each with: (a) the Part A.2 Supporting Agency, (b) the Parts B.1 and B.2 Supporting Agency and (c) the Part C.3 Supporting Agency to set forth, under terms and conditions acceptable to the Association, their respective responsibilities in the implementation of the respective Parts of the Project (the Implementation Agreements). Conditions Type Effectiveness Description The Project Operational Manual has been adopted by the PSA s Cadastru in form and substance satisfactory to the Association. Page 5 of 67

10 REPUBLIC OF MOLDOVA LAND REGISTRATION AND PROPERTY VALUATION PROJECT TABLE OF CONTENTS I. STRATEGIC CONTEXT... 8 A. Country Context... 8 B. Sectoral and Institutional Context... 9 C. Higher Level Objectives to which the Project Contributes II. PROJECT DEVELOPMENT OBJECTIVES A. PDO B. Project Beneficiaries C. PDO-Level Results Indicators III. PROJECT DESCRIPTION A. Project Components B. Project Cost and Financing C. Lessons Learned and Reflected in the Project Design IV. IMPLEMENTATION A. Institutional and Implementation Arrangements B. Results Monitoring and Evaluation C. Sustainability D. Role of Partners V. KEY RISKS A. Overall Risk Rating and Explanation of Key Risks VI. APPRAISAL SUMMARY A. Financial and Economic Analysis B. Technical C. Financial Management D. Procurement E. Social (including Safeguards) Page 6 of 67

11 F. Environment (including Safeguards) G. Other Safeguard Policies (if applicable) H. World Bank Grievance Redress VII. RESULTS FRAMEWORK AND MONITORING ANNEX 1: DETAILED PROJECT DESCRIPTION ANNEX 2: IMPLEMENTATION ARRANGEMENTS ANNEX 3: IMPLEMENTATION SUPPORT PLAN ANNEX 4: FINANCIAL AND ECONOMIC ANALYSIS Page 7 of 67

12 I. STRATEGIC CONTEXT A. Country Context 1. Moldova is a small, economically and culturally open, lower middle-income country with 3.5 million people in Recently, the economy has grown by an average of 5 percent per year, fueled largely by consumption. Remittances from Moldovans abroad account for a quarter of Moldova s GDP, one of the highest shares in the world. The country is vulnerable to climatic and regional economic conditions and its economic performance remains volatile. The poverty rate measured at the upper-middle-income line of purchasing power parity (PPP) of US$ 5.50/day is projected to decrease by 3.2 percent in , supported by real wage growth, remittances and public transfers. 2 The poor and the bottom 40 percent are concentrated in rural areas, which are significantly less well-off than urban areas. In 2016, inequality, as measured by the Gini coefficient, decreased to 26.3 after a minor uptick between 2014 and Moldova ranks among the most climate-vulnerable countries in the Europe and Central Asia (ECA) region based on a range of social and economic indicators. Climate projections indicate increasing mean annual temperatures (exceeding 2 degrees Celsius by 2050), decreasing (in some regions increasing) precipitation and an increase in extreme weather events, such as droughts and floods, as well as other severe weather events such as hailstorms, torrential rains, late frosts, or heavy winds. The INDC 4 of Moldova particularly requested a developing mechanism for monitoring climate change vulnerabilities, impacts and costs, promoting crop and flood related insurances and disseminating climate relevant information. Systematic land valuation data prepared before disasters is shown to be essential for estimating the costs of climate disaster damage, cost-benefit analysis of recovery planning and disaster-related compensation and insurance systems 5. Climate-induced disasters, mainly floods, are also shown to cause significant temporal population displacements and a loss of housing and other property in Moldova. 6 The Post Disaster Needs Assessment of the 2010 floods underlines the need for property registration and improved tenure security to ensure that exposed people can relocate without fear of losing their land rights. 3. Moldova is divided into thirty-two districts (raions), three municipalities and two autonomous regions (Gagauzia and Transnistria 7 ). There are 1,681 localities, of which 982 localities have their own local public authority (LPA). Five localities have municipality status, 66 have city status and 916 are villages with commune status. The remaining 699 villages are too small to have an independent administration and belong to either cities (40) or communes (659). LPAs exercise local autonomy through elected local councils and mayors. There are also councils at the district level. The Territorial Office of the State Chancellery is 1 Country Context: 2 Country Snapshot: 3 Moldova, Poverty and Equity Brief, Spring Meetings 2018, World Bank. 4 Intended Nationally Determined Contributions for reduction in greenhouse emissions under the United Nations Framework Convention on Climate Change (UNFCCC) 5 Mitchell, D., Myers, M. & Grant, D. (2014). Land Valuation: A Key Tool for Disaster Risk Management, Land Tenure Journal, 1:14, Republic of Moldova (2010). Post Disaster Needs Assessment: Floods p. 7 The status of Transnistria is disputed and the central government does not control this region. Therefore, the proposed project will not support activities in Transnistria. Page 8 of 67

13 responsible for the administrative control of the LPAs. 4. European Union (EU) integration prospects have driven the Government's policy reform agenda since Political instability, however, impedes the progress of the reforms and governance and corruption challenges remain high. In recent years, the Government s reform priorities have included business environment reforms, modernization of public services and more balanced regional development. In this context, the Government would need to work to improve security of property rights and further develop real estate markets; enhance e-services for enabling access to real estate information, which will attract investors and reduce transaction costs and time; and expand the property valuation system and improve public property management to generate more revenues from properties, which would be important for local authorities, as they rely significantly on intergovernmental transfers. B. Sectoral and Institutional Context 5. Like many other former Soviet Union republics, Moldova conducted a land reform in 1992 that included the transfer of land from state to private ownership, followed by allocation of individual titles to land and property (or real estate) and, finally, registration of those individual private rights. In a real estate registry was established. Following a major restructuring, Cadastru (formerly State Enterprise Cadastru (SEC)) which is responsible for the management of the cadastre, land registry and valuation is now a department under the newly-created Public Services Agency (PSA), the implementing agency of the project. Prior to the restructuring, Cadastru was hosted by the Agency for Land Relations and Cadastre (ALRC). The Public Property Agency (PPA) is responsible for public property management. Both ALRC and PPA are being transformed under the ongoing government agencies reform. 6. In Moldova, there is currently an estimated 1.1 million unregistered properties (of the total estimated 5.85 million) divided into around 800,000 privately-owned and 325,000 publicly-owned. 8 The project seeks to complete the registration of 95 percent of all unregistered properties (both private and public) through systematic registration. 9 During the First Cadastre Project (P035771) financed by the World Bank ( ), million private properties were registered, including 4.2 million through the systematic process and 0.5 million through the sporadic procedure. 7. Moldova s public land is divided into around 25 percent state-owned and 75 percent LPA-owned. Only 7 percent, or approximately 25,000 of the total 350,000 parcels accounting for 45 percent of the country s total surface area, are currently registered. Such a high share of unregistered public land provides fertile ground for corruption and causes conflicts and insecurity for people with land rights adjacent to, or inside, public lands. It also causes significant income losses for the state and LPAs due to unauthorized uses of public land and/or natural resources, including an increased risk of carbon pool losses caused by deforestation and other unsanctioned, environmentally-unfriendly activities. Incomplete documentation causes additional problems pertaining to the registration of publicly-owned assets, principally those under the control of ministries or 8 Based on the data from the Public Service Agency, Department of Cadaste (Cadastru) 9 Based on the experience of the First Cadastre Project and the pilot project conducted by Cadastru in Varatic community in 2017, there would be 3 to 5 percent of properties which could not be registered during systematic registration but would be registered through subsequent processes which are likely to run beyond the project period. 10 First Cadastre Project included original credit (US$ 15 million) and additional financing in 2005 (US$ 3 million) for scaling up the project activities. The project supported registration of private land only. Page 9 of 67

14 LPAs. 8. From 2004 to 2008, Moldova implemented a successful reform of recurrent property taxation, which changed the system of taxation based upon the area of the property to one based on its value by using mass valuation for urban residential and commercial properties. This reform, however, has never been fully implemented. The new mass valuation system was applied to urban areas but not to rural housing, agricultural land, or special properties such as utility networks. As Moldova is a predominantly rural country, only 12.5 percent of properties were included in the mass valuation system. Thus, the system is yet to be rolled out to include the majority of properties. The new system was also expected to result in revaluations taking place every three years. None of this has occurred, with the result that the current valuations and tax rolls in urban areas are well out-of-date. It is estimated that current market values exceed the appraised values of apartments in Chisinau, which were valued in 2004, by 60 percent. Similarly, the current market values of commercial properties, which were valued in 2009, exceeds the appraised values by an estimated 15 percent. Moldova s fiscal situation, particularly the financial position of its LPAs, would be considerably improved by a program to extend the system of mass valuation nationwide, as was originally intended, and to carry out revaluations of the properties included in the mass valuation reform and to embed regular revaluations into the system. 9. With donor support, a National Spatial Data infrastructure (NSDI) is being created in Moldova under the responsibility of ALRC. A law on NSDI has been adopted and a prototype geo-portal, including a number of geospatial datasets and services, has been developed. Good progress has been made but further support is required if the achievements made so far are to be developed into meaningful economic benefits. In particular, data exchange protocols and procedures need to be developed, standards have to be defined and adopted, more data must be made available in the correct format and further capacity must be built in the sector. C. Higher Level Objectives to which the Project Contributes 10. The project will support the following key priority areas of the new Country Partnership Framework (CPF) for FY18-21: (i) Strengthening the rule of law and the accountability of institutions by enhancing the security of property rights, increasing the transparency of property data and improving efficiency of the cadastre system; and (ii) Improving efficiency, quality and inclusive access to public services by completing the cadastre and conducting property valuation to improve equity and fairness of the property valuation system and ensure equal opportunities for all to exercise their property rights. The project will also address the climate vulnerability context of Moldova and contribute to the climate cross-cutting theme, Objective 4A: Greater adaptation, resilience and response to climate change by improving tenure security and property registration data needed during climate disaster response and recovery, pooling essential data for climate related disaster risk management, climate-smart service, infrastructure and land use planning and by creating property value data needed to monitor the costs of climate related disasters and for related compensation and insurance systems. 11. By clarifying private and public property land and property rights, the project will contribute towards Maximizing Finance for Development (MFD). Clarification of private land and property rights is linked to greater private sector investment in the economy because constraints such as insecurity of tenure are reduced or entirely removed, giving the private sector greater incentives to use the land and property Page 10 of 67

15 resources available in the country. The clarification of public land and property rights is linked to improved management of public property assets, which, in turn, can create a crowding-in effect because public property assets that are deemed unnecessary for the public-sector portfolio can be sold or leased to the private sector. 12. The project will build on and/or be complementary to the ongoing Government and World Bank joint work on the tax administration modernization and modernization of Government services (egovernment). 13. The project is complementary to a number of donor-funded projects, such as the EU Twinning Project financed by the European Commission for development of NSDI in Moldova; Norwegian support for development of a Geoportal and improvements to the Information and Communication Technology (ICT) system; and United Nations Development Program (UNDP) support to Cadastru for a new information system for the address register that is compliant with the EU INSPIRE standards. II. PROJECT DEVELOPMENT OBJECTIVES A. PDO To improve the quality and transparency of the land administration and property valuation systems. B. Project Beneficiaries 14. The primary beneficiaries of the project would be the general population, particularly members of the public within Moldova, but also foreign investors and overseas Moldovan nationals, who currently own real estate or who will acquire real estate in the future. Special attention would be paid to women and vulnerable members of society to ensure that the benefits are more equally distributed. Beneficiaries would also include the land market professionals (surveyors, valuers) and organizations associated with mortgaging (commercial banks), who would benefit from more accurate and accessible real estate data and who will be able to provide better services to the public. Further, government institutions and agencies, such as the Ministry of Finance, PSA and the LPAs, would benefit as they will be able to easily access information about real estate for planning and property tax purposes; for providing social and other local government services; and through improvements in the use of the real estate that they manage. C. PDO-Level Results Indicators 15. The project will have the following PDO-level indicators: Percentage of land in Moldova recorded in cadastre increased (target: 95 percent for both private and public land); Percentage of urban residential and commercial properties revalued (target: 95 percent for both urban residential and urban commercial); Percentage of customers satisfied with Cadastru services (target: 70 percent; gender-disaggregated); Land administration system information easily and widely accessible (target: Data available online and/or offline); and Page 11 of 67

16 Information on property values and property valuation methodologies easily and widely accessible (target: Data available online and/or offline) III. PROJECT DESCRIPTION A. Project Components 16. The project consists of four components: (A) First Property Registration; (B) Property Valuation; (C) Land Administration System Strengthening; and (D) Capacity Building and Project Management. Component A First Property Registration (EUR 15.3 million) 17. This component will support the first registration of public and private land in Moldova and strengthen the data quality for records already in the land register. This component will also organize mandatory public displays and public awareness campaigns to ensure citizens are engaged and aware of the procedures, activities and benefits during first property registration. Additionally, a comprehensive Grievance Redress Mechanism (GRM) will be set up at Cadastru to monitor feedback received from beneficiaries and provide a formal avenue to appeal. The component consists of three subcomponents: (i) systematic registration of private land including implementation of public displays, public awareness campaigns and a grievance mechanism; (ii) systematic registration of public land; and (iii) improvement of the quality and reliability of the cadastre data. Component B Property Valuation (EUR 5 million) 18. This component will support extending mass valuation to incorporate those properties not currently included and to carry out selected revaluation of properties to help improve the transparency of the property market and keep the property valuation system current and usable through inter alia: (i) initial valuation of properties; (ii) revaluation of properties which have not been revalued since 2008; and (iii) setting up of a property valuation infrastructure and an independent appeals system to challenge valuations. Component C Land Administration System Strengthening (EUR 7.7 million) 19. This component will support the strengthening of the land sector in Moldova by facilitating policy dialogue and conducting a review of the existing institutional and regulatory frameworks, proposing improvement where possible. It will also encourage a development of simplified business processes and modernization of cadastre services through use of ICT and support the development of NSDI. The component will support: (i) development of land sector and land sector sustainability polices covering governance, organizational systems, the roles of different process participants, notaries and private sector and registration and valuation processes and including, if applicable, the preparation of legal or regulatory reforms; (ii) strengthening information and communications technology capacities; and (iii) strengthening of the NSDI including preparation of a business plan, expansion of the geoportal and capacity building activities for agencies responsible for the provision of core reference datasets on data standards, maintenance of metadata and creation of interoperable datasets. Page 12 of 67

17 Component D Capacity Building and Project Management (EUR 2.1 million) 20. This component will support capacity building at stakeholder agencies and institutions to ensure the smooth implementation of project activities and support project sustainability, as well as provide support for project implementation through inter alia: (i) training and capacity building and equipping for LPA s staff as needed to support the systematic registration and valuation at the local level; (ii) training and capacity building activities at PSA s Cadastru to improve their client orientation and servicing skills; (iii) design and implementation of a comprehensive social assessment (including a social management plan) and three customer satisfaction surveys; (iv) monitoring and evaluation (M&E) of the Project; and (v) operation of Project Implementation Unit (PIU). B. Project Cost and Financing Project Components Project cost (EUR million) IDA Financing (EUR million) Trust Funds (EUR million) Counterpart Funding (EUR million) A. First Property Registration B. Property Valuation C. Land Administration System Strengthening D. Capacity Building and Project Management Total Costs Total Project Costs Total Financing Required Cross-cutting Activities 21. Gender. By global and regional standards, gender equality in Moldova is high. The country s constitution provides for gender equality as does the 2006 Law on Ensuring Equal Opportunities for Men and Women 11. A legal assessment conducted during project preparation confirmed that the legal framework in Moldova supports equal land rights for men and women. Women can buy, sell, inherit, lease, or mortgage their property. Joint rights over the spousal property can be registered. Land sector was not identified as a sector with a gender gap in the Gender Assessment conducted by the World Bank in Moldova in However, an analysis of property data is needed to understand how the gender equality guaranteed by laws is being implemented in practice. Currently, Cadastru s systems do not enable property data collection in a gender disaggregated manner. The project will thus support an upgrade of Cadastru s ICT system for collecting property data in a gender disaggregated manner to enable analysis and reporting for informed planning and policy making. It will also be used for reporting on project results. Additionally, any reforms supported by the 11 Country Partnership Framework for the Republic of Moldova for the period FY18 to FY 21, World Bank Group, June 2017 Page 13 of 67

18 project will be tailored whenever necessary such that the impact on male and female beneficiaries is equal. Policy guidance provided by the project will also be gender-sensitive. Public awareness and communications campaign, customer surveys and training activities carried out as part of the project will be designed in such a way that they reach male and female beneficiaries, and in full understanding and acknowledgement of the different ways that men and women obtain information. 22. Citizen Engagement. Several citizen engagement tools will be mainstreamed into different sub-components: (i) frequent public consultations (at least bi-annually) supporting effective public awareness and engagement campaigns (PAC); (ii) participatory monitoring through small participatory committees in each local community accompanying mandatory public display to register and follow up on citizens observations, comments and grievances about the systematic registration to ensure accountability, manage local conflicts should they arise, and propose possible adjustments to the public display process to Cadastru; (iii) a comprehensive GRM, set up at Cadastru who will respond to all feedback; the information gathered will also be used to improve services provided and to mitigate any negative social impacts on individuals (all three tools supported under sub-component A.1.); and (iv) three customer satisfaction surveys (at the beginning, mid-term and close to the end of the project and supported under sub-component D.2), which will be used to inform Cadastru s strategies and plans for improved servicing and client orientation. Survey results will be published on Cadastru s website and will be communicated through the PAC together with Cadastru s action plan to address issues/gaps identified through the customer surveys. 23. Climate Change. The project will support the addressing of Moldova s climate vulnerability context. Systematic registration (Component A) of private and public lands will improve climate disaster response and recovery in cases of temporal displacement and/or property loss, as it will allow relocation without fear of losing land rights and enhance the repossession of property. In addition, the support to the country s NSDI (Component C) will strengthen Moldova s INDC goal for improved dissemination of climate relevant information by pooling relevant geospatial datasets. Property valuation (Component B) will strengthen INDC goals to monitor climate change impacts and promote disaster-related insurances by providing economic property value data essential for estimating costs of climate disasters and for related compensation and insurance claims. C. Lessons Learned and Reflected in the Project Design 24. has funded land administration projects across the globe and particularly focused on the ECA region just after the collapse of the Soviet Union given the need to secure property rights in order to develop well-functioning market economies. Over forty land administration projects were completed in ECA since Before Bank-financed projects, ECA countries did not have good land registers or cadastres and the land administration sectors were operationally and institutionally fragmented, paper-based and bureaucratic. Today, many of these countries operate fully digital systems for land and property registers and cadastres 12 and are moving to the next generation of services with geospatial data and online services as part of the egovernment initiatives. Therefore, the Bank s strong foundations and track record in ECA helped to gather the right experience for project design. At the same time, lessons learned from other regions, particularly Latin America and the Caribbean (LAC), are reflected in areas where interventions and policies relate to public land delineation, which was not previously tackled under ECA projects. 12 In Doing Business 2018, six ECA countries (Lithuania, Georgia, Belarus, Estonia, Slovak Republic and Kyrgyz Republic) were ranked in the top 10 countries on Registering Property. Page 14 of 67

19 25. Overall, this project design has incorporated the following lessons learned from the Bank s experience in land projects: a. Policy and legal reforms need to be conducted alongside technical investments to achieve strategic goals and harness the complete benefits of investments; b. Public awareness and participation is critical for success and public awareness and education campaigns add important value. Results of customer surveys are a valuable channel for feedback from the public and suggests important corrective actions for agencies; c. Investments in transparency (e.g. publication of valuation methodologies and market values) can help reduce costs in other areas (e.g. appeals systems) and are, therefore, highly beneficial and make the system financially sustainable; d. Communication and training need to reach out to multiple stakeholders and different social groups including vulnerable groups and women, considering their priorities and varying ways they access information; e. Addressing gender inequality in access to formal property rights is important even if the law prescribes equal rights. Providing access to gender disaggregated data and including gender specific messages in public awareness campaigns, training and education can have significant positive impact. Tailoring project activities to men and women when appropriate can help to prevent unintended biases and mitigate negative gender impacts; and f. Strong safeguards and grievance redress mechanisms need to be in place when it comes to investments in public land delineation. Once again, transparency and public perception will be important in ensuring the success of the investments. 26. In addition, country-specific lessons learned from previous Bank engagements in Moldova have also been incorporated. Some key design lessons include: (i) mobilizing LPAs and citizens in the registration project as the lack thereof was identified as a the reason some areas of the territory could not be covered under the previous Bank-financed registration project; (ii) public displays of survey data and focused awareness raising campaigns to minimize errors in data collected during first registration; (iii) a focus on the valuation of urban residential and commercial properties to generate tax revenues; and (iv) an emphasis on revaluations to make the valuation system both relevant and sustainable. 27. Another important lesson was considered during project preparation: a long preparation period with time invested that conducts extensive consultations with sector stakeholders (public and private), donor partners and communities (local authorities but also citizens) often pays off during project implementation. It ensures the project has broad, in-country support and that key stakeholders are mobilized for implementation. 28. Finally, the design of a project amidst major Government restructurings is always difficult. Care has been taken to make the design flexible to allow room for maneuvering should anything change. At the same time, the client will need to be proactive and restructure the project should the need arise. Page 15 of 67

20 IV. IMPLEMENTATION A. Institutional and Implementation Arrangements 29. The implementing agency for the project is the Public Service Agency (PSA) through its Department of Cadastre (Cadastru). PSA will be responsible for project implementation with support from (i) the Agency for Land Relations and Cadastre (ALRC) on activities related to property valuation and NSDI (subcomponents B1, B2 and C3); and (ii) the Public Property Agency (PPA) on activities related to registration of public land (subcomponent A2). PSA will enter into implementation agreements with ALRC and PPA to set forth the respective responsibilities of each supporting agency in the implementation of the respective project activities by no later than one month after the Effective Date of the project. Should the ongoing institutional reform in Moldova result in a change in the organizational structure, roles and/or responsibilities of any of the supporting agencies in a manner affecting the project, the Government of Moldova may designate another agency as a supporting agency per the Bank s prior agreement. 30. The PSA will coordinate project with the Ministry of Finance, Ministry of Agriculture, Regional Development and Environment, Ministry of Justice, egovernment Center, LPAs and public and private sector institutions that produce and manage geospatial data on project implementation. The cooperation and coordination between the PSA and relevant government agencies and LPA representatives will be implemented through a Project Council (PC) that will be established no later than one month after the Effectiveness Date of the project. The PC will provide policy guidance and direction to project implementation. The PC will tentatively include representatives of the State Chancellery (chairing the PC), Ministry of Finance, Ministry of Agriculture, Regional Development and Environment, Ministry of Justice, Congress of Local Authorities of Moldova (CALM), ALRC, PPA and PSA. 31. The PIU will be established in Cadastru no later than one month after the Effectiveness Date of the project and will be responsible for day-to-day implementation and for providing specific technical oversight to project activities. The PIU will be responsible for procurement, financial management, M&E and safeguards under the project. It will be led by a project director and will include specialists in procurement, financial management, M&E, environmental and social safeguards and other technical and fiduciary specialist, as needed. Heads of the relevant Cadastru divisions will act as component/subcomponent coordinators. Fiduciary staff familiar with the Bank procedures will be recruited externally on a competitive basis following the Bank s Procurement Regulations. Although Cadastru has a decade of experience in implementing World Bank projects (e.g. First Cadastre Project implemented through ) the current institutional memory is limited. 32. Thematic working groups (WG) may be established to provide technical guidance to project implementation and could tentatively include Cadastre WG, Public Land Delineation WG, Property Valuation WG, Policy and Regulatory WG and Geospatial WG. 33. In terms of collaboration and synergies among external parties, EU, Norwegian donor and UNDP will be natural partners as they support the Government of Moldova on NSDI, ICT and address registry through policy advisory and technical support. The PSA, through the PIU, will carry out the important function of donor coordination to ensure that priorities are clearly identified and implemented and that effort is not duplicated. Page 16 of 67

21 B. Results Monitoring and Evaluation 34. Project monitoring will include two areas: (i) a regular output monitoring of project performance and an evaluation system to be established in the first few months of project implementation. This system will monitor the PDO and intermediate indicators; and (ii) customer surveys conducted biannually will monitor customer satisfaction and provide a venue for citizen engagement and an important feedback loop for the project. In total, there will be three surveys conducted during the life of the project. The survey results will influence further capacity building efforts at Cadastru and relevant customer suggestions or complaints will guide further improvements of registration services. Survey results and certain activities on how the customers considerations have been taken into account will be disseminated to the wider public in a userfriendly format. A baseline survey will be conducted during the first year of project implementation. Where there are yes/no indicators, interim checkpoints will be set to monitor progress towards the achievement of the respective indicator. 35. A project GRM will be set up at Cadastru to monitor feedback (including appeals) received from beneficiaries, including citizens, specialized users (e.g. valuers, notaries) and Government agencies and LPAs. The GRM is supported by an information campaign and training for responsible Cadastru staff. Cadastru will respond to all feedback and the information gathered will also be used to improve services provided and to mitigate any negative social impacts on individuals. The GRM will increase transparency and accountability and aims to reduce the risk of the project s possible unintended adverse effects on citizens and will serve as an important feedback and learning mechanism for improving project impact. 36. A dedicated PIU expert will be assigned with the M&E function to provide not only statistical reports but also analysis for the quarterly progress reports, which will be provided to Cadastru, PSA and the Bank team. C. Sustainability 37. Cadastru has proven capacity to implement systematic registration and property valuation program as shown by the success in implementing the First Cadastre Project. The PSA operates on a fee basis and the one-time investment in first registration pays off through fees charged to subsequent property transactions. As for property valuation, the project will support the development and implementation of a sustainable methodology for property revaluation. The project will finance developing and testing periodic revaluations because regular revaluations are more efficient than one-time revaluations after long periods of time. Regular revaluations also maintain a high usability of the property valuation system in areas like value-based property taxation, valuing public sector assets, valuations for investment portfolios and company balance sheets and estimating the cost of projects that involve expropriation. As for investments in ICT (e.g. procurement of software upgrades and e-services), the technical capacity is in place and these systems will operate on the existing egovernment platform using the government s information infrastructure that operates on the basis of cloud computing technology (e.g. MCloud Platform). The project's investments in institutional capacity building for improved service delivery with a clear customer focus will also enable Cadastru to provide information to both the government and private sector and support the sustainability of project results. Page 17 of 67

22 D. Role of Partners 38. There is no co-financing or parallel financing for the project. However, there are several donor partners supporting the Government of Moldova in improving the Cadastru s ICT systems and geospatial information sharing. The core partners to the project are the European Commission, which is supporting the development of NSDI in Moldova; the Government of the Kingdom of Norway is supporting the development of a Geoportal and improvements to the ICT system; and UNDP, which supports Cadastru with a new information system for establishing the address register that is compliant with the EU INSPIRE standards. V. KEY RISKS A. Overall Risk Rating and Explanation of Key Risks 39. The project overall risk is rated High due to the following five prominent risks associated with the project: (i) Political and Governance; (ii) Sector Strategies and Policy; (iii) Institutional Capacity for Implementation and Sustainability; (iv) Stakeholders; and (v) Social risk. 40. Political and Governance (High). Political changes in Moldova have been frequent in the recent past. Such fragile political stability poses a substantial risk. Upcoming parliamentary elections in February 2019 might bring significant changes in the government, resulting in a change of priorities, suspensions or delays of reforms, or replacement of key staff. The recent banking sector crises have had a negative impact on the citizens trust in public institutions. However, the project is expected to have broad support from different political parties given its focus on strengthening the security of property rights through registration and improving the transparency of the registration and valuation system. This risk will be mitigated through early engagement with the new government and the establishment of the PC that will consist of key government institution representatives to ensure that the government is kept informed about project activities and will provide policy guidance to the implementing agency. 41. Sector Strategies and Policy (High). This risk stems from the ongoing institutional reform, the results of which are still uncertain. Cadastru has been transformed from a self-financing agency to a department of the PSA. The ALRC is no longer closely associated with Cadastru but is an entity which is likely to be further reorganized. Other important sector agencies IPOT, INGEOCAD and the Soil Institute are also no longer under the same umbrella as ALRC. The details as well as a timeline for completion of the reforms are unknown. Flexibility will, therefore, be required to respond to changing institutional circumstances. The project has been designed to provide for such flexibility (for instance, focusing on activities that are and will remain clearly in the mandate of Cadastru). Stakeholder coordination will also be key in ensuring that there is sufficient communication across key agencies and entities in terms of strategy, policy, data sharing and activity implementation. 42. Institutional Capacity for Implementation and Sustainability (High). Cadastru successfully implemented the World Bank-funded First Cadastre Project and has substantial experience and technical capacity to implement this project. The risk is rated Substantial, because of: (i) Cadastru s loss of executive, self-funding agency status, which might result in difficulties for Cadastru to attract and retain high quality staff; and (ii) expected territorial reform that might lead to a fewer number of LPAs. In such circumstances, managing a Page 18 of 67

23 complex project could be a major challenge. The project design includes certain measures to address such risks by providing substantial international and local technical support for project implementation, including the establishment of a specialized PIU. Major shares of project supported activities are to be done once (e.g. first registration, first valuation) and the need for extensive technical support would cease to exist with project completion. The project also includes support to LPAs to conduct the systematic registration process in their territories. A reduced number of LPAs resulting from the territorial reform would require adjusting the systematic registration implementation plan to accommodate fewer LPAs but for a longer period. The project design provides for flexibility in terms of systematic registration planning and implementation. 43. Fiduciary (Substantial). While the financial management risk is Moderate, the overall fiduciary risk is considered Substantial due to procurement. The PSA/Cadastru lacks experience and knowledge of Bank procurement procedures. The implementing agency also lacks an internal manual that provides practical guidance on the steps of the procurement process. Risk mitigation measures are described in detail in Annex Stakeholders (High). The success of the project will depend on the cooperation between Cadastru and LPAs and coordination between the PSA (Cadastru) and relevant government agencies, such as ALRC, PPA and various ministries. To mitigate the risk of insufficient coordination and cooperation causing the project to fail to meet its objectives, a set of activities was incorporated in the project design such as public awareness raising campaigns (both at the national and local level), capacity building and technical assistance to LPAs, the organization of public displays of cadastre data in local communities, etc. Additionally, as part of institutional arrangements, the PC will be established to include representatives from key stakeholder institutions. 45. Social (Substantial). Through a social risk survey conducted in December 2017 and a pilot systematic registration project conducted by Cadastru in Varatic community during 2017, a number of social risks were identified. The most typical social risks identified include potential excess land use, absentee titleholders, titles with land plots geographically unidentified, as well as risks associated with lack of legal clarity. Risk mitigation plans includes public awareness activities, consultations and the establishment and maintenance of a project-level GRM. Mitigation measures are envisioned under the Environmental and Social Management Framework (ESMF), such as the Comprehensive Social Assessment and Social Management Plan (SMP), and are financially supported through the project components to ensure their adequate implementation. VI. APPRAISAL SUMMARY A. Financial and Economic Analysis 46. In terms of the financial benefit, the revaluation of urban residential and commercial properties is expected to boost appraised property values by 60 percent and 15 percent, respectively. Additional property tax revenues are possible with first valuation of agricultural and rural residential properties but this would involve changes to the property tax policy, which is not a part of this project. The key statistics for the financial analysis are presented below. Based on the model assumptions, the estimated financial net present value Page 19 of 67