Panama - Land Administration Project Project Restructuring Project Paper

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized 1. Introductory Statement Panama - Land Administration Project Project Restructuring Project Paper This Project Paper seeks the approval of the Executive Directors to introduce the following changes in the Panama Land Administration Project (Loan 745-PAN; P5595) and any accompanying amendments to the project s legal documents. The original loan of US$47.9 million was approved by the Board of Executive Directors on January 16, 21. The project became effective on July 19, 21, with a closing date of September 3, 26. The project has suffered significant implementation delays, resulting in an unsatisfactory rating with respect to the development objectives. The delays were largely the result of weak leadership (an interim Coordinator for the first 18 months) and limited budgetary allocations. The major modifications being proposed include: (i) a narrowing of project scope (25-3 percent) and cost (about 2 percent); (ii) the creation of a new component to separate monitoring and evaluation activities; (iii) the application of the new financing parameters for Panama, which were approved on December 2, 24; (iv) an increase of the authorized allocation of the Special Account; (v) the reallocation of expenditure categories; and (vi) the use of a financial administrator. The proposed changes would provide the Government of Panama with improved implementation and financing modalities and an appropriate timeline to allow for the successful completion of project implementation and full attainment of the revised PDO. 2. Background and Reasons for Restructuring Project design and scope: The Project Development Objectives are to: a) promote equitable access to land and improve land tenure security by providing land administration services in the project areas, and b) enhance natural resources conservation through the consolidation of SINAP (National Protected Areas System) and Indigenous Peoples territories. The original project design had three components: 1) land policy, legal and institutional framework, and project monitoring; 2) land regularization activities; and 3) consolidation of protected areas and indigenous territories. Performance to date: During its first four years, the project has suffered significant implementation delays resulting mainly from: a) Fiscal space constraints and limited availability of counterpart funds. These constraints affected the disbursement of the loan and the ability of the executing agencies to execute the project at the expected rate. Initially, it was expected that the project would disburse between US$8 million and US$1 million per year, while in practice it has only disbursed on average US$3 million per year over the last three years; 1

2 b) Weak operational leadership, largely due to the failure to appoint a permanent Project Coordinator (the project operated with an interim Technical Coordinator from July 21 until early 23, and another interim Coordinator from September 24 until mid-january 26); c) Inability to approve key legal reforms that would significantly simplify land regularization procedures and allow for massive land titling; and d) Ineffective inter-institutional coordination. The project has been rated unsatisfactory with respect to implementation for two years and with respect to the development objectives for almost a year. Many of the output targets (especially in Component 2 - Land regularization - which is the core of the project) are lagging behind. As of March 15, 26, loan disbursements stood at US$13.3 million (25 percent of the total loan amount), with a balance of US$34.6 million undisbursed. While important measures to address the problem of slow implementation, contracting, and management have been recently taken, such as larger budgetary allocation and appointment of a permanent Project Coordinator, the PDO and output targets will not be achieved in the remaining six months of project implementation. A restructuring of the project, making financing arrangements more flexible, and an extension of the closing date are needed. The Government of Panama and the Bank are faced with two alternatives to the proposed restructuring: (i) to significantly reduce the scope of the project within the current time frame, or (ii) to cancel the loan. During the most recent project supervision mission (November 14-19, 25), the government proposed a restructuring of the project, summarized below, which would allow it to overcome the difficulties encountered in terms of financing and operational modalities, and to continue to support improvements in the quality of land administration services. The action plan agreed during this mission provides a solid framework for achieving the (slightly revised) PDO and reduced (by about 25-3 percent) output targets. The proposed restructuring aims to accomplish two main outcomes: (i) a narrowed but more realistic project size and scope and (ii) putting in place more effective financing and operational modalities. This restructuring was requested by the Government of Panama which has demonstrated a renewed commitment to the project, indicated by (a) a significantly higher budgetary allocation for the project, (b) appointment of a permanent Project Coordinator, and (c) political commitment to enact substantive legal and regulatory reforms. The proposed restructuring, described below, reduces the bottlenecks that were constraining the project in the past and capitalizes on the Government s renewed commitment to land administration reforms. Without such a restructuring, however, some of the output indicators (e.g., titling of rural areas) could likely not be attained fully and the achievement of the revised PDO would be at risk, though still possible. 2

3 3. Proposed Changes Project design and scope: The restructuring proposes a narrowing of the project s scope, while simplifying the two PDOs into a single objective. Other significant modifications being proposed include the revision of targets to better reflect the PDO, the creation of a new component to separate quality control and monitoring activities, and the application of the new financing parameters for Panama, which were approved by the Board on December 2, 24. Specifically, land regularization targets in rural areas would be reduced by 3 percent, while in urban areas they would be reduced by 25 percent. Project Administration and M&E (which was previously included under Component 1) would now be a separate component. As a result of the narrowed scope of the project, the total costs would be reduced by about 2 percent (for a total project cost of US$58.57 million - see Annex 1 for detailed cost structure by component). The total loan amount would remain unchanged as it would be accompanied by a reduction of the amount of required government counterpart funding. Implementation arrangements: To improve the operational modalities of the project, the following changes are being proposed: a) strengthening the permanent Project Coordinator s decision-making power; b) making the Superior Council and the Technical Operating Committee more effective in coordinating the various coexecuting agencies; c) improving resource allocation for institutional strengthening among the agencies involved, especially at the local level; and d) strengthening the provincial Technical Operation Units participation in the technical decisions that affect project implementation at the local level. In addition, the Ministry of Housing (MIVI) would be included as co-executing agency because of its role in approving the urban cadastral plans before they are registered. New expenditure categories and financing parameters: To facilitate disbursements and expedite project implementation, the new financing parameters approved for Panama on December 2, 24 would be adopted. All categories would be financed up to 1 percent by loan proceeds, except operating costs which would be at 9 percent after countersignature of the amended Loan Agreement. The proposed changes to expenditure categories reflect the lessons learned over the last four years of project implementation. Specifically: The civil works category would be increased by US$.83 million (from US$l.5 million to US2.331 million) to finance small additional renovation works in central government facilities (in the national Directorate of Agrarian Reform and The project development objectives, as formulated in the PAD, are to: a) promote equitable access to land and improve land tenure security by providing land administration services in the project areas, and b) enhance natural resources conservation through the consolidation of SINAP (National Protected Areas System) and Indigenous Peoples territories. The reformulated project development objective is to: modernize the land administration system, including priority protected areas and Indigenous Peoples Territories. 3

4 the Cadastre Office) and municipal offices to allow for the installation of the Integrated Cadastre-Registry System (SIICAR); The goods category would be increased by US$.72 million (from US$8 million to US$8.72 million) for the purchase of additional equipment for the installation of the SIICAR and a new camera for the National Geographic Institute (IGN); The consultants services category would be increased by about US$2.6 million (from US$15.85 million to US$18.42 million) to reflect the shift in the nature of services from land regularization services (Category 3, which would be decreased by an equivalent amount-from US$14.75 million to US$12.18 million) to consultants services (Category 4), because recent experience with land regularization showed the need for more consultations, ex ante land tenure studies, and public dissemination activities; The training category would be decreased by about US$.5 million (from US$1.9 million to US$1.41 million) as a result of savings in the implementation of these activities; and The operating costs category would be increased by US$1.16 million (from US$3.2 million to US$4.36 million) to reflect the three-year extension of the closing date. As a result, the unallocated funds (US$2.221 million) would be used to revise upward the works, goods, and operating costs categories. The proposed changes to expenditure categories and financial percentages are shown in Annex 2. The new financing parameters would significantly reduce the government s counterpart contribution. Similarly, the proposed reallocation of expenditure categories better reflects the revised scope of the project. In light of the government s overall fiscal constraints, the reallocation of expenditure categories and the change in financing parameters increase effectiveness of project implementation. In addition, to facilitate implementation, the size of the Authorized Allocation of the Special Account would be increased to US$4.79 million (equivalent to 1 percent of the total loan amount). Neither Panama nor this project is subject to an ongoing suspension of disbursements, and no audit reports are outstanding for the project. The Financial Management rating for this project is Satisfactory. Financial administrator: The government has been using UNDP as a financial administrator for the project, financed entirely with counterpart funds. As is the practice with other similar projects, the revised Loan Agreement specifies that the Borrower may enter into an agreement with a financial administrator, under terms and conditions satisfactory to the Bank. Procurement: At the government s request, the Bank s 24 Procurement Guidelines would apply after countersignature of the amended Loan Agreement, and new procurement methods would be incorporated in the Procurement Schedule. Extension of the closing date: The new implementation schedule requires a three-year extension, until December 31, 29. Based on our assessment of the action plan 4

5 submitted by the government for restructuring the project, we are satisfied that all criteria for extension have been met. These are: (a) This is the jrst extension sought for the project. The option of a shorter extension with possible hrther extension was considered and rejected because it would be disruptive to project implementation and have undue transaction costs. Based on the findings of the last supervision mission (November 14-19, 25), a three-year extension is justified in this case. (b) The project objectives continue to be achievable. The budget and action plan for the remainder of the project are consistent with the revised PDO and output indicators (Annex 3-Project Design Summary). (c) The performance of the Borrower and the other project implementation agencies has improved. During the past two years, implementation performance has been unsatisfactory. Important measures to address the problem have recently been taken, in particular the appointment of a permanent Project Coordinator in January 26, and signs of improvement are already noticeable, such as the clear acceleration in project implementation. However, these efforts are not sufficient, and a restructuring of the project is needed. The restructuring includes clear actions to ensure improved effectiveness of the current operational and implementation arrangements. These include: a) strengthening the permanent Project Coordinator s decision-making power; b) making the Superior Council and the Technical Operating Committee more effective in coordinating the various co-executing agencies; c) improving resource allocation for institutional strengthening among the agencies involved, especially at the local level; and d) strengthening the provincial Technical Operation Units participation in the technical decisions that affect project implementation at the local level. (d) The action plan is satisfactory to the Bank. During the November 25 supervision mission, the Bank and the government discussed the action plan for completion of the project over the extended period. The changes described in this section would require an amendment to the Loan Agreement, which has been prepared. 4. Analysis The proposed changes would not have any major effect on the original economic, financial, technical, institutional, environmental, or social aspects of the project as appraised, because the design o f the operation would essentially be maintained. The proposed restructuring makes the project s scope and size, and corresponding PDO, more realistic and attainable. In light o f this, the project s overall impact would be less than that originally anticipated. It is estimated that the expected benefits would be reduced by an amount comparable to the narrowed project scope (about 25-3 percent lower). The expected Economic Rate of Return (ERR) would not be altered by much, since at appraisal it was estimated using only land regularization activities. The reduction in scope and the application of the new financing parameters would 5

6 reduce the project s counterpart funding requirements. The project s technical objective (the integration of the registry and cadastre functions under one common framework) remains sound and achievable. Finally, the project would maintain its positive social impact through the issuance of land titles (urban and rural), the demarcation and consolidation of indigenous territories, and the establishment of alternative conflict resolution mechanisms. Similarly, the environmental category of the project would be unchanged (Category By ) and no new safeguard policies would be triggered. The restructured project area would remain within the original project area. 5. Expected Outcomes The proposed restructuring, the resulting narrowing in scope, and more effective operational arrangements are expected to facilitate achievement of the revised PDO. The reductions in funding for each component would be mirrored by proportional reductions in expected outputs. It is expected that the number of surveyed parcels to be titled would be about 25-3 percent lower than at appraisal, reflecting a more realistic target than previously estimated. The land regularization component would benefit 5, rural parcels (issuance of 12, titles) and approximately 6, urban parcels (issuance o f 15, titles), as opposed to 75, rural parcels (issuance of 5, titles) and about 8, urban parcels (issuance of 54, titles) in the original estimates. Despite a reduction in its size, the project is expected to have a similar impact on the PDO outcome indicators, revised as follows (see Annex 3, Project Design Summary): 24 hours and US$2 per transaction required for titling and registering a land parcel; 7 percent o f users of SIICAR satisfied; Existing land occupations in five protected areas regularized; Shared administration plan implemented in the Ngobe-Bug16 area In the original design, broad and un-quantified outcome indicators were mixed with output indicators. The revised outcome indicators better measure the efficiency and public benefit of a modernized land administration system in Panama. In terms of component outputs, the indicator related to the establishment o f alternative conflict resolution mechanisms has been reclassified as an output indicator of Component 1. Those of Component 2 have been recalibrated based on the new project scope. And those of Component 3 have been clarified, namely, nine management plans for the other protected areas must be completed. 6. Benefits and Risks The risks that could jeopardize the achievements o f the restructured project objectives remain essentially the same as the original design. The risk of inadequate legal and 6

7 regulatory reforms to expedite land titling (i.e., a law that would allow massive-ex officio2--land titling, and the executive decree that would significantly simplify the regularization procedures) is substantial, but this would affect project outputs under component 2, not overall project outcomes (PDO indicators). In other words, with limited legal reforms, the Project Development Objective can still be achieved, but the rate of project implementation under Component 2 would probably be reduced. The Government of Panama has made key legal reforms an important aspect of its national development agenda. The government is currently considering two parallel reform initiatives, namely (i) a draft bill that would allow massive land titling (Ley de Titulacidn de Ojcio), and (ii) a broader reform bill that, in addition to massive land titling, would also create a new institutional reform framework (Ley del Instituto Nacional de Tierras). The government expectation is that significant legal reforms, which would in any case include important changes for massive land titling, will be presented to the Assembly between April and June 26. The government expects to have broad support in the Assembly for these reforms. Finally, the Government has agreed on a budget allocation for the remainder o f the project which matches the proposed restructured counterpart funding requirements and would allow for considerably more rapid implementation. No additional environmental or social risks deriving from the restructuring of the project have been identified. However, under the restructured project, measures to mitigate some o f the risks originally identified - such as difficulties in the payment of titling services, land conflicts, and weak local participation - would be strengthened through support for legal and technical assistance, more effective information campaigns, streamlined regularization procedures, and more efficient interinstitutional coordination mechanisms. The regularization of parcels would be carried out systematically by area, rather than on demand on a case by case basis. 7

8 Annex 1 - Restructured Project Costs, by Component (US$ million) Components costs August Committed Restructuring TOTAL 1. Policy 2. Land regularization 3. Indigenous Territories & Protected Areas 4. Administration Other UNDP Front-end fee Spec. Account TOTAL (BW (47.9) (GOP) (24.46) " (1.45) (3.41) (34.4) (47.9) (6.89)" (.28) (3.5) (1.67) 8

9 Annex 2 - Costs by Expenditure Category (US$ million) Category Disburse as of Augi Remainder New allocation Yo of financing 1. (a) Works 1. (b) Works 2. Goods 3. Consultants services 4. Services under Land Regularization Activities 5. Training 6. Operating costs 7. Premia Interest Rate Caps and Interest Rate Collars 8. Unallocated 9. Front-end fee TOTAL

10 Annex 3 - Project Design Summary Hierarchy of Objectives Key Performance Indicators Monitoring& Evaluation Critical Assumption Project Development Objectives (PDO To modernize the land administration system, including priority protected areas and Indigenous Peoples Territories Components 1. Land policy, legal and institutional framework To establish simpler procedures in project area; strengthen land administration institutions; and establish alternative conflict resolution mechanisms 24 hours and US$2 per transaction required for titling and registering a land parcel. 7 percent of users of SIICAR satisfied. Existing land occupations in 5 protected areas regularized. Sharedadministration plan implemented in the Ngobe-BuglC area. Law proposal for a modernized land administration system presented to the Assembly. Regulations for simplifying regularization process and for massive land titling approved. Alternative conflict resolution mechanisms established in 3 provinces and 8 percent of conflicts resolved. Beneficiaries surveys; Field visits M&E reports Annual reports IGNP CU/D W C adas tr e Annual reports ANAM Field visits and protected areas surveys Official Gazettes Draft laws and regulations MARC agreements M&E reports Reports from participating agencies Government facilitates legal and institutional changes. SIICAR is operating. Government enables participation and social consultations. Political willingness to support shared administration of overlapping protected areas and indigenous territories. Government continues to provide political support to the proposal for a new legal framework for land administration. Specialized Land 1

11 Tribunal established in 4 provinces. I 2. Land regularization activities To regularize, title and register lands in project area using an Integrated Registry- Cadastre System (SIICAR) 1, staff of executing agencies trained in the use of SIICAR. 3 CORS stations operating. Basic geodetic network (2 points) available. Primary geodetic network (1 75 points) available. 5 percent of national territory photo graphed, 5 percent of old registries in the project area updated. 5, rural parcels surveyed and 12, titles issued. M&E reports Reports from IGN/DINRA/Registry Field visits Sufficient resources (human and financial) for the use of appropriate technology are allocated by the Ministry of Economy and Finance in a timely manner. Interinstitutional agreement to operate SIICAR is complied with by all relevant entities. 3. Consolidation of protected areas and indigenous territories. To consolidate priority protected areas and indigenous territories. 6, urban parcels surveyed and 15, titles issued. SIICAR operating in 4 implementing agencies with no less than 1, parcels incorporated. 7 linear km of protected areas demarcated. 3 management plans :ompleted. 3 indigenous ;erritories :onsolidated (Kuna Yala, Ngobe BuglC, Vaso Tjerdi) and 1 ANAM reports Field visits Llanagement plans Ll&E reports ]raft Executive Decree Land regularization costs are reduced. There is sufficient compatibility among agricultural, natural resources and economic polices. There is enough political 11

12 administrative norm elaborated. 1,361 km of indigenous territories demarcated. willingness to recognize and enforce Indigenous Peoples rights. 4. Project administration and monitoring To facilitate the physical and financial implementation of the project. 3 roundtables established (Kuna Yala, Ngobe Bug16 y Chimhn). Annual Operating Plan and procurement plan drafted every year on November 3. Monitoring and Evaluation report issued every three months. M&E reports Procurement plan FM reports Overall Government budgeting and procurement planning process is compatible with project implementation timetable. Annual auditing carried out. 12

13 Data Sheet Template for Project Paper Borrower: Republic of Panama Remonsible agencv: Ministrv of Economv and Finance Revised estimated disbursements (Bank FY/US$m) FY I FY6 I FY7 I FY8 I FY9 I FYlO Annual O - Cumulative Current closing date: September 3, 26 Revised closing date [if applicable]: December 31, 29 Is approval for any policy exception sought from the Board? Revised project development objective/outcomes [Zf applicable] The (slightly) revised objective of the project is: To modernize the land administration system, including priority protected areas and indigenous territories. Does the restructured project trigger any new safeguard policies? NO Revised Financing Plan (US$m.) Source Local Foreign Total Borrower 1.67 IBRD/IDA 47.9 Others.