PROJECT INFORMATION DOCUMENT (PID)

APPRAISAL STAGE

Report No.: 64686

Project Name / Institutions Building Technical Assistance Additional Financing
Region / LATIN AMERICA AND CARIBBEAN
Sector / General public administration sector (100%)
Project ID / P123461
Borrower(s) / REPUBLIC OF URUGUAY
Implementing Agency
Ministry of Economy and Finance
Colonia 1089, 3er Piso
Montevideo
Uruguay
Tel: (598-2) 1712-2210 Fax: (598-2) 1712-2212

Environment Category / [ ] A [ ] B [X] C [ ] FI [ ] TBD (to be determined)
Date PID Prepared / September 20, 2011
Date of Appraisal Authorization / October 7, 2011
Date of Board Approval / December 6, 2011

1.  Country and Sector Background.

Uruguay is an upper-middle income country characterized by a mature and stable democracy, high caliber public institutions, and a long track record of reforms aimed at public sector modernization. Although the country embarked on a series of programs aimed at strengthening public sector administration, throughout the last two decades, certain areas of the modernization process have lagged behind and continue to challenge the overall efficiency and transparency of the State apparatus. The importance of improving public sector performance to achieve sustainable and equitable growth has been acknowledged by the administration of President Jose Mujica, who took office in March 2010, and embodied public sector reform its platform Reforma del Estado.[1] Moreover, the establishment of a modern and efficient state accountable to the electoral base and capable of spurring sustained economic development while increasing the efficiency and effectiveness of social spending is considered pivotal to promoting long-term growth and social welfare.

2.  The need to improve core public sector institutions is a recurring theme of several pillars of the Government’s platform. Key pillars of the Government’s public sector reform include improved management of public resources, enhanced use of technology in public sector management, improved statistics for decision-making and enhancing the business environment. The Government has indicated a desire to improve the quality and impact of public spending and there is a strong emphasis on enhancing capacity on budget.

3.  The Government is committed to increasing the effectiveness of public policies, such as further expanding social sector programs with an increased emphasis on enhancing their impact. The Ministry of Economy and Finance (MEF) has been a major driving force behind public sector reform and has articulated the institutional development needs for improved public sector performance as well as those arising from implementing the agenda of public policy reforms.

4.  Objectives.

The objective is to improve the Borrower’s public sector performance by: (i) supporting its public sector modernization program in the areas of monitoring and evaluation, performance-based budgeting, e-government, tax administration and statistics; and (ii) strengthening its institutions involved with the design and implementation of public policy reforms in the areas of taxation, promotion of the business environment, and social protections.

5.  Rationale for Bank Involvement

Strengthening public sector administration remains a top priority for President Mujica’s administration and is confirmed in the new Country Partnership Strategy for 2010-2015 (Report No. 55863-UY), which was discussed by the Board on August 18, 2010. The Bank has been supporting the Government to improve public sector performance through the Institutions Building Technical Assistance Loan, which was approved in May 2007. Of the original seven components, component number one focusing on strengthening customs administration and human resource management was dropped due to shifting Government priorities at that time. The remaining six components are performing well and include: (i) Component 2—Improving Institutional Planning, Monitoring and Evaluation, (ii) Component 3—E-government, (iii) Component 4—Support to BPS for Institutional Strengthening and Implementation of Tax and Social Protection Reforms, (iv) Component 5—Support for Capital Markets and Corporate Transparency Reforms, (v) Component 6—Support for Bankruptcy Regulation Reforms, and (vi) Component 7—Project Coordination and Strategy Development.

6.  The Borrower has requested the additional financing for the Institutions Building Technical Assistance Loan (P097604, Loan 7451-UR) to scale-up activities in order to enhance its development impact. This will be achieved through: (i) increasing financing for four components to expand their original coverage; (ii) adding two components; (iii) slightly adjusting the PDOs to reflect the changes made to the original components and the inclusion of the two new components; and (iv) revising or eliminating a few activities envisioned in the original Legal Agreement, which are no longer relevant; and (v) adjusting the project’s results framework to reflect the identification of a few data limitations, the modifications of the original components, and the inclusion of new components. Furthermore, the additional financing will help continue to provide technical assistance to the DPL series on Public Sector Competitiveness and Social Inclusion, especially in the areas of fiscal reform, capital markets, and the social information system, SIIAS.

7.  Description.

Four original components would receive additional financing: (i) Component 2—Improving M&E; (ii) Component 4(b)—Support for Institutional Strengthening and Implementation of Social Protection Reforms; (iii) Component 5.b—Supporting Corporate Transparency; and (iv) Component 7—Project Coordination and Strategy Development. Component 2, Improving M&E, would receive US$1 million in additional funds to begin work on second generation improvements on M&E, focused on increasing transparency and dissemination of M&E results, supporting rapid evaluations of priority Government interventions, building capacity for the evaluation of public sector projects, programs, and policies, and finally designing and implementing impact evaluations. Component 4b, Support for Institutional Strengthening and Implementation of Social Protection Reforms, would receive an additional US$1.1 million to fund SIIAS, the Integrated Social Information System, to increase institutional coverage of social programs, fund analytical surveys, and provide further institutional strengthening. Component 5.b, Supporting Corporate Transparency, would receive US$500,000 in additional funds to strengthen the National Internal Audit (AIN by its Spanish acronym), centered on the implementation of XBRL, which is a new taxonomy for the digital communication of financial information to the Registry of Financial Statements (REC by its Spanish acronym). Finally, Component 7, Support for the Project Coordination and Strategy Development, would also receive an additional US$3 million in funds to continue to provide just in time support for carrying out studies and other consultancies related to Project coordination and strategic development that are proposed by the Borrower and approved by the Bank.

8.  The two additional components would be Component 8—Supporting Selected Modernization Efforts of National Tax Directory and Component 9—Supporting Institutional Strengthening of the National Statistics Institute. Component 8, Supporting the Directorate of Taxation (DGI by its Spanish acronym), would receive US$3 million to strengthen tax compliance and risk management at DGI and to support the development of software for managing electronic accounting, its dissemination and customer support, aimed at increasing electronic filing (e-filing) and, indirectly, improving tax controls. Component 9—Supporting the National Statistics Institute (INE by its Spanish acronym), would receive US$1.4 million, to support institutional strengthening, support for the coordination of a poverty measurement working group of the Latin American and Caribbean Economic Association (LACEA), the design and deployment of a panel survey of the most vulnerable population, and the house income and expenditure survey.

9.  Financing

Source: / ($m.)
Borrower / 0
International Bank for Reconstruction and Development / 10
Total / 10

10.  Implementation

The Ministry of Economy and Finance (MEF), through its Vice-Ministry of Economy, will continue to have the responsibility for overall project implementation. The MEF has been the key interlocutor with the Bank on the operation’s design and has been the articulator between the core public sector modernization activities and those in support of the implementation of policy reforms. Furthermore, the MEF has a strong leadership position in the central government and all of the entities involved have explicitly agreed to the proposed implementation arrangements. Implementation ratings for the Institutions Building Technical Assistance Loan are satisfactory.

11.  Sustainability

There is abundant evidence of the Borrower’s commitment to the implementation of this project. First, the Government is continuing to demonstrate successful implementation of the original project. Secondly, the elements which make up the core public sector modernization component have been explicitly addressed by high-ranking government officials as key areas for reform in the public sector. Third, Government commitment to public sector reform has been stable, spanning several administrations and built upon consensus. Finally, the MEF, responsible for overall implementation, is an entity with high credibility and respect in the public administration and has accompanied project design in detail.

12.  Lessons Learned from Past Operations in the Country/Sector

The Additional Financing incorporate three important lessons learned from past operations: the need for flexibility in project design, the need for strong leadership during implementation, and the importance of ex-ante and concurrent coordination with other donors. Regarding the need for flexibility in project design, which is necessary according to the Bank’s Handbook on Technical Assistance, the Additional Financing will strengthen Component 7.3 (Studies and Other Consultancies). This component, studies and other consultancies, allows activities identified during implementation to be incorporated into the project as long as they are consistent with the project’s development objectives. This component has put at the disposal of the MEF a pool of resources for just-in time support and analysis of specific subjects. The MEF has taken advantage of these resources to contract advice or support in areas as varied as: fiscal impact of the health reform, reform of the cadastre, competitiveness, potential fiscal impacts of a draft Public-Private Participation (PPP) Law in Infrastructure, and others. This component is considered very valuable to the authorities and they would like to increase it.

13.  The second important lesson learned which has been incorporated into project design is the need for strong leadership during implementation. Given the large number of agencies involved in the project, strong leadership during implementation is paramount. The Project has been designed with one single executing unit within the MEF would oversees overall implementation. All agencies involved have explicitly agreed to this mechanism and to the leadership of MEF. As a well respected institution with capacity to mobilize all stakeholders towards achievement of the project’s objectives, the MEF has met or exceeded implementation standards.

14.  The third lesson learned has been the importance of ex-ante and concurrent coordination with other donors. Uruguay has received abundant support in public sector modernization from other donors, in particular the Inter-American Development Bank (IADB). Yearly coordination meetings between the Borrower, the IADB and the Bank to review operational plans and assess project performance are built into the design of the project. Constructive discussions with other donors have ensured that the Bank work will not overlap or duplicate efforts of other development operations.

15.  Safeguard Policies (including public consultation)

The original project (P097604, Loan 7451-UR), was classified as Category C. While there were no safeguards triggered by the original project, some of the envisaged studies and consultancies under Component 7.c (Studies and Other Consultancies) of the additional financing may have some downstream social and environmental implications through future programs or projects.

Studies and consultancies already financed under Component 7.c (Studies and Other Consultancies) of the original project have been analyzed, with particularly close attention to the private public partnerships law and updating of the methodology for evaluation of the cadastre system. No safeguard issues have been identified.

The new studies and consultancies to be financed under Component 7.c (Studies and Other Consultancies), which may involve drafting of policies or regulations with potential environmental and social effects, will be confirmed once their nature and scope are defined during implementation of the project. The Bank will review the terms of reference (TORs) for these future activities and comment, if applicable. The TORs will include a standard section asking consultants to identify any potential social or environmental downstream implications of their work or the implementation of their recommendations.

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16.  List of Factual Technical Documents

17.  Contact point

Contact: Amparo Ballivian

Title: Lead Economist

Tel: (202) 458-4962

Fax:

Email:

18.  For more information contact:

The InfoShop

The World Bank

1818 H Street, NW

Washington, D.C. 20433

Telephone: (202) 458-4500

Fax: (202) 522-1500

Email:

Web: http://www.worldbank.org/infoshop

[1]“Public Sector Reform”