Panama - Land Administration Project Project Restructuring Project Paper 1. Introductory Statement This Project Paper seeks the approval o f the Executive Directors to introduce the following changes in the Panama Land Administration Project (Loan 7045-PAN; P050595) and any accompanying amendments to the project’s legal documents. The original loan of US$47.9 million was approved by the Board o f Executive Directors on January 16, 2001. The project became effective on July 19, 2001, with a closing date o f September 30, 2006. The project has suffered significant implementation delays, resulting in an unsatisfactory rating with respect to the development objectives. The delays were largely the result o f weak leadership (an interim Coordinator for the first 18 months) and limited budgetary allocations. The major modifications being proposed include: (i) a narrowing o f project scope (25-30 percent) and cost (about 20 percent); (ii) the creation o f a new component to separate monitoring and evaluation activities; (iii) the application o f the new financing parameters for Panama, which were approved on December 20, 2004; (iv) an increase o f the authorized allocation o f the Special Account; (v) the reallocation o f expenditure categories; and (vi) the use o f a financial administrator. The proposed changes would provide the Government o f Panama with improved implementation and financing modalities and an appropriate timeline to allow for the successful completion o f project implementation and full attainment o f 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 o f 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 o f counterpart funds. These constraints affected the disbursement o f 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$10 million per year, while in practice it has only disbursed on average US$3 million per year over the last three years; 1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Panama - Land Administration Project Project Restructuring
Project Paper
1. Introductory Statement
This Project Paper seeks the approval o f the Executive Directors to introduce the following changes in the Panama Land Administration Project (Loan 7045-PAN; P050595) and any accompanying amendments to the project’s legal documents. The original loan o f US$47.9 mi l l ion was approved by the Board o f Executive Directors on January 16, 2001. The project became effective on July 19, 2001, with a closing date o f September 30, 2006. The project has suffered significant implementation delays, resulting in an unsatisfactory rating with respect to the development objectives. The delays were largely the result o f weak leadership (an interim Coordinator for the first 18 months) and limited budgetary allocations. The major modifications being proposed include: (i) a narrowing o f project scope (25-30 percent) and cost (about 20 percent); (ii) the creation o f a new component to separate monitoring and evaluation activities; (iii) the application o f the new financing parameters for Panama, which were approved on December 20, 2004; (iv) an increase o f the authorized allocation o f the Special Account; (v) the reallocation o f expenditure categories; and (vi) the use o f a financial administrator. The proposed changes would provide the Government o f Panama with improved implementation and financing modalities and an appropriate timeline to allow for the successful completion o f project implementation and full attainment o f 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 o f S I N A P (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 o f protected areas and indigenous territories.
Performance to date: During its f irst four years, the project has suffered significant implementation delays resulting mainly from:
a) Fiscal space constraints and limited availability o f counterpart funds. These constraints affected the disbursement o f the loan and the ability o f the executing agencies to execute the project at the expected rate. Initially, i t was expected that the project would disburse between US$8 mi l l ion and US$10 mi l l ion per year, while in practice i t has only disbursed on average US$3 mi l l ion per year over the last three years;
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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 2001 unti l early 2003, and another interim Coordinator from September 2004 until mid-January 2006);
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 o f the output targets (especially in Component 2 - Land regularization - which i s the core o f the project) are lagging behind. As o f March 15, 2006, loan disbursements stood at US$13.3 mill ion (25 percent o f the total loan amount), with a balance o f US$34.6 mill ion undisbursed. While important measures to address the problem o f slow implementation, contracting, and management have been recently taken, such as larger budgetary allocation and appointment o f a permanent Project Coordinator, the PDO and output targets will not be achieved in the remaining six months o f project implementation. A restructuring o f the project, making financing arrangements more flexible, and an extension o f the closing date are needed. The Government o f Panama and the Bank are faced with two alternatives to the proposed restructuring: (i) to significantly reduce the scope o f the project within the current time frame, or (ii) to cancel the loan.
During the most recent project supervision mission (November 14-19, 2005), the government proposed a restructuring o f the project, summarized below, which would allow it to overcome the difficulties encountered in terms o f financing and operational modalities, and to continue to support improvements in the quality o f land administration services. The action plan agreed during th is mission provides a solid framework for achieving the (slightly revised) PDO and reduced (by about 25-30 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 o f Panama which has demonstrated a renewed commitment to the project, indicated by (a) a significantly higher budgetary allocation for the project, (b) appointment o f 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 o f the output indicators (e.g., titl ing o f rural areas) could likely not be attained fully and the achievement o f the revised PDO would be at risk, though s t i l l possible.
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3. Proposed Changes
Project design and scope: The restructuring proposes a narrowing o f the project’s scope, while simplifying the two PDOs into a single objective’. Other significant modifications being proposed include the revision o f targets to better reflect the PDO, the creation o f a new component to separate quality control and monitoring activities, and the application o f the new financing parameters for Panama, which were approved by the Board on December 20, 2004. Specifically, land regularization targets in rural areas would be reduced by 30 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 o f the narrowed scope o f the project, the total costs would be reduced by about 20 percent (for a total project cost o f US$58.57 mi l l ion - see Annex 1 for detailed cost structure by component). The total loan amount would remain unchanged as i t would be accompanied by a reduction o f the amount o f required government counterpart funding.
Implementation arrangements: To improve the operational modalities o f 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 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. In addition, the Ministry o f Housing (MIVI) would be included as co-executing agency because o f i t s 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 20, 2004 would be adopted. All categories would be financed up to 100 percent by loan proceeds, except operating costs which would be at 90 percent after countersignature o f the amended Loan Agreement.
The proposed changes to expenditure categories reflect the lessons learned over the last four years o f project implementation. Specifically: 0 The civ i l works category would be increased by US$0.83 mi l l ion (from US$l.50
mi l l ion to US2 .331 million) to finance small additional renovation works in central government facilities (in the national Directorate o f 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 o f SINAP (National Protected Areas System) and Indigenous Peoples territories. The reformulated project development objective i s to: modernize the land administration system, including priori ty protected areas and Indigenous Peoples Territories.
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the Cadastre Office) and municipal offices to allow for the installation o f the Integrated Cadastre-Registry System (SIICAR); The goods category would be increased by US$0.72 m i l l i on (from US$8 m i l l i on to US$8.72 mil l ion) for the purchase o f additional equipment for the installation o f the SI ICAR and a new camera for the National Geographic Institute (IGN); The consultants’ services category would be increased by about US$2.6 m i l l i on (from US$15.85 m i l l i on to US$18.42 mil l ion) to reflect the shift in the nature o f services f rom land regularization services (Category 3, which would be decreased by an equivalent amount-from US$14.75 m i l l i on to US$12.18 mil l ion) 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$0.5 m i l l i on (from US$1.90 m i l l i on to US$1.41 mil l ion) as a result o f savings in the implementation o f these activities; and The operating costs category would be increased by US$1.16 m i l l i on (from US$3.20 m i l l i on to US$4.36 mil l ion) to reflect the three-year extension o f the closing date.
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As a result, the unallocated funds (US$2.221 mil l ion) 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 o f expenditure categories better reflects the revised scope o f the project. In light o f the government’s overall fiscal constraints, the reallocation o f expenditure categories and the change in financing parameters increase effectiveness o f project implementation. In addition, to facilitate implementation, the size o f the Authorized Allocation o f the Special Account would be increased to US$4.79 m i l l i on (equivalent to 10 percent o f the total loan amount). Neither Panama nor this project i s subject to an ongoing suspension o f disbursements, and no audit reports are outstanding for the project. The Financial Management rating for this project i s Satisfactory.
Financial administrator: The government has been using UNDP as a financial administrator for the project, financed entirely with counterpart funds. A s i s 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 2004 Procurement Guidelines would apply after countersignature o f 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, 2009. Based o n our assessment o f the action plan
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submitted by the government for restructuring the project, we are satisfied that a l l criteria for extension have been met. These are:
(a) This is the j r s t extension sought for the project. The option o f a shorter extension with possible h r the r extension was considered and rejected because it would be disruptive to project implementation and have undue transaction costs. Based o n the findings o f the last supervision mission (November 14-19, 2005), a three-year extension i s justified in this case.
(b) The project objectives continue to be achievable. The budget and action plan for the remainder o f 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 o f a permanent Project Coordinator in January 2006, and signs o f improvement are already noticeable, such as the clear acceleration in project implementation. However, these efforts are not sufficient, and a restructuring o f the project i s needed. The restructuring includes clear actions to ensure improved effectiveness o f the current operational and implementation arrangements. These include: a) strengthening the permanent Project Coordinator’s decision-making power; b) making the Superior Counci l 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 2005 supervision mission, the Bank and the government discussed the action plan for completion o f 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 o n the original economic, financial, technical, institutional, environmental, or social aspects o f 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. I t i s estimated that the expected benefits would be reduced by an amount comparable to the narrowed project scope (about 25-30 percent lower). The expected Economic Rate o f Return (ERR) would not be altered by much, since at appraisal i t was estimated using only land regularization activities. The reduction in scope and the application o f the new financing parameters would
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reduce the project’s counterpart funding requirements. The project’s technical objective (the integration o f the registry and cadastre functions under one common framework) remains sound and achievable. Finally, the project would maintain i ts positive social impact through the issuance o f land t i t les (urban and rural), the demarcation and consolidation o f indigenous territories, and the establishment o f alternative conflict resolution mechanisms.
Similarly, the environmental category o f 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 o f the revised PDO. The reductions in funding for each component would be mirrored by proportional reductions in expected outputs. I t i s expected that the number o f surveyed parcels to be titled would be about 25-30 percent lower than at appraisal, reflecting a more realistic target than previously estimated. The land regularization component would benefit 50,000 rural parcels (issuance o f 12,000 titles) and approximately 60,000 urban parcels (issuance o f 15,000 titles), as opposed to 75,000 rural parcels (issuance o f 50,000 titles) and about 80,000 urban parcels (issuance o f 54,000 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):
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24 hours and US$2 per transaction required for titling and registering a land parcel; 70 percent o f users o f SI ICAR satisfied; Exist ing 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 o f a modernized land administration system in Panama. In terms o f component outputs, the indicator related to the establishment o f alternative conflict resolution mechanisms has been reclassified as an output indicator o f Component 1. Those o f Component 2 have been recalibrated based on the new project scope. And those o f 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 r isk o f inadequate legal and
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regulatory reforms to expedite land titling (i.e., a law that would al low massive-ex officio2--land titling, and the executive decree that would significantly s impl i fy the regularization procedures) i s substantial, but this would affect project outputs under component 2, not overall project outcomes (PDO indicators). In other words, with l imited legal reforms, the Project Development Objective can st i l l be achieved, but the rate o f project implementation under Component 2 would probably be reduced. The Government o f Panama has made key legal reforms an important aspect o f i ts national development agenda. The government i s currently considering two parallel reform initiatives, namely (i) a draft bill that would al low 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 i s 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 2006. 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 al low for considerably more rapid implementation.
N o additional environmental or social risks deriving f rom the restructuring o f 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 o f 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 inter- institutional coordination mechanisms.
The regularization o f parcels would be carried out systematically by area, rather than o n demand o n a case by case basis.
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Annex 1 - Restructured Project Costs, by Component (US$ million)
TOTAL 72.36 17.34 3.69 37.54
Components
58.57
1. Policy
0.0
2. Land regularization 3. Indigenous Territories &
Annex 2 - Costs by Expenditure Category (US$ million)
0.000
2.221 0.479
Category
0.000
0.000 0.479
1. (a) Works 1. (b) Works 2. Goods 3. Consultants services 4. Services under L a n d Regularization Act iv i t ies 5. Training 6. Operating costs 7. Premia Interest Rate Caps and Interest Rate Collars 8. Unallocated 9. Front-end fee TOTAL
Disburse as of Augi
47.900 1 10.449
Remainder
0.270 0.800 5.710 12.630
13.170
1.390 1.260
0.000
2.22 1 0.000
37.45 1
New allocation
2.33 1 0.000 8.720 18.420
12.180
1.410 4.360
0.000
0.000 0.479
47.900
Yo of financing
100
100 100
100
100 90
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Annex 3 - Project Design Summary
Hierarchy of Objectives
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
Key Performance Indicators
24 hours and US$2 per transaction required for titling and registering a land parcel.
70 percent o f users o f SIICAR satisfied.
Existing land occupations in 5 protected areas regularized.
Shared- administration 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 80 percent o f conflicts resolved.
Specialized Land
Monitoring& Evaluation
Beneficiaries surveys;
F ie ld visits
M&E reports
Annual reports IGNP CU/D W C adas tr e
Annual reports ANAM
F ie ld visi ts and protected areas surveys
Official Gazettes
Draft laws and regulations
M A R C agreements
M&E reports
Reports from participating agencies
Critical Assumption
Government facilitates legal and institutional changes.
SIICAR i s operating.
Government enables participation and social consultations.
Political willingness to support shared administration o f overlapping protected areas and indigenous territories.
Government continues to provide political support to the proposal for a new legal framework for land administration.
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2. Land regularization activities
To regularize, t i t le and register lands in project area using an Integrated Registry- Cadastre System (SIICAR)
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3. Consolidation o f protected areas and indigenous territories.
To consolidate priority protected areas and indigenous territories.
Tribunal established in 4 provinces.
1,000 staff o f executing agencies trained in the use o f SIICAR. 3 CORS stations operating.
Basic geodetic network (20 points) available.
Primary geodetic network (1 75 points) available.
50 percent o f national territory photo graphed,
50 percent o f o ld registries in the project area updated.
50,000 rural parcels surveyed and 12,000 titles issued.
60,000 urban parcels surveyed and 15,000 titles issued.
SIICAR operating in 4 implementing agencies with no less than 10,000 parcels incorporated. 700 linear km o f protected areas demarcated.
Sufficient resources (human and financial) for the use o f appropriate technology are allocated by the Ministry o f Economy and Finance in a timely manner.
Inter- institutional agreement to operate SIICAR i s complied with by all relevant entities.
Land regularization costs are reduced.
There i s sufficient compatibility among agricultural, natural resources and economic polices.
There i s enough political
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4. Project administration and monitoring
To facilitate the physical and financial implementation o f the project.
administrative norm elaborated.
1,361 km o f indigenous territories demarcated.
3 roundtables established (Kuna Yala, Ngobe Bug16 y Chimhn).
Annual Operating Plan and procurement plan drafted every year on November 30.
Monitoring and Evaluation report issued every three months.
Annual auditing carried out.
M&E reports
Procurement plan
FM reports
willingness to recognize and enforce Indigenous Peoples’ rights.
Overall Government budgeting and procurement planning process i s compatible with project implementation timetable.
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Data Sheet Template for Project Paper
Borrower: Republic o f Panama Remonsible agencv: Ministrv o f Economv and Finance Revised estimated disbursements (Bank FY/US$m) FY I FY06 I FY07 I FY08 I FY09 I FYlO Annual 4.5 8.5 8.7 8.7 5 .O Cumulative 18.5 26.5 35.2 43.9 47.90 - Current closing date: September 30, 2006 Revised closing date [if applicable]: December 3 1 , 2009
I s approval for any policy exception sought from the Board? Revised project development objective/outcomes [Zf applicable]
The (slightly) revised objective o f 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 10.67 IBRD/IDA 47.90 Others 0.00
