Completion Report

Project Number: 33335 Loan Number: 1836 and 1837 December 2010

Mongolia: Social Security Sector Development Program

CURRENCY EQUIVALENTS

Currency Unit – togrog (MNT)

At Appraisal At Program Completion (as of 31 July 2001) (as of 30 June 2009)

MNT1.00 = $0.0009 $0.0007 $1.00 = MNT1,099 MNT1,435

ABBREVIATIONS

ADB – Asian Development Bank BOM – Bank of Mongolia CEO – Central Employment Office CERO – Central Employment Regulation Office. CMP – Child Money Program CSWIF – Community Social Welfare Innovation Facility EEC – employment education center ETC – employment training center FNSWPP – Food and Nutrition Social Welfare Program and Project ILO – International Labour Organization IT – information technology LEAP – Livelihood Enhancement Assistance Program LMA – labor market analysis LMDS – Labor Market Demand Survey LSMS – Living Standards Measurement Survey LSWIA – Labor and Social Welfare Inspection Agency LSWSO – Labor and Social Welfare Service Office M&E – monitoring and evaluation MECS – Ministry of Education, Culture and Science MFE – Ministry of Finance and Economy MIS – management information system MOF – Ministry of Finance MSWL – Ministry of Social Welfare and Labour NCEA – National Council for Education Accreditation NCRD – National Centre for the Rehabilitation of the Disabled NDF – Nordic Development Fund NGO – nongovernment organization PMT – proxy means test PMU – project management unit RMC – regional methodological center SDR – special drawing right SSC – social security center SSIGO – State Social Insurance General Office SSSDP – Social Security Sector Development Program SSSP – Social Sectors Support Program SSSSP – Social Security Sector Strategy Paper SSWA – State Social Welfare Agency TA – technical assistance VTPC – vocational training and production center

GLOSSARY

aimag – administrative unit (province) khoroo – administrative subunit of urban district (subdistrict) soum – administrative subunit of aimag (district)

NOTES

(i) The fiscal year (FY) of the Government of Mongolia ends on 31 December. (ii) In this report, "$" refers to US dollars.

Vice-President C. Lawrence Greenwood, Jr., Operations 2 Director General K. Gerhaeusser, East Asia Department (EARD) Director A. Leung, Urban and Social Sectors Division, EARD Team leader W. Walker, Senior Social Development Specialist, EARD Team member A. Arago, Assistant Project Analyst, EARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

BASIC DATA i I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 2

A. Relevance of Design and Formulation 2 B. Program Outputs 3 C. Program Costs 8 D. Disbursements 9 E. Implementation Arrangements 9 F. Conditions and Covenants 9 G. Related Technical Assistance 10 H. Consultant Recruitment and Procurement 10 I. Performance of the Borrower and the Executing Agency 10 J. Performance of the Asian Development Bank and Nordic Development Fund 10

III. EVALUATION OF PERFORMANCE 11 A. Relevance 11 B. Effectiveness in Achieving Outcome 11 C. Effectiveness in Achieving Outcome and Outputs 12 D. Preliminary Assessment of Sustainability 12 E. Impact 12

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13 A. Overall Assessment 13 B. Lessons 13 C. Recommendations 14

APPENDIXES 1. Design Changes 16 2. Social Security Sector Development Program Framework 18 3. Project Implementation Schedule 2002–2009 34 4. Status of Compliance with Loan Covenants for Program Loan 1837-MON 35 5. Status of Compliance with Loan Covenants for Project Loan 1836-MON 38 6. Consulting Services Assignment 44 7. Lessons 45 8. Quantitative Assessment of Overall Project Performance 47

BASIC DATA A. Loan Identification

1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agencies

6. Amount of Loan a. Program Loan b. Project Loan

7. Project Completion Number

Mongolia ADB Loan 1836/1837-MON(SF), NDF Credit 359 Social Security Sector Development Program and Project Mongolia Ministry of Social Welfare and Labor (for Loan 1836-MON); Ministry of Finance (for Loan 1837-MON) SDR6.4 million SDR3.2 million 1223

B. Loan Data 1. Appraisal

– Date Started – Date Completed

2. Loan Negotiations

a. ADB Loan – Date Started – Date Completed b. NDF Credit

3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness

– In Loan Agreement – Actual – Number of Extensions

6. Closing Date (Actual)

a. Program Loan 1837 – In Loan Agreement – Actual – Number of Extensions b. Project Loan 1836 – In Loan Agreement – Actual – Number of Extensions

7. Terms of Loan

a. Program Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years) b. Project Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years)

4 February 2001 24 February 2001 4 June 2001 5 June 2001 2 October 2001 28 August 2001 8 November 2001 8 February 2002 21 February 2002 0 31 October 2005 22 November 2007 1 30 April 2007 9 October 2009 3 1% per annum during grace period, 1.5% thereafter 24 8 1% per annum during grace period, 1.5% thereafter 32 8

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8. Disbursements a. Dates

(1) Program Loan 1837-MON: Social Security Sector Development Program

Initial Disbursement

27 February 2002

Final Disbursement

23 December 2004

Time Interval

34 months

Effective Date

21 February 2002

Original Closing Date

31 October 2005

Time Interval

44 months

(2) Project Loan 1836-MON: Social Security Sector Development Project

Initial Disbursement

27 February 2002

Final Disbursement

9 October 2009

Time Interval

91 months

Effective Date

21 February 2002

Original Closing Date

30 April 2007

Time Interval

62 months

b. Amount (millions)

(1) Program Loan 1837-MON: Social Security Sector Development Program

Tranche No. Date Disbursed Amount Disbursed

SDR $ equivalent

First tranche 27 February 2002 1.595 1.987 Second Tranche 23 December 2004 2.392 3.670 Total 3.987 5.657

(2) Project Loan 1836-MON: Social Security Sector Development Project Amount (SDR millions )

Category or Subloan

Original Allocation

Last Revised

Allocation

Amount Disbursed

Undisbursed Balance

1/

01 Civil Works 0.407 0.420 0.399 0.021 02 Equipment 0.586 1.060. 0.954 0.106

03 Materials 0.115 0.097 0.093 0.004

04 Training 0.479 0.490 0.474 0.016

05 Consulting Service 0.501 0.392 0.396 (0.004)

06 CSWIF 0.259 0.176 0.175 0.001

07 Project Management 0.329 0.374 0.379 (0.005)

08 Interest charge 0.159 0.159 0.100 0.059

09 Unallocated 0.354 0.021 0.000 0.021

Total (SDR) 3.189 3.189 2.969 0.219

Total $ Equivalent 4.000 4.684 4.335 0.348

1/ For final cancellation. CSWIF = Community Social Welfare Innovation Facility, SDR = special drawing rights.

9. Local Costs (Financed) – Amount : $1,440,883 – Percent of Local Costs : 101.5% – Percent of Total Cost : 33.2%

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C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 5.313 5.553 Local Currency Cost 4.687 4.909 Total 10.000 10.462

2. Components by Financing Services ($ million)

Component

Appraisal Actual

ADB NDF Gov’t Total ADB NDF Gov’t Total

A. Social Welfare

Social Welfare Service Facilities 0.653 0.000 0.219 0.872 0.989 0.000 0.252 1.241

Community-Based Social Welfare Services

0.502 0.000 0.143 0.645 0.526 0.000 0.100 0.626

Social Welfare Management 0.425 0.000 0.202 0.627 0.627 0.000 0.127 0.754

Subtotal A 1.580 0.000 0.564 2.144 2.142 0.000 0.479 2.621

B. Employment Services and Working Conditions

Skills Training for the Unemployed and Poor

0.000 2.978 0.501 3.479 0.000 2.976 0.493 3.469

Entrepreneurship Development 0.000 0.552 0.123 0.675 0.000 0.500 0.086 0.586

Capacity Building for Employment Services

0.487 0.000 0.271 0.758 0.650 0.000 0.114 0.764

Labor Exchange Bureau and National Rehabilitation Center

0.000 0.000 0.000 0.000 0.000 1.143 0.073 1.215

Subtotal B 0.487 3.530 0.895 4.912 0.650 4.616 0.765 6.034

C. Social Insurance Management and Training

0.634 0.000 0.231 0.865 0.735 0.000 0.178 0.913

D. Project Management Support 0.655 0.000 0.049 0.704 0.658 0.000 0.086 0.744

Total Base Cost (A+B+C+D) 3.356 3.530 1.739 8.625 4.185 4.616 1.508 10.312

Contingencies 0.444 0.470 0.261 1.175 0.000 0.000 0.000 0.000

Service Fee 0.200 0.000 0.000 0.200 0.150 0.000 0.000 0.150

Total 4.000 4.000 2.000 10.000 4.335 4.616 1.511 110.462 ADB = Asian Development Bank, Gov‘t = Government of Mongolia, NDF = Nordic Development Fund.

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3. Cost Breakdown by Project Component ($ million)

Component

Appraisal Actual

Foreign Exchange

Local Currency

Total Cost

Foreign Exchange

Local Currency

Total Cost

A. Social Welfare

Social Welfare Service Facilities 0.392 0.480 0.872 0.558 0.683 1.241

Community-Based Social Welfare Services

0.137 0.508 0.645 0.131 0.495 0.626

Social Welfare Management 0.301 0.326 0.627 0.362 0.392 0.754

Subtotal A 0.830 1.314 2.144 1.051 1.570 2.621

B. Employment Services and Working Conditions

Skills Training for the Unemployed and Poor

1.868 1.611 3.479 1.873 1.594 3.469

Entrepreneurship Development 0.392 0.283 0.675 0.339 0.247 0.586

Capacity Building for Employment Services

0.350 0.408 0.758 0.351 0.414 0.764

Labor Exchange Bureau and National Rehabilitation Center

0.000 0.000 0.000 0.644 0.571 1.215

Subtotal B 2.610 2.302 4.912 3.207 2.824 6.034

C. Social Insurance Management and Training

0.468 0.397 0.865 0.493 0.420 0.913

D. Project Management Support 0.641 0.063 0.704 0.652 0.092 0.744

Total Base Cost 4.549 4.076 8.625 5.403 4.906 10.312

Contingencies 0.564 0.611 1.175 0.000 0.003 0.000

Service Fee 0.200 0.000 0.200 0.150 0.000 0.150

Total 5.313 4.687 10.000 5.553 4.909 10.462

4. Project/Program Schedule

Item Appraisal Estimate Actual

Date of Contract with Consultants

a. Social Welfare b. Employment Promotion c. Social Insurance

Q3 2002 Q2 2002 Q2 2003

15 May 2002 31 Dec 2003 23 Jan 2004

Completion of Engineering Designs Q3 2002 2 Jul 2002 Civil Works Contract Q3 2002 7 Oct 2002

Date of Awards Q3 2002 31 Oct 2003 Completion of Works Q3 2002 24 Jul 2003

Equipment and Supplies Q3 2002 19 Sep 2002 Last Procurement Q2 2005 30 Jun 2009 Completion of Equipment Installation Q4 2005 30 Jun 2009 Start of Operations Q3 2002 20 Nov 2002

Completion of Tests and Commissioning Q3 2002 11 Jun 2009 Beginning of Start-Up Q3 2002 20 Nov 2002

Q = quarter.

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5. Project Performance Report Ratings

Implementation Period

Ratings

Development Implementation Objectives Progress

From 28 Aug 2001 to 30 Jun 2003 From 1 Jul 2003 to 31 Dec 2003 From 1 Jan 2004 to 30 Sep 2004 From 1 Oct 2004 to 31 Dec 2009

Satisfactory Satisfactory Satisfactory Highly Satisfactory Satisfactory Highly Satisfactory Satisfactory Satisfactory

6. Program Performance Report Ratings

Implementation Period

Ratings

Development Implementation Objectives Progress

From 28 Aug 2001 to 30 Jun 2007 From 1 Jul 2007 to 31 Jan 2008

Satisfactory Satisfactory Satisfactory Partial Satisfactory

D. Data on Asian Development Bank Missions

Name of Mission

a

Date No. of

Persons No. of

Person-days Specialization of

Members

Inception

5–17 Mar 2002

4 31 Mission Leader-Project Economist, Social Security

Policy Specialist, Social Sector Officer, Assistant Project Analyst

Review

20–25 Oct 2002

3

8 Mission Leader-Social Security Officer, Assistant Project Analyst

Review 3–5 Mar 2003

3

3

Mission Leader-Project Economist, Social Security Officer, Assistant Project Analyst

Review

29 Jan–6 Feb 2004

6 15

Mission Leader-Health Economist, Senior Planning and Policy Specialist, Senior Counsel, Senior Protection Consultant, Senior Sector Officer, Assistant Project Analyst

Midterm Review

5–18 Nov 2004

5

39

Mission Leader-Health Economist, Social Security Policy Specialist, Social Sector Officer, Assistant Project Analyst, National Consultant

Review

31 May–6 Jun 2005

2

8

Mission Leader-Senior Social Sectors Specialist, Assistant Project Analyst

Review (Third Tranche Conditions)

7–10 Mar 2006

2 8 Mission Leader, Assistant Project Analyst

Review

2–9 Oct 2006

3 6 Mission Leader-Social Sector Economist, Assistant Project Analyst

Review

1–4 Oct 2007

4 8 Mission Leader-Principal Social Sector Economist, Nordic Development Fund Consultant, Social Sector Officer, Assistant Project Analyst

Review

1–9 Jun 2009

2 12 Mission Leader-Social Development Specialist, Assistant Project Analyst

Project Completion Review

14–25 Jun 2010

2 19 Mission Leader-Senior Social Development Specialist, Assistant Project Analyst

I. PROJECT DESCRIPTION

1. In August 2001, the Asian Development Bank (ADB) approved the Social Security Sector Development Program (SSSDP). The program was funded by two loans proposed in the report and recommendation of the President:1 (i) an ADB policy loan of $8 million equivalent to be used over 4 years, and (ii) an ADB investment loan of $4 million equivalent with an implementation period of 5 years. The investment loan was cofinanced by the Nordic Development Fund (NDF) with parallel financing for $4 million equivalent and an implementation period of 4 years. 2. The SSSDP aimed to strengthen the social security system‘s ability to deliver essential welfare, insurance, and employment services to the ultra poor, very poor, and those close to the poverty line. The policy program supported the development of comprehensive poverty reduction policies focused on (i) improving the quality and coverage of social welfare services and benefits, (ii) developing pro-poor labor market policies, (iii) strengthening social insurance operations to increase compliance, and (iv) developing a social security sector master plan. 3. The investment project shared almost the same structure as the policy program of the SSSDP with four basic components: social welfare, employment promotion and improvement of working conditions, social insurance, and project management support. The social welfare component included (i) developing and upgrading social welfare service facilities for the elderly and disabled, (ii) developing community-based social welfare services, and (iii) strengthening the capacity of the Ministry of Social Welfare and Labor (MSWL) and its agencies for social welfare management. The employment promotion and improvement of working conditions component included support for (i) demand-driven skills training for the unemployed and poor, (ii) entrepreneurship development for the unemployed and poor, and (iii) capacity building for employment services and improvement of working conditions. The social insurance component included support for (i) strengthening the social insurance management capacity of the State Social Insurance General Office (SSIGO), and (ii) training social insurance inspectors at provincial and district levels. The project management support component assisted the executing and implementing agencies in the efficient and effective implementation of project activities. 4. The Strengthening Policy for Social Security Reform technical assistance (TA) grant of $0.6 million was pledged in the report and recommendation of the President to help the government develop a comprehensive social security sector master plan. A complementary grant project, Expanding Employment Opportunities for Poor Disabled Persons2 (of $1 million) financed under the Japan Fund for Poverty Reduction, was implemented by MSWL. 5. The Ministry of Finance (MOF) was the executing agency for the policy program and MSWL was the executing agency for the investment loan. The Ministry of Education, Culture and Science (MECS) was closely involved in skills training and entrepreneurship development subcomponents. A steering committee chaired by the minister of social welfare and labor and comprising senior representatives from the relevant ministries, agencies, and civil society organizations supervised and guided the project implementation, which was entrusted to a project management unit (PMU).

1 ADB. 2001. Report and Recommendation of the President to the Board of Directors: Proposed Loans and

Technical Assistance Grant to Mongolia for the Social Security Sector Development Program. Manila. 2 ADB. 2002. Proposed Grant Assistance to Mongolia for Expanding Employment Opportunities for Poor Disabled

Persons. Manila.

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II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation 6. The project was designed to address the needs of the social protection sector and poor beneficiaries after the political and economic transition of the 1990s when the high levels of human development and the relative economic stability during the socialist period collapsed. The SSSDP was a timely and relevant initiative for social security sector reforms and improvement geared to remedying the perceived inadequacies of the existing system at the policy and service delivery levels. 7. The project was very relevant to the country‘s development objectives and ADB strategy. In 1996, the government requested ADB assistance to develop a project proposal for social protection. ADB undertook a sector review in mid-1997 and approved project preparatory TA3 to support the design of a sector development program. The 1998 country assistance plan included the proposed Social Safety Net Sector Development Plan but the work was discontinued due to the dissolution of the government in July 1998. In February 2000, the government again requested ADB assistance to support the Social Safety Net Sector Development Plan and this became the SSSDP which was in line with the Poverty Partnership Agreement between the government and ADB. 8. The project was designed with extensive consultation and collaboration and built on the TA reports and consultations with government. A national workshop was held in April 2001 with members of parliament, local and central government officials, civil society organizations, the private sector, and international donors who provided feedback on the scope and activities of the SSSDP. The emphasis on capacity building helped to build ownership at all levels and ensure sustainability. 9. Overall, few changes were made to the design itself, but the policy change on adoption of means testing for social assistance outlined in the Social Security Sector Strategy Paper (SSSSP) of 2003 led to cancellation of the third tranche of $3 million in 2007. The policy work initiated on means testing, capacity building and restructuring under the SSSDP was significant and has been built on by two successive ADB projects: Food and Nutrition Social Welfare Program and Project (FNSWPP)4 and Social Sectors Support Program (SSSP).5 Other changes focused on infrastructure and included: upgrading, rather than phasing out, the Batsumbur Nursing Home and using the savings from appreciation of the euro on the investment portion of the NDF loan to upgrade and extend the National Rehabilitation Center for the Disabled and to construct the Labor Exchange Bureau. These design changes are outlined in Appendix 1.

3 ADB. 1997. Technical Assistance to Mongolia for the Social Safety Net Project. Manila. (TA 2978-MON approved

on 31 December for $985,000). 4 ADB. 2008. Report and Recommendation of the President to the Board of Directors: Proposed Grant Assistance to

Mongolia for Food and Nutrition Social Welfare Program and Project. Manila. 5 ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Asian Development

Fund Loan and Grant and Technical Assistance Grant to Mongolia for the Social Sectors Support Program. Manila.

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B. Program Outputs

1. Policy Program

10. The program loan was designed to support key reforms contained in the government‘s five year Social Security Sector Action Plan (2000–2004), including (i) improving the quality and coverage of social welfare services and benefits, (ii) developing pro-poor labor market policies, (iii) strengthening social insurance operations to increase compliance, and (iv) developing a social security sector master plan. The program framework is shown in Appendix 2. All but two of the measures were fully complied with. Compliance with the measures is detailed in the policy matrix in Appendix 2. The major outputs are as follows:

a. Developing a Social Security Sector Master Plan

11. With the technical and financial assistance of ADB, MSWL, in cooperation with private and public stakeholders developed the comprehensive SSSSP in November. This paper set the direction for long-term development (10 years) and provided a basis for operations in the short and medium term. It was a management tool for (i) policy making and strategic planning, (ii) advocacy and information about reforms in the sector, and (iii) supporting the budgeting process and resource mobilization.

b. Improving the Quality and Coverage of Social Welfare Services and Benefits

12. The master plan policy guidelines, subsector strategies, lessons learned from the implementation of the community-based pilot projects, and recommendations for the residential care institutions helped MSWL to identify the core changes and reforms to be introduced into the existing social welfare system. MSWL, with inputs from the project, developed three sets of new social laws covering three specific areas: (i) general social welfare, (ii) social security for people with disabilities, and (iii) social security for the elderly. These laws were adopted by the Parliament in early December 2005 and their nationwide enforcement started on 1 July 2006. 13. Three social welfare programs were developed to be financed under a livelihood support fund: (i) the Integrated Community-Based Social Welfare Services Program, (ii) the Centre-Based Program for Extremely Vulnerable People, and (iii) the Livelihood Enhancement Assistance Program. Community-based social welfare services were promoted under the Integrated Community-based Social Welfare Services Program with the participation of civil society, the private sector, and nongovernment organizations (NGOs). The Livelihood Enhancement Assistance Program continued to provide some cash assistance to poor families, which was subject to certain conditions on health care, education, and community participation. The center-based residential care was to be reorganized and streamlined under the Centre-based Program for Extremely Vulnerable People with emphasis on need-based care services to carefully screened and selected vulnerable people and their eventual reintegration into the community. 14. Crucial bylaw regulations and guidelines related to the implementation of the new social welfare laws were developed and approved by the Cabinet of ministers under cabinet order number 118 of 24 May 2006.6 Based on the piloting experience of Community Social Welfare

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The laws are (i) social welfare fund regulations, (ii) social welfare pension and allowance regulations, (iii) regulations of social welfare assistance and services for vulnerable groups, (iv) regulations of social welfare

4

Innovation Facility (CSWIF) projects, standards for community-based social welfare services were developed and submitted to MSWL. Service standards of nursing homes for the elderly and the disabled were developed and approved by the government authority. 15. The new social welfare laws stipulated the development of social work programs and the training and employment of social workers for social welfare service delivery. A system of accreditation of training institutions and training programs has been established in consultation with the labor and social welfare sector, the health sector, and the education sector, and with the close collaboration of the National Council for Education Accreditation. 16. A plan for the restructuring of the National Centre for the Rehabilitation of the Disabled (NCRD) was approved by MSWL through its order number 81 on 4 August 2006. The plan stipulated that the NCRD be renamed the National Rehabilitation Center and restructured into four divisions: (i) a community development division, (ii) a prosthetic and rehabilitation division with a rehabilitation therapy unit, (iii) a training and vocational advisory division with a training unit, and (iv) an administrative division. 17. The project collaborated with MSWL and the United Nations Development Programme in developing a proxy means test (PMT) methodology to be used for the selection of the target beneficiaries. The PMT was used to determine beneficiaries for the Child Money Program (CMP) in 2005. The CMP was the first conditional cash transfer program in Mongolia targeted at poor households. The PMT was assessed by World Bank experts and suggestions were made to improve the targeting accuracy. Instead of improving the PMT, the Parliament abandoned it by making the CMP universal in 2006. This action led to the cancellation of the final tranche of the program loan.7 ADB had two concerns: (i) that making the benefits universal was not consistent with the key theme of the program to target support for the poor, and (ii) that such welfare measures may not be fiscally sustainable. The loan was otherwise satisfactorily implemented and partial cancellation did not have an adverse impact on achieving the objectives of the loan.

c. Developing Pro-Poor Labor Market Policies

18. The Employment Promotion Law was amended by the Parliament on 11 January 2006. The amendments were aimed at improving the quality and scope of employment services based on market demand, promoting the employment potential of the unemployed and poor, and developing entrepreneurship among the population. 19. The procedures, criteria, and guidelines for the accreditation of vocational education and training institutions were adopted by the National Council for Education Accreditation in 2004. Accreditation and supervision procedures for short-term training institutions were adopted by the Labor and Social Welfare Service Office (LSWSO) (resolution number 50 dated 22 February 2005). The charters of employment education centers (EECs) and employment training centers (ETCs) guarantee private sector training providers access to these state-owned premises and facilities. 20. An institutional network comprising a national methodological center and six regional methodological centers was established, linking them with business incubators, EECs, and ETCs for the purpose of developing and providing demand-driven vocational training and

assistance to the elderly, (v) regulations of social welfare assistance to the disabled, and (vi) regulations for salary supplements to the teachers of special schools (i.e., schools for the disabled).

7 The amount cancelled was SDR2.391 million ($3.789 million).

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promoting business initiatives. Charters of business incubators, EECs, and ETCs outlining their goals, rights, duties, structures, and modes of operation were developed and jointly approved by MSWL and MECS. 21. LSWSO and the relevant educational and training organizations are required to carry out labor market surveys to determine market demand for trade skills and to develop training curricula and organize vocational training accordingly in collaboration with the national methodological and regional methodological centers. A provision for frequent labor market demand surveys was included in the amended Employment Promotion Law. The project supported the ministry to establish the National Qualification Testing System. 22. The amended Employment Promotion Law ensures access to vocational training courses for people with disabilities.8 To support the physical accessibility, the government has issued an ordinance to the aimag and district governors to enforce compliance with the Architectural Norms and Construction Standards.

d. Strengthening Social Insurance Operations to Increase Compliance

23. To address the financial problems of the social insurance fund caused by evasion of compulsory social insurance contributions, a cooperation arrangement was established between the SSIGO and the General Department of National Taxation to share information on employment records, including quarterly data on the number of employees, payroll data, and social insurance contributions. The arrears of social insurance contributions owed by state-budget-funded entities amounted to MNT2.3 billion at the beginning of 2001. MOF, in cooperation with aimag and capital city governors, paid these arrears and there have been no accumulated arrears since 2004. 24. Powers of social insurance inspectors have been strengthened by the Amendment to the Law on Social Insurance passed by the Parliament in June 2004. The inspectors are now endowed with investigative authority and power to enforce compliance. 2. Investment Project 25. The outputs for the project loan were largely achieved and successfully implemented with few changes from what was anticipated at appraisal. a. Social Welfare 26. Development and upgrading of social welfare service facilities. All eight nursing homes were reviewed and a restructuring plan emphasizing streamlined referral, selection, services delivery procedures, and eventual transfer of cases to community and family care prepared. Four nursing homes were rehabilitated and seven nursing homes were provided with equipment and furniture. Training workshops for nursing staff and administrators from MSWL, LSWSO, and its local branches were held in 2006–2007.

8 The Labor Code requires that employers with a workforce of 50 or more employees pay compensation if at least

3% of their employees are not from disabled groups. These compensation payments constitute a fund for the vocational training and employment promotion of the disabled.

6

27. A plan for restructuring the NCRD was approved in August 2006. The government, in consultation with the NDF, decided to use some of the funds generated by the appreciation of euro (the loan currency) to extend the NCRD in line with its restructuring plan. Due to delays in securing land permission, approval for infrastructure use by authorities, the tendering processes and the contractor, the construction works could not be completed in 2008 as scheduled.9 28. Two pilot social security centers were built and equipped for one-stop service delivery in Bayangol district of Ulaanbaatar and in Uvurhangai aimag. A review of the two pilot centers conducted in 2006 revealed that the one-stop service delivery centers were working well and to the satisfaction of the clients. Their success has stimulated interest among some aimags and districts in replicating the one-stop service delivery mechanism. 29. Development of community-based social welfare services. Twenty-nine pilot CSWIF projects for various social welfare services and procedures were implemented in 2005. Fifteen community-based social welfare services (model building projects) and 14 community mobilization procedure schemes (design testing projects) completed pilot implementation with the participation of public and private entities and NGOs. Based on the piloting experience, social welfare service and procedure standards were drafted for the pilot-tested projects. The Integrated Community-Based Social Welfare Services Program was approved by MSWL and became effective in July 2006. In addition, six Livelihood Enhancement Assistance Program projects involving conditional cash payments, compensation packages, and livelihood support projects were pilot tested in two aimags and two districts of Ulaanbaatar. 30. A midterm participatory review and evaluation of the CSWIF pilot projects was done in June 2005 and measures taken to rectify observed weaknesses. The final review and evaluation was carried out in December 2005 and the results were consolidated under different performance indicators to be used as future guidelines. A high-level national NGO forum on social security and civil society held in the parliament house in June 2006 was attended by 148 senior government officials, NGOs, and private sector representatives. The forum paved the way for the creation of private and public sector collaboration in social welfare service delivery. 31. Strengthening social welfare management. A number of steps were taken to strengthen the capacity of MSWL and LSWSO for social welfare management. Senior officers from the ministry and LSWSO attended World Bank and International Labor Organization (ILO) core training courses and international conferences on social welfare issues. A series of local training workshops was organized for the policy makers and grassroots social welfare employees to help them understand the social welfare reforms, trends in service delivery, and their new roles and responsibilities. Trainings were delivered to 1,200 social workers regionally, thus creating a nationwide network of trained social workers capable of delivering quality services in line with the social security sector reform agenda. 32. Steps were taken to establish a nationwide database on social welfare services and beneficiaries as a part of the sectorwide management information system (MIS), including a feasibility study and procurement of information technology (IT) equipment for all local offices of the national system. A data center was set up at LSWSO, and staff trained. The current ADB operations of FNSWPP (footnote 5) and SSSP (footnote 6) are attempting to link the intersectoral database on PMT-identified households to this MIS.

9 The building was completed in August 2010.

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b. Employment Promotion and Improvement of Working Conditions

33. Skills training for the unemployed and the poor. To streamline the labor market supply with market demands, the capacity of labor market partners was upgraded, the labor market demand survey was piloted, and the pilot exercises were taken by local employment offices in aimags and districts. The survey is now conducted on a regular basis nationwide with funding from the state budget. 34. A national methodological center and six regional methodological centers were established, premises rehabilitated, equipment provided, staff trained in competency-based module curriculum development and delivery, a module bank for curricula established, and staff capacity built for its service provisions. The module bank and curricula are being used and expanded by the new technical education and vocational training agency. 35. Twenty-five ETCs were established based on the existing vocational training and production centers. Training equipment for 10 trades was procured and distributed to ETCs throughout the country. Staff were trained to develop modular-based training curricula for market-determined trades and skills upgrading. Handbooks and training materials were published and distributed. EECs were established based on the existing secondary schools, rehabilitated, and equipped with furniture, materials, and skills upgrading for staff. The charters for the centers were developed and approved by the relevant ministries. Training equipment for two trades was procured and distributed to each EEC throughout the country. 36. International trainings on the National Qualification Testing System were organized in Seoul, Republic of Korea in 2003 and 2006 and upon return to the country the Mongolian participants developed a national qualification testing system suitable for Mongolia. 37. Entrepreneurship development for the unemployed and poor. The business incubation concept was developed, and pilot tested. Four vocational training and production centers and one employment promotion office hosted the business incubators. Premises were rehabilitated, equipment procured, staff trained, and materials provided. The project cooperated with the Mongolian Employers Federation and the Ministry of Industry and Trade in introducing the ILO‘s Start and Improve Your Business training program. Twenty-eight business trainers from business incubators and ETCs were trained to carry out the training programs and were authorized by the ILO. 38. Capacity building for employment service and improvement of working conditions. All the inspection laboratories were refurbished, equipment procured and transferred to the prime minister‘s direct authority, thus endorsing the independent status of these laboratories. This helps the agency to check the environmental safety and health conditions in workplaces against mandatory norms and standards. 39. The appreciation of the euro generated significant savings on the NDF portion of the investment loan. The NDF approved a request from the government to put a portion of these savings towards the construction of a new building for the Labor Exchange Bureau and the provision of equipment and furniture. The mandate of the Labor Exchange Bureau includes employment promotion services for the general population. A number of factors, particularly land permission and approval of infrastructure use, caused a significant delay in construction. The work is ongoing and is expected to be completed in 2010 under the NDF credit.

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c. Social Insurance Management and Training

40. The management of the SSIGO and its local branches was strengthened through extensive trainings and workshops. Social insurance inspectors were trained in internal auditing and monitoring, international accounting standards, new social insurance computer software, social insurance reform issues, and English language skills. 41. The MIS of the SSIGO was reviewed under and recommendations provided for further development. Hardware identified in the feasibility study—including servers, firewall, laptop computers, and copiers—was procured and SSIGO management, key staff, and IT specialists were trained in MIS management and operation. Servers were provided for wage information sharing between the tax and insurance offices, and this system is now operating nationwide. 42. The project developed options for expanding social insurance coverage to the self-employed and herders. A local consulting team carried out surveys and projections of the necessary funds, contribution rate, pension level, and other factors required for the inclusion of people, especially herders and the self-employed, into a basic social pension insurance scheme. This scheme is now in place but has limited coverage and further work is needed.

d. Social Security Sector Activities

43. The midterm review of the SSSDP made a feasibility study of the sectorwide MIS. Based on this study, the project, in cooperation with MSWL, procured MIS hardware for nationwide use, installed software, and trained staff. The project organized a two-step monitoring and evaluation (M&E) training program in 2006 and 2007 to strengthen the M&E capacity of the sector. Project monitoring and evaluation indicators were identified and M&E software was developed and was submitted to MSWL. 44. An information, education, and communication strategy was developed and executed to inform and educate the public, civil servants, and journalists about the advantages of the new social security sector reforms and innovations. The strategy consisted of targeted interventions at regular intervals on television, radio, and print media as well as press releases and conferences. At the initiative of the project, the first annual report of MSWL (for 2005) was published in June 2006. The report highlighted the reforms and innovations in social welfare, employment promotion, social insurance and population development. The project also assisted MSWL to publish its annual reports for 2006–2008. C. Program Costs 45. ADB provided a program loan of $8 million equivalent and these funds were allocated through MOF. Actual disbursements totaled $5.7 million equivalent in two tranches—SDR1.6 million ($2.0 million equivalent) and SDR2.4 million ($3.7 million equivalent)—with the cancelation of the third tranche. Actual disbursements in dollar terms were higher than the appraised amount because of the appreciation of the SDR against the dollar during the program period. 46. The total cost of the investment project, including taxes, duties, and service charges, was estimated at $10.0 million, of which $5.3 million was the foreign exchange cost and $4.7 million was the local currency cost. The actual cost of the project was $10.4 million—$5.6 million in foreign exchange costs and $4.9 million equivalent in local currency costs. ADB financed $4.3

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million, including service charges, the NDF financed $4.6 million provided on a parallel basis, and the government financed $1.5 million equivalent. D. Disbursements

47. The loans were approved on 28 August 2001 and became effective on 21 February 2002. The first tranche of the program loan—SDR1.595 million ($1.987 million equivalent)—was disbursed on 27 February 2002. The second tranche—SDR2.392 million ($3.670 million equivalent)—was released on 23 December 2004 following compliance with all conditions regarding policy actions stipulated under the program. 48. At the ADB loan closing, disbursements under the project loan were $4.3 million equivalent and under the NDF credit $4.6 million. The undisbursed balance of $0.348 million equivalent of the ADB loan was cancelled at loan closing on 9 October 2009. Disbursements were low during the first 2 years of implementation, but picked up in 2004 and remained high during the consequent years. The government disbursed $1.5 million for local currency costs. An imprest account for the ADB loan and a special account for the NDF credit were established, efficiently utilized and were effective in facilitating project implementation. 49. The program loan was to be implemented over 48 months and the loan funds were to be released in three tranches. The first tranche was released at loan effectiveness in 2002 and the second tranche in 2004. The government relinquished the claim for the third tranche release due mainly to the financial and budget balance situation that prevailed in the country and introduced a number of universal benefits. Noncompliance with the policy condition led to the cancellation of the third tranche in 2007. The program loan was extended one time. 50. The project loan was to be implemented over 5 years with physical completion on 31 October 2006 and loan closing on 30 April 2007. The NDF-financed component of the project was to be implemented over 4 years with completion on 31 December 2005. The ADB project loan was extended three times, and the NDF project five times. The extensions were mainly due to the additional construction activities that were not planned at appraisal (funded by appreciation of the euro under the NDF credit) and establishment of a sectorwide MIS. The delay at the beginning of project implementation and the delay in the international bidding for training equipment under the NDF credit also affected the extension of the projects. Appendix 3 compares the implementation schedule at appraisal with actual implementation. E. Implementation Arrangements

51. MOF was the executing agency for the program loan and MSWL was the executing agency for the project loan and both the imprest account of the ADB loan and the special account of the NDF credit were administered according to MOF guidelines. At the beginning of project implementation, a PMU was established at MSWL, and a sub-PMU at MECS. To increase coordination and cooperation between MSWL and MECS the executing agencies in consultation with ADB merged the two units into one. Policy guidance was provided by a project steering committee. F. Conditions and Covenants

52. Thirty-four policy measures were included in the policy matrix attached to the development of policy letter under the program. Six of the policy measures were accomplished prior to loan effectiveness, and the remaining 28 were to be implemented during the program

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period. Compliance with the second tranche policy measures was on schedule; however, a policy condition for the third tranche related to targeting of beneficiaries was not met, leading to the cancellation of the third tranche release in 2007. 53. Major loan covenants for the program were complied with, except for the one on implementation mentioned in the policy letter for the reason cited in para. 52. Loan covenants for the project were mainly complied with. Appendix 4 shows compliance with loan covenants for the program and Appendix 5 shows compliance for the project. G. Related Technical Assistance 54. Three TA projects were associated with the SSSDP. The project preparatory TA for the Social Safety Net Project (footnote 4) supported consulting services for some of the initial project activities and the government in finalizing the SSSSP. The Expanding Employment Opportunities for Poor Disabled Persons (footnote 2) project, funded by the Japan Fund for Poverty Reduction (for $1 million) was implemented in three cities and three aimags in 2002–2006 and successfully met its goal of integrating people with disabilities into the labor market in Mongolia. The Strengthening Policy of Social Security Reform TA project (which was included in the SSSDP loan documents) ($0.53 million) provided the government with funds to develop a social security sector master plan. H. Consultant Recruitment and Procurement 55. Recruitment of project implementation consultants and activities was delayed due to a delay in the development of the social security master plan. A total of 185.0 person-months of consulting services (68.6 person-months of international consultants and 116.4 person months of national consultants) were utilized, compared with the 201.0 person-months planned at appraisal. The services of international consultants exceeded the appraisal estimate due to the decision to take a sectorwide approach to the development of an MIS. The performance of the international and national consultants was satisfactory. Consulting services assignments are shown in Appendix 6. 56. Goods and services were procured from loan funds in accordance with ADB and NDF guidelines for procurement. Procurement of civil works, equipment, and materials was undertaken as appraised. The performance of the contractors and suppliers for civil works, equipment provision, and materials development was satisfactory. All contracts were successfully completed or delivered on schedule and within budget. The quality of physical facilities was up to standards. Two contracts under the NDF credit for construction of the NCRD and the Labor Exchange Bureau were not completed as of the closing of the ADB loan. I. Performance of the Borrower and the Executing Agency

57. The performance of the borrower, MSWL, and MECS was satisfactory. The National Audit Board carried out a performance audit of the loan projects, including the SSSDP, in 2006 which judged implementation to be satisfactory. J. Performance of the Asian Development Bank and Nordic Development Fund

58. The performance of ADB and NDF were satisfactory. ADB conducted nine review missions during 2002–2009, including an inception mission. There was high turnover of ADB

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project officers (five officers) over the project implementation period. Taking into account the complicated nature of the policy reforms in the social security sector, more stable staffing would have been better. The implementation arrangements involving three different ministries were complicated and could have been better designed and coordinated

III. EVALUATION OF PERFORMANCE A. Relevance

59. The project was assessed highly relevant and remains so today. The financial crisis of 2008/09 highlighted issues that are central to the SSSSP, notably the need for fiscally sustainable welfare benefits and for targeting the poor. The 2010 Draft Social Welfare Law builds on many of the ideas initiated in the SSSP and, when passed, will improve the institutional architecture and rationale for social welfare in the country. The project supported the government‘s National Poverty Alleviation Program. Without exception, all the stakeholders interviewed during the 2009 participatory evaluation affirmed the relevance of the project to the evolving socioeconomic needs of Mongolia. B. Effectiveness in Achieving Outcome 60. Overall, the project was assessed effective in achieving its expected outcomes. Regarding to social welfare services, the expected outcome was qualitative and quantitative improvements in social welfare services for up to 230,000 people of which 70% are poor, from 2001 to 2005 and beyond. The qualitative improvements are particularly evident for (i) the users the new one-stop social security centers that were piloted under the project and are now being replicated by MSWL, and (ii) the residents of the upgraded nursing homes. The quantitative improvements are shown in Table 1.

Table 1: Quantitative Improvements in Social Welfare Indicator Baseline (2000) End of Project (2008)

Number covered by social welfare services 276,800 442,083 Resources MNT20.0 billion MNT57.7 billion Mean expenditure per beneficiary MNT72,200 MNT130,500

Source: D. Hall and B. Bavuusuen. 2009. Mongolia Social Security Sector Development Program Final Evaluation. Unpublished.

61. The employment promotion component sought to achieve qualitative and quantitative improvements in employment services for up to 143,000 people of which 43% are poor, from 2001 to 2005 and beyond. The quantitative results are as shown in Table 2.

Table 2: Quantitative Improvements in Employment Promotion Indicator

Baseline (2000)

2001–2006

Average per annum

Persons employed through employment services 14,000 328,547 54,757 Covered by skills training and re-training 5,000 155,354 25,892 Involved in public works 5,100 129,922 21,653

Source: D. Hall and B. Bavuusuen. 2009. Mongolia Social Security Sector Development Program Final Evaluation. Unpublished.

62. This component contributed very significantly to the overall effectiveness of the project. The approach was participatory and enjoyed high levels of support, and this resulted in all

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targets being met or exceeded. The project did not have a monitoring and evaluation officer to collect data disaggregated and this limited opportunities for gender and poverty analysis. 63. The social insurance expected output was qualitative and quantitative improvement in social insurance services for up to 330,000 people, of which 85% are poor, from 2001 to 2005 and beyond. The total achieved was 420,600 people. The project inputs in terms of training and equipment, combined with new legislation, information sharing, and a fast-growing economy, resulted in the expected output being reached effectively. The MIS and data networks were important inputs but there is scope for improvement as they, at present, do not allow for cross checking between aimags or across agencies. C. Efficiency in Achieving Outcomes and Outputs

64. No economic internal rate of return was established during project preparation so no reevaluation is possible. Delays were experienced in starting the community-based pilot projects, because the concept was new and it took time to build consensus and ownership. The project is classified as efficient in achieving its outcomes and outputs. The project received its final extension to be able to close with the NDF due to the delayed construction on the Labor Exchange Bureau and NCRD buildings. As explained in the text, these buildings were under the NDF project and not originally planned. D. Preliminary Assessment of Sustainability

65. The SSSDP played a key role in forging a new vision for social protection and instituting fundamental reforms in social welfare, employment promotion, and social insurance. These reforms paved the way for the creation of legal frameworks, institutions, and the budgetary support required for sustainable change. The adoption of the sector strategy paper was a major reform milestone. It is still considered to be a critical document, guiding decision making in many areas. Overall, the activities and reforms supported have a high level of sustainability. They fundamentally transformed the structure of the sector, management of data, and organization of technical education and vocational training, and, most importantly, the capacity building created a cadre of trained specialists, many of whom have risen to decision-making levels and continue to feel ownership of the outputs from the project. In certain areas, notably employment promotion, expansion of social insurance, and improvement of service standards, there were very high levels of political support. However, key concepts relating to social welfare reforms—such as community-based service provision and proxy means testing—were new and politically sensitive. Overall, the project is considered successful in terms of sustainability. 66. The design team foresaw that ―implementation of reforms, which will change criteria for entitlement to social welfare benefits, could prove controversial and may encounter resistance‖ (footnote 1). The team may have overestimated this level of commitment, especially at the political level. The policy shift leading to the cancellation of the third tranche in the program loan was an example of such resistance. Both succeeding ADB loans and grants (the FNSWPP and SSSP) and the World Bank have sought to support the targeting of welfare benefits and implementation of the PMT. This principle is currently in the 2010 Draft Social Welfare Law but it remains to be seen if the political will to pass and implement the law can be sustained. E. Impact

67. The anticipated impact was reducing poverty and increasing security among vulnerable groups by improving social welfare, and social insurance services and increasing employment

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and income generating opportunities. The performance indicators in the design and monitoring framework were (i) the number of long-term unemployed reduced, (ii) the number living under the poverty line reduced, and (iii) participation in insurance for unemployment and occupational injury and diseases increased. 68. Of these three performance indicators, it is only for insurance that the project impacts can really be disaggregated from other factors. On this indicator, there was a significant increase in the number insured—from 381,400 to 574,161. However, this must be seen in the context of a fast-growing economy that created over 300,000 new jobs in a decade. Determining the contribution of the SSSDP per se in reducing poverty and unemployment nationally is difficult given the very dynamic macroeconomic context with many variables influencing growth. 69. The project aimed to reduce poverty through a quantitative expansion of social welfare benefits to at least 230,000 people. According to LSWSO, this target was nearly doubled to 442,083 by 2008. While there is clear evidence of welfare benefits helping the poor to get by, this should not be equated with the more ambitious SSSDP goal of reducing poverty. The official National Statistical Office poverty head count remains at virtually the same level as the 1998 baseline (35.2% in 2008 as against 35.6% in 1998).

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS A. Overall Assessment 70. The project was very relevant to the needs of Mongolia, and remains so. It was successful at addressing a number of interrelated issues in social welfare and employment for the poor. The project was grounded in a sound analysis of the challenges posed by the economic transition but underestimated the extent to which reforms such as means testing would be resisted at the political level, and this remains a key issue today. The project helped to develop new understandings of the role of social welfare, developed new strategies and legislation, created IT systems, and helped to train a new cadre of social workers. The sustainability of these initiatives requires continued work and investment in the sector. Project implementation was successfully carried out by a capable PMU team during the bulk of the project. A quantitative assessment of overall performance is in Appendix 7. B. Lessons 71. Major lessons are reflected below. A description of the full range of lessons are provided in Appendix 7. 72. Targeting. Social welfare reform is a sensitive and protracted process. The SSSDP pioneered new concepts and approaches at a critical time in the country‘s history, but the reforms it initiated are not complete. The progress made by the program in developing a new vision for social welfare was undermined by the introduction of universal benefits. New efforts at introducing PMT under the FNSWPP, are attempting to help ensure that the reform agenda is sustained. The Draft Social Welfare Law of 2010 will be another measure of how far the reforms are accepted. 73. Livelihood support councils. As part of the reforms pioneered by the project, the government introduced livelihood support councils. The councils clearly have an important contribution to make and have the legal mandate to do so. However, there is uncertainty as to

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how effective they are nationally and what is the full range of their responsibilities. A national assessment of the strengths and weaknesses of the councils is urgently needed. 74. Updating the social security sector strategy paper. The SSSSP was a major milestone and the document is still a valuable guide for the sector. There is a need to update it, and this should be a priority once key decisions have been made regarding the proposed consolidation and targeting of benefits.

75. Use of information, education, and communication. The SSSDP conducted an intensive information, education, and communication campaign to garner support among the public and politicians for the reforms. As Mongolia enters a new period of reform that may result in the introduction of a national PMT, it is vital that a new information, education, and communication campaign is put in place and sustained. 76. Increasing roles for nongovernment organizations. The SSSDP brought civil society into social welfare provision for the first time in Mongolia. The role of NGOs can be expanded in the areas of monitoring of policy implementation, service, and advocacy for reforms. 77. Civil registration. The SSSDP failed to explicitly address a fundamental weakness in the social welfare system: the systematic exclusion of unregistered households. Efforts to overcome this flaw need to be accelerated. 78. Creating incentives at vocational training centers. The investment in training and workshop equipment has helped the vocational training centers to generate income. This income could provide a sustainable fund for equipment replacement and student scholarships. 79. Improving the impact of business incubation centers. The impact of the centers could be furthered by (i) providing start-up loans and performance-based support, (ii) providing better outreach to remote areas, and (iii) developing business incubation center packages that better target the livestock development needs of herders. 80. Social insurance. The SSIGO made considerable progress in improving its technical capacity under the project. It is likely that even greater progress would have been made had the office been given greater autonomy and more involvement in policy making. 81. Monitoring and evaluation. The project did not have an adequate M&E system. Analysis on gender and socioeconomic impacts are not available because of a lack of collection and disaggregation of data. The limited capacity of the M&E unit needs to be addressed if the impacts of future reform initiatives are to be properly assessed. C. Recommendations

82. Future monitoring. No monitoring and evaluation person was hired for the project and the lack of monitoring systems has limited the understanding of the impact of the program and project on beneficiaries and the general public. The 2010 gender results assessment for Mongolia10 also found that the lack of systems to monitor activities, beneficiaries, and sex-disaggregated data in the MIS have limited the gender impact of the program. The FNSWPP has integrated sex disaggregation into the PMT and food stamp databases.

10

ADB. 2010. Gender Equality Results in ADB Projects: Mongolia Country Report. Manila.

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83. Covenants. The covenants were generally relevant and almost all were complied with, except for the one supporting means testing. Lack of a targeting system and expansion of universal benefits have been responsible for the fiscal expansion of social welfare budget. This is an issue that still needs to be addressed in MSWL and MOF. 84. Further action or follow up. ADB has continued to support the social welfare sector in two programs—the FNSWPP and the SSSP—over the past 2 years. While they have been able to build on much of the institutional infrastructure, capacity, knowledge, and IT systems initiated by the SSSDP, both programs have been in response to crisis situations and have not emerged out of deep analysis of the emerging needs in the sector. The draft country partnership strategy does not include social protection. ADB has a long history of involvement in the social welfare sector, and a strong institutional memory of how things have been transformed and what has worked. ADB should continue to push for institutional reform, and also continue to build on its very successful work in employment training, vocational education, and institutional strengthening. 85. Timing of project performance evaluation report. It is recommended that the project performance evaluation be carried out within the next 12 months, by which time the new series of reforms on targeting and consolidation should have been initiated.

16 Appendix 1

DESIGN CHANGES

1. Given the range of policy and project activities, relatively few design changes were made during implementation. The key design changes for the program and project loans are listed below. 2. Targeting the poor. The original intention was that the project would rationalize the system of social assistance to focus resources on the poorest by modifying eligibility criteria to include only the poor and those at risk of poverty. 3. The Social Security Sector Strategy Paper of 2003 laid the policy foundation for means testing. In 2005, the Parliament passed a new Social Welfare Law. At the same time the Child Money Program (CMP) benefit for poor households was introduced. The CMP functioned as a conditional cash transfer for poor households.1 Beneficiaries had to pass a proxy means test, making the CMP the first social assistance benefit to target the poor.2 4. In July 2006, Parliament enacted an amendment to the Social Welfare Law that made ―child money‖ an entitlement to which all children below 18 would be eligible. In January 2007 the benefit was increased from MNT36,000 to MNT136,000 per annum. The number of CMP beneficiaries soared from less than 160,000 in 2004 to more than 1 million (40% of the population) in 2006, and subsequently expenditure rose by 173%. By 2008, more than 80% of social welfare beneficiaries were those receiving child money. This policy shift resulted in the cancellation of the third tranche of the policy loan of $3 million in 2007. 5. Phasing out centralized facilities at Batsumber. Under component 1, the project planned to ―improve the national system of nursing homes for the elderly and disabled.‖ The suggestion was to ―shift away from large, centralized institutions to smaller, more sustainable community-based facilities.‖ 6. The phasing out of the nursing homes did not take place as planned. Batsumber Nursing Home was not phased out. A number of ADB missions expressed concerns about this change in project design. However, the Ministry of Social Welfare and Labour responded by pointing out the need to urgently enhance the living environment and nursing services for residents for whom no alternative had been found. The outcome of upgrading is a facility of very high standards that is upheld as an example of how a modern nursing home should function. 7. Extension of the National Rehabilitation Center for the Disabled. The original design planned to improve rehabilitation services and aids for people with disabilities by upgrading the National Rehabilitation Center for the Disabled (NCRD) with furniture, equipment, and capacity development. 8. Appreciation of the euro generated significant savings on the Nordic Development Fund (NDF) portion of the investment loan. The NDF approved a request from the Government of Mongolia to put a portion of these savings towards the construction of a new building for the NCRD on adjacent land.

1 The cash transfers were conditional on children being immunized, living with their parents, attending school, and not

engaging in intolerable forms of child labor. 2 M. Caridad Araujo. 2006. Assessment of the Child Money Program and Properties of its Targeting. Working Paper

No. 2006-1. Washington, D.C.: World Bank.

Appendix 1 17

9. Construction of a labor exchange bureau. This was not in the original design. In 2007 the NDF approved the use of the currency savings for the construction of a labor exchange bureau as an extension of the employment promotion components of the project.3 Due to delays in land permissions and construction, as of August 2010 the building was still not completed.

3 The labor exchange bureau will provide (i) an information database on labor supply and demand, with networks

down to the soum (district) level; (ii) employment intermediary services, with labor brokers working to link demand

and supply; (iii) foreign labor services, to assist foreigners wishing to work in Mongolia as well as Mongolians wishing to export their labor; and (iv) career guidance, business counseling, and training.

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SOCIAL SECURITY SECTOR DEVELOPMENT PROGRAM FRAMEWORK

Table A2.1: Status towards Achieving Program Goals and Purposes

Design Summary

Performance Indicators/Targets

Baseline Indicators

Actual Performance Indicator

Change

Goal Reduce poverty and increase security among vulnerable groups by improving social welfare, and social insurance services and increasing employment and income-generating opportunities

Number living under the poverty line reduced

Poverty in total population: 35.6% Urban: 39.4% Rural: 32.6% (Source: NSO, LSMS 1998)

Poverty in total population: 35.2% Urban: 26.9% Rural: 46.6% (Source: NSO, Household Socioeconomic Survey, 2007–2008

An increase in poverty in rural areas may have been triggered by natural calamities like the severe winter weather.

Number of long-term unemployed reduced

As of 1 January 2001 there were 25,000 persons who remained unemployed for more than 6 months. (Source: CEO Report, 2000)

As of 1 January 2009 there were 24,186 persons who remained unemployed for more than 6 months, (Source: Labor and Social Welfare Office Report, 4th quarter, 2008)

3.3% decrease

Participation in insurance for unemployment and occupational injury and diseases increased

Insurance against unemployment and employment injury and occupational diseases: Number covered: 381,400 (Source: SSIGO report, 4th quarter, 2000)

Insurance against unemployment and employment injury and occupational diseases: Number covered: 547,161 (Source: SSIGO report, 4th quarter, 2008)

43.5% increase

Purpose Strengthen the social security system‘s ability to deliver essential welfare, insurance, and employment services to the ultra poor, very poor, and those close to the poverty line

Qualitative and quantitative improvements in social welfare services for up to 230,000 people of which 70% are poor, from 2001 to 2005 and beyond

Number of poor people covered by social welfare services: 276,800 Resources: MNT20.0 billion Average expense per person: MNT72,200

Number of poor people covered by social welfare services: 442,083 Resources: MNT57.7 billion Average expense per person: MNT130,500

Increase by: 59.7% 188.5% 80.7%

Rate of benefit per person (MNT per month) Welfare pension: 10,000 Maternal Benefit: 12,000 Infant benefit: 12,000

Rate of benefit per person (MNT per month) Welfare pension: 41,400 These three benefits are replaced with conditional cash benefits according to

4.1 times increase in benefit rate per person 2.0–2.6 times

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Design Summary

Performance Indicators/Targets

Baseline Indicators

Actual Performance Indicator

Change

Child care benefit: 9,000 (Source: SSWA Report, 2000)

the new Social Welfare Law: 24,000 (Source: LSWSO Report, 2008)

increase pension benefit

Qualitative and quantitative improvements in employment services for up to 143,000 people of which 43% are poor, from 2001 to 2005 and beyond

In 2000 number of persons: employed through employment offices: 14,000 covered by skills training and retraining: 5,000 involved in public works: 5,100 In total: 24,100 (Source: CEO Report, 2000)

In 2001–2006 number of persons: employed through employment offices: 328,547 covered by skills training and retraining: 155,354 involved in public works: 129,922 In total: 613, 823 (Source: LSWSO Labor Survey Report, 4th quarter, 2008)

Increase of nearly 25 times Target was met and exceeded by 4.3 times

Qualitative and quantitative improvement in social insurance services for up to 330,000 people from 2001 to 2005 and beyond

Types No. of persons (‗000)

Expenditure (MNT million)

Pension 254.4 55,593

ST benefit 62.7 2,299.6

Total 317.1 57,892.6

Average pension MNT18,200 Minimum pension MNT16,000 (Source: SSIGO report, Q4, 2000)

Types No. of persons (‗000)

Expenditure (MNT million)

Pension 300.6 341,060.2

ST benefit 120.0 17,162.7

Total 420.6 358,222.9

Average pension MNT96,430 Minimum pension MNT81,000 (Source: SSIGO report, 4th quarter, 2008)

No. of persons (%)

Expen-diture%

18.2 513.5

92.3 646.3

32.8 518.8

5.3 times increase 5.1 times increase

CEO = Central Employment Office, LSMS = Living Standards Measurement Survey, LSWSO = Labor and Social Welfare Service Office, NSO = National Statistical Office, SSIGO = State Social Insurance General Office, SSWA = State Social Welfare Agency.

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Table A2.2: Status towards Achieving Program Outputs

Design Summary

Performance Indicators/Targets

Actual Outputs

Comments

Outputs

1. Social Welfare Services Improved

a. Improvement of social welfare services

Upgrading of up to 20 nursing homes and provision of improved services to over 1,000 people

Seven nursing homes upgraded: Essential furniture and equipment provided, staff trained, four nursing homes rehabilitated and one nursing home relocated to aimag center. Policy framework: A Centre-Based Program for Extremely Vulnerable People developed

and approved. The functioning of all eight nursing homes in Mongolia reviewed and

assessed. A restructuring plan for the nursing homes developed and approved. Strategic and residential care service plans of nursing homes

developed. Service standards of nursing homes for the elderly and people with

disabilities developed and approved Services improved for 295 residents currently living in these nursing

homes.

The government pursues a policy of encouraging community-based services rather than institutionalized residential care. Therefore, only seven nursing homes are run by the government as of 2009.

Upgrading of NCRD and provision of improved services to over 1,500 persons with disability

NCRD upgraded: Prosthetic and orthopedic equipment provided, remodeling designed. As an additional activity, the construction of an extension of the NCRD building and its technical and technological modernization have been carried out under the project and are expected to be completed in 2010. Policy framework: A restructuring plan of the NCRD developed and approved. The center provides services to 4,500 people with disabilities per

year.

A contract for construction of new building signed on 15 July 2008. Due to cold weather the construction was stopped over winters. Completion was achieved in August 2010.

Establishment of three SSCs to allow the delivery of improved services to over 5,000 clients

Two pilot SSCs established: New buildings constructed and equipped, staff trained. A review of the pilot SSCs was conducted and it revealed that the centers were working well and to the satisfaction of the clients. The one-stop service delivery mechanism has been replicated in other aimags and districts.

The allocated budget was insufficient for the establishment of three SSCs. However, a third SSC was independently piloted with a small level of state budget support.

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Design Summary

Performance Indicators/Targets

Actual Outputs

Comments

b. Improvement of community-based social welfare services

Survey of existing community-based activities Implementation of up to 50 community-based projects with CSWIF financing in support of up to 4,000 people Implementation of public awareness campaign

The survey was carried out: The survey report highlighted the institutionalized, costly, centralized, and ill-targeted practices of the state-run social welfare services as opposed to a limited number of well-targeted and efficient services rendered by NGOs. 29 projects (15 model building and 14 design testing) implemented in 2005: The total number of people who benefited from CSWIF was 6,612 (2,425 people from design testing projects, 3,569 people from model building projects). Policy framework: Integrated Community-Based Social Welfare Services Program

developed and approved. Draft community-based social welfare service and procedure

standards were developed. Public awareness campaign implemented: Including (i) dissemination conferences on midterm and final participatory review and evaluation of the pilots, and (ii) a high-level national NGO forum aimed at the creation of an enabling and informed environment for private and public sector collaboration in social welfare service delivery. In addition, six LEAP projects involving conditional cash payments, compensation packages, and livelihood support projects were pilot tested; 618 people benefited from LEAP projects with CSWIF funding.

MSWL in consultation with the project consultants concluded that the 29 pilot projects selected for implementation within the model building and design testing framework were adequate to develop suitable service and procedure models for potential community-based services. The government decided to pilot conditional cash benefits with CSWIF funding under LEAP that was proposed by the project consultants in cooperation with MSWL.

c. Social welfare management

Improvement of MIS of MSWL and SSWA (now LSWSO) Repair of MSWL and SWA buildings Training for the staff of MSWL and SSWA

MIS has been improved: Information and communication technology equipment of immediate need provided, LAN installed at the SSWA, a feasibility study of a sectorwide MIS carried out. Hardware for operation of MIS procured, software installed, and key staff trained. Data centers set up at MSWL and LSWSO. Contribution made to the cost of repair of the MSWL building. Library, common service room, and public meeting rooms created at MSWL and equipped. A series of local and international training activities organized: 68 officials attended international conferences, study visits, and workshops, and officials undertook local training.

Due to complexity of establishing sectorwide MIS, consensus building and decision making by government agencies took a long time, leading to delayed implementation.

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Design Summary

Performance Indicators/Targets

Actual Outputs

Comments

2. Employment Promotion

a. Skills training for the unemployed and poor provided

Up to 25 ETCs established based on the existing training institutions and up to 5,000 persons trained

25 ETCs established: Two training workshops equipped in each ETC, premises of these workshops rehabilitated, teachers of these trades updated their skills through 4–5 weeks of local or abroad training, Dacum-based training modules with training tools developed by trained groups at the ETCs. Policy Framework: Charter of ETCs approved jointly by MSWL and MESS. In 2006–2008, 7,669 persons attended short-term skills training

courses organized at these centers and financed from the Employment Promotion Fund.

One ETC was not rehabilitated because the building was new.

Up to 40 EECs established based on the existing soum secondary schools and up to 4,000 persons trained

40 EECs established: Training workshop equipment provided to each EEC, premises of the workshops rehabilitated, selected teachers updated their skills through 5 weeks local training, Dacum-based training modules with training tools developed by trained groups at the EECs. Policy Framework: Charter of EECs approved jointly by MSWL and MESS. 2,809 persons were trained at these centers as of the end of 2008.

Skills training of the unemployed at the EECs started in 2007 due to delayed approval of legislation and provision of equipment. Premises of 36 EECs were rehabilitated as the remaining was rehabilitated under an ADB education project.

Six RMCs established, up to 250 persons from ETCs and EECs trained

Six RMCs established: Equipment and furniture for methodological training for two trades provided to each RMC, premises for these methodological and skills training activities rehabilitated, teachers of the trades upgraded their skills through 4–5 weeks of local or overseas training, Dacum-based training modules with training tools developed by trained groups at the RMCs and with their support at the ETCs and EECs. Policy Framework: Charter of RMCs approved jointly by MSWL and MESS. 1,300 EEC/ETC teachers trained by RMC methodologists.

b. Entrepreneurship development for the unemployed and poor

Business development services developed in 10 ETCs for up to 5,000 clients

Business development services developed in 12 ETCs: 28 teachers from ETCs and business incubators attended ILO‘s Start and Improve Your Business training of trainers and received ILO authorization, training materials and tools provided, 7,001 people received business development training organized by the trained teachers at these centers.

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Design Summary

Performance Indicators/Targets

Actual Outputs

Comments

Five business incubators established for up to 750 clients

Five business incubators established: Chosen premises rehabilitated and equipped, staff recruited and trained, and international and local experiences shared. Policy Framework: Charter of business incubators approved jointly by MSWL, MESS,

and Ministry of industry and Trade. Financial sustainability of business incubators secured by amended

Employment Promotion Law. Business incubators provided services to 5,287 clients and occupy

128 participants as of December 2008.

Business incubator in Nalaih is restructured to business development center with no beneficiaries in 2007 as its premises were given to another government agency by the Ulaanbaatar city mayor.

c. Capacity building for employment services and improvement of working conditions

MIS/LMA system established in CEO/LSWIA and all aimag/district branches and users trained.

MIS and LMA system established at LSWSO and its branches: LAN installed at local branches, LMA network resumed, website developed, staff trained including distance training via the redesigned network. LMDS piloted, staff trained, and the pilot exercise taken by locals. Since the pilots LMDS has been conducted five times on a regular basis nationwide with funding from the state budget. Policy Framework: A provision on frequent LMDS included in the amended Employment

Promotion Law.

New business practices introduced in CEO and LSWIA

Both CEO and LSWIA are restructured: LSWIA is integrated into the State Inspection Agency, CEO and SSWA were merged into a single unit called LSWSO. LSWIA‘s responsibility is to execute control over implementation of legislation including labor and social security related legislation. Activities related to social welfare and employment promotion and improvement of working conditions fall under the purview of LSWSO. Conducting labor market demand surveys, providing business incubation services, selecting training providers through open tendering, delivering entrepreneurship training, and conducting qualification testing in cooperation with professional associations are the new practices and services introduced under the project for employment promotion.

Public awareness campaign implemented

Public awareness campaign implemented: Including a 2-day national workshop in December 2005 to disseminate the results to major government, NGO, and private sector partners and to elaborate future development strategies for skills training and entrepreneurship development. Targeted advocacy and information campaign was conducted regularly on television, radio, and print media under the information, education, and communication strategy of the project.

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Design Summary

Performance Indicators/Targets

Actual Outputs

Comments

3. Social Insurance

a. Social insurance strengthening social insurance management capacity and training of social insurance inspectors

Over 5,000 persons are newly insured

The number of newly insured persons in 2002–2006 reached 356,800.

Improve MIS of SSIGO and its offices

MIS of SSIGO and its offices improved:

Wage information sharing system between the tax and the insurance offices established, servers provided.

MIS of SSIGO reviewed under the feasibility study of a sectorwide MIS and recommendations were provided for further development.

Hardware identified in the feasibility study, including servers, firewall, laptop computers, and copiers, were procured.

SSIGO management, key staff, and information and communication technology specialists were trained in MIS management and operation.

Examine feasibility of expanding social insurance to self-employed and herders

Feasibility of expanding social insurance to self-employed and herders examined:

An international consultant in cooperation with MSWL developed feasible options for expanding social insurance to self-employed and herders.

A local consulting team carried out surveys and did projections of the necessary funds, contribution rate, pension level, and other factors required for inclusion of people, especially herders and self-employed, into a basic social pension insurance scheme.

Launch public awareness program

Public awareness program launched: An information, education, and communication strategy was developed and executed with a view to informing and educating the public about the advantages of the new social security sector reforms and innovations. Information and advocacy campaigns were conducted through radio, television, and print media to encourage voluntary adherence of herders and informal-sector workers to social insurance.

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Design Summary

Performance Indicators/Targets

Actual Outputs

Comments

b. Training of social insurance Inspectors

Train up to 250 social insurance inspectors

1,660 social insurance inspectors trained:

Senior officers attended World Bank and ILO core courses.

International study visits organized.

Inspectors trained in internal auditing and monitoring, international accounting standards, new social insurance computer software, social insurance reform issues, and English language skills.

CEO = Central Employment Office, CSWIF = Community Social Welfare Innovation Facility, EEC = employment education center, ETC= employment training center, ILO = International Labour Organization, LEAP = Livelihood Enhancement Assistance Program, LMA = labor market analysis, LMDS = Labor Market Demand Survey, LSMS = Living Standards Measurement Survey, LSWIA = Labor and Social Welfare Inspection Agency, LSWSO = Labor and Social Welfare Service Office, MIS = management information system, MSWL = Ministry of Social Welfare and Labour, NGO = nongovernment organization, NSO = National Statistical Office, RMC = regional methodological center, SSC = social security center, SSIGO = State Social Insurance General Office, SSWA = State Social Welfare Agency.

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Table A2.3: Implementation and Compliance with Policy Matrix Policy Measures under the Program

ADB Time Frame

Monitoring Arrangements

Responsibility

Status of compliance

1. Improve the Quality and Coverage of Social Welfare Services and Benefits

Objective 1.1: Rationalize the system of social assistance benefits to concentrate resources on the ultra-poor and very poor

1.1.1 Establish a broad-based working group to evaluate the efficiency and effectiveness of social assistance benefit systems in reaching the poor and very poor and assess current impact of benefits on poverty reduction.

June 2001 (condition for

loan negotiations)

Copy of order of MSWL

MSWL, SSWA Full compliance Established by Ministerial Order 55 (May 2001)

1.1.2 Develop a new set of criteria based on nonincome and income dimensions to determine eligibility for social assistance benefits to allow improved targeting of the poor and most in need.

Before 28 February 2003

Evaluation report

submitted to ADB

MSWL,SSWA Full compliance A set of criteria for PMT was developed jointly with the United Nations Development Programme project in 2005. The PMT methodology was approved by joint order 05/07 of minister for SWL and head of National Statistical Office.

1.1.3 Implement and evaluate new means testing methods on a pilot basis in two districts in each of four provinces and in two districts in Ulaanbaatar.

Before 28 February 2003

Criteria submitted to

ADB

MSWL, MOF Full compliance By Ministerial Order 24 (5 March 2005), the new means testing method was used for the integrated Livelihood Support Fund piloting in four soums and two khoroos. The PMT further was used by MSWL to determine beneficiaries for the CMP in 2005.

1.1.4 Amend Social Welfare Law to incorporate the new eligibility criteria and selected means testing method.

Before 31 August 2003

Amended legislation

submitted to ADB

MSWL, Ministry of Justice

Full compliance Social Welfare Law was approved by Parliament in December 2005. The law had provisions for eligibility and selection methodology.

1.1.5 Following amendment of law, introduce new systems for social assistance benefits‘ distribution and means testing on a nationwide basis, and in agreement with ADB, allocate sufficient financial resources from the budget and staff to implement the system

Before 28 February 2006 (condition for third tranche

release)

Report submitted to

ADB

MSWL, SSWA Partial compliance A new system of social welfare assistance and benefits was accepted by the government and incorporated into the Social Welfare Law approved in 2005. Unfortunately, later in 2006, the PMT was abandoned by government with CMP becoming universal. This led to the cancellation of the third tranche in 2007.

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Policy Measures under the Program

ADB Time Frame

Monitoring Arrangements

Responsibility

Status of compliance

The current Draft Law on Social Welfare (2010) includes targeting and consolidation of benefits.

Objective 1.2: Develop community-based social welfare service delivery mechanisms as an alternative to institutionalization of vulnerable groups

1.2.1 Develop community-based approaches for delivery of social welfare services as the main principle of social welfare policy. Design strategy and mechanisms for promoting community-based approaches for delivery of social welfare services (as an alternative to institutionalization), including options for public–private partnerships and the participation of civil society organizations.

Before August 2002

Strategy submitted to

ADB

MSWL, SSWA Full Compliance Strategy is submitted to ADB

1.2.2 Commence phasing out centralized social welfare institutions. Implement in parallel pilot projects for community-based social welfare service delivery. Evaluate pilot activities (and other relevant initiatives) with participation of all stakeholders in the process.

Before 31 August 2003

Evaluation report

submitted to ADB

MSWL, SSWA Full compliance 29 community-based social welfare service pilot projects were implemented in 2005. Midterm and final participatory review and evaluation of pilot services and processes were carried out in May and November 2005 and reports were submitted to ADB. Restructuring plan of residential care institutions based on recommendations of SSSDP consultants were approved by MSWL and submitted to ADB.

1.2.3 In consultation with ADB, amend Social Welfare Law to allow for more community-based approaches to delivery of social welfare, including participation of civil society organizations and private sector.

Before 28 February 2006 (condition for third tranche

release)

Amended legislation

submitted to ADB

MSWL, Ministry of Justice

Full compliance The Social Welfare Law amended in 2005 was designed to allow for more community-based approaches in social welfare service delivery with the participation of NGOs, civil society organizations, and private sector.

Objective 1.3: Establish a new framework for social work services

1.3.1 Establish a broad-based working group to evaluate the efficiency and effectiveness of existing social work systems for supporting the poor and very poor and assess quality of

June 2001 condition for

loan negotiations

Copy of order of MSWL

MSWL, SSWA Full Compliance Established under MSWL Ministerial Order 54 (28 May)

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Policy Measures under the Program

ADB Time Frame

Monitoring Arrangements

Responsibility

Status of compliance

programs for training and preparing social workers.

1.3.2 Establish an overall policy framework for social services. Define institutional authorities and responsibilities for implementation policies and service management. Allocate sufficient resources from the budget and staff to implement the system.

Before 28 February 2003

Policy framework

submitted to ADB

MSWL, SSWA, National

Children‘s Committee

Full Compliance Policy framework submitted to ADB. Article 34 of the new Social Welfare Law stipulates the development of social work. Social welfare services shall be delivered by social workers.

1.3.3 Develop and implement a new system for accreditation and certification for social worker training programs and qualifications. Allocate sufficient resources from the budget and staff to implement the system.

Before August 2003

Report submitted to

ADB

MSWL, SSWA, National

Children‘s Committee,

MECS

Partial compliance The new Social Welfare Law includes provision for the development of a system for certification of social workers and MSWL‘s approval for the implementation of the certification system is pending. Program accreditation has been instituted in Mongolia with the establishment of the NCEA, however social work program accreditation has not been done yet. The University of Humanities in Ulaanbaatar applied for accreditation of its social work program in early 2004, complied with preliminary requirements, and has started its self-evaluation. Program accreditation usually takes 3–4 years. A program accreditation subcommission is to be established by the NCEA for social work and social welfare to carry out the accreditation.

2. Develop Pro-Poor Labor Market Policies

Objective 2.1: Increase provision of employment-related education and training programs to the unemployed and poor

2.1.1 Develop a new law on employment, including definition of the role of training for employment in active labor market policy.

June 2001 condition for loan negotiations

Copy of employment law

MSWL Full compliance Employment Promotion Law (19 April 2001) provides the definition

2.1.2 MSWL and MECS to formalize an agreement allowing the use of MECS vocational training facilities as well as selected district schools for training programs for the

Condition for loan effectiveness

Copy of partnership memorandum submitted to

MSWL, MECS Full compliance Copy of ministerial order submitted to ADB

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Policy Measures under the Program

ADB Time Frame

Monitoring Arrangements

Responsibility

Status of compliance

unemployed and poor as organized by CERO. ADB

2.1.3 Develop procedures and criteria (including core standards) for accreditation of public and private sector vocational and skills training entities. Develop and maintain a database of accredited providers. Develop and implement supervision systems to safeguard the quality of training in accredited institutions, to the satisfaction of ADB.

Before 28 February 2006 (condition for third tranche release)

Copy of minister‗s resolution submitted to ADB

MSWL, CERO, MECS

Full compliance Procedures and guidelines for accreditation of vocational education and training institutions were adopted by NCEA resolution number 09 of 12 March 2004. Procedures and guidelines for accreditation of short-term training institutions including supervision mechanism were adopted by head of LSWSO No. 50 of 22 February 2005.

2.1.4 Develop legislative framework satisfactory to ADB on provision of training for employment; include provision to promote competition between public and private organizations offering training services and to allow private sector training providers to lease and operate state-owned training institutions, facilities, and assets.

Before 28 February 2006 (condition for third tranche release)

Copy of legislation submitted to ADB

MSWL Full compliance Employment Promotion Law amended on 11 January 2005 specifies provision of short-term skills training for employment by institutions selected through competitive bidding regardless of whether the training provider is of public or private sector. The charters for employment, education, and training centers approved by government have provisions stipulating equal access to these centers for both private and public sector training providers.

2.1.5 Develop assessment systems for participants in state-owned and accredited training programs. Develop formal national certification systems to assess and verify achievement of students and to allow grading of workers. Allocate sufficient resources from the budget and staff to implement the system.

Before 30 September 2003

Copy of ministerial resolution submitted to ADB

MSWL, MECS Full compliance Included in the Law on Vocational Education and Training. Training has been organized to support development of the national system

2.1.6 Establish national curriculum and methodological center for vocational and skills training within an existing educational institution. Allocate sufficient resources from the budget and staff for management of the center.

Before 28 February 2003

Copy of ministerial resolution submitted to ADB

MSWL, MECS Full compliance Established by government resolution number 247 of 5 December 2003, equipped, and staff trained. Financed now by state budget

2.1.7 Identify and establish six regional vocational and skills resource centers within

Before 28 February 2003

Copy of ministerial

MSWL, MECS Full compliance Established by joint order number 65/137

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Policy Measures under the Program

ADB Time Frame

Monitoring Arrangements

Responsibility

Status of compliance

existing VTPCs to support methodology and training of trainers in VTPCs and other accredited training institutions within their regions. Allocate sufficient resources from the budget and staff for management of the centers.

resolution submitted to ADB

of ministers of SWL and ECS on 22 April 2003

2.1.8 Prepare an outreach strategy for (i) linking provincial center VTPC‘s with interdistrict schools, and (ii) linking them with district schools, for supporting training for employment among the population and better use of existing facilities.

Before 28 February 2003

Copy of ministerial resolution submitted to ADB

MSWL, MECS Full compliance Joint order number 65/137 of ministers of MSWL and MECS of 22 April 2003 endorses a list of 25 training institutions as ETCs and 40 inter-soum schools as EECs.

2.1.9 In consultation with ADB, introduce necessary regulatory framework to ensure full access to skills and vocational training for people with disabilities both in terms of physical accessibility and suitability of courses. Establish mechanisms to monitor implementation of the regulatory framework.

Before 28 February 2006 (condition for third tranche release)

Copies of relevant laws, orders, decrees, and other implementation regulation documents, as applicable, submitted to ADB

MSWL, MECS Full compliance The existing Labor Code enforces requirement of employers having 50 and more employees to employ people with disabilities representing 3% of their total workforce. The employers not complying with this requirement are subject to compensation payments. According to the revised Law on Employment, these compensation payments will constitute a fund for vocational training and employment promotion for the disabled and the fund will be used to meet the extra needs in providing vocational training to people with disabilities. Architectural Norms and Construction Standards BD 31-101-04 accepted by order number 17 of the head of Construction, Urban Development and Common Services Office on 4 March 2004 specify the requirements enabling physical access of the disabled to buildings.

2.1.10 Establish mechanisms to ensure ongoing labor market analysis for linking labor market demand for the provision of training.

Before 31 April 2003

Copy of labor market demand reports

MSWL, MECS Full compliance Survey report submitted to ADB

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Policy Measures under the Program

ADB Time Frame

Monitoring Arrangements

Responsibility

Status of compliance

Objective 2.2: Expand the eligibility for employment services to the uninsured unemployed

2.2.1 Establish a broad-based working group to assess levels of coverage of employment services to the de facto unemployed and to assess impact of external and domestic programs in support of employment services.

June 2001 (condition for loan negotiations)

Copy of order of MSWL

MSWL,CERO, MECS

Full compliance Established by minister of MSWL Order 53 (28 May 2001)

2.2.2 Study options for expanding employment services (including active labor market interventions) to unemployed people who are also uninsured.

Before 30 August 2002

Study submitted to ADB

MSWL, CERO Full compliance Study report is submitted to ADB

2.2.3 Based on the study, and in consultation with ADB, introduce necessary regulatory framework concerning eligibility of persons to benefit from employment services, including training.

Before 28 February 2004 (condition for second tranche release)

Copies of relevant laws, orders, decrees, and other implementation regulation documents, as applicable, submitted to ADB

MSWL, Ministry of Justice

Full compliance The Employment Promotion Law (19 April 2001) sets out the overall legal framework. Copy of the law is submitted to ADB

2.2.4 Ensure adequate budget allocations for training targeted at the poor.

Before 30 August 2003

CERO annual reports submitted to ADB.

MSWL, MOF

Full compliance 0.3% of gross domestic product to be allocated according to Employment Promotion Law. CERO‘s 2002 report is submitted to ADB

3. Strengthen Social Insurance Operations to Increase Compliance

Objective 3.1: Improve cooperation between social insurance and taxation authorities

3.1.1 SSIGO and STGO to design and implement a nationwide program of sharing data on salaries between themselves, in consultation with ADB.

Before 28 February 2004 (condition for second tranche release)

Copy of information sharing reports submitted to ADB

MSWL, SSIGO, STGO

Full compliance Information exchange system is in place. Data sharing on salaries started in November 2004

Objective 3.2: Clear arrears of social insurance contributions from state budget organizations

3.2.1 MFE to deduct the outstanding social insurance contributions owed by state-budget-funded entities from budget allocations in 2004

Before 28 February 2006 (condition for

Copy of social insurance accounts

MSWL, MOF Full compliance MOF has withheld and transferred to the Social Insurance Fund the complete

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Policy Measures under the Program

ADB Time Frame

Monitoring Arrangements

Responsibility

Status of compliance

and transfer resources to the appropriate social insurance fund as defined by the Social Insurance Law

third tranche release)

submitted to ADB

outstanding social insurance arrears of MNT4.5 billion owed by the state-budget- funded entities in early 2001.

3.2.2 Take measures to recover social insurance fund resources held by bankrupt state banks.

Before 31 April 2003

Copy of relevant orders and reports submitted to ADB

MSWL, MOF, Ministry of Justice

Full compliance Court decisions are in place. Report submitted to ADB

Objective 3.3: Increase the enforcement powers of social insurance inspectors

3.3.1 Amend social insurance law to increase the powers of social insurance inspectors to the level of tax inspectors.

Before 31 April 2003

Copy of amended Social Insurance Law

MSWL, Ministry of Justice

Full compliance. Law was amended.

Objective 3.4: Examine feasibility of expanding social insurance to self-employed herders

3.4.1 Investigate the feasibility of covering self-employed and herders in formal and compulsory social insurance schemes and identify options for their inclusion.

Before 31 April 2003

Copy of reports submitted to ADB

MSWL, SSIGO Full compliance Study report submitted to ADB

4. Develop a Social Security Master Plan

Objective 4: Develop a master plan for medium- and long-term development of the formal social security system

4.1 MSWL to publish a register of all current and planned domestic and externally supported programs for social safety net development, including financing requirements and budgetary allocations.

June 2001 (condition for ADB board submission)

Copy of register

MSWL Full compliance

4.2 Develop a social security master plan covering medium- and long-term development of mandated areas of responsibility of MSWL, including (i) social welfare, (ii) employment services, and (iii) social insurance (unemployment and occupational diseases/injuries insurance)

Draft before 28 February 2004 (condition for second tranche release)

Copy of draft and final master plans submitted to ADB

MSWL Full compliance SSSSP approved by Cabinet resolution on 12 November

4.3 Specifically include in the master plan a strategy for introducing program budgeting in MSWL by 2003.

Draft before April 2003

Copy of draft submitted to ADB

MSWL, MOF Full compliance MSWL developed 2003 plan in accordance with output budgeting principles

4.4 Adopt master plan as formal statement of government policy on social security

Before 28 February

Cabinet resolution

MSWL Full compliance Press conference was organized and

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Policy Measures under the Program

ADB Time Frame

Monitoring Arrangements

Responsibility

Status of compliance

development. Formally request external funding agencies to channel assistance in the framework of the master plan.

2004 submitted to ADB

copies of SSSSP were distributed during final ceremony.

ADB = Asian Development Bank; CERO = Central Employment Regulation Office; CMP = Child Money Program; EEC = employment education center; ETC = employment training center; LSWSO = Labor and Social Welfare Service Office; MECS = Ministry of Education, Culture and Science; MFE = Ministry of Finance and Economy; MOF = Ministry of Finance; MSWL = Ministry of Social Welfare and Labour; NCEA = National Council for Education Accreditation; NGO = nongovernment organization; PMT = proxy means test; SSIGO = State Social Insurance General Office; SSSDP = Social Security Sector Development Program; SSSSP = Social Security Sector Strategy Paper; SSWA = State Social Welfare Agency; STGO = State Taxation General Office; VTPC = vocational training and production center.

34 Appendix 3

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PROJECT IMPLEMENTATION SCHEDULE 2002–2009

Activities

Years and Quarters of Implementation

2002 2003 2004 2005 2006 2007 2008 2009

4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

A. Social welfare

1. Social welfare services facilities

Improvement of nursing homes

Improvement of NCRD

Establishment of pilot social security centers

2. Community-based services

Survey of existing community-based services

Piloting community-based approaches

3. Social Welfare management

Capacity building training

Information systems

Facilities renovation

B. Employment Promotion

1. Skills training for unemployed and poor

Development of ETCs, EECs

Methodological center, resource centers

2. Business training for unemployed and poor

Development of programs in ETCs

3. Capacity Building of CERO, LSWIA

CERO development

LSWIA development

C. Social Insurance

1. Social Insurance Management

SSIGO strengthening

2. Social Insurance Inspectors Training

Training development and provision

D. Project Management

Establish project management unit

Project Implementation

CERO = Central Employment Regulation Office, EEC = employment education center, ETC = employment training center, LSWIA = Labor and Social Welfare Inspection Agency, NCRD = National Centre for the Rehabilitation of the Disabled, SSIGO = State Social Insurance General Office.

= At appraisal

= Actual

Appendix 4 35

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STATUS OF COMPLIANCE WITH LOAN COVENANTS

FOR PROGRAM LOAN 1837-MON (SF): SOCIAL SECURITY SECTOR DEVELOPMENT PROGRAM AND PROJECT

Covenant

Reference in Loan

Agreement

Status of

Compliance

1

(a) The Borrower shall cause the Program to be carried out with due diligence and efficiency and in conformity with sound social security, administrative, financial, engineering, and environmental practices.

Loan Agreement, Section 4.01.a

Complied with

(b) In the carrying out of the Program, the Borrower shall perform, or cause to be performed, all obligation set forth in Schedule 5 to this Loan Agreement.

1

Loan Agreement, Section 4.01.b

Complied with

2

The Borrower shall make available, promptly as needed, the funds, facilities, services, land and other resources, which are required, in addition to the proceeds of the Loan, for the carrying out of the Program.

Loan Agreement, Section 4.02

Complied with

3

The Borrower shall ensure that the activities of its departments and agencies with respect to the carrying out of the Program are conducted and coordinated in accordance with sound administrative policies and procedures.

Loan Agreement, Section 4.03

Complied with

4

(a) The Borrower shall maintain, or cause to be maintained, records and documents adequate to identify the Eligible items financed out of the proceeds of the Loan and to records the progress of the Program.

Loan Agreement, Section 4.04.a

Complied with

(b) The Borrower shall enable the Bank‘s representatives to inspect any relevant records and documents referred to in paragraph (a) of this Section.

Loan Agreement, Section 4.04 b.

Complied with

5

(a) The Borrower shall furnish, or cause to be furnished, to the Bank all such reports and information as the Bank shall reasonably request concerning (i) the Loan, and the expenditure of the proceeds and maintenance of the service thereof; (ii) the goods financed out of the proceeds of the Loan; (iii) the counterpart Funds and the use thereof; (iv) the implementation of the Program, including the accomplishment of the targets and carrying out of the targets and carrying out of the actions set out in the Policy Letter; (v) financial and economic conditions in the territory of the Borrower and the international balance-of-payments position of the Borrower; and (vi) any other matters relating to the purpose of the Loan.

Loan Agreement, Section 4.05.a

Complied with

(b) Without limiting the generality of the foregoing, the Borrower shall furnish, or cause to be furnished, to the Bank quarterly reports on the carrying out of the Program and on the accomplishment of the targets and carrying out of the actions set out in the Policy Letter. Such report shall be submitted in such form and in such detail and within such a period as the Bank shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter.

Loan Agreement, Section 4.05.b

Complied with

1 The details of compliance are given in the main text, Appendixes 4 and 5.

36 Appendix 4

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Covenant

Reference in Loan

Agreement

Status of

Compliance

(c) Promptly after the closing date for withdrawals from the Loan Account, but in any event not later than three (3) months thereafter or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, in such form and in such detail as the Bank shall reasonably request, on the execution of the Program, including its cost, the performance by the Borrower of its obligations under this Loan Agreement and the accomplishment of the purposes of the Loan.

Loan Agreement, Section 4.05.c

Complied with. Final PCR has been submitted following the initial presentation of a draft PCR.

6

(a) It is the mutual intention of the Borrower and the Bank that no other external debt owed a creditor other than the Bank shall have any priority over the Loan by way of a lien on the assets of the Borrower. To that end, the Borrower undertakes (i) that, except as the Bank may otherwise agree, if any lien shall be created on any assets of the Borrower as security for any external debt, such lien will ipso facto equally and ratably secure the payment of the principal of, and interest charge and any other charge on, the Loan; and (ii) that the Borrower, in creating or permitting the creation of any such lien, will make express provision to the effect.

Loan Agreement Section 4.06.a

Complied with

(b) The provisions of paragraph (a) of this Section shall not apply to (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; or (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date.

Loan Agreement Section 4.06.b

Complied with

(c) The term ―assets of the Borrower‖ as used in paragraph (a) of this Section includes assets of any political subdivision or any agency of the Borrower and assets of any agency of any such political subdivision, including BOM and any other institution performing the functions of a central bank of the Borrower.

Loan Agreement, Section 4.06.c

Complied with

Project Implementation and Other Matters

7

Coordination and Administration Except as the Borrower and the Bank may otherwise agree, the Program Executing Agency shall bear overall responsibility for (a) Program implementation, (b) ensuring the reforms under the program are undertaken in line with the agreed timetable, (c) initiating withdrawals under the Loan, and (d) allocating and monitoring the use of Counterpart Funds.

Loan Agreement, Schedule 5, para. 1

Complied with

8

To ensure interagency coordination on Program implementation, the Program Executing Agency shall be supported by a Steering Committee. The Steering Committee shall be chaired by the Minister, MSWL, with the vice Minister of MFE as the deputy chair, and shall include representatives from MECS, and additional representatives from MFE, MSWL, Ministry of health, National Children‘s committee, Veteran‘s Association, non-government organizations representing persons with disability and employers‘ representatives (including Project Director of the project management Unit for the Project who shall serve as the Secretary of the Steering Committee). The Steering Committee shall have been established prior to Effective Date, and shall meet at least once every three months, and as often as necessary, to ensure that the policies and actions in connection with the program set out

Loan Agreement Schedule 5, para. 2

Complied with

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Status of

Compliance

in the Policy Letter and the Policy Matrix attached to the Policy Letter are carried out in accordance with the schedule of policy reforms included in the Policy Matrix.

9

Implementation of the Policy Letter The Borrower shall (i) ensure that the policies adopted and actions taken as described in the Policy Letter, including the Policy matrix prior to the date of this Loan Agreement continue in effect for the duration of the program period and subsequently; and (ii) promptly adopt the other policies and take the other actions indicated in the Program as specified in the Policy Letter, including the Policy Matrix, and ensure that such policies and actions continue in effect for the duration of the Program period and subsequently.

Loan Agreement, Schedule 5, para. 3

Partially complied with. The policy condition related to the means testing and targeting of beneficiaries failed in the wake of political and economic developments.

10

Policy Dialogue The Borrower shall keep the Bank informed of, and the Borrower and the Bank shall from time to time exchange views on, the progress made in carrying out the Program. The Borrower shall engage in policy dialogue with the Bank, in a timely manner, on problems and constraints encountered during Program implementation and on desirable changes to overcome or mitigate such problems and constraints.

Loan Agreement, Schedule 5, para. 4

Complied with

11

The Borrower shall keep the Bank informed of the policy discussions with the other multilateral and bilateral aid agencies that have implications for implementation of the Program, and shall provide the Bank with an opportunity to comment on any resulting policy proposals. The Borrower shall take the Bank‘s views into consideration before finalizing and implementing any such proposals.

Loan Agreement, Schedule 5, para. 5

Complied with; Social Security Sector Strategy Paper was approved by the Cabinet in Nov 2003. It was submitted to ADB in Dec 2003.

12

Use of Counterpart Funds The Counterpart Funds shall be used to support the adjustment cost for reforms to be initiated and implemented under the program. Any counterpart Funds not required for the program shall be used first to finance the local currency costs of the projects financed by the Bank, and second to finance the expenditures for the general development purposes of the Borrower.

Loan Agreement Schedule 5, para, 6

Complied with

13

Monitoring the program The Borrower shall ensure that MWSL (i) monitors the implementation of the Program and its impacts, and (ii) submits to the Bank quarterly reports on the implementation of the Policy Matrix, including accomplishment of the measures set forth in the Policy Letter and Policy Matrix. The Borrower and the bank shall review the implementation of the Program every six months, and assess the impact of all relevant reforms in the social security sector and labor markets, in particular, and the economy in general.

Loan Agreement Schedule 5, para. 7

Complied with

BOM = Bank of Mongolia; MECS = Ministry of Education, Culture and Science; MFE = Ministry of Finance and Economy ; MSWL = Ministry of Social Welfare and Labour; PCR = project completion report.

38 Appendix 5

STATUS OF COMPLIANCE WITH LOAN COVENANTS FOR PROJECT LOAN 1836-MON (SF): SOCIAL SECURITY SECTOR DEVELOPMENT

PROGRAM AND PROJECT

Covenant

Reference in Loan

Agreement

Status of

Compliance

1

(a) The Borrower shall cause the Project to be carried out with due diligence and efficiency and in conformity with sound social security, administrative, financial, engineering and environmental practices.

Loan Agreement, Section 4.01.(a)

Complied with

(b) In the carrying out of the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 6 to this Loan Agreement.

Loan Agreement, Section 4.01.(b)

Complied with

2

The Borrower shall make available, promptly as needed, the funds, facilities, services, land and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project and the maintenance of the project facilities.

Loan Agreement, Section 4.02

Complied with

3

(a) In the carrying out of the Project, the Borrower shall cause competent and qualified consultants and contractors, acceptable to the Borrower and the Bank, to be employed to an extent and upon terms and conditions satisfactory to the Borrower and the Bank.

Loan Agreement Section 4.03. (a)

Complied with

(b) The Borrower shall cause the Project to be carried out in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to the Borrower and the Bank. The Borrower shall furnish, or cause to be furnished, to the Bank, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as the Bank shall reasonably request.

Loan Agreement Section 4.03. (b)

Complied with

4

The Borrower shall ensure that the activities of its departments and agencies with respect to the carrying out of the Project and operation of the Project facilities are conducted and coordinated in accordance with sound administrative policies and procedures.

Loan Agreement Section 4.04

Complied with

5

(a) The Borrower shall make arrangements satisfactory to the Bank for insurance of the Project facilities to such extent and against such risks and in such amounts as shall be consistent with sound practice

Loan Agreement Section 4.05. (a)

Complied with

(b) Without limiting the generality of the foregoing, the Borrower undertakes to insure, or cause to be insured, the goods to be imported for the Project and to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such goods.

Loan Agreement Section 4.05. (b)

Complied with

6

(a) The Borrower shall maintain, or cause to be maintained, records and accounts adequate to identify the goods and services and other items of expenditure financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, the operations and financial condition of the agencies of the Borrower responsible for the carrying out of

Loan Agreement Section 4.06. (a)

Complied with

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the Project and operation of the Project facilities, or any part thereof.

(b) The Borrower shall (i) maintain, or cause to be maintained, separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to the Bank; (iii) furnish to the Bank, as soon as available but in any event not later than six months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the covenants of this Loan Agreement as well as on the use of the procedures for imprest account/statement of expenditures), all in the English language; and (iv) furnish to the Bank such other information concerning such accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably request.

Loan Agreement Section 4.06. (b)

Complied with

(c) The Borrower shall enable the Bank, upon the Bank's request, to discuss the Borrower's financial statements for the Project and its financial affairs related to the Project from time to time with the Borrower's auditors, and shall authorize and require any representative of such auditors to participate in any such discussions requested by the Bank, provided that any such discussion shall be conducted only in the presence of an authorized officer of the Borrower unless the Borrower shall otherwise agree.

Loan Agreement Section 4.06.(c)

Complied with

(a) The Borrower shall furnish, or cause to be furnished, to the Bank all such reports and information as the Bank shall reasonably request concerning (i) the Loan, and the expenditure of the proceeds and maintenance of the service thereof; (ii) the goods and services and other items of expenditure financed out of the proceeds of the Loan; (iii) the Project; (iv) the administration, operations and financial condition of the agencies of the Borrower responsible for the carrying out of the Project and operation of the Project facilities, or any part thereof; (v) financial and economic conditions in the territory of the Borrower and the international balance-of-payments position of the Borrower; and (vi) any other matters relating to the purposes of the Loan.

Loan Agreement Section 4.07. (a)

Complied with

7

(b) Without limiting the generality of the foregoing, the Borrower shall furnish, or cause to be furnished, to the Bank quarterly reports on the carrying out of the Project and on the operation and management of the Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as the Bank shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter.

Loan Agreement Section 4.07.(b)

Complied with

(c) Promptly after physical completion of the Project, but in any event not later than three (3) months thereafter or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a

Loan Agreement, Section 4.07.(c)

Complied with. Final PCR has been submitted following the

40 Appendix 5

Covenant

Reference in Loan

Agreement

Status of

Compliance

report, in such form and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by the Borrower of its obligations under this Loan Agreement and the accomplishment of the purposes of the Loan.

initial presentation of a draft PCR.

8 The Borrower shall enable the Bank's representatives to inspect the Project, the goods financed out of the proceeds of the Loan, and any relevant records and documents.

Loan Agreement, Section 4.08

Complied with

9

The Borrower shall ensure that the Project facilities are operated, maintained and repaired in accordance with sound administrative, financial, engineering, environmental, and maintenance and operational practices.

Loan Agreement, Section 4.09

Complied with

10

(a) It is the mutual intention of the Borrower and the Bank that no other external debt owed a creditor other than the Bank shall have any priority over the Loan by way of a lien on the assets of the Borrower. To that end, the Borrower undertakes (i) that, except as the Bank may otherwise agree, if any lien shall be created on any assets of the Borrower as security for any external debt, such lien will ipso facto equally and ratably secure the payment of the principal of, and interest charge and any other charge on, the Loan; and (ii) that the Borrower, in creating or permitting the creation of any such lien, will make express provision to that effect.

Loan Agreement, Section 4.10 (a)

Complied with

(b) The provisions of paragraph (a) of this Section shall not apply to (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; or (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date.

Loan Agreement, Section 4.10 (b)

Complied with

(c) The term "assets of the Borrower" as used in paragraph (a) of this Section includes assets of any political subdivision or any agency of the Borrower and assets of any agency of any such political subdivision, including the Bank of Mongolia and any other institution performing the functions of a central bank for the Borrower.

Loan Agreement, Section 4.10 (c)

Complied with

Project Implementation

11

Executing Agency As the Project Executing Agency, MSWL shall be responsible for the overall implementation of the Project. MECS shall be the implementing agency for Parts B(i) and B(ii) of the Project.

Loan Agreement Schedule 6, para.1

Complied with

12

Steering Committee To ensure interagency coordination on Project implementation, the Borrower shall ensure that the Project Executing Agency is supported by a Steering Committee. The Steering Committee shall be chaired by the Minister, MSWL, with the Vice-Minister of MFE as the deputy chair, and shall include representatives from MECS, and additional representatives from MFE, MSWL, Ministry of Health, National Children‘s Committee, Veterans‘ Association, NGOs representing persons with disability and employers‘ representatives, including the Project Director who shall serve as the Secretary of the Steering Committee. The

Loan Agreement Schedule 6, para. 2

Complied with. Last steering committee meeting was held in Aug 2009.

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Status of

Compliance

Steering Committee shall provide policy guidance for the Project and shall meet at least once every three months, and as often as necessary.

13

Project Director The Borrower shall ensure that the Project Director, appointed by the Minister, MSWL, shall be responsible for the overall execution and supervision of the Project at the national level, and coordination of Project activities with other donor-financed interventions, including those financed by the Bank.

Loan Agreement Schedule 6, para. 3

Complied with

Project Management Unit The Borrower shall ensure that the PMU is responsible for the day-to-day coordination and implementation of the Project, including bidding for procurement and construction supervision; procurement of equipment and materials; selection, engagement and management of consultants; and liaison with the Bank on Project-related matters. The Borrower shall also ensure that under the supervision of the Project Director, the PMU is headed by a Project Manager and includes a Project management adviser (international consultant for a total of eight person months of Project implementation over a four-year period), a social welfare and insurance specialist, a procurement officer, a secretary, an accountant and a driver.

Loan Agreement Schedule 6, para. 4

Delayed compliance. Project management advisor was engaged only in November 2004 due to limited consultants specializing in social security development.

15

Sub-Project Management Unit The Borrower shall ensure that the sub-PMU is responsible for the day-to-day implementation of Parts B(i) and B(ii) of the Project. The sub-PMU shall be headed by a Project Coordinator who shall report to the Project Manager. The Project Coordinator shall also be responsible for procurement matters under Parts B(i) and B(ii) of the Project. The sub-PMU shall be staffed by a training specialist and an accountant.

Loan Agreement Schedule 6, para. 5

Partially complied with. At the beginning of the project implementation, a project coordinator was recruited; however, the position was terminated due to unsatisfactory performance. EA decided to merge positions into one ADB loan project manager to head the merged PMU without the project coordinator.

Community Social Welfare Innovation Facility

16

Technical Committee The Technical Committee, to be established by MSWL, shall be responsible for review and approval of the proposals for innovations in community social welfare services, which seek support from the CSWIF established under Part A(ii) of the Project. The members of the Technical Committee shall be appointed by the Minister, MSWL. The terms of reference and

Loan Agreement Schedule 6, para. 6

Complied with. The technical committee was established in June 2004. ADB approved the TOR and

42 Appendix 5

Covenant

Reference in Loan

Agreement

Status of

Compliance

membership of the Technical Committee shall be subject to the Bank‘s concurrence. The Project Director shall chair the Technical Committee.

membership in August 2004. It completed its duties in December 2005.

17

Screening and Selection Criteria; Applicable Procedures The Borrower shall ensure that (i) MSWL finalizes, with the concurrence of the Bank, the screening and selection criteria and the applicable procedures for the CSWIF, before any disbursement is made from the CSWIF, and (ii) the first three applications to be selected are jointly reviewed with the Bank before final approval is granted.

Loan Agreement Schedule 6, para. 7

Complied with. The national consultant was engaged in Nov 2003 while the international consultant in May 2004. Guidelines for model building were developed by consultants and approved in July 2004.

18

Evaluation Criteria The Borrower shall ensure that the proposals are evaluated by the Technical Committee in accordance with criteria regarding: (i) technical soundness of the proposed innovation; (ii) relevance to priority areas; (iii) development and implementation costs; (iv) beneficiary coverage and needs; (v) potential for replication; (vi) sustainability; and (VII) the extent of provision of counterpart support, including

local government support or other forms of community mobilization.

Loan Agreement Schedule 6, para. 8

Complied with. Project proposals were developed and evaluated in accordance with criteria.

19

Eligibility The Borrower shall ensure that the CSWIF is made available to social care centers at the aimag level, NGOs, CSOs groups or individuals for development and provision of community-based social welfare services aimed at the elderly, children, disabled and single-parent families.

Loan Agreement Schedule 6, para. 9

Complied with. Expressions of interest have been made available as required: NGOs, private entities, and government agencies.

20

Implementation Arrangements The Borrower shall ensure that the PMU, under the guidance of the Social Welfare Agency and Policy Coordination Department of MSWL, disburses and administers the CSWIF in accordance with guidelines and procedures established with the concurrence of the Bank. Awards from CSWIF shall be in the form of block grants not in excess of $10,000 equivalent, unless otherwise agreed by the Borrower and the Bank. Block grants shall be disbursed in a phased manner according to monitorable milestones or indicators that shall be elaborated in the respective proposal. The PMU shall conduct training workshops for prospective eligible participants about the availability and the operating principles of the CSWIF.

Loan Agreement Schedule 6, para. 10

Complied with. 29 pilot projects were implemented for a duration of a year, and midterm (June 2005) and final (December 2005) participatory evaluation conducted and

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Status of

Compliance

Proposals shall be reviewed and approved quarterly. The deadlines for submitting proposals for each quarter shall be set by the PMU in consultation with the Technical Committee.

progress and results of piloting disseminated in a timely manner.

Other Matters

21

Monitoring and Evaluation The Borrower shall ensure that MSWL modifies the existing management information system for the social security system to allow clear and ongoing impact assessment of Project activities without establishing duplicate reporting structures. The modified management information system shall include quantitative and qualitative data on social welfare, social insurance, employment promotion services and other additional indicators specified by the Bank. Efficiency of service provision shall also be measured under this system. Additional indicators for modification of the standard monitoring and evaluation subsystem shall be developed by MSWL and the finalized system shall be submitted to the Bank for concurrence within three months after the Effective Date.

Loan Agreement, Schedule 6, para. 11

Partial compliance. The midterm review took a sectorwide approach and subsequently an MIS for the sector was developed and installed in 2008.

22

Supervision and Midterm Reviews The Borrower and the Bank shall jointly undertake semi-annual reviews of the Project to assess progress, identify any constraints and agree on strategies for resolving constraints. In addition, the Borrower and the Bank shall undertake a midterm review of the Project at about the end of the second year of the Project implementation period to assess the Project‘s progress and achievements against its objectives, identify any difficulties being encountered and recommend remedial action, if and where required.

Loan Agreement, Schedule 6, para. 12

Complied with. A midterm review was conducted in 2004. Annual reviews were conducted.

23

Training Programs for the Unemployed The Borrower shall, within eighteen months after the Effective Date, commence delivery of training, re-training and skills upgrading programs for the unemployed, in accordance with a plan acceptable to the Bank.

Loan Agreement, Schedule 6 para. 13

Complied with. Training is accessible to unemployed people under Employment Promotion Fund

24

Access to Micro-Finance Schemes The Borrower shall, within eighteen months after the Effective Date, commence implementation of a program for facilitating access of the Project beneficiaries to the ongoing and planned micro-finance schemes in its territory, in accordance with a plan acceptable to the Bank

Loan Agreement, Schedule 6, para. 14

Complied with. Micro Finance Scheme is part of Employment Promotion Fund.

25

Environment The Borrower shall ensure that the Project is carried out, and all Project facilities are constructed, operated, maintained and monitored, in accordance with the existing laws, regulations and standards of the Borrower concerning environmental protection, and the Bank's environmental guidelines.

Loan Agreement, Schedule 6, para. 15

Complied with

ADB = Asian Development Bank; CSO = civil society organization; CSWIF = Community Social Welfare Innovation Facility; EA = executing agency; MECS = Ministry of Education, Culture and Science; MIS = management information system; MFE = Ministry of Finance and Economy; MSWL = Ministry of Social Welfare and Labour; NGO = nongovernment organization; PCR = project completion report; PMU = project management unit.

44 Appendix 6

CONSULTING SERVICES ASSIGNMENT

Position

Source of

Funds

Person-months

Appraisal Actual

International National International National

A. Social Welfare

1. Social Welfare Service Specialist ADB 2.0 9.0 1.5 8.5

2. Community Social Services Specialist ADB 2.0 20.0 8.9 16.2

3. Social Welfare Management Specialist ADB 3.0 7.0 1.6 3.2

4. Civil Works Specialist ADB Lump sum Lump sum

5. Unallocated ADB 5.0

B. Employment Promotion

1. Labor Market Policy Specialist NDF 2.0 6.0 2.0 4.0

2. Skills Training Specialist NDF 18.0 46.0 14.5 39.0

3. Entrepreneurship Specialist NDF 8.0 35.0 7.1 27.0

4. Employment Services Specialist ADB 2.0 6.0 1.0 2.0

5. Civil Works Specialist NDF Lump sum Lump sum

6. Working Conditions Specialist ADB 1.0 3.0 1.0 1.0

C. Social Insurance

1. Unemployment Insurance Specialist ADB 2.0 6.0 0.0 0.0

2. Social Insurance (Self-Employed) Specialist

ADB 1.0 4.0 2.0 2.0

3. Employment Injuries and Disease Insurance Specialist

ADB 2.0 4.0 1.5 3.0

D. Project Management

1. Project Management Specialist ADB 7.0 20.0

E. Management Information System 7.5 10.5

Total 50.0 151.0 68.6 116.4

ADB = Asian Development Bank, NDF = Nordic Development Fund.

Appendix 7 45

LESSONS 1. The Social Security Sector Development Program (SSSDP)1 was very ambitious in both the policy and project objectives. The project addressed both the basic institutional architecture of the social protection sector and human and physical resource aspects of service delivery. During the project completion review mission in June 2010, stakeholders repeatedly stressed the importance of the capacity building at all institutional levels and equipment provision as important inputs that had made a significant difference. Both kinds of investments have supported the development of human resource, information technology and institutional networks across the country that continue to provide the bulk of social protection services today. Key lessons from the implementation include: 2. Targeting. Social welfare reform is a sensitive and protracted process. The SSSDP pioneered new concepts and approaches at a critical time in the country‘s history, but the reforms it initiated are not complete. The progress made by the program in developing a new vision for social welfare was undermined by the introduction of universal benefits. New efforts at introducing proxy means testing under the Food and Nutrition Social Welfare Program and Project,2 are attempting to help ensure that the reform agenda is sustained. The Draft Social Welfare Law of 2010 will be another measure of how far the reforms are accepted. 3. Protecting social workers. The considerable progress made in training a new cadre of social workers is at risk as they do not have the status of civil servants. Their job security and productivity is undermined by the absence of officially approved job descriptions and work standards, which was anticipated under the project. The government needs to take measures in these areas to create a professional, protected, and productive cadre of social workers. 4. Livelihood support councils. As part of the reforms pioneered by the project, the government introduced livelihood support councils. The councils clearly have an important contribution to make and have the legal mandate to do so. However, there is uncertainty as to how effective they are nationally and what is the full range of their responsibilities. A national assessment of the strengths and weaknesses of the councils is urgently needed. 5. Updating the social security sector strategy paper. The Social Security Sector Strategy Paper was a major milestone and the document is still a valuable guide for the sector. There is a need to update it, and this should be a priority once key decisions have been made regarding the proposed consolidation and targeting of benefits. 6. Use of information, education, and communication. The SSSDP conducted an intensive information, education, and communication campaign to garner support among the public and politicians for the reforms. Although this did not prevent a reversal in policy in 2006, it was successful in terms of broadening public understanding of the role of social welfare. As Mongolia enters a new period of reform that may result in the introduction of a national proxy means test, it is vital that a new information, education, and communication campaign is put in place and sustained.

1 Asian Development Bank (ADB). 2001. Report and Recommendation of the President to the Board of Directors:

Proposed Loans and Technical Assistance Grant to Mongolia for the Social Security Sector Development Program. Manila.

2 ADB. 2008. Report and Recommendation of the President to the Board of Directors: on Proposed Grants Assistance

to Mongolia for Food and Nutrition Social Welfare Program and Project. Manila.

46 Appendix 7

7. Increasing roles for nongovernment organizations. The SSSDP brought civil society into social welfare provision for the first time in Mongolia. Nongovernment organizations participated in consultations and piloting community-based services. The role of nongovernment organizations can be expanded considerably in the areas of monitoring of policy implementation, service, and advocacy for reforms. 8. Civil registration. The SSSDP failed to explicitly address a fundamental weakness in the social welfare system: the systematic exclusion of unregistered households. Efforts to overcome this flaw need to be accelerated. 9. Creating incentives at vocational training centers. The investment in training and workshop equipment has provided the vocational training centers with opportunities to generate income. This income could be used to replace the equipment provided under the project, but currently all income has to be reported and the value of this is then deducted by the Ministry of Finance from the next year‘s budget. 10. Improving the impact of business incubation centers. Stakeholders frequently cited the creation and expansion of business incubation centers as an example of project success. The impact of the centers could be furthered by (i) providing start-up loans and performance-based support, (ii) providing better outreach to remote areas, and (iii) developing business incubation center packages that better target the livestock development needs of herders. 11. Social insurance. The State Social Insurance General Office made considerable progress in improving its technical capacity under the project. It is likely that even greater progress would have been made had the office been given greater autonomy, more involvement in policy making, and better protection from political appointments. In the future these fundamental issues need to be addressed. 12. Monitoring and evaluation. The project did not have an adequate monitoring and evaluation (M&E) system. Key analysis and insights on gender and socioeconomic impacts are not available because of a lack of collection and disaggregation of data. Initially it was planned that the project management unit would have an M&E officer to monitor progress but the M&E unit in Ministry of Social Welfare and Labour offered to play this role, with limited success. Project progress reports ended in 2006 and weaknesses in M&E were cited by many Asian Development Bank review missions as an issue to be addressed. The limited capacity of the M&E unit needs to be addressed if the impacts of future reform initiatives are to be properly assessed. 13. Management information system. Many stakeholders cited the provision of new hardware and software as a key success of the project. However, at the level of senior management there is less enthusiasm, and senior managers are still unable to obtain basic information easily on the status of social welfare beneficiaries to support basic decision making. The challenge ahead is how to link different vertical systems that have been created within different government agencies in ways that improve management and effectively eliminate fraud. This is an area still requiring support from international agencies.

Appendix 8 47

QUANTITATIVE ASSESSMENT OF OVERALL PROJECT PERFORMANCE

Criteria Assessment Rating (0–3) Weights (%) Weighted

Relevance Highly Relevant 3 20 0.6 Effectiveness Effective 2 30 0.6 Efficiency Efficient 2 30 0.6 Sustainability Likely 2 30 0.4 Overall Rating: Successful 2.2

Notes on Rating System: Rating 3 = Highly Relevant/Highly Effective/Highly Efficient/Most Likely 2 = Relevant/Effective/Efficient/Likely 1 = Partly Relevant/Less Effective/Less Efficient/Less Likely 0 = Irrelevant/Ineffective/Inefficient/Unlikely Rating greater than 2.7 = Highly Successful Rating between 1.6 and less than 2.7 = Successful Rating between 0.8 and less than 1.6 = Partly Successful Rating below 0.8 = Unsuccessful