report and recommendation of the president to the board of ... · peer reviewer j. gomez-reino,...

Report and Recommendation of the President to the Board of Directors

Project Number: 46059 September 2012

Proposed Programmatic Approach, Policy-Based Loan and Grant, and Grant Assistance for Subprogram 1 Lao People‘s Democratic Republic: Governance and Capacity Development in Public Sector Management Program

CURRENCY EQUIVALENTS (as of 5 September 2012) Currency unit – kip (KN)

KN1.00 = $0.00013 $1.00 = KN7,809.64

ABBREVIATIONS ADB – Asian Development Bank DDF – District Development Fund EPFC – economic planning finance committee FDI – foreign direct investment Lao PDR – Lao People‘s Democratic Republic MAF – Ministry of Agriculture and Forestry MDG – Millennium Development Goal MOES – Ministry of Education and Sports MOF

MOH MOHA

– – –

Ministry of Finance Ministry of Health Ministry of Home Affairs

MONRE – Ministry of Natural Resources and Environment MPI – Ministry of Planning and Investment NCAW – National Commission for the Advancement of Women NGPAR – National Governance and Public Administration Reforms NSAW – National Strategy for the Advancement of Women NSEDP7 – Seventh National Socio-Economic Development Plan PAM – project administration manual PFM – public financial management PFMSP

PPP – –

Public Financial Management Strengthening Program public–private partnership

PSM – public sector management SAO – State Audit Organization

NOTES

(i) The fiscal year (FY) of the Government of the Lao People‘s Democratic Republic

and its agencies ends on 30 September. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2012 ends on 30 September 2012.

(ii) In this report, "$" refers to US dollars.

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.

Vice-President S. Groff, Operations 2

Director General K. Senga, Southeast Asia Department (SERD)

Director S. Hattori, Public Management, Financial Sector and Trade Division, SERD

Team leader P. Jena, Senior Public Management Specialist, SERD

Team members A. B. Frielink, Lao Resident Mission (LRM), SERD

Peer reviewer

J. Gomez-Reino, Senior Public Management Specialist, SERD U. Hoque, Social Development Specialist (Gender and Development), SERD S. Leuangkhamsing, Senior Economics Officer, LRM, SERD M. Mina, Project Analyst, SERD J. Pedersen, Procurement Specialist, Central Operations Services Office R. Ramilla-Siquijor, Operations Assistant, SERD P. Rhee, Counsel, Office of the General Counsel E. Bolongaita, Public Management Specialist, South Asia Department

CONTENTS

Page

PROGRAM AT A GLANCE

I. THE PROPOSAL 1

II. THE PROGRAM 1

A. Rationale 1 B. Impact and Outcome 3 C. Outputs 3 D. Development Financing Needs 6

III. PROJECT GRANT FOR CAPACITY DEVELOPMENT 7

IV. DUE DILIGENCE 9

A. Economic and Financial 9 B. Governance 9 C. Poverty, Social, Gender, and Development 9 D. Safeguards 9 E. Risks and Mitigating Measures 9

V. ASSURANCES AND CONDITIONS 10

VI. RECOMMENDATION 10

APPENDIXES

1. Design and Monitoring Framework 11

2. List of Linked Documents 14

3. Development Policy Letter 15

4. Policy Matrix 20

PROGRAM AT A GLANCE

1. Project Name: Governance and Capacity Development in Public Sector

Management Program (subprogram 1 and grant assistance)

2. Project Number: 46059-001

3. Country: Lao

People's Democratic Republic

4. Department/Division: Southeast Asia Department Public Management, Financial Sector, and Trade Division

5. Sector Classification:

Sectors Primary Subsectors

Public sector management √ Public expenditure and fiscal management

6. Thematic Classification:

Themes Primary Subthemes

Governance Public administration (national, decentralized, and regional)

Capacity development √ Institutional development

6a. Climate Change Impact

No Climate Change Indicator available.

6b. Gender Mainstreaming

Gender equity theme (GEN)

Effective gender mainstreaming (EGM) √

Some gender elements (SGE)

No gender elements (NGE)

7. Targeting Classification:

General Intervention

Targeted Intervention

Geographic dimensions of inclusive

growth

Millennium development

goals

Income poverty at household

level

√

8. Location Impact:

National High

Rural Medium

Urban Medium

9. Project Risk Categorization: Low

10. Safeguards Categorization:

Environment C

Involuntary resettlement C

Indigenous peoples C

11. ADB Financing:

Sovereign/Nonsovereign Modality Source Amount ($

Million)

Sovereign Policy Based Loan Asian Development Fund 2.5

Sovereign Policy Based Grant Asian Development Fund 7.5

Sovereign Project grant Asian Development Fund 6.0

Total 16.0

12. Cofinancing:

No cofinancing available.

13. Counterpart Financing:

Source Amount ($ Million)

Government .5

Total .5

14. Aid Effectiveness:

Parallel project implementation unit No

Program-based approach Yes

I. THE PROPOSAL

1. I submit for your approval the following report and recommendation on (i) a proposed programmatic approach for the Governance and Capacity Development in Public Sector Management Program, (ii) a proposed policy-based loan to the Lao People's Democratic Republic (Lao PDR) for subprogram 1 of the Governance and Capacity Development in Public Sector Management Program, (iii) a proposed policy-based grant to the Lao PDR for subprogram 1 of the Governance and Capacity Development in Public Sector Management Program, and (iv) a proposed grant to the Lao PDR for the Governance and Capacity Development in Public Sector Management Project.1

2. The program supports the strategy of the Government of the Lao PDR to improve the overall public sector capacity and governance framework and strengthen public financial management (PFM) and public administration reforms as a way to achieve sustained and inclusive economic growth. The program and the related capacity development project is embedded in the Seventh National Socio-Economic Development Plan (NSEDP7), 2010–2015, which envisages an accountable, effective, transparent, and responsive public administration as a key development objective to strengthen service delivery.

II. THE PROGRAM

A. Rationale

3. Improved governance in public sector management is critical to ensuring better service delivery. In the Lao PDR, significant lack of resources and capacity constraints undermine the effectiveness of public sector management (PSM) at all levels. The underlying institutional weaknesses exacerbate expenditure inefficiencies in the achievement of better budgetary outcomes, and affect quality of frontline services.2 Skewed planning, weak PFM, and an ad hoc system of intergovernmental fiscal arrangements affect strategic allocation of resources. Weakened institutional capacities also arise in part from significant inadequacies in financial resources. Despite recent progress in public finance, and increased allocations for education and health services, budget resources are grossly inadequate when compared with the needs identified in sector development plans. Local administrations, responsible for delivering most of the pro-poor programs, have major capacity constraints, especially for efficient and equitable education and health outcomes. 3 While the Lao PDR has made significant progress in advancing gender equality, striking inequalities persist along rural–urban lines, geographic areas (north, center, and south), and between ethnic groups. These have directly contributed to slow achievement of critical Millennium Development Goals (MDGs).

4. The private sector has been identified as the main engine of growth. To overcome persistent resource scarcity in the public sector and chronic inefficiency, the government has adopted policies to facilitate the gradual transition to a private-sector-led market economy, and is seeking domestic and foreign direct investment (FDI) in key sectors, including agriculture, education, and health, to achieve gross domestic product growth of at least 8% annually and to address the financing gap under the NSEDP7. Increasing recognition of the potential of the agriculture and natural resources sector has led to a large flow of FDI since 2008. While FDI brings capital, technology, and skills, in several instances, investments in the agriculture and

1 The design and monitoring framework for subprograms 1 and 2 is in Appendix 1.

2 World Bank. 2010. Lao People's Democratic Republic: Public Expenditure and Financial Accountability: Public

Financial Management Assessment. Washington, DC. 3 World Bank. 2008. Lao PDR: Public Expenditure Tracking Survey in Primary Education and Primary Health.

Washington, DC.

2

natural resources sector, arising from highly discretionary large-scale land concession agreements, has led to environmentally and socially damaging results. The government also faces a growing governance and institutional gap, and lacks the capacity both at the national and the local government levels to implement and enforce the current law on investment to ensure long-term sustainability and widespread social gains. Gaps remain in enforcement of land concession agreements and public sector capacity to enforce contracts. Doing Business 2012 ranks the Lao PDR 182 among 183 economies in investor protection and 165 in ease of doing business overall.4

5. Government commitment. Governance is a key strategic priority under the NSEDP7. The government has adopted several measures, including a long-term strategic plan, to implement public sector governance reforms. The government is committed to strengthening the PFM system under the ongoing Public Financial Management Strengthening Program (PFMSP). 5 Revenue management arrangements for the Nam Theun 2 and Nam Ngum 3 hydropower projects commit the government to using hydropower revenues to achieve poverty reduction and environmental management goals through strategic allocation of budget resources. The National Governance and Public Administration Reforms (NGPAR), 2011–2015 seek to ensure an accountable and effective civil service at all levels. Major political reforms are under way to strengthen districts as the primary administrative units for service delivery, as a precursor to fundamental reforms in intergovernmental financial arrangements. In addition, gender equality and women‘s empowerment issues have been prioritized in the national development plans, including the National Strategy for the Advancement of Women (NSAW), 2011–2015. The business regulatory environment continues to be streamlined and a broad range of economic reforms has resulted in an improved investment climate, trade, and private sector development. The Lao PDR is geographically well placed to attract foreign investment from the rest of the Greater Mekong Subregion and from the Association of Southeast Asian Nations, and private sector participation.

6. Support to strengthen public sector capacity is a key theme across the country partnership strategy core sectors. The country partnership strategy, 2012–2016 6 and the country operations business plan, 2012–20147 of the Asian Development Bank (ADB) for the Lao PDR recognize governance as a key driver of change. The 2010 country assistance program evaluation recognized the importance of PSM in improving public sector governance.8 Since 2001, ADB has provided continued support through a cluster of technical assistance projects to address institutional and capacity weaknesses focusing on (i) PFM subsystems relating to budget formulation, reporting, and accounting; and (ii) external audit by the State Audit Organization (SAO). During 2006–2011, ADB also supported medium-term fiscal and expenditure frameworks. In addition, the implementation of several projects under the education and health sectors strengthened the capacity for budget planning and execution in the sector ministries. Design of the proposed program builds on these legacy works.

7. Lessons and complex nature of governance reforms. Key lessons from implementing PFM and civil service reforms in a capacity-constrained environment require that a step-by-step approach is followed to allow changes to be introduced gradually. A longer time frame is a prerequisite for external assistance given the ground realities and weak starting point.

4 World Bank. 2011. Doing Business 2012: Doing Business in a More Transparent World. Washington, DC.

5 Government of the Lao PDR, Ministry of Finance. 2005. Public Expenditure Management Strengthening Program.

Vientiane (since renamed the Public Financial Management Strengthening Program). 6 ADB. 2011. Country Partnership Strategy: Lao People’s Democratic Republic, 2012–2016. Manila.

7 ADB. 2011. Country Operations Business Plan: Lao People’s Democratic Republic, 2012–2014. Manila.

8 ADB. 2010. Country Assistance Program Evaluation: Lao People’s Democratic Republic—Sustainable Growth and

Integration. Manila.

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Therefore, it is necessary to remain engaged for a longer period of time and to respond flexibly to changes in priorities during implementation. These lessons have been incorporated into the design of the program.

8. The program priorities are aligned with government reform priorities, and are well coordinated with development partners. The program is consistent with key objectives of the NSEDP7 that underline the link between good governance and broader development goals. Support to the PFMSP, NGPAR, and NSAW goals maximizes harmonization and ownership. Using a programmatic approach, the program seeks to sequence high-impact policy reforms, which allows reforms to be phased over the medium term. Development partners recognize that the lack of institutional capacity in the public sector is a crosscutting challenge. The World Bank, the European Union, and Australia represented by the Australian Agency for International Development are supporting the PFMSP to strengthen PSM through a series of poverty reduction support operations and complementary technical assistance via a World Bank-managed multidonor trust fund. The United Nations Development Programme is the lead agency in public administration reforms.9

B. Impact and Outcome

9. The program impact will be improved delivery of key public services. The program outcome will be strengthened national and subnational PSM.

C. Outputs

10. Link between subprograms 1 and 2. The program comprises two subprograms, facilitating a concerted policy dialogue on the basis of an agreed program policy matrix related to key government reforms and sector priorities. In addition, the program provides a clear financing framework for the government over the medium term. The program policy matrix includes reforms completed prior to consideration of subprogram 1 by the ADB Board of Directors, and indicative triggers for subprogram 2 to facilitate continuous dialogue with the government (Appendix 4).

11. Subprogram 1 supports the government‘s efforts through (i) implementing multiyear budgeting and intergovernmental fiscal relations; (ii) strengthening civil service capacity at the central and subnational level, including gender-responsive capacity; and (iii) strengthening investment management capacity in the public sector for private sector investments and identifying potential public–private partnership (PPP) arrangements. Reform in these areas will be key policy pillars under subprograms 1 and 2. Under subprogram 1, the government began undertaking these reforms in January 2010, and all 19 policy measures required for subprogram 1 were completed. Subprogram 2 specifies 11 triggers (prior actions that are to be completed before submission to the Board) that need to be satisfactorily accomplished by mid-2014. These triggers advance accomplishments under subprogram 1.

12. Output 1: Multiyear budgeting and intergovernmental fiscal relations implemented. The government‘s PFM system continues to be strengthened under the PFMSP, and a medium-term implementation plan 2011–2015 monitors progress. The overall legislative framework and basic orderliness of budget processes has improved. Budget timetables are better aligned with budget execution. A draft public finance development strategy in support of the NSEDP7 is under consideration. The Ministry of Finance (MOF) had undertaken capacity development for implementation of medium-term expenditure framework (MTEF), in line with the

9 Development Coordination (accessible from the list of linked documents in Appendix 2).

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mandate of the 2006 State Budget Law and the 2009 Budget Implementation Decree. MTEF links policy, planning, and budgeting to improve efficiency and effectiveness of public spending. Key government staff members in the MOF, the Ministry of Education and Sports (MOES), and the Ministry of Health (MOH) were trained to develop medium-term fiscal and expenditure frameworks. The MOF budget instruction for FY2012 required the MOES and MOH to prepare medium-term budget projections for FY2012–FY2015 on a pilot basis, but much effort will be needed to institutionalize a MTEF during the implementation of subprogram 2. The government is committed to increasing total budget resources by 18% for the education sector and 9% for the health sector under the national budget. The MOES allocated $30 million in August 2010 under the Education for All – Fast Track Initiative Program that targeted increased enrolment of girls in primary schools in remote and ethnic areas.

13. A new set of accounting regulations for implementing the 2007 Law on State Accounting was approved by the minister of finance (Regulation 1325) in June 2010, and ministry and provincial staff were trained to strengthen accounting functions. All line ministries at the center and the provinces have access to government financial information system for transaction processing. In addition, Budget, Treasury, and other departments of the MOF are connected to the GFIS to improve budget reporting. Under subprogram 2, the MOF will make efforts to comply with the requirements of the 2007 Law on State Accounting, initially on a cash basis, through the phased adoption of International Public Sector Accounting Standards. The SAO has recently finalized an implementation plan for institutional strengthening and professional development, identifying immediate and longer-term support, and has prepared a detailed capacity development plan for procurement audit for implementation during 2012–2014. To strengthen legislative support to audit reports, the economic planning finance committee (EPFC) of the National Assembly and SAO has developed draft rules of procedure to improve coordination and strengthen discussion and examination of the audit reports by the EPFC. The SAO and EPFC are committed to the approval of the draft rules and to continue strengthening legislative oversight of public expenditure during the subprogram 2 implementation period.

14. Since the approval of the State Budget Law in 2006, the Lao PDR has successfully implemented critical reforms of the intergovernmental fiscal transfer system. In particular, it has recentralized the revenue functions (the Treasury, Customs, and Tax administration offices). Importantly, the reforms have contributed to increased revenue collection since FY2006–FY2007. The MOF has also prepared a decree on budget norms that should rationalize the system of budget appropriation to the major spending ministries such as Education and Health. The MOF has recently established a working committee to examine issues concerned with amendment of the 2006 State Budget Law. The current strategy in the Lao PDR is to strengthen the basic pillars of the deconcentrated fiscal system, and develop the role of districts as the key level of administration for service delivery, including transfers directly to the districts, initially as a pilot. In the area of fiscal transfers, further efforts will be made to shift to a transparent and formula-based mechanism for the distribution of tax revenues to be shared between the central and subnational administrations over the subprogram 2 implementation period.

15. Output 2: Civil service capacity at the central and subnational levels, including gender-responsive capacity, strengthened. Governance reforms are gradually being mainstreamed, underlined by a strong political commitment from the Ninth Party Congress. The Ministry of Home Affairs (MOHA) has prepared a draft governance strategy for 2011–2020 that aims to improve the public service, strengthen the rule of law and people‘s representation and participation, and improve PFM. A strategy to promote gender equality in public administration is under consideration by the government so as to support gender-sensitive policy and programs related to governance reforms. A national leading committee has been established to guide the implementation of the government‘s governance reforms. In a significant decision to strengthen

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institutional focus, the MOHA became a full fledged ministry in June 2011, responsible for governance-related reforms and addressing systemic weaknesses within the civil service. To support the implementation of the strategy for the advancement of women, the Division for the Advancement of Women was established in the MOHA. The NGPAR, 2011–2015 was approved by the prime minister in February 2012 to ensure an accountable, effective, and responsible administration and civil service. A program board for NGPAR implementation, chaired by the deputy prime minister, has been constituted. The Public Administration Research and Training Institute was established in 2011 to lead and coordinate research and training on civil service issues at the national and subnational levels. The MOHA continued to lead efforts to strengthen MDG-focused service delivery in 35 districts through the District Development Fund (DDF).10 Based on the prime minister‘s order in June 2012, the MOHA is also working out the policy framework and institutional processes needed to (i) build awareness and disseminate the nature of reforms to strengthen districts, initially as a pilot for 1 year (two districts in each province); and (ii) build on lessons learned. Under subprogram 2, the MOHA and other stakeholders are committed to strengthening implementation and monitoring of the strategic plan on governance, including the strategy for the promotion of gender equality by the National Leading Committee and the NGPAR Program Board. Effective implementation of the NGPAR will ensure enhanced skills and competencies for a modern public administration system through greater and more focused training, including gender-responsive training in the Public Administration Research and Training Institute. The MOHA will continue to lead, coordinate, and support measures to strengthen district administrations to perform efficiently for improved service delivery over the subprogram 2 implementation period.

16. Policies and processes related to gender equality are gradually being mainstreamed. The National Commission for the Advancement of Women (NCAW), responsible for the promotion of gender equality and the empowerment of women, has developed its second NSAW, for 2011–2015. In addition, the Ministry of Agriculture and Forestry (MAF) approved the Five–Year Strategy for the Advancement of Women in Agriculture and Forestry Sector, 2011–2015 in May 2012, supporting women‘s increased access to resources and decision-making positions. As part of strengthening capacity at the district level, a number of trainings were organized to improve gender-sensitive planning, monitoring, and evaluation, including gender-specific health issues on improving service delivery for maternal and child health. Under subprogram 2, the MAF and NCAW will continue to monitor the implementation of action plans and sector targets developed under the NSAW, 2011–2015 and the Five–Year Strategy for the Advancement of Women in Agriculture and Forestry Sector.

17. Output 3: Investment management capacity in the public sector for private sector investments and identifying potential public–private partnership arrangements strengthened. 11 Land concessions issued have resulted in losses of anticipated revenues and raised a number of governance challenges with regard to promoting sustainable land management. The government established the Ministry of Natural Resources and Environment (MONRE) in 2011 to improve the enforcement of land concession agreements, contracts, and strengthen interagency coordination in order to avoid overlap in mandates at various levels, including measures to develop capacity. The government has recently issued a moratorium on concessions for 2 years pending review of the existing policies and legal framework, and endorsed the revised Technical Guidelines on Compensation and Resettlement of People 10 DDF supports administrative capacities for delivering local government services that primarily supports expansion

of infrastructure to improve service delivery at kum ban (a cluster of villages) and district levels. DDF facility is intended to operate as a stimulus and foundation for intergovernment fiscal transfers.

11 Public Sector Capacity for Management of Investments in Land and Private Sector Participation through Public–Private Partnerships – A Background Note for the Proposed ADB Capacity Development Support (accessible from the list of linked documents from Appendix 2).

6

Affected by Development Projects in June 2011. Training on social safeguards (including gender issues in resettlement) was also provided to staff of the MONRE and line agencies from three provinces and nine districts. Two working groups are finalizing the National Land Master Plan and the National Land Policy to further streamline land management. Subprogram 2 will support further measures for training and to strengthen capacity to screen, award, and monitor investment proposals by the Ministry of Planning and Investment (MPI), MAF, and MONRE.

18. The government is seriously looking at PPP models to meet the funding gap in the social sector. Since 2010, the MPI, MAF, MOES, and MOH have strengthened the policy framework for enlisting private sector investment.12 The government is identifying policy measures required to strengthen the enabling investment environment to promote PPPs in the Lao PDR, specifically in the health and education sectors to start with. A draft PPP policy is being considered by the government. It is expected that upon adoption of the PPP policy the government will develop a combination of policy and regulatory reforms—including institutional support, incentives, and financing modalities—to increase incentives for private sector participation in financing, developing, and managing future infrastructure and development projects. Under subprogram 1, ADB facilitated a number of strategic policy dialogues to strengthen advocacy to foster an enabling framework for PPPs. Under subprogram 2, the MPI will seek to finalize the PPP policy framework, and adopt measures to develop an appropriate legal and regulatory framework.

D. Development Financing Needs

19. To support the government reform initiatives outlined in the program, tentative financing needs of $20 million have been identified. For subprogram 1, the government has requested a single tranche loan in various currencies equivalent to SDR1,655,000 and a single tranche grant not exceeding $7.5 million, in each case from ADB‘s Special Funds resources to finance subprogram 1. The loan will have a 24-year term, including a grace period of 8 years, and an interest rate of 1.0% per annum during the grace period and 1.5% per annum thereafter. The loan and grant will be subject to such other terms and conditions substantially in accordance with those set forth in the draft financing agreement. The policy-based loan and grant reflects the development financing needs based on estimated gross external borrowings for 2012–2013 of $218.0 million to implement development projects, including the proposed loan and grant under subprogram 1. Financing of subprogram 2 will also come from Special Fund resources and is estimated at $10 million. Additional budget resources for subprogram 2 are to be utilized for ensuring sustainability of the reforms under subprogram 1, with special focus on a greater level of public financing for the education and health sectors for improved service delivery. During 2010–2012, the net increases in the government budget for the education and health sectors (excluding foreign assistance) was about $88 million. Given that these sectors are significantly underfunded, the budget increases will readily exceed the amount of ADB financing over the medium term. The policy adjustment cost to the government of implementing and complying with the reform measures is estimated at $24 million.

20. Implementation arrangements for the program. The implementation period for subprogram 1 is from January 2010 to July 2012, and the implementation period for subprogram 2 is from August 2012 to September 2014. The executing agency for the program will be the MOF, which will also be responsible for the overall coordination and disbursement of resources under the programmatic approach. A program steering committee, chaired by the vice-minister 12

MPI: Investment Promotion Law 2009, National Investment Strategy 2011, and Prime Minister‘s Decree 119 for Implementation of the New Investment Promotion Law; MAF: Agricultural Development Strategy 2010; MOES: Ministerial Decree 113 of 29/3/2011 promoting private education; MONRE: State Land Law 2002; and MOH: Health Financing Strategy, 2011–2015 and Seventh Five-Year Health Sector Development Plan, 2011–2015.

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of finance, will oversee the implementation of the program and provide overall guidance. The MAF, MONRE, MPI, MOH, MOHA, MOES, NCAW, and SAO will be the implementing agencies. As the executing agency, the MOF will be responsible for the overall implementation of subprogram 1 including disbursements, maintenance of all program records, and communicating with ADB on behalf of the government.

21. Procurement and disbursement arrangements. The policy-based loan and grant for subprogram 1 will be released in a single tranche, following loan and grant effectiveness. The closing date of the loan and grant will be 31 March 2013. The government will primarily use the local currency counterpart funds generated by the loan and grant proceeds to meet program expenditures and associated costs of reform. The proceeds of the subprogram 1 loan and grant will be disbursed in accordance with the provisions of ADB's Simplification of Disbursement Procedures and Related Requirements for Program Loans.13 Before withdrawing any funds, the government will open or nominate a deposit account with the Bank of the Lao PDR to receive the loan and grant proceeds. The account will be managed, operated, and liquidated in accordance with ADB‘s Loan Disbursement Handbook (2012, as amended from time to time). ADB will retain the right to audit the use of the loan and grant proceeds, and to verify the accuracy of the government‘s certification for the withdrawal application.

III. PROJECT GRANT FOR CAPACITY DEVELOPMENT

22. The government has requested a grant not exceeding $6 million from ADB‘s Special Funds resources to help finance the project. Implementation will require technical inputs and targeted on-the-job support, given the weak civil service capacity to undertake public sector reforms and to meaningfully engage with the private sector. The project will have three components: (i) strengthening multiyear budgeting and intergovernmental financial arrangements; (ii) strengthening civil service management reforms and administrative capacity, including support to the NCAW; and (iii) strengthening investment management capacity in the public sector and for PPP initiatives. The project is estimated to cost $6.5 million. ADB will finance $6 million equivalent from ADB's Special Funds resources (Asian Development Fund), including applicable taxes, duties, and bank charges. The government contribution will be $0.5 million equivalent through in-kind contributions of counterpart staff and various facilities. The project administration manual (PAM) outlines the proposed activities under the project grant, and will be further refined prior to implementation.14 The project financing plan and project investment plan are summarized in Tables 1 and 2.

Table 1: Financing Plan Source Amount ($ million) Share of Total (%)

Asian Development Bank (Asian Development Fund) 6.00 92.31

Government 0.50 7.69 Total 6.50 100.00

Source: Asian Development Bank estimates.

Table 2: Project Investment Plan Item Amount

a

A. Base Costb

1. Consultants 3,320,420.00 2. Equipment/vehicle

c 290,000.00

3. Trainings/workshops c 795,000.00

4. Surveys/studies c 1,040,000.00

5. Project management support c

190,000

13

ADB. 1998. Simplification of Disbursement Procedures and Related Requirements for Program Loans. Manila. 14

Project Administration Manual (accessible from the list of linked documents in Appendix 2).

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500,000 690,000.00 Subtotal (A) 6,135,420.00 B. Contingencies

d 364,580.00

Total (A+B) 6,500,000.00 a Includes applicable taxes, duties, and bank charges to be financed from the Asian Development Bank (ADB) grant resources amounting to about $0.50 million. The basis for this financing of taxes and duties is ADB. 2011. Country Partnership Strategy: Lao People’s Democratic Republic, 2012–2016. Manila. The amount of taxes and duties (i) is within the reasonable threshold identified in the country partnership strategy, (ii) does not represent an excessive share of the project investment plan, and (iii) only apply with respect to ADB-financed expenditures. The financing of such taxes and duties is material and relevant to the success of the project.

b Mid-2012 prices.

c Details of equipment, training, project management support costs, including provision for prefeasibility and

feasibility studies for public–private partnership project development, are detailed in the project administration manual (accessible from the list of linked documents in Appendix 2). Some of these also include

transportation and

insurance costs. d

Contingencies at approximately 10% for base costs.

Source: Asian Development Bank.

23. The project implementation period will be from January 2013 to 31 July 2016. At the request and on behalf of the government, ADB will assist in the selection of consultants while the MOHA will sign and administer the contract with the consultants, following ADB‘s Guidelines on the Use of Consultants (2010, as amended from time to time) for the loan project or grant-financed project. The grant proceeds for financing activities under the project will be disbursed in accordance with ADB‘s Loan Disbursement Handbook. The implementation arrangements are summarized in Table 3 and described in detail in the PAM (footnote 15).

Table 3: Implementation Arrangements

Aspects Arrangements

Implementation period January 2013–July 2016

Estimated completion date 31 January 2016

Management

(i) Oversight body The program board under NGPAR will act as the project steering committee with vice-minister of MOHA as chair and representatives from implementing agencies as members.

(ii) Executing agency Ministry of Home Affairs

(iii) Key implementing

agencies

MAF, MOES, MOHA, MONRE, MOF, MOH, MPI, NCAW

(iv) Implementation unit Project management unit at MOHA

Procurement National competitive bidding 1 contract <$0.5 million – prior review

Shopping Various contracts <$0.5 million – prior review

Direct contracting Various contracts <$10,000

Consulting services QCBS selection method – component 1

80 person-months >$1.0 million – prior review

QCBS selection method – component 2

74 person-months >$0.5 million–$1.0 million – prior review

Individual consultant selection –

method – components 2 and 3

115 person-months >$30,000–$150,000 – prior

review

Disbursement The grant proceeds will be disbursed in accordance with ADB's Loan Disbursement

Handbook (2012, as amended from time to time) and detailed arrangements agreed upon

between the government and ADB.

ADB = Asian Development Bank, MAF = Ministry of Agriculture and Forestry, MOES = Ministry of Education and Sports, MOHA = Ministry of Home Affairs, MONRE = Ministry of Natural Resources and Environment, MOF = Ministry of Finance, MOH = Ministry of Health, MPI = Ministry of Planning and Investment, NCAW = National Commission for the Advancement of Women, NGPAR = National Governance and Public Administration Reforms, QCBS = quality- and cost-based selection.


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IV. DUE DILIGENCE

A. Economic and Financial

24. The program will have allocative efficiency gains from the reallocation of financial resources to development priorities with higher rates of socioeconomic returns. The program will result in greater budget for the education and health sectors, and the expected expenditure efficiencies will be achieved through a medium-term budget. In addition, the government's plans to strengthen districts will potentially lead to better assignment of functions and better service delivery of key MDGs. Enforcement and effective supervision of large-scale private sector investment in agriculture and potential PPPs will have large potential economic spin-offs. As reforms progress and regulatory changes are adopted, more accurate quantification of reform benefits and costs will be possible by the subprogram 2 in 2014.15

B. Governance

25. The government is committed to strengthening its PFM system through the PFMSP. A new procurement decree, implementing rules and regulations, a standard procurement manual, and standard bidding documents have improved procurement practice. The government has taken credible measures to strengthen key oversight agencies such as the SAO, and has adopted the Law on Anti-Corruption, Law on State Inspection, Law on Complaints and State Audit, and Law on State Accounting. ADB‘s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the government and the executing agencies. The specific policy requirements and supplementary measures are described in the PAM (footnote 15).

C. Poverty, Social, Gender, and Development

26. The program is a general intervention, which will indirectly reduce poverty by improving implementation of programs targeting poor and vulnerable groups. The key gender issues impacted by the program include (i) gender gaps in education in poor, rural, remote, and ethnic group areas; (ii) high maternal mortality as a result of lack of access to emergency obstetric care and skilled attendants at birth, and financial barriers; (iii) limited women‘s participation in decision making; and (iv) lack of gender awareness and gender-sensitive capacity of civil servants to support service delivery.

D. Safeguards

27. The program does not trigger safeguard policies and is classified category C for involuntary resettlement, impact on indigenous peoples, and impact on the environment.

E. Risks and Mitigating Measures

28. Implementation of the program faces three potential risks (Table 4), described in detail in the risk assessment and risk management plan. 16

Table 4: Summary of Risks and Mitigating Measures Risks Mitigating Measures

Potential external risks may arise from a prolonged global and regional economic downturn, deterioration in macroeconomic conditions, and inherent volatility in prices of key commodities.

Highest political leadership has strong commitment to focus on supply-side public investment and reduce reliance on the mining sector.

15

Summary Program Impact Assessment (accessible from the list of linked documents in Appendix 2). 16

Risk Assessment and Risk Management Plan (accessible from the list of linked documents in Appendix 2).

10

Institutional and implementation risks from weak administrative capacity to implement new policies and public financial management and public administration reforms

This risk is partially mitigated through sustained technical assistance from development partners, as well as the proposed capacity development project grant.

Institutional resistance to change, including gap between legislation and the cumbersome procedures actually faced by the private sector

Efforts are under way by the government to strengthen regulation and supervision, and to improve ease of doing business and enforce contracts.


V. ASSURANCES AND CONDITIONS

29. The government has assured ADB that implementation of subprogram 1 and the project shall conform to all applicable ADB policies including those concerning anticorruption measures, safeguards, gender, procurement, consulting services, and disbursement as described in detail in the PAM, the financing agreement, and grant agreement. The government has agreed with ADB on certain covenants for subprogram 1 and the project, which are set forth in the financing agreement and grant agreement. The conditions for loan and grant effectiveness are the establishment of (i) the program steering committee in the MOF, and (ii) a project management unit for each of the three components of the project.

VI. RECOMMENDATION

30. I am satisfied that the proposed programmatic approach, policy-based loan, policy-based grant, and grant would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the Board approve:

(i) the programmatic approach for the Governance and Capacity Development in Public Sector Management Program;

(ii) a loan in various currencies equivalent to SDR1,655,000 to the Lao People‘s Democratic Republic for subprogram 1 of the Governance and Capacity Development in Public Sector Management Program, from ADB‘s Special Funds resources, with an interest charge at the rate of 1.0% per annum during the grace period and 1.5% per annum thereafter; for a term of 24 years, including a grace period of 8 years; and such other terms and conditions as are substantially in accordance with those set forth in the draft financing agreement presented to the Board;

(iii) the grant not exceeding $7,500,000 to the Lao People‘s Democratic Republic, from ADB‘s Special Funds resources, for subprogram 1 of the Governance and Capacity Development in Public Sector Management Program, on terms and conditions that are substantially in accordance with those set forth in the draft financing agreement presented to the Board; and

(iv) the grant not exceeding $6,000,000 to the Lao People‘s Democratic Republic from ADB‘s Special Funds resources, for the Governance and Capacity Development in Public Sector Management Project, on terms and conditions that are substantially in accordance with those set forth in the draft grant agreement presented to the Board.

Haruhiko Kuroda President

5 September 2012

Appendix 1 11

DESIGN AND MONITORING FRAMEWORK Design Summary

Performance Targets and Indicators with Baselines

Data Sources and Reporting Mechanisms

Assumptions and Risks

Impact

Improved delivery of key public services

By 2018: Proportion of population living below poverty line reduced to 10% of the population (MDG 1) and maternal mortality rate reduced to 150 deaths per 100,00 live births (MDG 5).

a

(Baseline: proportion of the population living below the poverty line was 26.9% in 2007-2008 (MDG 1) and maternal mortality ratio estimated to be 580 per 100, 000 live births in 2008 (MDG 5). Doubling of budget resources to ensure improved education and health outcomes, especially reduction of mortality rates for children under 5 years and increase in gross secondary enrollment ratio and adult literacy rate. (2008–2009 baseline: estimated public spending on education and health totalled 4%–5% of gross domestic product)

MDG progress report Lao PDR gender profile update Human Development Report (United Nations Development Programme) MOF Gazette notification

Assumptions

Macroeconomic stability Steady increase in revenue from natural resources Significant official development assistance commitments, and steady foreign direct investment inflows Risks

External risks from adverse global economy and opportunity costs of large-scale investments Political economy risks from political backsliding

Outcome

Strengthened national and subnational public sector management

By the end of 2016: (i) Civil service training institute functioning efficiently with 50% of staff and budget, and implementing a well-formulated annual training plan (2011 baseline: civil service training institute established) (ii) Civil service management—organizational development, job descriptions, assignment criteria, performance management, and code of conduct and gender-sensitive approach—guidelines and procedures approved and implemented (2011 baseline: draft civil service management system in place) (iii) Increased direct budget support from MOF received by 70 districts (2011 baseline: 35 districts are receiving block grants through the District Development Fund)

Governance and Public Administration Reform Program secretariat progress reports on the use of the District Development Fund MOHA annual report

Assumptions

Government commitment to effectively implement public administration and public financial management reforms Effective coordination between MOF, MOHA, and MPI Risk

Institutional and implementation risks from lack of technical skills, and lack of resources

12 Appendix 1

Design Summary

Performance Targets and Indicators with Baselines

Data Sources and Reporting Mechanisms

Assumptions and Risks

Outputs

1. Multi-year budgeting and intergovernmental fiscal relations implemented

By the end of 2016: (i) Medium-term fiscal and expenditure frameworks implemented (2010 baseline: public expenditure and financial accountability framework score of D+) (ii) Formula-based intergovernmental transfer mechanism, including allocation of adequate resources to districts for achieving the MDGs in health and education, established (2010 baseline: PEFA score of D and no formula-based transfer system)

MOF annual reports, and budget call circulars, budget documents, medium-term fiscal framework MOF National Gazette Prime Ministerial Decree, MOF regulations

Assumption

Coordinated technical assistance support from development partners

2. Civil service capacity at the central and subnational levels, including gender-responsive capacity strengthening

By the end of 2016: (i) 750 district officials (30% of them women) benefited from training in financial management, personnel management, and service delivery validated by a post-training survey and evaluation report (2011 baseline: no training plan has been implemented for district officials) (ii) Monitoring and reporting capacity of the National Commission for the Advancement of Women strengthened (2012 baseline: training plan adopted)

MOHA progress reports to the National Assembly Post-training survey Post-training evaluation report

3. Investment management capacity in the public sector for private sector investments and identifying potential PPP arrangements strengthened

By the end of 2016: (i) Developing PPP framework (2012 baseline: No PPP framework exists) (ii) 70 national and provincial MAF, MONRE, and MPI staff trained on appraisal techniques (financial and economic analysis, including social, gender, and risk assessments) to screen, award, monitor, and exercise effective oversight of contracts and concession agreements for state lands (2012 baseline: approximately 15 national staff trained in MAF, MONRE, and MPI)

Prime Ministerial decrees

MOES, MOH, and MPI procedures

IFC Doing Business report 2012

MPI reports MAF and MONRE reports

Assumption

Adequate government capacity and political will to negotiate favorable PPPs and concession agreements Risk

Vested interests opposed to effective enforcement of contract awards and adequate oversight

Appendix 1 13

Activities with Milestones for subprogram 1 Inputs 1. Multi-year budgeting and intergovernmental fiscal relations implemented

1.1 MOF formulated the PFMSP medium term implementation plan 2011–2015. and issued budget instruction for FY2012 requiring MOE and MOH to prepare budget projections for FY2012–FY2015 on a pilot basis. Key government staff in MOE, MOF, and MOH trained to develop and pilot a MTEF.

1.2. MOES provided $30 million in August 2010 under the fast track initiatives to facilitate increased enrollment of primary school students, in particular girls in remote and ethnic areas.

1.3. MOF approved the new Accounting Regulation 1325 in 2010 to support effective implementation of the 2007 Accounting Law.

1.4. MOF commenced full implementation of the new government financial information system and provides training to provincial and line ministry users.

1.5. MOF established a working committee for amending the 2006 Budget Law to strengthen districts at the sub national level in 2012.

1.6. SAO formulated a plan for strengthening procurement audit. In addition, SAO and EPFC developed draft rules of procedure for coordination of objectives and discussion of the Audit Reports of SAO by the EPFC in 2012.

2. Civil service capacity at the central and subnational levels, including gender-responsive capacity, strengthened

2.1. MOHA formulated the draft Governance Strategy 2020 and established a national leading committee for monitoring implementation. In addition, the government formulated the strategy for the promotion of gender equality.

2.2. MOHA established as a new Ministry in 2011. NGPAR 2011–2015 approved and a Program Board established to monitor progress. A Division for the Advancement of Women (DAW) was established in MOHA.

2.3. The Public Administrative Research and Training Institute established in 2011 for research and training in civil service issues.

2.4. MOHA strengthened the policy framework and institutional processes, including capacity development to strengthen the role of districts.

2.5. MAF completed training on gender-sensitive planning in provinces and on monitoring and evaluation at the district level.

2.6. Project management skills training was undertaken for provincial and district health managers while training to improve service delivery for maternal and child health was undertaken for health workers and nurses in the northern provinces.

2.7. Government approved NSAW 2011-2015 and Five-Year Strategy for the Advancement of Women in Agriculture and Forestry Sector, 2011 to 2015.

3. Investment management capacity in the public sector for private sector investments and identifying potential PPP arrangements strengthened

3.1. MONRE established to coordinate and streamline land issues and mandates. In addition, staffs were trained on social safeguards and gender issues.

3.2. MPI commenced preparatory work, and drafted a PPP policy framework.

Subprogram 1

ADB: Policy-based grant and loan: $10 million – (i) Policy-based grant: $7.5 million

(ii) Policy-based loan: $2.5 million

Project grant for capacity development: $6.5 million –

(i) ADB: $6 million (consultancy, equipment, training/workshops, project management support, and contingency)

(ii) Government: $0.5 million in kind. The government will contribute with office accommodation, counterpart staff, salaries, meeting facilities, and others. Item Amount Consultants $3,320,420 Equipment/vehicle $290,000 Trainings/workshops $795,000 Surveys/Studies $1,040,000 Project Management Support $190,000 Contingencies $364,580 Government $500,000

Subprogram 2

Policy-based grant: estimated at $10.0 million

ADB = Asian Development Bank, EPFC = economic planning finance committee, IFC = International Finance Corporation, Lao PDR = Lao People‘s Democratic Republic, MAF = Ministry of Agriculture and Forestry, MDG = Millennium Development Goal, MOES = Ministry of Education and Sports, MOHA = Ministry of Home Affairs, MONRE = Ministry of Natural Resources and Environment, MOF = Ministry of Finance, MOH = Ministry of Health, MPI = Ministry of Planning and Investment, MTEF = Medium-Term Expenditure Framework, NGPAR = National Governance Public Administration Reforms, PEFA = Public Expenditure Financial Accountability Framework, PFMSP = Public Financial Management Strengthening Program, PPP = public–private partnership, SAO = State Audit Organization. a MDG 1: Poverty and hunger—reduce poverty and hunger—is seriously off track, and MDG 5: Improve maternal

health—universal access to reproductive health—is seriously off track. Reducing maternal mortality rate is also off track (source: Government of the Lao PDR. 2010. Accelerating Progress towards the MDGs. Vientiane, September 2010).


14 Appendix 2

LIST OF LINKED DOCUMENTS http://www.adb.org/Documents/RRPs/?id=46059-001-2

1. Financing Agreement: Subprogram 1

2. Grant Agreement: Project

3. Sector Assessment (Summary): Public Sector Management

4. Project Administration Manual

5. Contribution to the ADB Results Framework

6. Development Coordination

7. Country Economic Indicators

8. International Monetary Fund Assessment Letter

9. Summary Poverty Reduction and Social Strategy

10. Risk Assessment and Risk Management Plan

11. List of Ineligible Items

Supplementary Documents

12. Summary Program Impact Assessment

13. Public Sector Capacity for Management of Investments in Land and Private Sector Participation through Public–Private Partnerships – A Background Note for the Proposed ADB Capacity Development Support

http://www.adb.org/Documents/RRPs/?id=46059-001-2

Appendix 3 15

DEVELOPMENT POLICY LETTER

16 Appendix 3

Appendix 3 17

18 Appendix 3

Appendix 3 19

20 Appendix 4

POLICY MATRIX

Assessment of Policy Actions (Triggers) and Milestones and Medium-Term Goals

Objectives Subprogram 1 Policy Accomplishments under

Subprogram 1 (2010–2012)

Subprogram 2 Indicative Policy Actions

(triggers in bold) and Milestones for Subprogram 2 (August 2012–

September 2014)

Medium-Term Direction/Goals

(2010–2014)

A. Implementation of multi-year budgeting and intergovernmental fiscal relations

1. Multi-year perspective in policy-based budgeting

1.1. MOF formulated the PFMSP medium term implementation plan 2011–2015 and continued to progress in the area of budget planning, including Public Finance Development Strategy in Support of the Seventh National Development Plan, budget execution, accounting and reporting. 1.2. MOF issued budget instruction for FY2011/12 requiring MOES and MOH to prepare medium-term budget projection for FY2011/2012 to FY 2014/2015 on a pilot basis, consistent with the requirement of the Budget law and the Budget Implementation Decree to prepare budget in a medium-term context. MOES provided $30 million in August 2010 under the Fast Track Initiative to facilitate increased enrollment of primary school students, in particular girls in remote and ethnic areas.

1.1. MOF continues to improve PEFA scores in key PFM sub-systems, and strengthen coordination with MPI in formulating the annual budget to effectively support implementation of NSEDP7 (2011–2015) within a multi-year perspective. 1.2. MOF progressed in the area of medium-term budgeting, for priority sectors (health and education), building on the initial development of a MTEF, including increased budget resources consistent with the overall fiscal envelop and budget allocation norms to ensure greater budget resources to districts for achieving key MDG targets in health and education sectors with strong gender focus.

1.Strengthened credibility, transparency and comprehensiveness in PFM based on PEFA indicators and program performance assessment framework

2. Predictability and Control in Budget Execution (Accounting and Reporting)

2.1. MOF approved the new Accounting Regulation 1325 in 2010 to support effective implementation of the 2007 Law on Accounting Law and 2006 Law on State Budget, and provided training, including training on the requirements of the International Public Sector Accounting Standards using the cash basis of accounting to Accounting Department staff. 2.2. MOF commenced full implementation of the new Government Financial Information System (GFIS) compatible with the new budget nomenclature system and the structure of the new chart of accounts in 2010 and provided training to provincial and line ministry users.

2.1. MOF to adopt International Public Sector Accounting Standards, first on a cash basis by 2013, consistent with Article 18 of the Accounting Law 2007 and draft a decree and a roadmap for its implementation, including capacity building and provide targets for female trainees. 2.2. Plan upgrades to GFIS progressed, strengthening the transition to the proposed Treasury Information Management System (TIMS).

2. Public sector financial reporting quality strengthened for the public sector.

3. Well-defined institutional arrangements for intergovernmental

3.1 MOF set up a working committee for amending the 2006 Budget Law to accommodate the new arrangement to strengthen

3.1. MOF to undertake a review of current financing modalities for districts and define options for reform by 2014. In addition,

3. Transparency in inter-governmental financial arrangements to improve public service delivery.

Appendix 4 21





September 2014)


(2010–2014)

financial arrangements

districts at the sub national level.

MOF to strengthen policy analysis capacity for inter-governmental financial arrangements, including gender responsive planning and resource allocation to meet MDG targets.

4. Audit professionalism in the field of procurement audits and stronger institutional relationship between SAO and the National Assembly

4.1. SAO prepared a draft capacity development plan to strengthen procurement audit within the scope of 2009–2020 Action Plan, and Implementation Program for 2012. 4.2. EPFC and SAO developed draft rules of procedure for coordination of objectives and discussion of the Audit Reports of SAO by the EPFC

4.1. Improve procurement audit capacity and develop specific audit procedures and tools, consistent with INTOSAI public audit standards.

4.2. Approve rules of procedure for coordination of objectives and discussion of the Audit reports of SAO by the EPFC, and put into practice the procedures for discussion and submission of recommendations to the National Assembly by the EPFC on the audit reports, including training of EPFC members, and SAO staff (30% female staff trained).

4. Greater assurance on public procurement, effective legislative oversight and strengthened independence of SAO

B. Strengthening civil service capacity at the central and subnational level, including gender responsive capacity

5. Improved civil service capacity and strengthen subnational administration at the district level

5.1. The Government through the Ministry of Home Affairs (MOHA) formulated the Strategic Plan on Governance 2011–2020. In addition, the strategy for the promotion of gender equality in public administration developed during 2010–2012 is under consideration by the Cabinet. MOHA established a high-level ‗National Leading Committee‖ to monitor progress. 5.2. In June 2011, the former Public Administration and Civil Service Authority (PACSA) under the Prime Minister‘s office were upgraded to become the Ministry of Home Affairs (MOHA) responsible for leading all governance related reforms envisaged in the draft Governance Strategy 2020. To support gender analyses and gender mainstreaming of governance and public administration reforms, a Division for the Advancement of Women (DAW) was established in MOHA. 5.3. The Prime Minister endorsed the new National Governance

5.1. National Leading Committee on NGPAR to continue timely implementation and regular monitoring of the Strategic Plan on Governance 2011–2020 and the strategy for the promotion of gender equality in public administration.

5.2. National GPAR Program Secretariat to submit regular progress reports on implementation of project activities by cluster managers and to coordinate development partners assistance. In addition, DAW (Sub-CAW) network to be established in MOHA at provincial and district levels, with roles and responsibilities defined to support and build capacity of women in local governance and decision-making positions. 5.3. Program Board for NGPAR to ensure improved coordination

5. An effective, efficient, well-trained, and ethical civil service at the national and sub-national level for strengthened service delivery.

22 Appendix 4





September 2014)


(2010–2014)

Public Administration Reforms (NGPAR) 2011–2015 to strengthen administrative capacity at the central and sub-national levels. A ―Programme Board‖ was established to ensure implementation and monitor progress under the NGPAR. 5.4. Public Administrative Research and Training Institute (PARTI) was established in June 2011 for research and training for civil servants, including curriculum development. Of the 14 technical positions, 6 are occupied by women. 5.4.1 MAF trained 170 staff (122 females) from 11 provinces on gender sensitive planning and M&E (2011–February 2012) at the district level to strengthen capacity. Of the 13,477 Directors and Education staff trained by MOES in 2010–2011, 5,551 were female. 5.4.2. A total of 679 provincial and district health managers (196 females) were trained on project management skills, peer education and gender issues in health. In addition, 168 health workers and nurses (131 females) were trained to enhance their skills and qualifications and improve service delivery for maternal and child health (8 Northern provinces, 2010 to June 2012). 5.5. Prime Minister issued an order in June 2012 for strengthened role of the district as the key level of administration for service delivery initially as a pilot for one year beginning October 2012. This initiative builds on the District Development Fund (DDF) initiative that presently covers a total of 35 districts (25% of all districts).

and effective implementation of NGPAR by MOHA and other relevant offices. 5.4. Public Administrative Research and Training Institute (PARTI) to be fully operational adequately staffed and resourced to strengthen capacity of civil servants and district administration. 30% of trainees to be female. Training content to include gender responsive planning, budgeting, and service delivery as well gender sensitive HR management. 5.5. MOHA to strengthen government wide efforts to disseminate the new administrative arrangement to strengthen districts, and establish a well formulated plan for organizational development of district administration. 5.5.1. MOHA to implement district

development guidelines to ensure that district development committees ensure representation

Appendix 4 23





September 2014)


(2010–2014)

5.6. The Government approved the National Strategy for the Advancement of Women (NSAW) 2011–2015, and established specific gender targets for a range of sectors. Five-Year Strategy for the Advancement of Women in Agriculture and Forestry Sector, 2011 to 2015 to support women‘s increased access to resources and decision-making positions in the sector was approved in May 2012.

of Lao Women‘s Union. 5.6. NCAW and MAF capacity strengthened to monitor the implementation of the action plans and sectoral targets developed under the NSAW 2011–2015 and the Five Year Strategy for the Advancement of Women in Agriculture and Forestry sector—reporting on selected NSAW indicators.

C. Strengthening investment management capacity in the public sector for private sector investments and identifying potential public–private partnership arrangements

6. Effective oversight of land concessions

6.1. MONRE established as a new Ministry in 2011 to improve coordination and streamline overlapping mandates between central ministries, agencies and sub-national administrations to strengthen land governance, and improve human resource capacities.

6.1.1. Government endorsed the revised Technical Guidelines on Compensation and Resettlement of People Affected by Development Projects in June 2011. 101 staff of MONRE and line agencies from 3 provinces and 9 districts were trained on social safeguards (including gender issues in resettlement, such as women‘s legal rights to land and property in resettlement packages, gender sensitive income restoration programs, etc., during September 2011–March 2012).

6.1. MPI, MAF and MONRE to train relevant officials at the central, provincial and district levels on appraisal techniques (financial and economic analysis, including social, gender and risk assessments) to screen, award, and monitor investment proposals.

6. Improved agency coordination on land issues, and improved human resource capacities

7. Promoting private public partnerships (PPPs) in the social sector

7.1. MPI commenced preparatory work to raise awareness for public private partnerships, especially in the social sector 7.2. MPI circulated the draft PPP policy paper for interministerial comments in July 2012 and sought government guidance to further the PPP agenda.

7.1 The Government adopts the policy framework for PPPs by making a public pronouncement and through its website. 7.2 MPI develops appropriate legal framework for PPPs in Lao PDR.

7.3. MPI, MOH and MOES develop a step-by-step structured approach for promoting PPPs, especially for the social sector. This will include the following: - MPI, MOH and MOES Identify the required incentives and

7. Leverage private sector as resources to address financing gap, and improve service delivery

24 Appendix 4





September 2014)


(2010–2014)

government support for promoting PPPs in coordination with MOF. - Government strengthens institutional capacity with clear mandate, and sets up PPP units (to include social and gender expertise) in MPI as well as in Education and Health Ministry. - MPI, MOH and MOES conduct preparatory work on project development for pilot projects in the social sectors (including social and gender assessments). - Guidelines will include checklists for social/gender analysis and recommendations for developing gender action plans, as required.

ADB = Asian Development Bank; DAW = Division for the Advancement of Women; DDF = District Development Fund; EPFC = Economic Planning Finance Committee; FY = Financial Year; GFIS = Government Financial Information System; INTOSAI = International Organization of Supreme Audit Institutions MAF = Ministry of Agriculture and Forestry; MOES = Ministry of Education and Sports; MOF = Ministry of Finance; MOH = Ministry of Health; MOHA = Ministry of Home Affairs; MONRE = Ministry of Natural Resources and Environment; NGPAR = National Governance Public Administration Reforms; NSAW = National Strategy for the Advancement of Women; NSEDP = National Socio-Economic Development Plan; PACSA = Public Administration and Civil Service Authority; PARTI = Public Administrative Research and Training Institute; PEFA = Public Expenditure Financial Accountability Framework; PFMSP = Public Financial Management Strengthening Program; PPP = Public Private Partnership Arrangement; SAO = State Audit Organization; TIMS = Treasury Information Management System. Source: Asian Development Bank.