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SUDAN

MULTI-DONOR TRUST FUND – NATIONAL

PROJECT PROPOSAL DOCUMENT

FOR A

PROPOSED GRANT

IN THE AMOUNT OF US$14.74 MILLION

TO SOUTH KORDOFAN STATE, SUDAN

FOR THE

SOUTH KORDOFAN START-UP EMERGENCY PROJECT

April 15, 2005

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ABBREVIATIONS AND ACRONYMS

CIFA Country Integrated Fiduciary Assessment CPA Comprehensive Peace Accord DHSDP Decentralized Health System Development Project (MDTF) DJAM Darfur Joint Assessment Mission ERW Explosive Remnants of War FMFA Financial Management Framework Agreement GONU Sudan Government of National Unity ICB International Competitive Bidding IDP Internally Displaced Person IDPs Internally Displaced People JAM Joint Assessment Mission JAM UN-World Bank Joint Assessment Mission JIU Joint Implementation Unit LLINs Long-Lasting Insecticidal (Bed-) Nets MDTF Multi Donor Trust Fund MOEI (South Kordofan State) Ministry of Economy and Investment MOFNE Ministry of Finance and National Economy MOU Memorandum of Understanding MPPPU Ministry of Physical Planning and Public Utilities NCB National Competitive Bidding NCP National Congress Party NGO Non Governmental Organization NMAC National Mine Action Center OP/BP Operational Policy / (World) Bank Policy PER Public Expenditures Review PFM Public Financial Management PMU Project Management Unit PSC Project Steering Committee QCBS Quality- and Cost-Based Selection SA Special Account SMRDWR State Ministry of Rural Development & Water Resources SOE Statement of Expenditures SPLM Sudan Peoples’ Liberation Movement TA Technical Assistance UN United Nations UNICEF United Nations Children’s Emergency Fund UNIDO United Nations Industrial Development Organization UNMIS United Nations Mission to Sudan UXO Unexploded Ordnances

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Sudan Multi Donor Trust Fund National

Start-Up/Emergency Project for South Kordofan State

SUMMARY Applicant: Federal Ministry of Finance and National Economy (MoFNE), Sudan

Government of National Unity Brief Description: The project is the first (Start-Up/Emergency) phase of the recovery and

development program for South Kordofan State. It will address a number of emergency needs in basic services and capacity building in the short term (6-9 months). A follow-on, longer-term (Recovery & Development Phase) project will feature a more comprehensive and integrated approach addressing the need for lean, efficient, effective and transparent government institutions.

Project Development Objective:

The project has two key objectives: to contribute on the one hand to the supply of basic services and facilities to the respective conflict-affected populations; and to contribute to capacity building of the state government to enable it to more effectively execute its mandate, especially at the local (decentralized) level.

Performance Indicators (end of 2007):

Basic services: Improved access to water through: o Construction of 5 new water yards, providing access for 30,000

people and 50,000 livestock. o Construction of 20 new hand pumps, providing access for

10,000 people. o Rehabilitation of 100 hand pumps, providing access for 50,000

people. o Institutional support for maintenance of water supply system.

Improvement of the secondary road network through clearing of 50 km and grading of 8 km, construction of 3 bridges and 8 culverts.

Accelerated humanitarian demining, with 1.5 million square meters of high priority suspected or mined areas and roads cleared or verified in about 40 communities, affecting a population of more than 460,000.

Basic education tools & equipment provided: o desks and chairs provided for over 48,000 children. o school kits provided for 287,000 children. o classroom equipment for 350 teachers.

Vocational Training Center in Kadugli rehabilitated, allowing for training of 200 students per year.

Improved primary health through provision (including training for use) of long-lasting insecticidal bednets to 80 percent of rural households.

Rural Household Livelihoods Support (Agriculture):

Increased availability of agricultural and animal traction tools, with distribution of tools and training on use and maintenance provided in

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20 villages (4000 households provided with tools and 400 farmers trained).

Governance

Programs formulated to improve management and implementation capacity for six state ministries (Finance, Economy & Investment, Local Government, Water, Education, and Public Works).

Visible and more effective local administrations through the equipping of local authorities with minimum living and working facilities for civil servants: simple housing, offices, (computer) equipment, transport, electricity (solar panels), water supply and sanitation. Numbers envisaged are 20 offices, 10 living quarters, and requisite office furniture and equipment.

Sector: Multi-Sectoral Location: South Kordofan State, Sudan Total Project Costs and Financing

Total : $ 14.737 million MDTF-N : $ 7.880 million GONU : $ 6.857 million

Implementing Agencies

State Ministry of Economy and Investment, South Kordofan State, UNICEF and UNIDO, relevant line ministries.

Implementing Period:

Components of this Start-up Phase have been planned to end on 31 December 2007, as the start of the follow-up phase is envisaged for 1 January 2008. To allow certain activities to finalize and allow final payments, the closing date is fixed at 31 May 2008.

Contact for further information

1. Ahmed Mansour Geily, Director General, Ministry of Economy and Investment

2. Yousif Mohamed EL Noor, Deputy Director, Ministry of Economy and Investment

3. Hasan Gidail, Director, Planning and Development, Ministry of Economy and Investment

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TABLE OF CONTENTS Start-Up/Emergency Project for South Kordofan State

1. ABBREVIATIONS AND ACRONYMS........................................................................... 2 2. SUMMARY ....................................................................................................................... 3 3. STRATEGIC CONTEXT AND RATIONALE................................................................. 6

a. Key development issues .....................................................................................................6 b. Rationale for MDTF involvement ......................................................................................7

4. PROJECT DESCRIPTION ................................................................................................ 7 a. Project Development Objectives and Key Performance Indicators ...................................7 b. Project Components............................................................................................................8 c. Project Costs by Component............................................................................................16

5. IMPLEMENTATION ...................................................................................................... 16 a. Institutional and implementation arrangements ...............................................................16 b. Procurement arrangements ...............................................................................................18 c. Financial management arrangements ...............................................................................20 d. Monitoring and reporting..................................................................................................21 e. Sustainability and critical risks .........................................................................................21

6. SOCIAL ISSUES ............................................................................................................. 24 7. ENVIRONMENTAL ISSUES ......................................................................................... 24

ANNEXES 1. Country and Sector Background 2. Major Related Projects Financed by the MDTF-N 3. Results Framework and Monitoring 4. Detailed Project Description 5. Project Costs 6. Implementation Arrangements 7. Financial Management and Disbursement Arrangements 8. Procurement 9. Economic and Financial Analysis 10. Safeguards Policy Issues 11. Letters of Endorsement by Sector Ministry and MoFNE of the GONU

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1. STRATEGIC CONTEXT AND RATIONALE a. Key development issues Almost two years after the signing of the historic Comprehensive Peace Agreement (CPA), Sudan is still slowly transitioning from managing conflict to pursuing pro-poor development, which is characterized by high needs, limited and uneven capacity, and rapidly increasing oil revenues. A controversial Darfur Peace Agreement, with intensive efforts on security and political fronts, is taxing the efforts of the international community to engage with the Government of National Unity (GoNU). In the last year, much of the donor community’s attention was oriented towards the Darfur Joint Assessment Mission (DJAM), and the UN’s efforts elsewhere have been crowded out by the humanitarian imperative in Darfur. The 2005 CPA makes a provision for 70 percent of National Development Reconstruction Funds to be targeted to the least developed states in North Sudan, reflecting the recovery and development needs of these areas as well as their pivotal role in sustained peace and security. Within this group of least developed states, the particular status of the Three Areas – Abyei, Blue Nile, and South Kordofan – was recognized in the CPA through specific protocols. These protocols establish a special status under the Presidency for Abyei, and the Blue Nile and South Kordofan states with their own constitution and legislative bodies. The first Sudan Consortium, held in Paris on March 9-10, 2006, noted that since the signing of the CPA, the three transitional areas of Abyei, Blue Nile and South Kordofan had not received the expected resources, which can aggravate the existing political instability in the region. The quick formulation and start-up of a recovery project – including quick impact interventions – is therefore expected and desirable. This will require particular attention from, and coordination and interaction between, the national authorities, the international community (donors), the MDTF-N, the UN, and NGOs. Implementation of the CPA in all Three Areas is behind schedule, but in some areas recovery is moving rapidly. Internally Displaced People (IDPs) are returning, and humanitarian and development agencies are scaling up activities. Opportunities for households to invest more in agriculture have increased; there is a significant increase in food and cash income derived mainly from the benefits of increased stability and movement. However, there remain significant disparities between the Three Areas and the national average, and significant internal disparities between the more and less war-affected areas. The key development issues being addressed by this project and the planned follow-on Development Phase project can be divided into three categories. The political aspect will provide assistance to the implementation of the CPA in terms of encouraging fiscal transfers to the Three Areas. The socio-economic aspect will encompass the greater part of the project, and includes interventions addressing the access to basic services (water, education), infrastructure, and some support to the economic development of the population. Finally, the institutional component will provide support to and capacity building for government institutions, civil society, and other key actors. It will also assist with the development of a comprehensive data collection system for development planning.

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b. Rationale for MDTF involvement The MDTF-N will target its support towards a range of sectors in South Kordofan that are consistent with its comparative advantage relative to other development agencies (e.g. UN agencies, NGOs, and bilateral donors) that have a firm presence on the ground in implementing projects. To this end, MDTF funds will be used as much as possible to bolster projects that the state ministries implement together with these agencies. As a number of other agencies and donors are currently active in these sectors and feature specialized expertise, the MDTF will play a complementary role or provide funding for expansion of activities. In those priority fields where existing activities are limited or nonexistent, the MDTF can take a more active role in designing and implementing projects. For all activities, project design will take place on the basis of state government priorities and the work plans that the respective state authorities have developed together with the UN in a consultative manner. 2. PROJECT DESCRIPTION a. Project Development Objectives and Key Performance Indicators The objective of this start-up/emergency project is to contribute to the supply of urgently-needed basic services and facilities, such as access to water, education, and improved rural roads to conflict-affected populations. A second objective is to improve the capacity of the local authorities in performing their roles towards the population. Progress towards the above outcomes would be measured and monitored based on the following key performance indicators: Basic services:

Improved access to water through: o Construction of 5 new water yards, providing access for 30,000 people and 50,000

livestock. o Construction of 20 new hand pumps, providing access for 10,000 people. o Rehabilitation of 100 hand pumps, providing access for 50,000 people. o Institutional support for maintenance of water supply system.

Improvement of the secondary road network through clearing of 50 km and grading of 8 km, construction of 3 bridges and 8 culverts.

Accelerated humanitarian demining, with 1.5 million square meters of high priority suspected or mined areas and roads cleared or verified in about 40 communities, affecting a population of more than 460,000.

Basic education tools & equipment provided: o desks and chairs provided for over 48,000 children. o school kits provided for 287,000 children. o classroom equipment for 350 teachers.

Vocational Training Center in Kadugli rehabilitated, allowing for training of 200 students per year.

Improved primary health through provision (including training for use) of long-lasting insecticidal bednets to 80 percent of rural households.

Rural Household Livelihoods Support (Agriculture):

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Increased availability of agricultural and animal traction tools, with distribution of tools and training on use and maintenance provided in 20 villages (4000 households provided with tools and 400 farmers trained).

Governance

Programs formulated to improve management and implementation capacity for six state ministries (Finance, Economy & Investment, Local Government, Water, Education, and Public Works).

Visible and more effective local administrations through the equipping of local authorities with minimum living and working facilities for civil servants: simple housing, offices, (computer) equipment, transport, electricity (solar panels), water supply and sanitation. Numbers envisaged are 20 offices, 10 living quarters, and requisite office furniture and equipment.

b. Project Components The proposed project will have eight (8) components, each implemented in parallel. Component 1: Water Supply US$ 2.471 million This component will support the construction and rehabilitation of improved water sources throughout South Kordofan state, with the objective of providing access to potable water on a reasonable per capita per day rate for both human use and livestock watering needs. This component will be implemented by UNICEF, which has been working in South Kordofan for nearly 30 years, The UNICEF Water and Environmental Sanitation Program (WES), launched in 1978, operates within the State Water Corporation, which falls under the State Ministry of Rural Development and Water Resources. UNICEF has undertaken a survey to identify the priority zones and communities in South Kordofan for this component. The UNICEF WES budget for 2007 for South Kordofan is US$1,838,115. However, procurement in 2007 of a new drilling rig that is additional to this, as it was not included in the original plan for the area response. The activities funded by the MDTF will cover about 50 percent of the total cost of the intended WES 2007 program in South Kordofan, and will therefore allow the program to actually be possible to be implemented. The component will consist of the following:

Water Supply Cost (USD x 1000) Procurement of one new drilling rig (medium size) 450 Procurement of 100 new Hand Pumps 200 Procurement spare parts of 300 Hand Pumps, drilling rig and trucks 350 Procurement of 6 vehicles 225 Drilling/installation of 20 new hand pumps 120 Drilling/installation of 5 new water yards 375 Rehabilitation of 100 hand pumps (repairs and spare parts) 30 Geophysical study, Supervision and monitoring, training, etc. 360 Cross-Sectoral and indirect Support costs 361

Total 2,471

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Justification: Access to safe drinking water is severely limited in South Kordofan, with current levels of only 61 percent for human use and 50 percent for livestock. Most of South Kordofan was seriously affected by the North-South war, with infrastructure and basic services, including water points, left in poor condition. The increasing number of returnees will place further strains on the limited water supply points, and will aggravate the acute shortage of drinking water in productive areas. Access to water for human and productive uses is a key point of contention between nomads and sedentary farmers, and provision of additional or improved water sources can help to reduce tensions between these groups. Finally, there is a clear need for rehabilitation of non-functioning water points, which currently stand at 40 percent for hand pumps, 34 percent for water yards, 77 percent for hafirs, and 62 percent for dams. The weak implementing capacity of the state with regards to maintenance and management of water supply must be improved in order to bring sustainable improvements to water points. Component 2: Rural Roads Maintenance & Spot improvements: US$1.8 million This component will support the construction of three small one-lane bridges and eight box culverts, as well as clearing of 50 km and grading of 8 km of roads. Given the urgency of this intervention, private (local) contractors will be engaged under supervision of a consultant. This consultant will also prepare the necessary detailed designs, locations and budgets for the works to be implemented at the start of the project. Heavy equipment (graders, bulldozers, etc.) will also be leased from major national hardware companies that will handle the maintenance and running of these machines. A consultant will assess the added value of existing heavy equipment in need of repair before engaging in their rehabilitation. Capacity building will be integrated into this intervention as staff from respective departments of the ministry will participate in all phases of the project. Furthermore purchase of some equipment is also included in this component: two trucks, six vehicles (4x4), and one tanker. In addition, the South Kordofan Ministry of Physical Planning and Public Utilities (MPPPU) will also rehabilitate one grader, one excavator, two trucks and six tractors. The purchase/rehabilitation of this equipment is not meant to be used in the construction activities under this component (bridges, culverts, clearance/grading), but to re-establish in the medium term minimum capacity for emergency situations (in terms of equipment) and for monitoring ongoing works, routine activities, etc. All these purchases will be procured like other goods and equipment on the government side by the PMU together with the respective line ministry.

Rural Roads Maintenance & Spot improvements Cost (USD x1000) Clearing & grading of roads 450 Construction of bridges 450 Construction of culverts 180 Equipment Rehabilitation New Purchase

380 160

Tools and accessories (Computers and survey set) 60 Technical assistance 30 Design and Supervision (Consulting firm) 90

Total 1,800

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Justification: South Kordofan suffers severely from lack of secondary roads. The state lacks both proper links with other states as well as linkages between major towns in its nine localities. Because of its climatic nature and topographical features, vast regions of the state are inaccessible during the rainy season. Hence a large number of culverts, bridges and improved all-weather roads are needed. Recently, oil development companies have started construction of limited roads – but these are confined to oil development fields. The road department of the MPPPU, which is responsible for design and construction of roads and bridges within the state, suffers from an acute shortage of equipment and trained staff (even for the core tasks of the ministry). More than 60 percent of the limited equipment that it owns is not in working order. Component 3: Basic Education: US$2.843 million This component will build on efforts of the South Kordofan government and specifically the State Ministry of Education (MoE) together with UNICEF to improve and expand access to primary education. This component will be implemented by UNICEF, which has been working in South Kordofan for nearly 30 years and has been active in the education sector for the past two years. Of the 2007 budget for the UNICEF Education program in South Kordofan the MDTF contribution would cover about 97 percent . This component will fund supplies for students and teachers as well as furniture and mechanical equipment needed to render existing schools fully functional. It is expected that the follow-on development phase project (2008-2009) will including funding for rehabilitation of existing schools and construction of new schools; however, in the emergency phase, the focus will be on quick delivery and impact that can be achieved even during the rainy season, when construction cannot be undertaken in rural areas. The project will fund student and teacher kits, classroom equipment and solar cell devices for primary schools. The MoE and UNICEF will provide a more detailed project document, including the targeted communities and locations, before the start of the project. The detailed budget is as follows:

Basic Education Cost (USD x 1000) School kits for 287,353 students (bags with notes, pencils, pens, erasers, sharpeners)

538

350 Classroom bags (chalk, correction pens, rulers, teachers’ notebooks, etc.)

280

3500 cabinets for 1255 schools 155 Equipping of 82 schools & 16 administration offices with 98 solar panels

588

Tables & benches (with capacity for 4 students each) for 48,082 students

992

Distribution and Supervision 100 Cross -Sectoral and indirect support 455

Total 3,108 Justification: The school system in South Kordofan is characterized by inadequate supply of school materials, basic school furniture as well as basic teaching-learning materials. About 75 percent of students do not have even proper seats. Component 4: Vocational Training: US$0.515 million

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Since 2004, UNIDO has been assisting villages in South Kordofan through its Community Livelihoods and Rural Industry Support (CLARIS) program, which provides appropriate training and intermediate technology for soil preparation and weeding. In these targeted villages, agricultural productivity has doubled. On the basis of the results of CLARIS program, the South Kordofan Ministry of Education has requested UNIDO to rehabilitate and further develop the Kadugli Vocational Training College (KVTC). The training is designed to lead to sustainable self-employment or employment within the construction, manufacturing or service sectors. Therefore, this current emergency phase will operate under the comprehensive four-year UNIDO Rehabilitation of KVTC component, at the end of which the development project objective would be accomplished. The vocational training component will fund training programs for young people, women and other vulnerable groups in rural areas to enable them to gain technical skills and to develop livelihoods. The focus in the first stage of the program is on rehabilitating the existing Vocational Training Center in Kadugli so that it can offer courses in Fabrication/ Welding; Vehicle Mechanics; Woodwork/Joinery; Plumbing; Building Construction; Electrics and Tailoring/ Sewing. The total capacity of the Training Center will be 200 trainees per year. During the planned second stage of the program (which may be funded through the planned South Kordofan Development Phase project), other vocational training centers will also be targeted and better curricula will be developed and improved for training in a variety of vocational subjects. Through these interventions, target groups will be provided with the technical know-how and experience that will enable them to achieve sustainable livelihoods, either through self employment or by working in the construction, manufacturing, or service sectors. In this emergency phase the project will rehabilitate the Kadugli Vocational Training College by (i) repairing and refurbishing the building center and annexing basic infrastructure as necessary, and (ii) providing hardware training equipment for the courses. This first phase will be the precondition for activities planned for the second phase, including development and improvement of the curricula of the existing training center, provision of training equipment and furniture needed to implement the courses, and training of key trainers with the skills to deliver the developed training curricula. Targeted beneficiaries include local authorities and institutions, young people throughout South Kordofan, and IDPs and other returnees to the areas who will benefit from the training provided by the targeted training centers. The budget for the vocational training subcomponent is:

Vocational Training Centre of Kadugli Cost (USD x 1000) Rehabilitation of buildings/compound (incl. water system) 179 Training equipment, transport & installation 205 Contractor supervision & support costs 131

Total 515 Justification: The Kadugli Vocational Training Center is currently in very poor condition. Buildings are collapsing, facilities are nonexistent, and the water system is in need of repair. This program will allow a significant number of young people, women and other vulnerable segments of the rural population to access operational training structures and technical skills, enabling them to become more productive and be contributing citizens of their communities. Component 5: Humanitarian Demining: US$ 1.596 million

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This component will be implemented by the National Mine Action Center (NMAC) as part of its urgently-needed work on demining suspected roads and other high priority suspected areas in about 40 communities in South Kordofan. Where possible, registered and accredited local mine action NGOs will undertake clearance operations for mines, Unexploded Ordnances (UXO) and Explosive Remnants of War (ERW) in 15 high priority suspected mined areas. The clearance operations will include detailed technical surveys, location, and destruction of mines, UXO and ERW; certification; and handover to the local communities. All mine/ERW clearance operations will be undertaken in accordance with International Mine Action Standards (IMAS) by registered and accredited mine action organizations. Details are as follows: • Clearance/Verification of 4 suspected mined areas on Kauda-Kadugli Route: Beneficiaries

include 30 villages, with a total of 250,000 inhabitants. • Clearance/Verification of 2 suspected mined areas in Undolo community: Targeted

beneficiaries include more than 50,000 local inhabitants and IDP returnees. • Clearance/Verification of Boram Villages: Targeted beneficiaries include more than 85,000

local inhabitants and nomads. • Clearance/Verification of 4 suspected mined areas in Kalandi-Katala community: Targeted

beneficiaries include more than 78,000 local inhabitants and nomads. • Clearance/Verification of 5 suspected mined areas in Boran community: Targeted

beneficiaries include more than 85,000 local inhabitants and nomads. • Provision of Mine Risk Education to the at-risk population in about 40 communities where

suspected mined areas are located. • Construction and furnishing of new state-level Mine Action field office as part of the local

mine action Institutional Capacity Building for planning, coordination, monitoring, and supervision of mine action activities at state level.

Humanitarian Demining Cost (USD x 1000) Kauda-Kadugli Road 561 Undulo area 321 Boram Area 268 Kalandi-Katala area 344 Institutional Capacity 102

Total 1,596 Justification: Sudan is one of the most heavily landmine/Explosives Remnants of War-affected countries in the world. Current assessments indicate that as of December 2006, 1,490 dangerous areas have been identified in Sudan out of which 523 of have been cleared, with more than 950 dangerous areas still remaining to be cleared. The landmine/ERW problem is especially concentrated around garrison towns and along the North-South border in the Three Areas. Landmines and ERW contamination threaten daily lives of civilians in the affected communities; since 2002, mines and UXO have killed or maimed over 2,300 people in Sudan, with almost one quarter of the victims in South Kordofan. While during hostilities, members of the military were most likely to be victims of mines and other UXOs, the return to peace means that victims will more likely be those pursuing livelihoods such as collecting water and firewood, farming, or tending livestock. Furthermore, as many key travel routes were mined, travel remains dangerous and trade between towns is thus impeded. In addition, the landmine/ERW contamination impedes the safe return of IDPs and refugees to their hometowns, and as a result, constrains reconstruction and development efforts in mine/ERW and war-affected areas. More than 460,000 people, including local populations and returnees in about 40 communities, will benefit from this initiative.

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Component 6: Rural Households Livelihoods Support (Agriculture): US$0.596 million Since 2004, UNIDO has been assisting villages through its Community Livelihoods and Rural Industry Support (CLARIS) program by providing appropriate training and intermediate technology for soil preparation and weeding. In these villages, agricultural productivity has doubled. In addition, the food quality has improved and the role of women has been strengthened through the use of food processing and other machineries with potential of income generation. During this new phase of the CLARIS program, a minimum of 4,000 households (including returnees and IDPs) for a total estimated population of 20,000 will benefit of the distribution of kits of locally-produced agricultural hand tools. These tools are produced by 20 blacksmiths trained by the project and selected from within the targeted communities. In addition, 400 farmers will benefit from distribution of animal traction tools as well as training on use and maintenance. The beneficiaries are poor and marginalized rural communities in South Kordofan and Abyei area. This six-month emergency phase will serve as the start-up of the more comprehensive Phase II UNIDO CLARIS program in South Kordofan and Abyei. Under this more extensive program, other villages will be further involved in the project. In particular, women’s groups in the additional villages will be further provided with technology, equipment and management training for agro-processing productive activities and other income-generating activities.

Rural Households Livelihoods Support (Agriculture) Cost (USD x 1000) Supply of tools, training/extension 357 Set-up of sub-offices in Kadugli and Abyei, staff and support costs

240

Total 596 Justification: The supply of agricultural hand tools will allow the targeted populations to re-engage in agricultural production to assure their immediate livelihood needs. The distribution of appropriate technology (the Nuba hoe) will allow surplus production beyond subsistence needs and will contribute towards restoring a sense of responsibility and pride by providing the population with perspectives and choices. Component 7: Capacity Building for State & Local Government: US$ 3.10 million This component will support the South Kordofan state government in developing capacity needed to plan, develop, and implement programs and projects, as well as capacity in financial management and procurement. It also envisages the provision of basic office and housing facilities for local authorities in those localities where they are most needed. The support in this Start-Up/Emergency phase will consist of three elements:

a. Project Management Capacity. Under this subcomponent, the project will fund technical assistance for the management of the project. In addition to overall management, this includes financial management and procurement activities for the State Ministry of Economy and Investment (MoEI) and other state ministries involved in the project for those (sub-) components that are not implemented together with a UN agency. A number of consultants with accounting, procurement and project management expertise will be recruited to work together with a team of young MoEI staff to operate the Project Management Unit (PMU). For funds routed through the unit, the group of consultants will provide overall management and the full range of accounting and procurement

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services, including reporting based upon global best practice and international accounting standards. Capacity building for staff and monitoring of self-managed financial management and procurement responsibilities will form a key part of this support.

b. Implementation Capacity. For six ministries – Finance, Economy & Investment, Local Governance, Education, Water Resources, and Physical Planning & Public Utilities (MPPPU) – the project will fund technical assistance and diagnostic studies to assess the capacity of the respective ministries to plan and implement roles and responsibilities in the framework of their mandate at state and lower levels. These diagnostic assessments will allow the development of one or more comprehensive follow-up programs, either sectoral (such as Rural Roads, Water, etc.) or more cross-cutting (Capacity Building). Consultants will be contracted to formulate these follow-up programs.

c. Construction, equipment and vehicles. Construction of a number of basic office facilities and housing for authorities at the locality level is envisaged. The aim is to make local authorities more visible and to provide them with basic physical means to function. This component will support provision of 20 furnished offices with verandas and zinc roofing in six towns (localities). Ten houses for medium government officials or teachers in six localities will be rehabilitated. Given the urgency of this intervention, private contractors will be engaged under supervision of a consultant. This consultant will also prepare the necessary detailed designs and budgets for the works to be implemented. Furthermore, supporting equipment and vehicles will also be procured to facilitate the work of the authorities at the locality level. This includes: computers, stationery, photocopiers and 18 cars (Hilux 4x4). An additional two cars will be purchased to support the MoEI in its work.

Capacity Building for State & Local Government Cost (USD x 1000) Project Management

• Project Management Unit (4 persons, 11 months) • Office Equipment • Transport (2 vehicles 4x4) • Housing

440 50 75 75

640 Institutional Capacity Consultants for Institutional Assessment, Formulation of follow-up programs

600

Construction/equipment & vehicles 20 offices in different localities Rehabilitation of 10 houses Office furniture Office equipment TA, Design and Supervision 20 cars (Hilux DC 4x4)

500 180 100 120 60

750 1710

Total 2.950 Justification: Just emerging from a post conflict situation, the state government and local authorities face low capacities for planning, implementation, M&E and fiduciary functions. Until that capacity is built up, for an interim period of one to two years, there is a need to recruit an accounting firm to provide project management, fiduciary assurance and planning support. This firm will take the lead for those components not implemented by a UN agency (which would undertake these fiduciary functions). The state government does not currently have the capacity to carry out the

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day-to-day procurement activities or develop the international commercially-compliant procurement procedures necessary to ensure transparency and accountability in the procurement process. Recruitment of this firm is critical given the pipeline of MDTF-supported programs. Component 8: Anti-malaria Bednets: US$ 1.0 million This component was not included in the MDTF Three Areas strategy; however, given its high impact and quick start-up, it has been added to the project. The component will support the marketing and distribution of long-lasting insecticidal nets (LLINs) with the objective of raising coverage to 80 percent of rural households in South Kordofan. Insecticide-treated nets (ITNs) are a very effective malaria control intervention, shown to significantly reduce child mortality. This $1 million subcomponent is part of a larger LLIN program also covering Blue Nile State, Kassala, and Red Sea State. It is envisaged that the MDTF-N Three Areas Program will also contribute $0.4 million to the Blue Nile State Bednets program, with an additional $1.12 million allocated from the ongoing MDTF Decentralized Health System Development Project (DHSDP). The total of $2.52 million would finance the supply and distribution of an estimated 420,000 LLINs, covering most of the population in South Kordofan and Blue Nile as well as targeted groups in Red Sea State and Kassala Long-lasting insecticidal nets (LLINs) have been developed to retain their effectiveness for an estimated 3-4 years. ITNs lose their effectiveness after several washings and so need to be re-treated with insecticide approximately every six months, which has been the major bottleneck to sustaining the impact of ITNs. Recently, LLINs that incorporate insecticide in their fibers have been developed, so that their effectiveness is maintained through at least 20 washes, or for an estimated three to four years. Three types of LLINs have been approved by WHO to date. With the aim of achieving high coverage among entire communities, populations are targeted on the basis of the following criteria, determined on the basis of the situation analysis above: 1. Malaria endemic; 2. Co-existence of visceral leishmaniasis and/or lymphatic filariasis (other mosquito-borne

diseases); 3. Rural population; 4. Current low coverage of LLINs; and 5. Conflict-affected and poor.

Anti-malaria bednets Cost (USD x 1000) Purchase of LLINs 750 In -country delivery, distribution and communication 250

Total 1,000 Justification: Malaria is among the most prevalent causes of illness and death in Sudan, particularly among children and pregnant women. It is endemic in most of South Kordofan, and is more widespread in rural areas than urban areas. Under-five mortality (1999 estimate) was 147 per 1,000 in South Kordofan, and estimates of fever and malaria prevalence suggest that around 4,000 children die of the disease in South Kordofan and Blue Nile every year. Malaria also has a significant impact on maternal and neonatal health, associated with anemia, low birth-weight and maternal and neonatal mortality. It is also associated with malnutrition, increased risk of HIV/AIDS, and other diseases.

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ITNs have been observed to reduce the incidence of malaria episodes by 50 to 62 percent. Several studies have indicated that high coverage of ITNs leads to a “community effect,” whereby even children who do not have a net experience reduced risk of mortality. ITNs for pregnant women are similarly effective in preventing illness, fetal loss, anemia, and low birth-weight. c. Project Costs by Component The total cost for this project is $ 14.737 million. Of this amount, $ 7.88 million will come from the MDTF-N and $ 6.857 million in counterpart funds will be provided by the GONU.

Table 1: Project Costs and Financing (US$ millions) For Grant Purposes

Component MDTF-N GONU Total

Cost 1. Water Supply

a. Water Program b. Vehicles for Ministry

2.246

0.225

2.471 2. Rural Roads Maintenance & Spot Improvements 1.800 1.800 3. Basic Education 3.108 3.108 4. Vocational Training 0.515 0.515 5. Demining 1.596 1.596 6. Rural Households Livelihoods Support (Agriculture) 0.596 0.596 7. Capacity Building for State & Local Government

a. Project management Unit (11 months) b. Consultants Assessments & formulation follow-

up c. Construction/equipment/vehicles

0.640

0.400

0.200 1.710

2.950 8. Anti-Malaria Bednets 1.000 1.000

Total 7.505 6.531 14.036 Contingency 5% 0.375 0.326 0.701

Grand Total 7.880 6.857 14.737 3. IMPLEMENTATION a. Institutional and implementation arrangements I. A State Project Management Unit (PMU) will be established with overall management and

coordination responsibility, such as planning, monitoring & evaluation (PME), and preparation of quarterly reports. It will also be responsible for financial management and procurement services for some of the components as well as capacity building for all concerned state ministries as well as their representatives at the locality level. The components to be handled by the PMU are: 1. Component 2 (Rural Roads Maintenance & Spot Improvements) 2. Component 7 (Governance/Capacity Building) If the respective line ministries do not have the necessary capacity, the PMU will be responsible for the design and preparation of bidding documents, evaluation of offers, and awarding of contracts. The PMU will be situated within the State Ministry of Economy and Investment. To ensure effective functioning of the PMU, a team of external professionals

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will be recruited externally as an interim arrangement to take on the above-mentioned tasks and responsibilities. The MoEI will assign staff to the PMU who will be trained on these tasks and responsibilities.

II. At the level of the line ministries, if there is not already a similar project management

structure in place (with the support of an UN agency involved), a Project Manager (PM) will be appointed with responsibility for implementation of the respective (sub-) project.

III. Wherever a state ministry and a UN agency have a joint program and fiduciary systems in

place, these institutions will be used to save time and avoid the creation of an extra parallel system. In these cases, the respective UN agencies will enter into a Memorandum of Understanding with the MoEI and the respective line ministry, in which the MoEI and the line ministry agree that the UN agency manage the component. The UN agency will sign a specific Grant Agreement with the World Bank to manage these components, including their fiduciary aspects. This Grant Agreement will be based on the Financial Management Framework Agreement between the World Bank and the United Nations1 dated March 10, 2006 (the “Financial Management Framework Agreement”). The components under this arrangement are: 1. Component 1 (Water Supply): UNICEF 2. Component 3 (Basic Education): UNICEF 3. Component 4 (Vocational Training): UNIDO 4. Component 6 (Rural Households Livelihoods Support (Agriculture): UNIDO

IV. Two special cases are Component 5 (Demining), which will be implemented directly by the

National Mine Action Center with federal funding, and Component 8, Anti-Malaria Bednets, for which the DHSDP procurement systems (within the Federal Ministry of Health) are already in place and will thus allow for rapid implementation of the program.

V. A monitoring agent, PricewaterhouseCoopers, has been selected by the MDTF-N at the

national level (Khartoum) to monitor and report on the fiduciary and implementation aspects of the project.

VI. Interim Implementation Arrangements (if any): NA VII. Strategic Oversight: To provide overall strategic orientation and oversight as well as inter-

ministerial and (other) donor coordination, a Program Steering Committee (PSC) will be established. The PSC will be headed by the State Minister of Economy and Investment with representatives of the MDTF-N Technical Secretariat, all concerned implementing ministries, and UN agencies. The PSC will approve the annual work plan and budgets, and will review audit reports and quarterly progress reports. In addition, the PSC will coordinate the roles and funding of various participating donors and government counterparts, resolve inter-agency issues, and conduct monthly reviews of project progress and fund utilization. Figure 1 describes the oversight and implementation structure of the project.

Figure 1. Oversight and implementation structure

1 Signed by Christoper Burnham, Under Secretary-General for Management, United Nations; Robert Patterson, Officer-in-Charge, Food and Agricultural Organization of the United Nations; and James Adams, Vice President, Operations Policy and Country Services, World Bank.

Grant Agreement (GA)

MOEI

Other partners (UN agencies, NGOs)

Federal Ministry of Finance and national Economy

Activities Activities

Line Ministry

Project Manager

Line Ministry

UN agency-

supported project

UN Agency

MoU

Grant Agreement (GA)

PMU

MDTF-N TS

State MOFNE Heads of UN

Agencies

Chair: Minister of

MOEI

State Line Ministers or representatives

State Program Steering Committee (PSC)

W O R L D B A N K

Subsidiary Agreement (SA)

VIII. Role of Other Partners: The project will collaborate with government entities and other

donors such as UNMIS and WHO which are not routing their assistance through the MDTF but could in certain cases support the project in-kind or through parallel financing.

b. Procurement arrangements I. For this program the provisions in the World Bank‘s guidelines for Rapid Response to Crises

and Emergencies (OP/BP 8.00) apply. Detailed procurement procedures are described in Annex 8. Procurement under the project will be implemented by the State government based on fast-track procurement procedures consistent with World Bank Guidelines of OP/BP 8.00.

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II. For project components implemented by UN agencies, the procurement will be carried out under a specific Grant Agreement between the World Bank and that UN agency, which again is based on the Financial Management Framework Agreement between the World Bank and the United Nations,2 dated March 10, 2006 (the “Financial Management Framework Agreement”).

III. Given the scarce management and procurement capacity of State government, procurement

will be carried out, as an interim measure, by either the PMU or the UN agencies involved. The aim is to speed up the delivery of the project services to the population through efficient yet transparent procurement practices. As mentioned above, the PMU will also work on increasing the procurement capacity of the State ministries. • Under Component 1, Water Supply, UNICEF will procure the project equipment and

material and will sub-contract to private entities where appropriate. The overall value of the package is US $ 2.01 million. In addition, six vehicles will be procured by the MoEI/PMU (together with other vehicles to be purchased).

• Under Component 2, Secondary Roads Maintenance & Spot Improvements, the sub-

contracting and the purchase of hardware and equipment for road improvements will be undertaken by the PMU in collaboration with the Project Manager within the Ministry of Physical Planning and Public Utilities. The technical staff of the MPPPU, together with a selected infrastructure consultant, will be responsible for setting the specifications for the contracts as well as for the hardware to be purchased with the allocated budget. The overall value of the package for this component is $1.8 million.

• Under Component 3, Basic Education, UNICEF will procure the proposed project

equipment and goods. The overall value of the package is $2.843 million. • Under Component 4, Vocational Training, UNIDO will procure the proposed equipment

and goods and sub-contract with private entities where appropriate (e.g. for works). The overall value of the package is $ 0.400 million.

• Under Component 5, Humanitarian Demining, NMAC will implement the activities.

NMAC will, where suitable, subcontract to local NGOs for undertaking various components, in accordance to federal rules and regulations. The overall value of the package is about US $1.596 million.

• Under Component 6, Rural Households Livelihoods Support (Agriculture), UNIDO will

implement the project (CLARIS), and all procurement will follow UNIDO procedures. Procurement from local suppliers will be arranged where possible, specifically for the Nuba hoes. The overall value of the package is US $0.553 million.

• Under Component 7, Capacity Building for State & Local Government, there are 3 sub-

components: a. Project Management Unit. Local professionals will be recruited by the State

Ministry of Economy and Investment (with assistance of the MDTF-TS) to staff the

2 Signed by Christoper Burnham, Under Secretary-General for Management, United Nations; Robert Patterson, Officer-in-Charge, Food and Agricultural Organisation of the United Nations; and James Adams, Vice President, Operations Policy and Country Services, World Bank.

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PMU. Office equipment and vehicles will also be procured and housing arranged. The value of the package is US $0.640 million.

b. Institutional Assessment & Strengthening. Consultants will be recruited by the PMU/State Ministry of Economy and Investment (with assistance of the MDTF-TS) to undertake this activity. The value of the package is US $0.600 million.

c. Basic office facilities, equipment and vehicles. The PMU in collaboration with the Project Manager of the MPPPU will sub-contract the construction works. The technical staff of the MPPPU, together with a selected infrastructure consultant, will be responsible for setting the specifications for the contracts. Regarding the purchase of equipment (office furniture, e.g.), the PMU will procure this together with the Ministry of Local Governance. Finally, the PMU will undertake the procurement of the vehicles. The value of the package is $ 1.710 million.

• Under Component 8, Anti-Malaria Bednets, the DHSDP procurement system already in

place (within Federal Ministry of Health) will allow rapid implementation of this program. The international competitive tender for supply and delivery of the LLINs has already been issued, and it is expected that the contract will be signed and delivery and distribution begun soon after funds are available. Results are thus expected to be rapidly evident on the ground. The overall value of the package for this component is $ 1.0 million.

c. Financial management arrangements I. So far there is no country fiduciary assessment for Sudan. A Country Integrated Fiduciary

Assessment (CIFA) is underway following the recent Public Expenditure Review (PER 2006) which revealed that in general the Public Financial Management (PFM) system is reasonably well functioning in the North but needs to be substantially revamped and modernized. At state level, the public financial management capacity remains weak.

II. The Federal Ministry of Finance and National Economy (MoFNE) on behalf of the Republic

of Sudan will be the recipient of the MDTF grant. The MoFNE will in turn sign a Subsidiary Agreement with the State Ministry of Economy and Investment (MOEI) of South Kordofan, which will handle overall coordination of the program and manage the MDTF funds for Components 7a & b as well as for the counterpart funds from the MoFNE. A State Project Management Unit (PMU) will be established with overall management and co-ordination responsibility, such as planning, monitoring & evaluation (PME), and preparation of quarterly reports. While the MOEI, line ministries of South Kordofan and locally-based UN agencies are demonstrating strong commitment to support the project, clear coordination and monitoring will be needed to limit the risks of diffuse accountability and the potential for lack of ownership. MOEI lacks both experience in managing development projects and exposure to World Bank procedures. Furthermore, the project will be implemented at the decentralized level in Kadugli where, according to COWI Assessment, fiduciary capacity is extremely weak. Accordingly, the financial management risk on the State government side is considered high. To mitigate these risks a Project Management Unit (PMU) will be installed to handle fiduciary functions and monitor the implementation of the project on behalf of the State MoEI. Furthermore UN agencies, namely UNIDO and UNICEF, will be contracted to manage certain components, including fiduciary aspects as per the general Financial Management Framework Agreement (FMFA) between the Bank and each UN agency.

Given the emergency natures of this project and the presence of the risk-mitigating measures mentioned above, effectiveness conditions can be limited to (1) a national counterpart

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Project Coordinator being appointed by the MoEI; (2) a subsidiary agreement being signed between the federal MoFNE and the state MoEI, and (3) a designated account being opened at the Central Bank and project account opened in an acceptable commercial bank in Kadugli.

III. The project unit will be required to maintain accounting records and prepare project

financial statements in line with International Accounting Standards and have them audited by the Auditor-General in accordance with International Standards on Auditing. The audit reports will be submitted to IDA not later than six months after the end of each fiscal year. Within 45 days following the end of each quarter, a consolidated progress report will be submitted to IDA according to the format adopted for MDTF-N projects, including components directly implemented by UN agencies.

d. Monitoring and reporting The implementing agencies (UN agencies, state ministries) will prepare quarterly Progress Reports which cover outputs, implementation progress, financial statements, as well as results against monitoring indicators. The project will make use of existing data sources, supplemented by regular routine project data collection. Monitoring will focus on positive changes in key indicators such as:

• A total area of 1.5 million square meters in about 40 communities successfully cleared or verified from mines and ERWs and returned to the local population for productive use or safe passage.

• Increase in number of functioning improved water sources. • Number of students provided with school kits. • Etc.

The PMU will compile the reports received from the implementing agencies into one overall Quarterly Report. e. Sustainability and critical risks Country/State issues Sudan has just emerged from almost 25 years of civil war. As with most conflict-affected countries there will be continuing concerns for security, political and economic leadership capacity and possible corruption. The Three Areas remain a high-risk area for conflict, both local and political. The CPA provides a balanced power-sharing arrangement for the Three Areas. Thus without agreement by both parties, decisions and actions can be delayed. In addition, there is a high percentage of IDPs in the Three Areas, and additional pressure of being “model” states. These risks are inherent to the region and indeed justify the need for a start up/emergency project. By addressing the need for basic services, especially among the most war-affected and marginalized populations, the project can help to mitigate some of the instability caused by the influx of IDPs. In addition, with the economy, governance, and peace agreement fragile, the newly established Multi Donor Trust Fund, administered by the World Bank, has been facing considerable pressure to facilitate a faster disbursement of funds, while Government experience with World Bank operations is limited. In terms of security and political stability, South Kordofan should still considered as a risky environment for project implementation. Limited capacity – both physical and managerial – in the state government, and in particular lack of experience in program implementation, may present a

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challenge for speedy implementation. In addition, difficulties in identifying qualified external technical assistance may slow the pace of implementation. Finally, experience with other MDTF projects suggests that transfer of counterpart funds from the GoNU may not occur in a timely manner. The risks are thus estimated high at country and even more at State level. The project will allocate resources to begin a process of structurally improving the capacity in the state ministries concerned. The risks enumerated above will be addressed through the recruitment and engagement of experienced national professionals for the Project Management Unit, which will provide technical assistance and handle day-to-day operations of certain (sub-) components of the project at the state level. In addition, a number of UN agencies will provide the same type of support for the components that they are implementing. Entity level The terms of reference for the Project Management Unit will be drafted taking into account good practices in the design of such programs. Despite this, there remains a risk that well-qualified professionals may be reluctant to operate in a place like Kadugli, not only for political and security reasons, but also for its lack of acceptable living conditions. Consequently, the risks at entity level are considered high Project level Given the multitude of implementing actors (government, UN, private sector) and the short time period, there are considerable risks that the project might be delayed because:

1. The Grant Agreement between Government and the World Bank will take time to become effective (conditions must be satisfied: PMU in place, counterpart funds available).

2. Although there is an agreed-upon standard Grant Agreement between the UN and World Bank, finalization of individual contracts will nevertheless take time. UN-World Bank contracts need to be agreed upon.

3. Procurement of goods may encounter unexpected delays, such as customs or transport hurdles for imported goods or limited availability of locally-sourced goods.

4. The availability of contractors capable of implementing the requested activities with the required quality may be limited.

Consequently, the risks at project level are considered high Below are the detailed risk assessment ratings and mitigation measures.

Risk Risk rating

Risk Mitigating Measures Incorporated into Project Design

Disbursement Conditions

(Y/N)

Remarks

Country/State level

H With regard to political instability and security, little can be done. With regard to capacity, this phase will undertake diagnostics for a number of key state

N Only by addressing the need for basic services, especially among the most war-affected and marginalized populations, can the project help to mitigate some of the social and political instability in the state (caused amongst others by the influx

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Risk Risk rating

Risk Mitigating Measures Incorporated into Project Design

Disbursement Conditions

(Y/N)

Remarks

ministries. Capacity building programs will be part of the second phase With regard to counterpart funds, staff of the MoFNE will work to make these available in a timely manner.

of IDPs).

Entity level H A firm with accounting, procurement and project management expertise will be recruited following the World Bank’s Consultants Guidelines using the Quality and Cost Based Selection (QCBS) procedures. The project will also make use of UN agencies to speed up the implementation as they have systems already in place.

N The team of professionals recruited under the project for the Project Management Unit will be acceptable to the Bank and will, under close supervision of the Bank, be responsible for the day-to-day management of the project at the state level, including the procurement process and accounting functions. Given the relevance of the assignment for future procurement and accounting functions in South Kordofan, the assignment will be subject to Bank prior review at all recruitment stages.

Project level H The process of finalizing the Grant Agreement between UN and WB has already been started. With regard to procurement, it is estimated that most can be done in the early part of the project period. In most cases and especially for UN agencies, there is sufficient experience with hiring of local contractors. Appointment of state counterpart staff in the PMU and in the line ministries will be requested. Furthermore, given the high risk of delays, it has been decided to fix the Closing Date on 1 June 2008, which should give the implementing partners sufficient time to finalize the activities.

Y Appointment of counterpart project coordinator in the PMU is critical.

Overall risks H The overall risk is High. However, this is a much needed project in a desperate but complex political and economic environment.

H-High, S-Substantial, M-Moderate, L-Low

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The overall risk for this project is therefore considered High.

4. SOCIAL ISSUES As per OP/BP 8.00 concerning emergency projects, this project can be processed under simplified procedures regarding social safeguards policies. There are a number of post-conflict issues of concern such as a lack of government institutions, procedures, and legally defined rights; continuing conflicts in some areas; and grievances arising from perceived lack of inclusiveness and equity that have the potential to undermine project activities and affect the implementation of sub-projects. Social risks largely arising from differential access to benefits, traditional rights and entitlements, adequacy of targeting mechanisms, and varying public perception of benefits will be addressed through continuous monitoring of agreed social indicators. The borrower’s capacity for safeguard policies is limited. However, the project will be closely supervised and will be implemented in cooperation with a Project Management Unit knowledgeable about World Bank procedures (including use of the Africa Region’s Environmental Guidelines for Community-Driven Development projects3) and by UN agencies with environmental and social procedures and policies acceptable to the Bank. However, within the institutional support (Component 7) to restructure and enhance the capacity of a number of ministries, the development of safeguard policies and procedures to handle social and environmental issues prudently, will be included. The implementation of these programs will be taken up in the next phase (2008/2009). 5. ENVIRONMENTAL ISSUES As per OP/BP 8.00 concerning emergency projects, this project can also be processed under simplified procedures also regarding environmental safeguards policies. The borrower’s capacity for implementing environmental safeguard policies is limited. However, as noted above, the project will be closely supervised and will be implemented in cooperation with a Project Management Unit knowledgeable about World Bank procedures (including use of the Africa Region’s Environmental Guidelines for CDD Projects4) and by UN agencies with environmental and social procedures and policies acceptable to the Bank. Given the emergency conditions of the project, the most tractable way of achieving sound environmental management is through the adoption of the following actions: (a) immediate application of World Bank Africa Region’s Environmental Guidelines for CDD Projects (b) for the water supply component 1, precautions should be taken for assuring the hygiene at the waterpoints (human and livestock) and that drawdown of the water table in the region will be monitored. This component, however, will be implemented under the "Water & Environmental

3 As expressed in the Environmental Guidelines for the Community Development Fund (CDF) Project for Northern Sudan 4 As expressed in the Environmental Guidelines for the Community Development Fund (CDF) Project for Northern Sudan

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Sanitation” (WES) program of UNICEF, which has (as the name says) a particular focus on water quality and resources protection. Under the (Partner) Grant Agreement with UNICEF, UNICEF will implement this component using its own guidelines and procedures, (c) appropriate disposal of mines and other UXOs as part of the demining component. Furthermore, within the institutional support (Component 7) to restructure and enhance the capacity of a number of ministries, the development of safeguard policies and procedures to handle environmental issues prudently will be included. The implementation of these programs will be taken up in the next phase (2008/2009). It is anticipated that the environmental and social impacts of the project will be minimal and with the adoption of mitigation measures following the “Environmental Guidelines for the Community Development Fund (CDF) Project for Northern Sudan”, will result in sustainable outputs. Below is a table showing the possible impacts and mitigation interventions. SAFEGUARD POLICIES THAT MIGHT APPLY Safeguard Policies Triggered Yes No TBD Environmental Assessment (OP/BP 4.01) X Natural Habitats (OP/BP 4.04) X Forests (OP/BP 4.36) X Pest Management (OP 4.09) X Cultural Property (OPN 11.03) X Indigenous Peoples (OD 4.20) X Involuntary Resettlement (OP/BP 4.12) X Safety of Dams (OP/BP 4.37) X Projects on International Waterways (OP/BP 7.50) X Projects in Disputed Areas (OP/BP 7.60) X The components of the proposed project likely to generate any environmental impacts include: rehabilitation of roads, the construction of culverts and bridges, and the demining of villages and roads. Based upon available information, the impacts are likely to be minimal, local in extent and readily assessed, mitigated and managed. In the case of the rural roads, the work will be done on existing roads. Accordingly, the project is allocated a B impact category. Given the emergency conditions of the project, the most tractable way of achieving sound environmental management is through the adoption of the following actions: (a) immediate application of World Bank Africa Region’s Environmental Guidelines for CDD Projects (b) appropriate disposal of mines and other UXOs as part of the demining component. However, within the institutional support (Component 7) to restructure and enhance the capacity of a number of ministries, the development of safeguard policies and procedures to handle environmental issues prudently will be included. The implementation of these programs will be taken up in the next phase (2008/2009).

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Annex 1 Country and Sector Background

Extracted from: South Kordofan Transitional Five Year Plan; Development Projects 2006-2010, Part Two. (February 2006)

South Kordofan State Location South Kordofan State locates between altitudes 32:51o and 29:68o East and latitudes 09:85o and 12:76o North. It covers an area of 123,700 Km2. It borders North Kordofan state in the North, White Nile state in the East, Upper Nile state to the Southeast and Northeast, Bahr Gazzal and Unity states to the South and South Darfur State to the West. Climate and Vegetation South Kordofan lies in the savannah zone with annual rainfall of 350 mm in the North and 850 mm in the South. The dense of vegetation varies from one area to another in the state according the rainfall and soil. To the North and West where the rainfall is lesser, acacia trees and poor shrubs are scattered all through the zone. Hence, these areas can provide rangelands for immense numbers of cattle and sheep since it has poor quality pasture in the dry season, while it becomes lush during wet season (July-October). Rainfall in the Southern and Eastern parts of the state tends to be higher. Vegetation is dense with bulky trees and lofty wild plants. Rangelands are rich and plentiful during both dry and wet seasons. Forestry and grazing lands are exposed to incessant traditional shifting farming, mechanized farming, overgrazing, charcoal and timber extraction and fires. Thus forestry and gazing lands face continuous deterioration. The upper average temperature ranges between 30o and 40o all through the year with exceptional temperatures of 39o during the three months leading up to the wet season. The lower average temperature ranges between 17o and 20o in the dry season. Average humidity is low and ranges between 20 and 30 percent in the dry season, climbing up to 80 percent in the wet season. Wind movement is moderate in general. Landforms and Soil Landform, soil, rainfall, surface water, ground water, forestry, ranges and land use can be deemed as the major factors in development efforts in South Kordofan. Regarding landforms and soil, South Kordofan can be characterized with the following:

1. The Nuba mountains cover 7 percent of South Kordofan state. They are located in the mid-western and eastern parts of the state, reaching 500-1300 meters. They are interspersed with some wadis and large ponds among the mountains and scattered highlands.

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2. Nuba mountains lands comprise semi-granite mountain-shed soils. The mountain shed progresses to heavy clay soils which sustain most of the agricultural production in the central and eastern regions of the state. It comprises 25 percent of the total state area.

3. Planes with cracked clay soil characterize the southern regions and scattered sites in the eastern part of the state. This comprises 25 percent of the area of the state.

4. Baggara planes are in the western regions of South Kordofan. These include ancient sediment soil and clay lands exploited for grazing and farming activities. This comprises 5 percent of the area of the state.

5. Sandy lands or Goz lands are in the western parts of the state and around northern territories of Dilling locality. This comprises 20 percent of the total area of the state.

6. Gardood lands where there is no water comprise 18 percent of the total area of the state. Water: South Kordofan has no yearlong natural water resources except for a narrow strip in the southwestern region at the Bahr Al-Arab river where mountainous landforms make water flow rapidly towards the planes (northwards and southwards) in seasonal watercourses (Khors). Some of the major seasonal watercourses are:

1. Khor Abu Habil and its two branches, 2. Wadi Shalango and branches, 3. Wadi Al-Ghilla and branches, 4. Khor Al-Badsab, 5. Khor Al-Bathaa, 6. Khor Al-Abbasiya Al-Ao’why,

These watercourses constitute water resources for livestock in the dry season. Shallow wells are dug in the main course or branches of the watercourse. - Surface water presented in open lakes is located in the southern parts of the state (Ar-Ragaba,

Al-Turda, Al-Boot, Ar-Rihood). The most important of all are Lake Abyad, Lake Keilek and Lake Liya. These are in addition to small Foolas scattered in all regions of the state which preserve water for two months or more after wet season. Furthermore, water natural resources include Hafirs, reservoirs, dams, and both shallow and deep wells.

- Groundwater is in the western part of the state at the Baggara plane. Most regions of the state are characterized by basic rocks with not much water and recent sediments at watercourse planes. It produces small amount of water suitable for open shallow wells and Idds. Waters of open shallow wells in the bed of watercourses of seasonal streams are the main water resources for human and animal use, especially in the dry season.

Land Use: 1. The Sudan Land Law of 1970 gives the right over unregistered lands (according to 1925 law)

in rural areas and outside urban sites to the state. Nevertheless tribes and sedentary and nomadic groups considered lands where they move and live customarily as their own. They hold it by historic rights and set boundaries for it recognized by all tribes and associates. Hence, land is owned by tribe according to norms. The land is organized and managed by native tribal leadership (Native Administration). Individuals and groups may benefit from it;

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land is exploited by individuals and households for farming, and fallow land is exploited for public grazing, woodcutting, and other usage.

2. This customary tribal ownership gives the native administration the role of land organizer and land manager as a positive chance to let the tribal population benefit from the land and deepen interrelations through this usage. These interrelations amongst tribes and dominant customs have instituted pathways for the nomadic tribes known as Migratory Routes (Maraheel) giving entrance into lands of the sedentary and nomadic tribes for grazing, and are of advantage to range and water resources situated in lands of sedentary tribes. That is in accordance with agreements and cohesions concluded between these tribes. This has allowed matter-of-fact coexistence between tribes for many decades, although the interference of the state in the 1960s as a result of planning and allocation of vast arable lands on commercial basis as agricultural schemes regardless of the existing situation at that time, caused inconsistency in the customs prevailing among sedentary and nomadic groups. State intervention caused grazing lands, traditional farmlands and horticulture to shrink and scramble for water resources. Increases in human and livestock populations have aggravated the situation.

3. land is exploited for urban use as well to make people reside in towns and cities. This results in the expansion of towns and villages on the account of rural lands.

4. In recent times, land use includes oil explorations and exploration requirements, precisely in the western part of the state.

Population: The population of South Kordofan is 1,711,288. 1,224,649 live in rural areas (1993 census). Traditionally, the population divided into different ethnic groups as follows: 1. Nuba Tribes:

Practice sedentary traditional farming in addition to livestock rearing and grazing in their tribal terrains. Some of them (Moro, Keiga, Gulfan) are take part in recognized typical migration (northwards and southwards).

2. Baggara Tribes (Missairiya, Hawazma, Kinana, Awlad Himaid):

Practice grazing and typical migration (northwards and southwards) as they raise a large number of livestock. Some endeavor to alter their way of living by shifting to traditional farming around towns and some villages.

3. African Western Sudan Tribes (Bargo, Fallata, Barno):

Sedentary tribes engaging in horticulture and livestock rearing (grazing). 4. Merchants from North and Central Sudan:

Residents of cities and big villages, engaging in trade professions. In late 1960s, most of them turned became owners of vast mechanized farming schemes.

- In this specific area, these ethnic groups, in urban and rural areas, are interconnected to each other in terms of dwelling; social, economical and cultural transactions; their local leadership and organization in specific tribal ceremonies; and as regards governance and everyday coexistence.

- Historically, and after the fall of Mahadi State in 1989, the relations between tribes in Sudan (including some in South Kordofan) have witnessed conflicts, violence, warfare and fleeing of

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some tribes and associates to other tribes – in some cases leading to cohesion, aid and exchange of benefits. In the latter part of the twentieth century, after issuance of Native Administration Acts and the policy of absorbing tribal tension and uneasiness, relationships among these ethnic groups and between other groups gradually tended towards peaceful coexistence and establishing a basis for coexistence. However this coexistence faced disruption as a result of the war that spread to the region from the South from 1985 to 2002.

Recent Situation of the Population 1. The population of South Kordofan State is 1,711,288; 309,620 of them (18.1 percent) live in

urban areas, 1,224,649 (71.5 percent) live in rural areas, and 177,019 (10.4 percent) are nomads. Population growth is 2.3 percent.

2. The majority of the population of the state practices farming and grazing. Small portions of population practice other professions and trades.

3. A large number of the population is organized in civic tribal organizations or in local associations. Political loyalty is fragmented into many political associations.

4. Islam and Christianity are widespread in the state, although African beliefs are still present in a limited fraction of population.

5. The outbreak of war in the state caused many inhabitants to migrate from the state, fleeing to other states or other places within South Kordofan.

This displacement led to an unbalanced population structure in the state and consequently a defective census. Communities displaced from South Kordofan into other states managed to organize themselves into associations. They prepared data and information about themselves, and urged and pressured the state and NGOs for voluntarily return to their homelands. Some of displaced returned to the state of their own free will, using their own resources. These displaced people returned to their abandoned villages. Natural Resources: Land is the most important economic resource of South Kordofan. The following economic activities depend mainly on land as natural resource:

A. Agriculture: The state produces sorghum, sesame, rain-fed cotton, millet, groundnut, maize, cowpea and karkadai (hibiscus).

B. Horticulture:

In addition to agricultural crops, the state produces the following horticulture products: mango, lime, guava, banana, tomato, okra, pumpkin, hot pepper and leafy plants.

C. Forestry Products:

Forestry products include timber for furniture making and building materials, some trees used for paper fabrication, gum arabic production, wild fruit trees (fruits used in Sudanese cuisine), trees with therapeutic qualities, and insect repellent trees.

D. Animal Wealth:

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South Kordofan is one of the richest states of the Sudan with regard to animal wealth. The most important livestock are: cattle, sheep, goats, camels, horses and poultry. Livestock raising is practiced through traditional measures in which the number of livestock possessed by the owner is of paramount importance rather than the modernized profit-making tendency. The state is characterized with plentiful and diversified rangelands. Rangelands vary from poor in the North to very rich in the South. Exploitation of rangelands is still undertaken in traditional way. Animal additive nutrients are not yet produced with high quality and low cost. Modernized grazing patterns such as pastoralist farming and pastoralist colonies have not yet been introduced. Animals have not yet been incorporated in the cropping rotation.

E. Minerals:

Recently, oil (drilling and exploitation) has been considered the most important resource in South Kordofan. Likewise, the state is rich in some high-value minerals such as iron, magnesium, aluminum, chromium, silicon, quartz, gold and uranium. These minerals have not been precisely quantified. Plans have not yet been set for economic exploitation.

F. Electricity:

In the eastern part of South Kordofan there is a group of power stations generating an aggregate of 4076 megawatts, while the state requires 1956 megawatts. The generated power is used only for basic services exclusive of the fundamental utilization in economic production. Al-Foula, Babanoosa and Al-Mujlad have their own power stations. Al-Foula’s demand is fully satisfied by the electricity supply, while Babanoosa and Al-Mujlad suffer from deficiencies in electricity supply. Lagawa city lacks a power station.

G. Solar Energy:

As in much of Sudan, South Kordofan receives sunshine all year long. This enables the state to make use of the sun for exploiting solar energy, particularly in rural areas. Solar energy in for social services use only and is not sufficient enough to build an industrial basis for the state.

H. Water:

Groundwater is used in a limited manner for horticulture activity, while water is utilized in general for human and animal use. Water is not economically exploited for irrigation, generating electricity or otherwise.

I. Roads:

Roads are divided into two types: 1. paved highways symbolized in the projected orbit road, 2. feeder roads and unpaved roads which are subject to obstruction either by natural

incidents or due to the effects of warfare (e.g. landmines).

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Services: Although the services structure in the state prior to the war was fragile, the prolonged war practically caused services to collapse. These services are: Education: - collapse of buildings, closing of large number of schools during the years of war until the

present, - movement of teachers to other states, - lack of education facilities such as school books and other facilities, - paralysis of the activity and efficacy of the technical management of education, - weak financial resources employed in education, - weak pupil admission to schools and escalation of school absenteeism. Health: - Collapse of buildings and ultimate closure of many health institutions in the years of war, - Migration of medical staff outside the state, - Weak state medical facilities, - Paralysis of the activity and efficacy of the medical management, namely environmental

sanitation, preventive health and vaccinations. - Poor financial resources, - Lack of drugs, - Negative balance between health services against population. Water: - Water services and water treatment, despite their insufficiency at present, were concentrated

only in big towns. Rural water services were totally disregarded as a result of the extended war. Many water yards and hafirs were devastated. Many hand pumps are not in working order.

Others: - there are a few banking services in the state, but coverage and credit ceilings are less than

needed for the public and to accelerate the economy of the state. Management: The managerial institutions of South Kordofan state are: The Legislative Council and the executive authority represented by the Wali (Governor), Ministries of Finance, Agriculture, Social Affairs, Education, Urban Planning and Health. This is in addition to the ministries of Local Government and Manpower, Culture and Information and Youth and Sports, Economy and Investment, Rural Development and Water Resources. In response to the CPA, which called for a ten-ministry cabinet, the administrative organization of the state includes the justice institutions represented by the judiciary, attorney general, order control institutions, security services, police forces and others. The state is divided into nine localities (Kadugli, Dilling, Rashad, Abu Gubeiha, Talodi, Lagawa, Kailak, AS-Salam and Abyie) which are in turn divided into Administrative Units. Native administration prevails in the rural areas of South Kordofan, and constitutes a regular form in the structures of local government. It comprises Al-Ameer (Al-Nazir), Omda, Mack and Sheikh. Organizational institutions combine modern general administration, such as ministries

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and other organizations, and traditional tribal administration presented by the Native Administration; civil services suffered severe difficulties during wartime when qualified and trained human resources moved away from the state. Qualified civil servants are urgently needed for postwar development activities, including rehabilitation, reconstruction, and social and economic development. The personnel working at present time in the state need improved work conditions, training and introduction to modernized occupational systems.

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Annex 2 Major Related Activities Financed by the MDTF

Activity Name

Year

Economic and Sector Work Kordofan Growth & Institutions Study 2007 Projects 1. Rapid Impact Emergency Project. MDTF-South Sudan 2006 2. Community Development Fund Project (CDF). MDTF-National Sudan 2006 3. Decentralized Health System Development Project (DHSDP). MDTF-National

Sudan 2006

4. National Emergency Transport Rehabilitation Project (NETREP). MDTF-National Sudan.

2006

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Annex 3 Results Framework and Monitoring

Project Development Objective

Indicators Assumptions

1. To contribute to the supply of urgently-needed basic services and facilities, such as access to water, education, and improved rural roads to conflict-affected populations.

2. To improve the capacity of the local authorities to perform their roles towards the population.

See components 1. A competent Project Management Unit acceptable to the World Bank is operational in time.

2. The Counterpart (MoFNE) funding, necessary for the respective components, is released in time.

3. The assigned UN agencies implement their respective components.

4. No major socio-political (security) problems arise in the State.

Intermediate Results Indicators for each component Monitoring progress Component 1. Water Supply: Improved access to water through:

• Construction of 5 new water yards, providing access for 30,000 people and 50,000 livestock.

• Construction of 20 new hand pumps, providing access for 10,000 people.

• Rehabilitation of 100 hand pumps, providing access for 50,000 people.

• Institutional support for maintenance of water supply system.

1. Data to be provided by UNICEF in quarterly reports.

2. Periodic field visits by PMU and MDTF-TS.

Component 2. Secondary Roads: Part of the secondary road network improved

• Clearing of 50 km and grading of 8 km of roads, construction of 3 bridges and 8 culverts.

1. Data to be provided by MPPPU in quarterly reports.

2. Periodic field visits by PMU and MDTF-TS.

Component 3. Basic Education: Primary Education tools & equipment provided:

• Desks and chairs provided for over 48,000 children.

• School kits provided for 287,000 children.

• Classroom bags for teachers

1. Data to be provided by UNICEF in quarterly reports.

2. Periodic field visits by PMU and MDTF-TS.

Component 4. Vocational Training Center Kadulgi

• Vocational Training Center in Kadugli rehabilitated which will allow for training of 200 students per year.

1. Data to be provided by UNIDO in quarterly reports.

2. Periodic field visits by PMU and MDTF-TS

Component 5 Humanitarian Demining: Accelerated humanitarian demining,

• 1.5 million square meters of high priority suspected or mined areas and roads cleared or verified in about 40 communities, affecting a

1. Data to be provided by NMAC in quarterly reports.

2. Periodic field visits by PMU and MDTF-TS.

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population of more than 460,000.

Component 6. Rural Households Livelihoods Support: Increased availability of agricultural and animal traction tools

• Distribution of tools and training on use and maintenance provided in 20 villages (4000 households provided with tools and 400 farmers trained).

1. Data to be provided by UNIDO in quarterly reports.

2. Periodic field visits by PMU and MDTF-TS.

Component 7. Capacity building State government: • PMU effective • Improved management and

implementation capacity within six state ministries (Finance, Economy & Investment, Local Government, Water, Education, and Public Works)

• Visible and more effective

local administrations

• PMU installed • Programs formulated taking

into account assessment of present capacity of these ministries and offering a tailored approach to work towards the desired institutional capacity in fields of planning, design, data collection & analysis, budgeting, monitoring, and coordination.

• equipping of local authorities

with minimum living and working facilities for civil servants. Numbers envisaged are 20 offices, 10 living quarters, and requisite office furniture and equipment.

• Furthermore, 20 vehicles

will be purchased, 18 for the authorities at the locality level and 2 for the MoEI.

1. Data on progress to be

provided by MoEI/PMU in quarterly reports

1. Data to be provided by MPPPU/PMU in quarterly reports

2. Ad random field visits by PMU and MDTF-TS

1. Data to be provided by

MoEI/PMU in quarterly reports

2. Ad random field visits by PMU and MDTF-TS

Component 8. Anti-Malaria bed nets : Improved Primary Health

• provision (including training of its use) of long-lasting insecticidal bednets to 80 percent of rural households.

1. Data to be provided by DHSDP in quarterly reports

2. Ad random field visits by PMU and MDTF-TS

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Annex 4 Detailed Project Description

As most components have only a limited set of activities, there is little added value for an extensive project description. For Components 1 (Improved Water Sources) and 3 (Basic Education), UNICEF will handle the procurement of a limited list of items and will supervise implementation. For Components 4 (rehabilitation of the Kadugli Vocational Training Center) and 6 (Rural Households Livelihoods Support) which have a broader intervention and development scope, project proposals elaborated by UNIDO are available. For Component 2 (Rural Roads) and sub-component 7c (construction for government capacity building), more detailed design and budgeting will be undertaken at the start of the project. With regard to the installation of the Project Management Unit (PMU, sub-component 7a), it is agreed that this will be undertaken according to World Bank standards.

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Annex 5 Project Costs

The total cost for this project is $14.729 million. Of this amount, $7.872 million will come from the MDTF-N and in addition to $6.857 million in counterpart funds from the GONU.

Table 1: Project Costs and Financing (US$ millions) Disbursements 2007

% Component

MDTF GONU Total 1. Water Supply

c. Water Program d. Vehicles for Ministry

2.246

0.225

2.471

17.61 2. Rural Roads 1.800 1.800 12.83 3. Basic Education 3.108 3.108 22.16 4. Vocational Training 0.515 0.515 2.85 5. Demining 1.596 1.596 11.38 6. Rural Households Livelihoods

Support (Agriculture) 0.596 0.596 3.94

8. Capacity Building for State & Local Government • Project management Unit (11

months) • Consultant Assessments &

formulation of follow-up • Construction/equipment/vehicles

0.640

0.400

0.200 1.710

2.950

22.10 8. Anti-Malaria Bednets 1.000 1.000 7.13

Total 7.505 6.531 14.036 100 Contingency 5% 0.375 0.326 0.701

Grand Total 7.880 6.857 14.737

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Annex 6 Detailed Implementation Arrangements

The implementation arrangements for executing the Start Up/Emergency Project for South Kordofan have been designed to cater to the following key requirements of the proposed project:

• Accelerated implementation which in turn would require: i. A simplified institutional arrangement for project coordination and oversight. ii. Simple decision-making procedures and work-planning and procurement procedures

to avoid delays. iii. Rapid contracting of UN agencies to procure and implement relevant components. iv. Engagement of a Project Management Unit with expertise in World Bank

procurement practices and international accounting standards.

• Building partnerships: i. Implementation arrangements designed to promote strong linkages with participating

donors, and development arrangements allowing shared implementation of various project components.

ii. Sharing of best practice with partners.

Institutional and Implementation Arrangements Project implementation period: Components of this Start-up Phase have been planned to end on 31 December 2007, as the start of the follow-up phase is envisaged for 1 January 2008. To allow all activities to be finalized and final payments to be processed, the closing date is fixed at 31 May 2008. Project Organization and Management: The Government of National Unity of Sudan will be the recipient of the grant. The State Ministry of Economy and Investment of South Kordofan will be responsible for the overall coordination of the project. The PMU will be responsible for overall management, including providing procurement and accountancy services as well as fiduciary assurance regarding use of funds for specific components (2 and 7). UN agencies (UNICEF and UNIDO) will take on this responsibility for Components 1, 3, 4 and 6. For Component 8 (anti-malaria bednets), the DHSDP (within the Federal Ministry of Health) will handle the fiduciary aspects as well as the organization and implementation of the activity. The financial management arrangements are described in greater detail in Annex 5 below. The World Bank will sign separate Grant Agreements with UNICEF and UNIDO to implement their components of the project. The table below shows the proposed implementation arrangements for each component.

Table 1: Project Component and Implementing Agency Project Component Implementation Agencies Estimated

Value (USD millions)

1. Water Supply State Ministry of Rural Development & Water Resources (SMRDWR), UNICEF, WES

2.471

2. Rural Roads Maintenance & Spot Improvements

State Ministry of Physical Planning and Public Utilities (MPPPU), PMU

1.800

3. Basic Education State Ministry of Education, UNICEF 2.950 4. Vocational Training State Ministry of Education, UNIDO 0.515

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5. Demining National Mine Action Center (NMAC), State Ministry of Humanitarian Affairs, State Level Office of the National Mine Action Center, registered local NGOs.

1.596

6. Rural Households Livelihoods Support (Agriculture)

Ministry of Agriculture, UNIDO 0.596

7. Capacity Building for State & Local Government:

Project management.

Institutional Assessment & Building

Construction of basic office facilities

State Ministry of Economy and Investment (with assistance of the MDTF-TS)

State Ministry of Economy and Investment (with assistance of the MDTF-TS)

State Ministry of Physical Planning and

Public Utilities (MPPPU), PMU

0.640

0.600

1.710

8. Anti-Malaria Bednets DHSDP, Federal Ministry of Health, State Ministry of Health

1.000

Contingency (5%) 0.701 TOTAL 14.737

Implementation Arrangements for each component: Component 1: Improved Water Sources Project organization & management: State Ministry of Rural Development & Water Resources (SMRDWR)

Improved Water Sub-component

Implementation agencies Implementation arrangements Estimated Value (USD

Million) RAINY SEASON (MAY-

OCTOBER)

Procurement of spare parts for 300 Hand Pumps (HP)

WES, UNICEF & others Sub-contract to UNICEF or others.

0.150

Procurement of spare parts for Rig unit & trucks

Private sector & NGOS Through private sector (rig and truck spare) & others

0.200

Procurement of six vehicles State MoEI/PMU Procurement to car dealer 0.225 Procurement of 100 new HP UNICEF UNICEF (supervision) 0.200

Procurement of one Drilling Rig

UNICEF & others According to SWC specifications, through UNICEF or others.

0.450

Five technical teams SMRD & WR (SWC, WES)

SMRDWR (SEC & WES). 0.050

Training//extension (WES staff and community members)

SMRD & WR (WES), NGOS

Through SMRD & WR (WES teams) & NGO teams

0.150

DRY SEASON (NOVEMBER ONWARDS )

Construction/drilling of 20 Hand Pumps (HP)

SMRD, WR & UNICEF Through direct work using WES teams

0.120

Construction of five water yards

Private sector Sub-contract to private sector. 0.375

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Repair of 100 HP SMRDWR & WES Through SMRD & WR (SWC teams)

0.030

Geophysics study SMRD & WR (GWD) Subcontract to state ground water and wadies directorate

0.060

Supervision and monitoring 0.100 Subtotal 2.110 Cross-Sectoral and indirect support costs

0.361

TOTAL 2.471 Timeframe: The activities that UNICEF can implement during the rainy season are procurement, training and formation of technical teams. These activities will be complete by end-November, with the exception of the drilling rigs, which can take up to six months to arrive in country. Although most activities can be finalized by 31 December, some might finish as late as end-April 2007. Component 2: Rural Roads Maintenance & Spot Improvements Project organization and management: State Ministry of Physical Planning & Public Utilities, with support from the PMU and MDTF-N TS. At the start of the project, a consultant will prepare the necessary detailed designs and budgets that will be used for the contracts (private sector). This consultant will also supervise the works. Capacity building will be integrated into this activity as staff from respective departments of the ministry will participate in all phases of the project. Component 3: Basic Education Project organization and management: UNICEF and State Ministry of Education. Activities include procurement of basic tools and equipment, which can take place during the rainy season. While some supplies may be delivered during the rainy season, it should be noted that delivery cannot be guaranteed during this time. However, it is reasonable to expect that the supplies will be delivered to schools by the end of December 2007. Accessibility will depend on the selection of localities. Component 4: Vocational Training Project organization and management: UNIDO, State Ministry of Education, State Ministry of Industry. Implementation consists of contracting firms for the rehabilitation of the Kadugli Vocational Training Center buildings and procurement of equipment. These UNIDO-managed activities can be finalized before 31 December 2007. A detailed project proposal is already available. Component 5: Humanitarian Demining Under the umbrella National Mine Action Authority (NMAA, by Presidential Decree No. 299), the National Mine Action Center (NMAC) will implement this component. NMAC will subcontract to registered and accredited local NGOs for undertaking various components of the project. NMAC will retain responsibility for the coordination, monitoring, supervision, quality assurance, and reporting of its local implementing partners.

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Component 6: Rural Households Livelihoods Support (Agriculture) Project organization and management: UNIDO, State Ministry of Agriculture through Federal Ministry of Industry. A detailed project proposal is available. For all components, administration and supervision will be provided by UNIDO. The proposed emergency intervention consists of three project inputs:

a) CLARIS-Phase-II Kadugli sub-office/guesthouse set up. b) Supply of agricultural hand tools for returnees for the forthcoming agricultural season

and the restoration of the productive capacity for the production of these tools in selected villages.

c) Distribution of animal traction technology and appropriate cultivation tools to selected farmers’ groups in the selected villages

Major activities under a) include:

Assessment of available offices to be rented and refurbished. Procurement of office equipment. Installation of office equipment.

Major activities under b) include:

• Provision of a set of hand tools for 2,000 returnees in 10 villages. • Training of 20 blacksmith trainees from 10 villages and provision of toolkits and

scrap steel for the production of agricultural hand tools. Major activities under c) include:

• Production and distribution of 50 Nuba hoes together with yokes, chains and fittings. • Production and distribution of 10 ox carts with accessories. • Financing purchase of 100 oxen. • Community Development Work (village selection, awareness and information

meetings, interest group formation meetings). • Training of farmers in the use of oxen and of cultivation with the Nuba hoe. • Training of work oxen.

Component 7: Capacity Building for State & Local Government Project management: Local professionals will be recruited by the State Ministry of Economy and Investment (with assistance of the MDTF-TS) to staff the PMU.

• Institutional Assessment & Building. Regarding the PMU, local professionals will be recruited by the State Ministry of Economy and Investment (with assistance of the MDTF-TS) to undertake this activity. The same procedure will be used regarding the contracting of consultants for the institutional assessments and formulation of follow-up programs.

• Basic office facilities, furniture/equipment and vehicles. The PMU, in collaboration with the ministry PIU, will sub-contract the construction works, including a consultant to undertake the design and supervision. The technical staff of the MPPPU, together with a selected infrastructure consultant, will be responsible for setting the specifications for the contracts.

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Under this subcomponent, the project will fund technical assistance for the management of the project. In addition to overall management, this includes financial management and procurement activities for the State Ministry of Economy and Investment (MoEI) and other state ministries involved in the project for those (sub-) components that are not implemented together with a UN agency. A team of professionals will be recruited to work together with a team of MoEI staff to operate the Project management Unit (PMU), including a project accounting and procurement unit. The PMU, which must possess accounting, procurement and project management expertise, will be recruited though the World Bank’s Consultants Guidelines using the Quality and Cost-Based Selection (QCBS) procedures. The team recruited under the project for the PMU and acceptable to the World Bank will, under close supervision of the Bank, be responsible for the day-to-day management of the project at the state level, including the procurement process and accounting functions. Given the relevance of the assignment for future procurement and accounting functions in South Kordofan, the assignment will be widely advertised and will be subject to Bank prior review at all recruitment stages. Regarding the institutional assessments and the formulation of follow-up programs, consultants will be contracted to undertake this work. Regarding the construction of offices and housing, a consultant will prepare the necessary detailed designs and budgets that will be used for the contracts (private sector). This consultant will also supervise the works. Capacity building will be integrated into this intervention as staff from respective departments of the ministry will participate in all phases of the project. Procurement of equipment (office furniture, etc.) and vehicles will be handled according to International Standards. Component 8: Anti-malaria bednets Project management: Federal Ministry of Health, DHSDP, State Ministry of Health A limited number of transactions are necessary for these operations, and financial management will be handled by the DHSDP, which has already established procurement capacity (within Federal Ministry of Health) that will allow rapid implementation of this component. The international competitive tender for supply and delivery of the LLINs has already been issued, so it is expected that the contract can be signed and delivery and distribution started soon after funds are available. Results should thus be rapidly evident on the ground. By far the bulk of the financing will be devoted to one contract for supply and delivery of the LLINs, which will be paid directly to the international supplier from the MDTF-NS funds managed by the World Bank. Other transactions, to be handled by the PIUs, will be for the operational expenses of the government teams implementing the LLIN distribution and monitoring and evaluation. The LLINs will be supplied and delivered to the target locations by a single contractor selected under International Competitive Bidding (ICB) procedures. Work on this procurement has started with an initial draft of the tender documents based on the World Bank’s standard bidding documents for health sector goods, guided by a toolkit for malaria-related procurement and similar documents for LLIN procurement by World Bank projects in Zambia and Democratic Republic of Congo (DRC). Customs clearance and storage at intermediate points, notably Port Sudan, will be the responsibility of the contractor, while state and local authorities will ensure storage at the delivery locations. From these locations to final distribution points in the villages, transport will be arranged by the State Malaria Control Programs and budgeted and financed as an operational expense.

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Suppliers will provide LLINs approved to meet WHO standards, most notably the requirement that they retain effectiveness after at least 20 washes. Currently, three LLINs are WHO/ WHOPES-approved, and the average price of a standard size (160 x 180 x 150 cm) is around US$ 4.50-4.90. Once the LLINs are delivered to each location, the State Malaria Control Program, with the support of the National Program, will organize distribution, involving the following steps:

i) A high profile ceremony involving the state governor (Wali) and minister of health, the locality governor and community leaders, with accompanying publicity in the press and radio, will introduce the program to the population and emphasize the usefulness of LLINs in protecting against malaria and other diseases.

ii) One or two volunteers from each community will receive one day of training and provided with vests and bibs. They will carry out a pre-distribution census, provide education on LLIN use before and after distribution, and produce a distribution report.

iii) Five to seven teams will be composed of staff from the National and State Malaria Control Programs, other disease control programs, the State Ministry of Health, local authorities and local health workers. These teams will organize distribution at the village level with the assistance of volunteers, attendance by community leaders, and guidance from the pre-distribution census. The teams will provide distribution reports to the Malaria Control Program.

iv) A sheet of instructions will be distributed with each LLIN.

v) Utilization will be monitored by the village volunteers, who will continue to provide education on how to use the nets.

Strategic oversight: To provide overall strategic orientation/oversight and inter-ministerial and (other) donor coordination, a Project Steering Committee (PSC), headed by the State Minister of Economy and Investment with representatives of the MDTF-N Technical Secretariat, and representatives of all concerned implementing ministries and UN agencies will be established. The PSC will approve the annual work plan and budgets, and review audit reports and quarterly progress reports. In addition, the PSC will provide coordination with respect to the roles and funding of various participating donors and government counterpart funding, resolve inter-agency issues, conduct monthly reviews of project progress and fund utilization. Figure 1 describes the oversight and implementation structure of the project. Role of UN Agencies: As indicated above, UN agencies will implement a number of components of the project. While the South Kordofan MOEI will be responsible for the coordination of the overall program, UN agencies will lead implementation of specific components. Together with the respective state ministries, UNICEF will be responsible the Water and Basic Education components and UNIDO will lead the Vocational Training and Livelihoods subcomponents.

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Annex 7

Financial Management and Disbursement Arrangements Scope and objective of the assessment 1. The financial management assessment is conducted in line with the Financial Management

Practice Manual issued by the FM Board on 3 November 2005. The objective of the assessment is to determine whether the implementing entities have acceptable financial management arrangements, which will ensure: (1) the funds are used only for the intended purposes in an efficient and economical way, (2) the preparation of accurate, reliable and timely periodic financial reports, and (3) safeguard the entities’ assets.

Executive Summary 2. So far there is no country fiduciary assessment in Sudan. A Country Integrated Fiduciary

Assessment (CIFA) is underway following recent the Public Expenditures Review (PER 2006) which revealed that in general the Public Financial Management (PFM) system is reasonably well functioning in the North but needs to be substantially revamped and modernized. At state level, the public financial management capacity remains weak.

3. The Federal Ministry of Finance and National Economy on behalf of the Republic of Sudan

will be the recipient of the MDTF-grant. The MoFNE will again sign a Subsidiary Agreement with the State Ministry of Economy and Investment (MOEI) of South Kordofan, which will have overall coordination of the program and manage the MDTF funds for the component 7a & b as well as for the counterpart funds from the MoFNE. The State Ministry of Economy and Investment (MOEI) of South Kordofan will have overall coordination of the program and manage the MDTF funds for the component 7a & b as well as for the counterpart funds from the MoFNE. A State Project Management Unit (PMU) will be established with overall management and co-ordination responsibility, such as planning, monitoring & evaluation (PME), and preparation of quarterly reports. While MOEI, line ministries of South Kordofan and locally-based UN agencies are demonstrating strong commitment to support the project, clear coordination and monitoring will be needed to limit the risks of diffuse accountability and lack of ownership. MOEI lacks both experience in managing development projects and exposure to World Bank procedures. Furthermore, the project will be implemented at decentralized level in Kadugli where the fiduciary capacity is said to be extremely weak according to COWI Assessment. Accordingly the financial management risk on the State government side is considered high. To mitigate these risks the Project Management Unit (PMU) will handle fiduciary functions and monitor the implementation of the project on behalf of the State MoEI. Furthermore UN agencies, namely UNIDO and UNICEF will be contracted to manage certain components, including fiduciary aspects as per the general Financial Management Framework Agreement (FMFA) between the Bank and each UN agency.

Given the fact that this is an emergency project and given the presence of the risk-mitigating measures mentioned above, it can be allowed to limit effectiveness conditions to (1) a national counterpart Project Coordinator being appointed by the MoEI; (2) a subsidiary agreement being signed between the federal MoFNE and the state MoEI, and (3) a designated account being opened at the Central Bank and project account opened in an acceptable commercial bank in Kadugli.

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4. The project unit will be required to maintain accounting records and prepare project financial statements in line with International Accounting Standards and have them audited by the Auditor-General in accordance with International Standards on Auditing. The audit reports will be submitted to IDA not later than six months after the end of each fiscal year. Within 45 days following the end of each quarter, a consolidated progress report will be submitted to IDA according to the format adopted for MDTF-N projects including components directly implemented by UN agencies.

Summary of Project Description 5. This is a start-up/one-year emergency project funded jointly by the donors (MDTF-N) and the

Government of National Unity (GoNU). The objective of the project is to supply urgently-needed basic services and facilities, such as access to water, education, and improved rural roads to conflict-affected populations. A second objective is to improve the capacity of the local government.

Risk Analysis 6. Country issues: So far there is no country fiduciary assessment in Sudan. A Country

Integrated Fiduciary Assessment (CIFA) is underway following recent the Public Expenditures Review (PER 2006) which revealed that in general the Public Financial management (PFM) system is reasonably well functioning in the North but needs to be substantially revamped and modernized. Main challenges faced by the federal government PFM systems are: (i) the entire accounting and financial system is manual (ii) the budget classification needs to be in line with the international standards, (iii) improvements needed in commitment controls, debt management, cash and revenue management, reconciliation of accounts, and limited capacity of staffs (accountants, financials, auditors…etc). Besides, the economy, governance and the peace agreement are fragile and the newly established Multi Donor Trust Funds, administered by the World Bank, has been facing considerable pressure to disburse funds more quickly, while Government experience with World Bank operations is limited. As a result, the risks are estimated high at country level.

7. Entity level (State of South Kordofan): The State Ministry of Economy and Investment

(MOEI) of South Kordofan will have overall responsibility to coordinate the program. A State Project Management Unit (PMU) will be established with overall management and co-ordination responsibility, such as planning, monitoring & evaluation (PME), and preparation of quarterly reports. It will also be responsible for financial management and procurement services for some of the components as well as capacity building of all state ministries involved and their representatives at the locality level. But the project unit is yet to be set up from scratch at locality level without any experience in World Bank procedures. The MOEI is a newly created ministry that institutional capacity and experience in managing development project. Besides the COWI assessment report concluded that the public financial management in South Kordofan is extremely weak. Consequently the risks at entity level are considered high. To mitigate these risks, a Project Management Unit (PMU) will handle fiduciary functions and monitor the implementation of the project on behalf of the State MEI. Furthermore UN agencies, namely UNIDO and UNICEF will be contracted to manage certain components, including fiduciary aspects as per the general Financial Management Framework Agreement (FMFA) between the Bank and each UN agency.

8. Project level: The performance of the project will depend on the quality of coordination

between the different stakeholders, e.g. the State Ministry of Economy and Investment (MOEI), the line ministries and local government, the Project Management Unit and the UN

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agencies. Furthermore, though the Federal government is committed to support the project to provide peace dividends in the “Three Areas”, the GoNU may face some difficulties in releasing its contributions in a timely manner that impact negatively on the project’s implementation. For these two reasons, the project inherent risks are estimated substantial. To mitigate these risks, clear coordination and monitoring mechanisms should be agreed between the different stakeholders within the Steering Committee. Government contributions could also be released in- kind but an initial deposit of 6-month expenditures should be released for the cash portion.

Risk Assessment and Mitigation Below are the detailed risk assessment ratings and mitigation measures.

Risk Risk rating Risk Mitigating Measures Incorporated

into Project Design

Effectiveness Conditions

(Y/N)

Remarks

Inherent risk H Country level H None N The ongoing CIFA will set the

framework to address the country PFM issues.

Entity level (South Kordofan State)

H (i) Delegate fiduciary functions to a team of professionals (Project Coordinator, Procurement specialist, Financial Management specialist) familiar with WB guidelines; (ii) UN agencies will be accountable for the component handled by them according to FMFA.

Y COWI assessment report concluded that the public financial management in South Kordofan is extremely weak. MOEI and other government apparatus are yet being re-organized, thus they lack minimum institutional capacity to run adequately a emergency project.

Project level S (i) Agree on clear coordination and monitoring mechanism between different stakeholders; (ii) ensure strong commitment to release counterpart contributions to avoid delays.

N Though the MOEI will have the overall responsibility of the project, the involvement of several actors could diffuse the overall accountability. Thus clear coordination and monitoring mechanism should be agreed within the Steering Committee.

Control Risk H Budgeting L N A detailed budget has been prepared

and will be monitored. Accounting S Given the weak PFM

system in South Kordofan, a private firm will be contracted out to handle accounting and financial functions.

Y The PMA will have the overall responsibility of ensuring that an acceptable accounting system is in place and maintained during project implementation.

Internal Control

H The institutional capacity of MOEI is

N The PMA will develop simplified procedures where minimum internal

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Risk Risk rating Risk Mitigating Measures Incorporated

into Project Design

Effectiveness Conditions

(Y/N)

Remarks

very weak; thus the Internal Audit Department of MoFNE will assure that the existing procedures are complied with to ensure internal controls

control mechanisms are described.

Funds Flow H (i) Open a local bank account to channel funds from the designated account in Khartoum; (ii) Initial deposit equivalent to 6-month expenditures released by GoNU besides in-kind contributions.

Y As a decentralized project, the channeling of funds to Kadugli will be closely monitored.

Financial Reporting

S A consolidated quarterly progress report will be required (including UN agencies’ transactions) and monitored closely

N The SPMU may experience some delays in submitting progress report in a timely manner.

Auditing S Audit arrangements set up within 6 months after effectiveness and monitored closely to avoid delays in submitting audit reports

N The ToR should specify that the audit should take place at local level and will include transactions managed UN agencies.

Overall risks H The FM overall risk is High. H-High, S-Substantial, M-Moderate, L-Low The overall financial management risk for this project is considered High. The residual risk would be moderate only if the mitigation measures are implemented satisfactorily and in a timely manner. Strengths 9. MOEI, line ministries and UN agencies are all committed to support this emergency project given the specific context of the “Three Areas” particularly in South Kordofan.

Weaknesses and Action Plan Significant Weaknesses

Action Responsible body Completion

Lack of exposure to World Bank procedures at MOEI.

Immersion training in WB procedures provided to SPMU

WB and MOEI Within 3 months after effectiveness

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staff.

Pressure for quick delivery in a weak environment that could compromise fiduciary quality.

Contract a team of professionals to handle fiduciary functions.

MOEI and WB Before effectiveness

Implementing entity 10. A State Project Management Unit (PMU) will be established within the MOEI with overall management and co-ordination responsibility, such as planning, monitoring & evaluation (PME), and preparation of quarterly reports. The PMU will comprise at minimum a Project Coordinator, a Financial Officer, a Procurement Officer, an Accountant and supporting staff. Budgeting 11. A detailed budget has been prepared and reflected in the cost table. The different steps of budget management - preparation, revision, adoption and execution/monitoring- will be detailed in the manual of procedures that will be set up by the PMU. It is agreed that the budget will be closely monitored and execution reports reflected in each quarterly progress report. 12. MOEI will ensure that the portion to be funded by GoNU is approved, secured under the national budget and released to the project in a timely manner. Accounting 13. The PMU will establish an acceptable accounting system to record the transactions directly managed by the PMU. Cash-basis accounting system could be used at the beginning then convert to accrual when a computerized accounting system is installed and well functioning. The PMU accountant and financial management specialist will have the overall responsibility of the accounting system. Internal Control and Internal Auditing 14. Internal control comprises the whole systems of control, financial or otherwise, established by management in order to (a) carry out the project activities in an orderly and efficient manner, (b) ensure adherence to policies and procedures and (c) safeguard the assets of the project and secure as far as possible the completeness and accuracy of the financial and other records. 16. The PMU will set up an acceptable internal control system which should help the management of the project in achieving the development objectives in orderly and efficient manner. Thus, the main focus of the internal control is placed on the following: (i) Segregation of duties, (ii) Physical control of assets, (iii) Authorization and approval, (iv) Clear channels of command, (vi) Arithmetic and accounting accuracy, (vii) Integrity and performance of staff at all levels, (viii) Supervision. Besides, the project implementation manual (PIM) will provide more details in terms of segregation of duty. 17. The Internal Audit Department (IAD) of the MoFNE will ensure that the procedures and regulations set up for the project are effective. The staff of the Internal Audit Unit in Kadugli will include the review of the project operations in their annual audit program.

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Fund Flows and Disbursement Arrangements Flow of funds 18. A project account will be opened in an acceptable commercial bank in Kadugli for the

payment of local expenses directly managed by PMU. This local bank account will be managed by the PMU coordinator and the financial officer.

19. A Designated Account (DA) in United States Dollars will be opened at the Central Bank of

Sudan to receive MDTF funding to be released by IDA. The DA will be replenished by the World Bank on the basis of Withdrawal Application supported by relevant documents cleared by the Monitoring Agent.

20. It is estimated that UN agencies, e.g. UNICEF and UNIDO, will manage nearly $6.5 million

through their own procedures. Only a remaining portion of $1.2 million will be managed by the PMU through the designated account. Thus an upfront release of 50 percent as an initial deposit will be made by IDA upon the grant effectiveness.

21. As per OP 8.00, retroactive financing of up to 40 percent of the grant amount may be made

for payments made by the borrower not more than 12 months prior to signing of the Grant Agreement, subject to provision of supporting documentation.

Disbursement Methods 19. The project will start with the transaction-disbursement method based on Designated Account Advance, Direct Payment and Special Commitment. At the beginning of the project, the designated account will be replenished on the basis of statements of expenditures. It would be possible to use the interim financial reports for the replenishment of the DA if considered satisfactory by the World Bank. A Blanket request will be submitted by each UN agency to withdraw at once their respective allocation according to the direct implementation agreement. Minimum Value of Applications 20. The minimum value for Direct Payment and Special Commitment will be USD 50,000 Reporting on Use of Grant Proceeds 21. The supporting documentation for reporting eligible expenditures paid from the designated account should be a summary report of the Statements of Expenditure (SOEs) and records evidencing eligible expenditures for payments against contracts valued above USD 100,000 for work, USD 50,000 for consulting firms and USD 30,000 for individual consultants. 22. The supporting documentation for requests for direct payment should be records evidencing eligible expenditures (copies of receipt, supplier’s invoices, etc). 23. The project will submit Bank statement and a reconciliation of the designated account and the project account together with the withdrawal application on a quarterly basis. 24. All supporting documentation for SOEs will be retained at the PMU and must be made available for review by periodic World Bank review missions and Monitoring Agent and external auditors. 25. The standard format of quarterly progress report adopted for MDTF-N operations will apply; a sample will be attached to the disbursement letter.

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Designated Account 26. MOEI in liaison with MoFNE will delegate officials to manage the Designated Account to be opened in the Central Bank. The currency for Designated Account will be the United States dollar. Counterpart contributions 27. The Government will make all arrangements necessary to ensure the timely mobilization of the counterpart contributions required for project implementation. These contributions are estimated at $6.4 millions and could be released partially in cash or in-kind given the short time span of the project implementation and the emergency nature of the project. Financial Reporting 29. The PMU will record and report on project transactions directly managed by the PMU. Accordingly the project will have its own ledgers extracted from its accounting system capable of generating the financial reports. Each UN agency will submit its quarterly progress reports including the financial reports to the PMU for consolidation. 30. The PMU will produce consolidated quarterly progress reports including Interim Financial Monitoring Reports (IFRs) to be submitted to the World Bank not later than 45 days after the end of each quarter. At a minimum, the financial reports must include the sources and uses of funds, expenditures by main expenditure classifications, beginning and ending cash balances and other supporting schedules. Auditing 31. The movement of the Designated Account and the Project Account should be reflected in the project financial statements separately. The project accounts and operations including those implemented by UN agencies will be audited by the Auditor-General according to International Standards on Auditing. One lifetime audit report and financial statements, along with the management letter, will be submitted to IDA not later than six months after the project closing date. 32. At the time of writing this report, there is no overdue audit report from MDTF portfolio. The terms of reference and other arrangements for the audit will be agreed upon not later than 6 months after project effectiveness. Supervision plan 34. This is decentralized project that will be managed by a PMU under the supervision of the State Ministry of Economy and Investment in South Kordofan. The Bank’s supervision will be as intensive as possible during the project implementation to ensure that the funds are used for the intended purposed and also provide support when need be.

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Annex 8 Procurement Arrangements

Procurement Environment 1. A Joint Assessment Mission (JAM) by the UN, the World Bank, the Government of Sudan and the SPLM included an assessment report on public procurement. The JAM concluded that the current public procurement system of the National Government of Sudan is deficient to meet the country’s needs for transparency and achievement of value for money. The Assessment recommended procurement reforms which would include capacity building and logistical support. The current regulatory system of the GOS5 could be easily modernized in the short-term while a more comprehensive legal framework is developed. 2. The main weaknesses of the current system are improper application of the existing regulations and the lack of oversight mechanisms. The public service has deteriorated seriously during the war time and recent reform efforts have not yet taken hold. There is lack of information on how funds are spent at the decentralized levels, so it is difficult to evaluate volume and efficiency of public procurement in Sudan. Procurement capacity has been lost due to the many years of conflict and low budget for non-defense activities. This includes a lack of capacity to manage donor-funded procurement. The private sector has also lost its ability to perform and meet the demands of government procurement, which currently is perceived as reserved for a handful of enterprises. Restoring confidence in the system is a major challenge. 3. To facilitate the financing of reconstruction needs by the international community, donor funds have been contributed into Multi Donor Trust Funds (MDTF), part of which will be used for this project. The World Bank also provided Trust Funds to finance activities in critical areas in capacity building including in the area of Public Sector Management, Public Financial Management and Public Procurement. This capacity building is to support the systems for use of funds under the MDTF as well as for Government own resources. But this capacity building in public procurement has have not yet taken hold. The Donors agreed that all procurement under MDTF programs would follow World Bank Procurement Guidelines. To assist the Bank in monitoring the MDTF Projects, two Monitoring Agents (one for the North and one for the South) have been appointed. Capacity Assessment and mitigation of risk 4. The procurement capacity of the key institutions that will implement this project6 is very weak in terms of technical personnel and application of procedures. There is no specific staff to carry out procurement functions. Any procurement functions are diffused into ad-hoc procurement committees (established to process specific contracts for goods and/or works). The Procurement capacity is therefore assessed as very low and the overall project risk for procurement is high.

5 Finance and Accounting procedures ordinance 1995 – Chapter 8 6 State Ministries of South Kordofan for: (i) Economy and Investment; (ii) Finance; (iii) Local Government; (iv) Water; (v) Education: (vi) Public Works; and (vii) Physical Planning and Public Utilities.

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5. To mitigate this risk, the proposed project will take a two pronged approach: (a) reduce the procurement workload for the State agencies involved by delegating the implementation of some of the components to UN agencies specialized in the specific sector of activity; and (b) the Project Management Unit (PMU) of MoEI-SK would be staffed with an experienced Procurement Specialist to be responsible for managing procurement functions under the project. The Procurement Specialist would be provided with appropriate support of assistants and logistics (office equipment etc). The TOR of the Procurement Specialist will include on-the-job training of line Ministries staff to gradually improve their procurement capacity Requirement for a Procurement Plan 6. PMU will prepare a schedule of all the works, goods and services required for the project as part of the annual work plans and budget. These schedules will be used by the Procurement Specialist to prepare annual procurement plan in the format provided by the Project Operational Manual. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements (if applicable), and time frame will be agreed between the PMU and the line Ministries in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. Detailed Arrangements

7. The financing arrangements for the project, either parallel co-financing by GONU or implementation by UN agencies under the Financial Management Framework Agreement, will result in most of the procurement being carried out in accordance with those entities’ procurement procedures. Only procurement of consulting services under Component 7, Capacity Building, will be carried out in accordance with the World Bank “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004, revised August 2006; and the provisions stipulated in the Grant Agreement.

Scope of Procurement 8. Consultant Services: the project will require technical assistance to support MOEI and most of the line agencies and ministries in project management and implementation, institutional assessment and governance, and procurement. The project will finance directly only a few consultancy contracts with firms for the provision of: Project Management Unit (PMU) services and of Technical Assistance for Institutional Assessment and formulation of Follow-up Programs. The total cost is estimated at about US$ 1,200,000 equivalent of which the PMU accounts for an estimated US$640,000. The balance of the funds will be used for a number of contracts, yet to be defined in scope and cost, with firms and individuals. (i) Quality- and Cost-Based Selection (QCBS) in accordance to Section II of the consultants Guidelines will be used for all major contracts under the project and for all contracts estimated to cost more than US$ 100,000 equivalent. Shortlists for contracts estimated to cost less than US$ 200,000 may consist of national firms and NGOs, where available.

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(ii) Consultants Qualifications (CQ) may be used for assignments estimated to cost less than US$100,000 and for which the need for proposing and evaluating competitive proposals would not be justified. (iii) Single-Source Selection may be used for contracts only for emergency situations in accordance with paragraphs 3.8 to 3.11 of the Guidelines for the Selection and Employment of Consultants in the case of firms; and with Section V Selection of Individual Consultants in accordance with paragraphs 5.1 to 5.3 of the Guidelines (iv) Individual Consultants. Services for assignments that meet the requirements set forth in the first sentence of paragraph 5.1 of the Consultant Guidelines may be procured under contracts awarded to individual consultants in accordance with the provisions of paragraphs 5.2 through 5.3 of the Consultant Guidelines. Under the circumstances described in paragraph 5.4 of the Consultant Guidelines, such contracts may be awarded to individual consultants on a sole-source basis. Prior Review Thresholds: the following contracts will be subject to Bank’s prior review: (i) All terms of reference for consultants’ services and training. (ii) Each contract with a consulting firm estimated to cost the equivalent of $50,000 or more, each contract with individual consultants estimated to cost the equivalent of $20,000 or more and first two contracts on basis of Consultants Qualifications (CQ) irrespective of their value. (iii) All contracts awarded under the Single Source Selection method or awarded to United Nations Agencies. 9. All other contracts will be subject to post-review and procurement audit by the Bank. The project staff will maintain accurate records of all procurement activities and documents related to the Project. The procurement files will be maintained for review by the Bank's supervision missions and independent auditing. The project staff will also consolidate procurement activities into Quarterly and Annual Progress Reports. 10. Advertising: Immediately after negotiations, a General Procurement Notice (GPN) will be published online in dgMarket and UN-Development Business and in at least two national news papers of wide circulation. The GPN will provide a description of the Project and an indication of consultants’ services estimated at more than US$100,000. EOI will be advertised for consulting services above US$100,000, in addition to being advertised online in dgMarket and UN-Development Business 11. Frequency of Procurement Supervision: Bank supervision missions will be carried out every 4 months for the first year and every 6 months thereafter. Two ex-post review audits will be done during the first year and from thereon at least once a year.

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Annex 9 Economic and Financial Analysis

Per OP 8.00, an Economic and Financial Analysis is not required.

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Annex 10 Social and Environmental Safeguards

As per OP/BP 8.00, this project can be processed under simplified procedures also regarding the safeguards policies. However, within the institutional support (Component 7) to restructure and enhance the capacity of a number of ministries, the development of safeguard policies and procedures to handle social and environmental issues prudently, will be included. The implementation of these programs will be taken up in the next phase (2008/2009). Social/Gender There are a number of post-conflict issues of concern such as a lack of government institutions, procedures, and legally defined rights; continuing conflicts in some areas; and grievances arising from perceived lack of inclusiveness and equity that have the potential to undermine project activities and affect the implementation of sub-projects. Social risks largely arising from differential access to benefits, traditional rights and entitlements, adequacy of targeting mechanisms, and varying public perception of benefits will be addressed through continuous monitoring of agreed social indicators. Environment The components of the proposed project likely to generate any environmental impacts include: rehabilitation of roads, the drilling of waterpumps, the construction of culverts and bridges, and the demining of villages and roads. Accordingly, the project is allocated a B impact category. Given the emergency conditions of the project, the most tractable way of achieving sound environmental management is through the adoption of the following actions: (a) immediate application of World Bank Africa Region’s Environmental Guidelines for CDD Projects (b) for the water supply component 1, precautions should be taken for assuring the hygiene at the waterpoints (human and livestock) and that drawdown of the water table in the region will be monitored. This component, however, will be implemented under the "Water & Environmental Sanitation” (WES) program of UNICEF, that has (as the name says) a particular focus on water quality and resources protection. Under the (Partner) Grant Agreement with UNICEF, UNICEF will implement this component using its own guidelines and procedures, (c) appropriate disposal of mines and other UXOs as part of the demining component. Furthermore, within the institutional support (Component 7) to restructure and enhance the capacity of a number of ministries, the development of safeguard policies and procedures to handle environmental issues prudently will be included. The implementation of these programs will be taken up in the next phase (2008/2009). Conclusion It is anticipated that the Environmental and Social Impacts of the project will be minimal and will result in sustainable outputs. Below is a table showing the possible impacts and mitigation interventions. Component Possible Impacts Mitigation Interventions 1. Improved

Access to Water

Decreasing water tables and soil erosion around water points

Study to be undertaken to assess water tables. Given the fact that implementation is done by the UNICEF supported Water & environmental Sanitation Project, sound

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environmental practices are taken care of. 2. Rural Roads Appropriate disposal of construction

materials/ rubble as well as possible soil erosion by re-opening old tracks

Based upon available information, the impacts are likely to be minimal, local in extent and readily assessed, mitigated and managed.

3. Basic Education

• No Impact • N/A

4. Vocational Training

Appropriate disposal of construction materials/ rubble including asbestos and other potentially toxic materials if encountered:

To be addressed by UNIDO; signing of specific protocol that will be in place prior to commencement of work involving asbestos removal.

5. Demining Erosion of soil due to the use of mine clearance machines/mechanical equipment to cut vegetation and trees, or pollution of water and soil due to lubricants or fuel used for operating these machines. Unintentional damage to unknown archeological, heritage and cultural sites due to use of mechanical equipment for mine clearance and verification.

The mine clearance/verification operations are undertaken in compliance with the UN-approved International Mine Action Standards (IMAS). The mine/UXO clearance and verification operations normally do not pose any serious damage to the environment. In order to mitigate potential environmental damage, specialized Standing operating Procedures (SOPs) will be followed by demining personnel.

6. Rural Households Livelihoods Support (Agriculture)

• No Impact • N/A

7. • Construction

of office buildings and housing

• Purchase of equipment and vehicles

• Appropriate disposal of construction materials/ rubble including possibly asbestos and other potentially toxic materials if encountered

• No Impact

• Addressed in a protocol that will be in place prior to commencement of work involving asbestos removal if this is the case.

• N/A

8. Improved Health (Bednets)

• No Impact • N/A

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Annex 11 Letters of Endorsement by Sector Ministry and MOFNE