DIPL 6170-Report on a World Bank Project

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1 Report on a World Bank Project: Kosovo Social Assistance System Reform Project Student's Name Institutional Affiliation Course Code Professor's Name Due Date

2 Kosovo Social Assistance System Reform Project Economic development is a complex process that does not just involve the economy's growth but also ensures that communities enjoy an improved quality of life. This approach ensures that communities feel the impact of economic growth and that there are no inequalities among the populations, sectors or country development goals. According to Asher and Novosad (2020), for economic development to be felt among countries, Governments have to ensure that there are relevant programs to support various sectors, policies, and activities that improve the general wellbeing of populations. This comprehensive approach makes a Government realise equity among populations and thus makes a community more stable in that every person gets access to whatever they need. It should be noted that economic development cannot be felt in communities if there are significant development inequalities, such as certain aspects of development being ignored and vulnerable populations being neglected. According to Lange and Vollmer (2017), economic growth and development should directly impact social support, health, education, policy development, and outreach for essential services, which means that a government cannot realise these goals without forming partnerships with various entities such as the financial institutions (World Bank), World Health Organization, local, regional and international partners who are ready to help. It should be noted that the World Bank undertakes various projects around the world with almost every country to promote economic development, equality, and good governance. This makes the institution be at a core position to influence countries' policies and even ensure the implementation of sustainable programs that impact communities. According to Öhler et al. (2019), the World Bank projects are an essential part of improving countries' economic situations as they ensure that underdeveloped countries receive the support they require to meet their

3 development goals. Although the institution is committed to meeting its support roles, it usually insists on balanced projects and does not just impact one area of the community, and they align well with the United Nation’s sustainable development goals. This is through providing technical assistance for policy development and direct assistance to communities so that the impact of the projects can be felt everywhere. The approach has led to communities worldwide receiving support to improve their livelihood and access to much-needed cash or skills to expand businesses. One of the countries that the World Bank has supported implementing numerous projects is the Kosovo Republic. Since its self-declared independence from Serbia in 2008, the nation has been in dire need of support to implement several projects and ensure that the country gains stability. This has seen the World Bank mobilise private partners who have been at the forefront in developing Kosovo, and it has also pledged support in various projects that from education to social support. The World Bank project that will be analysed for this project is the Kosovo Social Assistance System Reform Project (KSASRP), which seeks to ensure equity and adaptability of Kosovo’s social safety net and adequately sustain its social protection programs. Part 1: Kosovo Social Assistance System Reform Project Analysis Key Development Issues and Rationale for Bank Involvement According to the World Bank Report (2017), most governments often fail to adopt policies and frameworks which can spur growth and pro-poor to achieve balanced growth of the country. This is the case with the Kosovo Social Assistance System Reform Project, whereby the World Bank identified that the country was experiencing economic growth without a positive impact on the population. The project was initiated to impact two public sectors (Social

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4 protection and public administration on social protection), which had experienced poor outcomes since independence. The Kosovo Republic and the World Bank assessed that even with positive economic growth, there was slow growth in employment creation, poor poverty reduction, inaccessibility of basic services, ineffective social assistance systems, and low coverage of social assistance programs. According to the Project Information Document (2021), even after the country experienced a 3.4% growth in gross domestic product per capita with the adoption of the market-based system, unemployment was still a challenge. This is because the country only has a 40.1% labour force participation compared to 63.3% for the Balkan region, while women's labour force participation remained relatively low at 20.5% and high unemployment rates of 25.3%, which is almost twice that of the western Balkan region. Further analysis of the economy shows that the country has the highest informal sector in Europe as most of the employed workers work in the informal sector (42%), and sometimes their long-term source of income can be interrupted. According to Gashi and Williams (2019), the increased number of people working in the informal sector in Kosovo is mostly driven by a lack of growth in registered SMEs, meaning that the people seeking employment have to rely on the large informal sector to survive. Another key development issue that the project sought to address is the poor social assistance system that the country relies upon to reach out to vulnerable populations/households to prevent the impact of unemployment. The Project Information Document (2021) indicates that since independence, the social assistance program budget has been increased from 3.5% of the GDP to 6.8%, but still, its efficiency was questionable as more people were not being targeted or impacted by the program. The information provided by the country indicates that the major compositions for the social assistance programs were dominated by pensions and veterans’ payments, whereby the

5 populations benefitting are old (50%). This means that the productive workforce that needs the support is not factored in most SAP payments. The World Bank noted that the approach means that the poor and general populations who might benefit from the program and create much impact are not covered, making it ineffective. If the program is well-targeted, its effects can be felt a lot in the community because much of the population’s potential will be exploited, thus leading to low poverty rates. In Kosovo, over 60 of the population live in rural areas that need serious support to enhance their livelihood as they mostly depend on agriculture, with high poverty rates of 21%, and over 40% of the population is unemployed. This shows why the country’s economic development has not impacted the population, as the majority who are poor are not covered by the SAS program due to its inefficiency. This world bank points this out in the Project Information Document (2021), whereby the report indicates that poverty rates were mostly high among the unemployed populations, and the ineffectiveness of the SAS systems was putting more people into poverty. The document further indicates that improving the effectiveness of the SAS program will rescue the households affected by poverty, mostly those headed by a woman or the family head who did not complete secondary education. The new poverty dynamics will be considered in the social assistance system reforms that the world bank will undertake. Also, the project seeks to ensure that the majority of the Kosovo population can access basic services by being included in assistance programs or being supported in various ways. This is because the Bank noted that households that have children are twice more affected by poverty than those without, making it hard for the families and children to get access to basic services such as education, health facilities and even clean water. This has led to 4.3% of the children aged five and below experiencing chronic and less than 54% of them getting vaccinated for

6 measles. It also pointed out that due to the ineffectiveness of the SAS program and low coverage of the poor, children in poor households do not get to enrol for early childhood education, unlike the neighbouring countries, which have better rates. Due to increased inequalities among the populations in Kosovo, lack of funding, and poor coverage of the SAS program, the world bank had to be involved. According to Mahon (2019), the world bank in recent times has focused on helping countries make their social assistance programs effective as part of ensuring that countries grow in a balanced manner. It should be noted that with the indication of the ineffectiveness of the Kosovo SAS program, the world bank had to step in because it has restructured such systems and it has the capacity to provide technical support to make reforms that can lead to greater impacts. Also, the issue of financing is an issue when overhauling such a system because of the tight budgets of the young country, which necessitate the bank's inclusion to guide the program reforms. Project Development Objective(s) In project implementation, objectives are key to making progress as they provide an outlook of the issues that have to be tackled. In this case of the Kosovo Social Assistance System Reforms project by the World Bank, several objectives had to be achieved, and they include; I. Increased coverage of poor households with targeted social assistance. II. Increased share of SAS reaching children in the bottom income quintile. III. Improved adequacy of the SAS benefit for households with four or more members. IV. New poverty targeting system used by at least two social protection programs.

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7 V. Decrease in the financial inclusion gender gap (share having bank accounts) (for gender tag) (World Bank, 2021). These objectives will help ensure that the SAS benefits are balanced and are felt by all populations, unlike the current approach, which has less impact and does not cover the poor. Safeguarding Policies and Financing Since the project is under the social assistance programs, the safeguarding policies used are under the Environmental and Social Safeguard Policies of the World Bank, which are part of the 11 operational policies. These policies help guide investment in projects by the bank and ensure that the set guidelines can make the project successful. Thereby, the policy that is used in the current project is the “Piloting the Use of Borrower Systems to Address Environmental and Social Safeguard Issues in Bank-supported Projects.” According to World Bank (2005), the policy states that the bank can only carry out a project in a country (Borrower) whose environment it considers acceptable for borrowing and meeting project objectives. Also, the borrower has to show commitment to filing the gaps in their system, implementing its obligations according to the Bank assessment, and the Bank has to exercise its full responsibility with no restriction. Lastly, the Bank has to carry out assessments during the implementation phase if there are new changes in terms of legislation and the effect they will have on the borrower’s abilities and ensure transparency in the project. This policy ensures that no project is undertaken without proper appraising, and the borrower accepts its guidelines to ensure smooth implementation of the projects. Also, financing is a serious part of implementing projects as it determines if a project can succeed, not by understanding the terms set out by banks. In the case of the Social Assistance

8 System reform project, the financing agreement was made between the Republic of Kosovo and the International Development Association. According to the Finance agreement (2021), the IDA will advance the KSASRP project a credit facility amounting to forty-seven million Euros with an interest charge of 1.25%, and the payments have to be made on 15 th May and November each year. The agreement further points out that the project has to be carried out under the Ministry of Finance, Labor and Transfer to meet the project objectives and that it can only be terminated after 20 years. The agreement also indicates that after 60 days of the agreement, the project will be assigned a Project Coordination Unit under the ministry to coordinate all the functions like staffing and implementing project activities. The borrower would further furnish the association with the annual budget and activities by September 15 th each year, and they may include training for the staff and that the project fits the world bank safeguarding policies. Lastly, the financing agreement stipulates how the forty-seven million euros will be used and that monitoring and evaluation of the project have to be carried out each calendar year until its closing date on December 31 st 2026. Strategic Context and Appraisal Summary The strategic context for projects helps explain if a project can be successful and the factors that can help make the project take off. In this case, it should be understood that the Kosovo Social Assistance system is in place and that it requires reforms by altering its inclusion criteria, expanding its reach and ensuring that it is effective. This is because the current system rarely makes any impact, and its continued use has led to the wastage of an opportunity to prevent high levels of poverty and increase human capital. The presence of the system in place signifies that the World Bank Project can have a great impact because they are not building from scratch a new system but just making improvements. Thereby, pushing for new policies and

9 altering the system will ensure that the World Bank project through the Ministry of Labor can achieve fundamental changes that can make economic growth fit with the poverty reduction, access to basic services and unemployment. According to the appraisal summary of the project conducted in 2021, the word banknotes that the project is being carried out in a situation that does not need urgent assistance, but its implementation has positive impacts on the population. Hence, the world bank noted that implementing the project will ensure the unemployment rate of 33% and 60% among youths. The bank notes that the most challenging part of the project is expanding outreach and that the ministry requires hiring a community and stakeholder expert to support staff in implementing the project activities. The report further indicates that there will be moderate social risk and low environmental risk as the project has no activities that can lead to negative environmental effects. Lastly, the bank appraisal notes that the Ministry of Labor has the capacity and experience to implement the project with the assistance of the PCU. Part 2: How the Project Fits into the Country’s Policies and Programs In implementing a project, it is always advised that it has to fit into a country’s policies and programs under which it is being carried out. This is because fitting into the programs and policies provides easy implementation time as the country might have frameworks in place to help in implementing the project and the will to seek funding. According to Shin et al. (2017), most world bank projects have been successful because they fall within the frameworks and plans that a country has to achieve within a specified period. Thereby, it is common for each nation to develop a country partnership framework (CPF) that assists in determining which projects can be carried out in each country. In this case, the project fits well under the Kosovo

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10 CPF as outlined in focus areas 1 and 2, which adequately deals with poverty reduction and improved access to basic services in communities. According to Kosovo CPF (2017), the country has three focus areas which all partnerships are based upon, and they include; “(1) Enhancing Conditions for Accelerated Private Sector Growth and Employment, (2) Strengthening Public Service Delivery and Macro- Fiscal Management, and (3) Promoting Reliable Energy and Stewardship of the Environment.” This document highlights that one of the drivers of poverty and development challenges in the country is increased unemployment, high untradable sectors, and reduced output of the population, which explains low exports. This indicates that the country requires serious partnerships because it needs to ensure that its economic growth fits well into increased employment creation, reduced emigration, increased labour participation, and refocusing on the bottom 40% of the population. One way that the project fits into the CPF is by addressing the need to refocus on the bottom 40% of the population and increasing the population's participation in the SAS program. According to World Bank (2017), the development agenda for Kosovo needs to address the increased poverty levels, change policies and support a good business environment. This cannot be achieved if the population is stuck in a constant poverty cycle, poor education levels and access to basic services. Thereby, seeking to broaden the new guidelines for the inclusion of the recipients of the SAS benefits ensures that the population is well-cushioned against extreme poverty, and it will increase the country's human capital. According to Rewilak (2017), increasing the population's access to financial support ensures that they can experience a better quality of life, increased educational levels and access to basic services such as treatment. This

11 reflects the objectives of the World Bank project to reform the social assistance system to promote equity and outreach of the social safety net. Also, by increasing the capacity of the population to access basic services and education, the project impacts the employment environment as there can be enough skilled workers to allow the firms to expand and create more employment. According to the CPF (2017), the country’s employment market is limited by the inability of the firms to expand due to a poor business environment and a lack of skilled workers to carry out new tasks. This is mostly contributed by the lack of means to train and educate children leading to a shortage of qualified specialists who can carry out product development, sales and design to fit into the needs of the export market. This means that low exports further limit the country's growth due to non-compliance to standards. Broadening the SAS program to cover the vulnerable households ensures that the CPF is fulfilled by providing grounds for improving education levels that later lead to qualified experts who can help the companies grow and spur development in the country. It should be noted that the broadening of the SAS, increasing the number of poor households and changing inclusion criteria help support the CPF priorities and the country development agenda 2016 by spurring agricultural growth and community output. According to World Bank (2017), improved market performance in Kosovo was predominantly witnessed in the agriculture and land sector because of having strong ministerial policies and readiness to implement projects. This reflects the 60% of the population who live in rural areas, and 40% of them depend on agriculture to earn their daily living even with their poverty levels of not affording farming input. Thereby implementing the program ensures that the poor households of the bottom 40% can get access to cash transfers that will enable them to increase agriculture output and thus increase the country's productivity. When there is increased agricultural

12 productivity, there is a high chance of better employment because the population will need people delivering products, processing in companies and preparing the produce for exports. This will eliminate the increased informal sector of the country and lead to increased trade and accountable employment, which makes their income stable. Concluding Remarks The world bank’s WDR (2017) highlights key issues that affect countries, and its main messages offer an in-depth analysis of the areas that countries need to work on to promote equity by working on the policies, rules, and development outcomes. The report indicates that governance is key to the development of each country, and adopting developmental or poor- oriented policies can help spur growth in all sectors and reduce inequalities. Hence, the report suggests that governance has to be put one the centre of all development debates to ensure that there is sustainable economic growth, equitable distribution of resources and peace. This is always the approach of the World Bank projects that it carries out around the world, such as this Social Assistance System Reform. The majority of the projects that are carried out by the institution ensure that the populations are uplifted, policies are changed, and the projects can have a long term impact on the population and economy. One of the challenges that the project addresses is that “ Ineffective policies persist, while potentially effective policies are often not adopted.” This is because the project explains that the Kosovo Social Assistance System Reform Project has witnessed massive failures in covering the desired population leading to poor outcomes such as lack of access to services due to policies. The program document indicates that the reforms by the world bank aim to change the criteria through which the SAS programs identify vulnerable households and include them in the system. This directly addresses the problem of ineffective policy and brings in new ideas that can create

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13 more impact than the current one, which benefits mostly the elderly and veterans. Also, the project addresses the issue of program coordination by proposing the use of the project coordinating Unit within the ministry of labour to undertake the programs. This approach ensures that the SAS project is successful as it is coordinated well, and even the inclusion of the community and stakeholder engagement experts can lead to better outcomes. It should be noted that the use of PCU within the ministry ensures that there is a proper evaluation of th project and that there is no chance that the project could be captured by a few bureaucrats and limit its effectiveness. By placing the PCU unit under the Ministry of Labor, the project further ensures that there is a renewed commitment to implementing the SAS project. This is because the project is evaluated regularly, and not meeting the targets brings about the issue of non-commitment, leading to the termination of the financing agreement. Thereby, having the renewed commitment as indicated in the appraisal summary shows that the project has addressed the two key issues from the WDR report 2017, which always lead to ineffectiveness and poor outcomes in the management of projects. Lastly, the project’s goal of expansion ensures that the population is well catered for and that the previous ineffectiveness in curbing poverty and improving economic growth can be addressed adequately.

14 References Asher, S., & Novosad, P. (2020). Rural roads and local economic development. American Economic Review, 110 (3), 797-823. https://www.aeaweb.org/articles? id=10.1257/aer.20180268 Gashi, A., & Williams, C. C. (2019). Evaluating the prevalence and distribution of unregistered employment in Kosovo: Lessons from a 2017 survey. The South East European Journal of Economics and Business, 14 (1), 7-20. http://journal.efsa.unsa.ba/index.php/see/article/view/925 Lange, S., & Vollmer, S. (2017). The effect of economic development on population health: A review of the empirical evidence. British Medical Bulletin, 121 (1), 47-60. https://doi.org/10.1093/bmb/ldw052 Mahon, R. (2019). Broadening the social investment agenda: The OECD, the World Bank and inclusive growth. Global Social Policy, 19 (1-2), 121-138. https://doi.org/10.1177%2F1468018119826404 Öhler, H. N. (2019). Putting your money where your mouth is: Geographic targeting of World Bank projects to the bottom 40 percent. PloS One, 14 (6), e0218671. https://doi.org/10.1371/journal.pone.0218671

15 Rewilak, J. (2017). The role of financial development in poverty reduction. Review of Development Finance, 7 (2), 169-176. https://journals.co.za/doi/abs/10.1016/j.rdf.2017.10.001 Shin, W. K. (2017). Do different implementing partnerships lead to different project outcomes? Evidence from the World Bank project-level evaluation data. World Development, 95 , 268-284. https://doi.org/10.1016/j.worlddev.2017.02.033 Word Bank. (2017, April 25). Country Partnership Framework-Kosovo . https://documents1.worldbank.org/curated/en/297951496160148830/pdf/112337- Corrigendum-PUBLIC-Kosovo-CPF-with-Corrigendum-May-8-clean-w-scd-box-edits- May-24-2017-08032017.pdf World Bank . (2021, April 27). Project Information Document-KSASRP . https://documents1.worldbank.org/curated/en/517531620922667468/pdf/Concept- Project-Information-Document-PID-Kosovo-Social-Assistance-System-Reform-Project- P171098.pdf World Bank. (2005, March). OP 4.00 - Piloting the Use of Borrower Systems to Address Environmental and Social Safeguard Issues in Bank-Supported Projects . https://ppfdocuments.azureedge.net/1564.pdf World Bank. (2017). Worldl Development Report: Governance and the law . https://openknowledge.worldbank.org/bitstream/handle/10986/25880/210950mm.pdf? sequence=12&isAllowed=y World bank. (2021, May 12). Environmental and Social Review Summary . https://documents1.worldbank.org/curated/en/391671620863181252/pdf/Concept-

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16 Environmental-and-Social-Review-Summary-ESRS-Kosovo-Social-Assistance-System- Reform-Project-P171098.pdf World Bank. (2021, October 26). Financing Agreement . https://documents1.worldbank.org/curated/en/895961635266561478/pdf/Official-Documents- Financing-Agreement-for-Credit-6988-XK.pd

DIPL 6170-Report on a World Bank Project

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