world bank document...a faction of frud signed the peace accord while remaining frijd members led by...

Document ofThe World Bank

Report No: 17777-DJI

PROJECT APPRAISAL DOCUJMENT

ONA

PROPOSED CREDIT

IN THE AMOUNT OF SDR 2.0 MILLION (US$ 2.7 MILLION)

TO THE

REPUBLIC OF DJIBOUTI

FOR AN

EX-COMBATANTS REINTEGRATION PROJECT

November 30, 1998

Country Department 8Africa Region

Post-Conflict UnitSocial Development Department

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CURRENCY EQUIVALENTS

Currency Unit = Djibouti Franc (FD)FD 177 =US$ 1 (March 1998)

FISCAL YEAR

January 1 - December 31

ABBREVIATIONS AND ACRONYMS

ADB African Development l3ankAGETIP Agence d'Execution de Travaux d'Interet PubliqueAND Arm6e Nationale DjiboutienneESAF Enhanced Structural Adjustment FacilityEU European UnionFD Djibouti FrancFNP Force Nationale de PoliceFRUD Front pour la Restauration de l'Unite et la DemocratieFY Fiscal yearGDP Gross Domestic ProductIDA International Development AssociationIFAD International Fund for Agricultural DevelopmentIMF International Monetary FundLIL Learning and Innovation LoanNGO Non-governmental organizationPAAC Programme d'Assistance aux Anciens CombattantsPATARE Projet d'Assistance Technique pour Appuyer la Reforme EconomiquePRAC Programme de Reinsertion des Anciens CombattantsSDR Executive Secretariat for Demobilization and ReintegrationUNDP United Nations Development ProgramUNOPS United Nations Office for Project Services

Vice President: Callisto MadavoCountry Director: Michael Sarris

Sector Manager: Nat CollettaTask Team Leader: Markus Kostner

DjiboutiEx-Combatants Reintegration Project

Project Appraisal Document

Africa RegionCountry Department 8

Date: November 30, 1998 Task Team Leader: Markus Kostner

Country Director: Michael Sarris Sector Manager: Nat Colletta

Project ID: Sector: SA Program Objiective Category: PA

Lending Instrument: LIL Program of Targeted Intervention: [] Yes [x] No

Project financing data [] Loan [x] Credit [ Guarantee [] Other

Amount: US$ 2.7 m / SDR 2.0 m

Proposed terms: [x] Multicurrency [] Single currency, specify:

Grace period (years): 10 [I Standard [ Fixed [] LIBOR-basedVariable

Years to maturity: 40

Commitment fee: n/a

Service charge: 0.75%

Financing plan (US$ m):

Source Local Foreign Total

Government 0.08 - 0.08

IDA 2.59 0.14 2.73

Beneficiaries 0.37 - 0.37

Total 3.04 0.14 3.18

Borrower: Republic of Djibouti

Responsible agency: Executive Secretariat for Demobilization and Reintegration

Estimated disbursements (Bank FY/US$ m): FY99 FY00

Annual 0.94 1.79

Cumulative 0.9.4 2.73

Project implementation period: 18 months

Expected effectiveness date: January 1, 1999

Expected completion date: June 30, 2000

Expected closing date: September 30, 2000


CONTENTS

A. Project Development Objective 1

1. Background2. Project development objective3. Key performance indicators

B. Strategic Context 2

1. Sector-related Country Assistance Strategy goal supported by the project2. Main sector issues and Government strategy3. Sector issues to be addressed by the project and strategic choices

C. Project Description Summary 4

1. Project components2. Key policy and institutional reforms supported by the project3. Benefits and target population4. Institutional structure5. Implementation arrangements

D. Project Rationale 10

1. Project alternatives considered and reasons for rejection2. Reasons for using a Learning and Innovation Loan3. Major related projects financed by the Bank and/or other development agencies4. Lessons learned and reflected in proposed project design5. Indications of borrower commitment and ownership6. Value added of Bank support in this project

E. Summary Project Analyses 14

1. Financial2. Institutional3. Social4. Environmental assessment5. Participatory approach

F. Sustainability and Risks 16

1. Sustainability2. Critical risks3. Possible controversial aspects

G. Main Loan Conditions 18

1. Agreements to be reached during negotiations2. Conditions for approval by Bank management3. Effectiveness conditions

H. Readiness for Implementation 18

I. Compliance with Bank Policies 19

Annexes

Annex 1 Project Design Summary 21

Annex 2 Detailed Project Description 23

Annex 3 Estimated Project Costs 31Table A Disbursement Schedule

Annex 4 Executive Secretariat - Organigram 33

Annex 5 Procurement and Disbursement Arrangements 35Table A Project Costs by Procurement ArrangementsTable B Thresholds for Procurement Methods and Prior ReviewTable C Allocation of Loan Proceeds

Annex 6 Timetable for Training, Monitoring and Consultants 39

Annex 7 Project Processing Budget and Schedule 41

Annex 8 Documents in Project File 43

Annex 9 Statement of Loans and Credits 45

Annex 10 Djibouti at a Glance 47

Annex 11 Map of Djibouti 49

ii


A. Project Development Objective

1. Background

Following the overthrow of the governments in neighboring Ethiopia and Somalia in early 1991, theinflux of about 100,000 refugees into Djibouti exacerbated already exiisting ethnic disparities. A civil warensued in late 1991 which in one year of heavy fighting (1991/92) resulted in major destruction ofinfrastructure in the northern districts. The war formally ended in December 1994 with the signing of thePeace Accord between the Government and the Front pour la Restauration de l'Unite et de la Democratie(FRUD).' As a result of the war, the combined strength of the Armee Nationale Djiboutienne (AND) andthe Force Nationale de Police (FNP) reached an estimated 17,000 men (and some women) under arms,representing a staggering 7% of the labor force. The burden of military expenditure on the Government'srecurrent budget was also substantial, rising from 24.5% in 1991 to 35.8% in 1994.

Within its program of fiscal decentralization and economic reform initiated in October 1995, theGovernment accords center stage to the restructuring of public expenditure from military to social andeconomic development needs. The demobilization and reintegration of ex-combatants into productivecivilian lives is the central element of this restructuring process. It is also a prerequisite for enduringsocial peace. The Government has subsequently prepared a comprehensive demobilization andreintegration program in 1996/97 to which donors have responded favorably. However, most of theexternal financial assistance is directed towards the payment of departure allowances (demobilization).The program's reintegration component remains severely underfunded.

2. Project development objective

Without any reintegration assistance, the 4,096 ex-combatants2 who were demobilized between 1993 and1996 often spent their departure allowance unwisely. Rarely did they or the FRUD ex-combatants findsustainable employment. As a result, ex-combatants from all warring factions - many of whom areunskilled and illiterate - tend to live lives in destitution and are at risk of resorting to banditry, robbery,and armed opposition. Targeted reintegration assistance is essential to ease the pressure originating fromhaving to cope in an unfamiliar environment. Such assistance needs to touch on all facets of this psycho-social and economic transition. Hence, the project development objective is to effectively facilitate thesocial and economic reintegration of ex-combatants into civilian liife through tairgeted, multi-sectoralassistance, validating, in the process, this innovative approach for an envisaged follow-up operation (seeAnnex 1).

A faction of FRUD signed the Peace Accord while remaining FRIJD members led by Mr. Ahmed Dini,Prime Minister in 1977/78, contest the Accord and remain in armed opposition. As a result of continuing insecurityin several districts, there are currently approximately 6,500 Djiboutians living in refuge in Ethiopia. Another 25,000Djiboutians are thought to be internally displaced.2 These include an official figure of 103 servicemen killed or missing in action. Their families are entitled toreceive reintegration assistance.

I

2 Ex-Combatants Reintegration Project

3. Key performance indicators

For the purposes of this project, "social reintegration" is defined as the acceptance of an ex-combatantand his/her family by the host community. "Economic reintegration" implies the financial independenceof an ex-combatant's household through productive and gainful employment. Consequently, the project'skey performance indicators include: (i) acceptance of ex-combatants and their families by the receivingcommunities; (ii) the degree of ex-combatant participation in community social life; (iii) the incidence ofcrime related to ex-combatants; and (iv) the level of poverty (financial autonomy) among ex-combatanthouseholds.

B. Strategic Context

1. Sector-related Country Assistance Strategy goal supported by the project

CAS document number: P-5416-DJI Date of latest CAS discussion: January 15, 1991

The last formal Country Assistance Strategy for Djibouti was discussed in 1991, i.e. before the outbreakof hostilities. A new one is to be prepared in FY00, on the basis of preparatory work to be undertaken bythe Bank over the current fiscal year, and extensive in-country discussions (involving government, civilsociety, private sector and other partners). The exact timing of the document and content of the strategywill be shaped primarily by the pace and vigor of the Government's efforts in setting developmentpriorities and defining a long-term strategy for equitable growth. Social peace is a prerequisite for thepreparation and implementation of this national development strategy.

Present Bank involvement in Djibouti is guided by the Government's 1997policy framework note whichemphasizes the re-establishment of regional integration, the expansion of the resource base, and socialcohesion as the three strategic pillars to sustainable development. Immediate objectives are to consolidatepeace and resume economic growth. Bank assistance thus aims to help the Government (i) lay thefoundation for sustainable development through a process of social and economic inclusion andemployment generation, and (ii) outline a human resources strategy for people-centered development.

Such a strategy could draw heavily from the Bank's 1997 Poverty Assessment, with attention to poverty(45% of the population is estimated to live below the poverty line - US$1,223 per adult equivalent) andhousehold spending patterns (including consumption of khat, a natural substance containing alkaloids,which accounts for nearly 10% of household expenditure). The Bank will also, in close collaborationwith the IMF, continue its support to the Government's efforts aimed at putting in place a policyframework supportive of restoring financial balance and sustainable economic growth.

The project corresponds to the focus of the forthcoming CAS. By reintegrating a specially vulnerablegroup into peaceful and productive civilian life, the project contributes to sustainable development. Theproject also aims at providing (self-) employment opportunities .o ex-combatants, thereby revitalizing theinformal sector in rural and urban areas. Importantly, it helps weave ex-combatants into the communitysocial fabric through counseling services, sensitization initiatives, and community activities, therebystrengthening social cohesion.

Ex-Comibatants Reintegration Project 3

2. Main sector issues and Government strategy

At the end of the civil war in December 1994, the Government faced the tremendous challenge ofreconstructing a war-torn economy experiencing high unemployment (over 40%), high population growth(over 3% per annum), a decreasing GDP, and increasing internal and external debt. Responding to anunsustainable fiscal situation, the Government started on its own account the demobilization of soldiersfrom the armed forces and police (including disarmament, assembly in discharge centers, variousadministrative procedures, and the payment of a departure allowance) even before the signing of thePeace Accord. This first phase of demobilization, which up to August 1996 reached 4,096 combatants,did not foresee support for reintegration.

The Government subsequently prepared a phased, comprehensive demobilization and reintegrationprogram ("Programme d'assistance aux anciens combattants" [PAAC]) with Bank technical assistance in1996/97 and presented this program at the UNDP Round Table in May 1997. Donors (France, theEuropean Union [EU] and the African Development Bank [ADB]) pledged support in the amount of US$15.9 million out of a total of US$ 17.9 million, almost exclusively for the payment of the departureallowance for 8,224 ex-combatants. This departure allowance differs between front-line duty (8 monthsof salary equivalent) and headquarters (4 months of salary equivalent). IDA is also supporting thePAAC,specifically the administrative structure, through its technical assistance credit ("Projetd'assistancetechnique pour appuyer la reforme 6conomique" [PATARE]).

The initial Government program foresaw US$ 2.5 million for assisting the reintegration of the 8,224phase II ex-combatants (including the disabled), but an upward revision in the calculation of the departureallowance led to an increase of the costs of demobilization of approximately US$ 2.5 million, henceessentially crowding out funds for reintegration assistance, given the externally fixed resource envelopeof US$ 17.9 million. This revision was necessary because more accurate data on the distribution ofsoldiers between front-line and headquarters duty became available after PAAC preparations. It isjustified as it assures fair and equitable support to all demobilized combatants. (See Section F.3 forfurther controversial aspects regarding PAAC financing.)

The Government is gravely concerned that a lack of reintegration support for ex-combatants could lead tomicro-insecurity (banditry, petty crime), if not social unrest. This general risk is exacerbated by thecountry's weak economic base for absorbing a substantial addition to the labor force. The currentunemployment rate is already high, at around 45%. Consequently, the Government, through theExecutive Secretariat for Demobilization and Reintegration, which is funded by IDA, prepared a programaimed at the economic and social reintegration of ex-combatants ("Programme de Rdinsertion desAnciens Combattants" [PRAC]). In order to avoid any discontent among ex-combatants demobilizedbefore and after August 1996, this program targets all 12,300 AND and FNP ex-combatants and, in thespirit of the Peace Accord, the members of the former rebel forces, FRUD, who had not been integratedinto the security forces or the civil service.

3. Sector issues to be addressed by the project and strategic choices

As experience elsewhere suggests (see Section D.4), the first few years after formal discharge are criticalfrom both an economic and a psycho-social perspective, even in an economically prosperingenvironment. Given Djibouti's extremely difficult economic situation, targeted reintegration assistance asproposed by the Government is especially crucial. Likewise, extending such support to, in principle, allex-combatants is justified for reasons of equality and reconciliation. T he project supports thePRAC on apilot basis, testing the envisaged design, institutional structure and implementation arrangements.


The design of the project reflects certain key strategic choices. Firstly, given the very limited potential foragricultural development in the country, the project focuses on income generation and skills enhancementin the informal sector, complemented by employment referral in the formal sector, qualifications anddemand permitting. Secondly, the project aims at a broad geographical spread, providing incentives forex-combatants to return to their communities of origin or to their families where their social capital isoften still the strongest. Thirdly, benefits to ex-combatants will be implemented in such a way that theyhelp revitalize local economies, on both the demand and supply sides. Lastly, the institutionalarrangements allow for community participation in the identification, appraisal, monitoring andimplementation of sub-projects. Such arrangements could help overcome a sentiment of mistrust anddiscontent on the part of the receiving communities.

C. Project Description Summary

1. Project components (see Annexes 2 and 3)

A. Social mobilization. Ex-combatants, as well as the general public, need to be aware of the project, itsbenefits, as well as their respective rights and obligations. Hence, the project contains (i) a socialcommunication sub-component for sensitizing the local population, using various media; and (ii) acounseling and referral service for ex-combatants, offering economic and psycho-social counseling andemployment referral. This component will be implemented by the Executive Secretariat with theassistance of local counselors.

B. Economic reintegration fund. The economic reintegration needs of ex-combatants vary widely, basedon their socio-economic characteristics and aspirations. The project, therefore, offers a range of supportmeasures, on a grant basis, for skills enhancement and micro-enterprise development. Sub-projects willbe identified, prepared and implemented by the beneficiaries in cooperation with service providers(NGOs, training centers, artisans, etc.). The district committees (see below) will appraise and recommendor reject sub-project proposals. The component will be coordinated by the Executive Secretariat.

C. Social reintegration fund. To strengthen the absorption capacity of social services in the hostcommunities, the project supports small-scale social infrastructure and activities aimed at reinforcingsocial cohesion in the ten most severely affected communities. These communities have been selected onthe basis of ex-combatant population and poverty level and will be allocated US$ 30,000. They willidentify local priority social needs, and specialized NGOs will be contracted to implement theinterventions addressing these needs in close collaboration with the relevant government departments.

D. Assistance to disabled ex-combatants. Rehabilitation assistance to disabled ex-combatants from theAND, FNP and FRUD includes the provision of medical services, the provision of prostheses and otheraids, special rehabilitation training and special services to the severely disabled. This component will beimplemented through the Ministry of Health and Social Services (Peltier Hospital), the rehabilitationcenter for the disabled as well as through specialized NGOs and training institutes.

E. Project implementation. The operating costs for the first 15 months of operation, as well as majorequipment, will be covered under a separate ongoing Bank project (see Section C.5 below). Fundingrequirements in these two areas are, therefore, limited. The project also finances capacity building forproject implementation at both the central and local levels and the carrying out of studies to better

Ex-Combatants Reintegration Project 5

understand the project's economic and social impact. Capacity building measures and studies, as well astwo external audits, will be undertaken by consultants (firms or individuaals).

Component Category Cost incl. Cont. % of Bank-fin. % Bank-(US$ m) Total (IJS$ m) financing

A. Social mobilization Capacity building 0.16 5 0.15 89

B. Economic reintegration fund Micro-projects 1.83 58 1.56 85.

C. Social reintegration fund Institution building 0.30 9 0.26 85

D. Assistance to the disabled Capacity building 0.44 14 0.36 80E. Project implementation Project management 0.44 14 0.41 95

Total 3.18 100 2.73 86

2. Key policy and institutional reforms supported by the project

The Government is currently undertaking adjustment and reform efforts that are supported by a secondstand-by arrangement with the IMF. An ESAF arrangement (Enhanced Structural Adjustment Facility) ispossible in 1999, for which further fiscal consolidation will be an important prerequisite. A reduction inthe wage bill, and hence military downsizing, are key elements of this overall reform process. ThePAACreduces the share of military expenditure in government recurrent expenditure from almost 36% in 1994to almost 21% with the completion of the demobilization program. Annual savings from thePAAC areestimated in the order of US$ 15 million. The project does not directly contribute to fiscal consolidation.However, it helps cushion the potentially negative impact of such consolidation on retrenched soldiersand policemen, as well as provide a safety net for members of the former rebel forces.

3. Benefits and target population

The project provides benefits to ex-combatants upon their request, supporting micro-initiatives designedby and for ex-combatants. The project is, thus, a demand-driven response to the expressed needs of thebeneficiaries. Socio-economic baseline data for all ex-combatants, to be collected during the start-upphase of the project, will throw light on where such demands lie. Project benefits will be balancedgeographically across districts.

Benefits include access to: an information and counseling service; literacy training; grants for micro-projects; the provision of formal and informal training; job referral (including to their pre-serviceoccupation); community services and social activities; medical services for the disabled; and capacitystrengthening. Regarding training and employmeint, special emphasis will be placed on informal sectorapprenticeships which provide simultaneous on-the-job training for technical, administrative, andcommercial skills.

The project's primary target group are 12,300 ex-combatants demobilized from the AND and FNP3 aswell as an estimated 3,000 ex-combatants of the former rebel forces.4 If underemployed or unemployed,

3 Approximately 7,000 have volunteered for demobilization, whereas the services of the remaining 5,200 areno longer required.4 As part of the Peace Accord, 500 FRUD ex-combatants were integrated into the AND, 200 into the FNP,and another 200 into the civil service. The project covers the remaining FRUD ex-combatants, including the 500who are eligible to receive a departure allowance. The exact number of FRUD ex-combatants will be establishedduring registration at start-up (see also Section F.3 below).


they will be eligible as individuals (for instance for counseling services and training) and in groups(mainly for micro-projects). The formation of mixed groups (ex-combatants/civilians) will be particularlyencouraged for two reasons: (i) mixed groups bring direct benefits to other members of the hostcommunity; and (ii) ex-combatants have access to skills they themselves may not yet possess.Dependents and widows and orphans could access benefits in lieu of eligible ex-combatants.

In preparation of the PAAC, a short socio-economic survey was carried out in late 1995 to determinedemographic characteristics, needs and aspirations of AND and FNP ex-combatants. Overall, the 3,308FNP ex-policemen are better qualified, and hence may integrate - find gainful employment - more easily,than the 4,916 AND ex-soldiers. (A short profile is presented below.) Assistance will be provided forsub-project proposals of acceptable quality (see Section C.5 below) on a first-come first-served basis.Overall, the project is expected to reach approximately 3,800 ex-combatants (including the disabled),amounting to 25% of the overall target group of approximately 15,000.

Indicator AND FNP

PAAC target group: 4,916 soldiers. 3,308 policemen.

Age distribution: 37% are between 25 and 29. 45% are between 25 and 29.

Education level: 82% have no formal education. 54% have no formal education.

Marital status: 64% are single. 53% are single.

Professional experience: 96% have no experience. 69% have no experience.Source: Comite Technique de Demobilisation et de Reinsertion.

Though there are fewfemale ex-combatants5 , every effort will be made to tailor reintegration assistanceto their needs where relevant, for instance through the provision of child care to enable them toparticipate in a training course, or access to special counseling services. A project component is dedicatedto the estimated 650 disabled ex-combatants.6 Depending on the degree of disability, they will receivemedication and medical services, wheelchairs and prostheses, and special skills training.'

Ex-combatants are a highly vulnerable but not necessarily a very poor target group. To the exten.possible, therefore, and to support the social reintegration objective, benefits should also reach thehostcommunities at large. The project finances social services and social activities (such as basic health andadult and peace education) to communities (villages) with a high percentage of ex-combatants in thecommunity's overall population and a high level of poverty in the community. Furthermore, the projectencourages the involvement of local NGOs and associations in micro-project design and implementation.

5 The mobilization decree of November 13, 1991 limited the number of female citizens to be mobilized to1% of male citizens mobilized. As approximately 12-13,000 citizens were mobilized between 1991 and 1993, thenumber of female soldiers to be demobilized is limited to between 100 and 150.6 There are 487 disabled ex-combatants in the AND and FNP. In addition, an estimated 160 FRUD ex-combatants are disabled. This estimate will be reviewed after the identification and screening process planned forproject start-up (see Section F.3 below).7 The moderately and severely disabled ex-combatants of the AND and FNP are eligible to receive adisability pension. For the 124 moderately disabled, this pension is calculated on the basis of their monthly salary,the degree of disability and the number of years in military service. For the 14 severely disabled, the pension iscalculated on the basis of their monthly salary, the degree of disability and the probable number of years of service(estimated at 20). Their pensions will be paid as an annuity beyond the duration of the project. These pensions,which amount to US$ 511,000, are not included in the project. The PAAC envisages the administration of pensionpayments directly and independently by the Ministry of Finance and National Economy.

Ex-Com batants Reintegration Project 7

The capacity of many local NGOs needs strengthcning, which will be provided by the project to thebenefit of their members and the wider community.

Though developed as an intervention primarily facilitating the social and economic reintegration of ex-combatants, the project is conceived around the concept of an ex-combatant household. The spouse andchildren, as well as other dependents are, therefore, eligible for certain types of assistance. For instance,rather than training an elderly or disabled ex-combatant, a child could participate in a training course. Thesame holds true for widows and orphans of the combatants who died in combat or are missing in action.

4. Institutional structure

The project will be implemented under the guidance and supervision of theInter-Ministerial Commissionfor Demobilization and Reintegration, established for the preparation and implementation of thePAAC.The Commission, inter alia, (i) formulates and coordinates all activities related to thePAAC/PRAC andto the reintegration project; (ii) identifies problems related to project implementation and impact; and (iii)undertakes all measures necessary for their quick and effective solution. The Commission holds quarterlymeetings, but extraordinary meetings can be called if necessary.

The Executive Secretariat for Demobilization and Reintegration (SDR) was established by presidentialdecree on February 10, 1997 as a civilian entity to implement the PAAC. Given the specific requirementsof a reintegration project, the SDR was reorganized by presidential decree on August 20, 1998; it will bedissolved upon termination of the reintegration program. The SDR reports to the Inter-MinisterialCommission and is responsible for the overall implementation and management of the project.

The SDR is headed by a Director and comprises four units: (i) information and counseling; (ii)reintegration/operations; (iii) management information system; and (iv) accounting. The organigram isprovided in Annex 4. The SDR is responsible for ensuring (i) the implementation of the individual projectcomponents in collaboration with other Government departments, NGOs and donors; (ii) the transparentand accountable administration of the project (including procurement and disbursements); and (iii)monitoring and evaluation.

At the local level, the SDR has established liaison offices in each district (Ali Sabieh, Dikhil, Djibouticity-Balbala, Obock and Tadjourah). Each liaison office comprises a liaison officer, an experienced andqualified project counselor and an ex-combatant counselor, all three familiar with the local socio-politicalenvironment. It also includes an experienced staff from a competent NGO as technical assistance. Theliaison offices are responsible for (i) information and counseling, in particular for sub-project preparation;(ii) coordination of the social and economic reintegration funds in the respective district; (iii) monitoringand evaluation; and (iv) coordination with government structures and other project interventions. A smallantenna, staffed by two ex-combatant counselors, has been opened in Yoboki for counseling andmonitoring.

Each liaison office and antenna is assisted by a district committee %vtn representation from: the localadministration, including local representatives of sector ministries; traditional and religious leaders;NGOs and local associations; the private sector; ex-combatants; local security (AND and FNP) andFRUD; and the district office. The responsibilities of a district commititee include: (i) sensitizing the localpopulation; (ii) assisting the liaison office in project implementation; (iii) identifyiing and solving localproblems related to ex-combatant reintegration; (iv) sub-project selection under the economic and socialreintegration funds; and (v) reporting on the progress and impact of the project to central government


authorities. Furthermore, the administration at lower levels assists the liaison offices and antennas inproject implementation.

5. Implementation arrangements

Implementation arrangements vary by component as briefly outlined in Section C.1 above. Detailedmechanisms are presented in the project implementation manual. During implementation, the economicand social reintegration funds will require closest attention, specifically the micro-projects andcommunity social services sub-components. The sub-projects to be funded thereunder for the benefit of(groups of) ex-combatants and host communities will follow a specific sub-project cycle. The districtoffices will organize start-up sessions for sensitizing ex-combatants and community members alike aboutthe steps necessary for sub-project preparation, appraisal and implementation. Sub-projects will then be:

1. identified by ex-combatants (and dependents), veterans associations or communities (the"beneficiaries"), with assistance from the liaison office and antenna;

2. prepared by the beneficiaries in collaboration with a veterans association, an NGO Iocal orinternational) or a private sector firm;

3. submitted to the liaison office; the proposal will include, among others, the beneficiarycontribution, a detailed budget and disbursement schedule, and capacity building needs;

4. appraised and recommended or rejected by the district committee;

5. approved by the SDR;

6. executed by the beneficiary in collaboration with a veterans association, an NGO or a privatesector firm; and

7. monitored and evaluated by the liaison office, antenna and district committee.

The beneficiaries (as well as the partner agency, if any), will be contracted by the liaison office afterconfirmation of a sub-project. Sub-project appraisal will follow specific guidelines to ensure - to theextent possible - sub-project sustainability, including institutional, economic, financial, social and, ifapplicable, environmental criteria as specified in the project implementation manual.

Accounting, auditing andfinancial reporting (see Annex 5). As a general rule, financial management willbe undertaken centrally by the SDR. The SDR will include an accountant who will be assisted by anexperienced financial expert for the establishment of a computerized project financial managementsystem, including accounting and internal control systems capable of recording and reporting reliably allassets, liabilities, and financial transactions of the project. The accountant will maintain project accountsand produce annual financial statements in accordance with internationally accepted accountingprinciples.

Payment to beneficiaries, NGOs, suppliers, etc., will be effected directly by the SDR according to theapproved payment schedules specified in the project implementation manual. All sub-projects will berequired to keep proper books of accounts and issue annual sources and applications of funds, with theassistance of NGOs, if necessary, in a format specified in the project implementation manual. Theaccountant will be trained on IDA financial reporting requirements and procedures by a FinancialManagement Specialist from the Bank.

Ex-Conmbatants Reintegration Project 9

Project accounts, the accounts of a randomly selected number of sub-projects, and the accounts of NGOsparticipating as executing agencies will be audited annually by an independent, internationally reputablefirm under terms and conditions satisfactory to IDA. The audit firm will conduct an interim audit (9months into the project fiscal year) and a final audit at the end of the project fiscal year. The interim auditwill provide a detailed and comprehensive review of the project internal control system and makepractical recommendations for its improvement. An interim report to that effect will be issued within twoweeks of the end of the assignment.

During the final audit the auditor will be required to produce: (i) an audit report including an opinion onthe financial statements and separate opinions on the utilization of statements of expenses and themanagement of the Special Account and (ii) a management report documenting the implementation of therecommendations of the interim report and providing additional recommendations for furtherimprovement. The reports will be provided within six (6) months of the close of the project fiscal year.

In order to facilitate project implementation, a Special Account will be opened in the central bank underterms and conditions satisfactory to IDA. The establishment of a sound and reliable financialmanagement system is a condition of credit effectiveness.

Monitoring. Project monitoring is the primary responsibility of the SDR. To this end, it will develop andapply a computerized management information system. The SDR will collect socio-economic baselineinformation of all ex-combatants during start-up and update this information during implementation. Suchinformation will be critical to trace ex-combatants during the reintegration phase and identify and solveproblems as they arise.

Sub-project implementers will have to submit quarterly financial reports to the respective district office(liaison office or antenna). Monitoring of sub-projects will be the duty of the district offices, assisted bythe district committees. Standardized monitoring forms are included in the project implementation manualto facilitate monitoring and situation analyses. These forms also contain objectively verifiable indicatorsof project performance to allow for easy comparison. The liaison offices will prepare short monthlydistrict implementation progress reports which will be summarized by the SDR into monthly financialand implementation monitoring reports. On a quarterly basis, the SDR will prepare a more detailedsituation analysis for submission to thie Inter-Ministerial Commission and IDA.

Evaluation. During the life of the project, two external evaluations, one mid-term, one final, will becontracted to independent consultants. Both evaluations will analyze: (i) the achievements in projectimplementation; (ii) the impact on the ex-combatant families and host communities; and (iii) theappropriateness of the institutional arrangements and administrative mechanisms. Both evaluations willbe based on (i) the internal management information system and the financial monitoring reports; and (ii)a beneficiary and community assessment to evaluate impact on the ground. The mid-term evaluation willbe followed by the Bank's mid-term review mission.

Special arrangements. Until December 1999, the costs of the SDR, including the district offices andtechnical assistance, will be funded under IDA's PATARE credit. The reintegration project is expected tobe completed by June 30, 2000. Hence, the project will finance operating costs for the last few months ofimplementation. Being funded as part of the PATARE project, procurement, disbursement and auditingarrangements are similar to enhance synergy.


D. Project Rationale

1. Project alternatives considered and reasons for rejection

Socialfund/AGETIP-type approach. A social fund aims to reduce poverty and integrate destitute groupsinto the economy. It is designed to fund local organizations, public or private, in a flexible andtransparent manner. A social fund is demand-driven in that it responds to funding requests from localagencies and neither identifies nor implements projects. On the other hand, an AGETIP (Agenced'Execution de Travaux d'Interet Publique) is an independent executing agency for public works with theaim of creating employment using labor-intensive tc hniques.

Social funds/AGETIPs are oriented towards an extended target population, usually focusing on the poorand otherwise marginalized groups. Treating ex-combatants within the social fund as a special targetgroup with preferential access bears the risk of creating discontent among the larger community.Furthermore, the social reintegration needs of ex-combatants, their families, and the host communities(such as psycho-social counseling and social communication) cannot easily be addressed using socialfunds/AGETIPs.

Ex-combatants are a specially vulnerable group in need of targeted, time-bound assistance. Without suchsupport, ex-combatants are at risk of social and economic exclusion as a result of their lack of social andhuman capital and financial resources. Unaided, they may resort to violence and rent seeking at the barrelof a gun, and hence pose a danger to social stability. Yet, while treating ex-combatants as a special targetgroup, the project includes measures aimed at mitigating possible community resentment.

2. Reasons for using a Learning and Innovation Loan

For a variety of reasons, a Learning and Innovation Loan (LIL) is the ideal instrument to process theproject. The LIL will test decentralized decision-making for a priority segment of the population, which,if not addressed, can soon threaten the evolving social reconstruction and peace process. Ex-combatantreintegration is uncharted territory in Djibouti. Locally viable economic, financial and social solutions tosuccessfully reintegrating ex-combatants into society following demobilization are not yet known. Theproject will test aflexible, multi-sectoral approach to reintegration, aimed at responding to the particularsocio-economic characteristics of the target population.

The intervention entails providing menu options from which ex-combatants can select what best fits theirneeds and aspirations. The approach is unique, and the combination of training through informal sectorapprenticeships, information/counseling, and community-based micro-enterprise development is expectedto facilitate the transition of ex-combatants into (self-) employment and income-generating activities. Itmay be noted that although the Bank has been involved in preparing and implementing demobilizationand reintegration programs in other countries (see Section D.3 below), this is itsfirst self-standing projectexclusivelyfocused on the economic and social reintegration of ex-combatants.

A second innovation relates to a decentralized approach whereby the local administration and local civilsociety participate in the decision-making process, thereby moving away from the country's historicalpattern of centralization. Decentralized decision-making and community participation provides aninnovative 'second generation' to earlier social fund approaches that relied heavily on intermediaries,instead of empowering communities to take responsibility for identifying needs and priorities andmanaging resources.


If successful, the project will set a good precedent with respect to decentralized institutional andimplementation arrangements for not only a possible second-phase related operation but also for otherfuture developmental activities, most immediately the Bank's CiviLl Works and Social Developmentproject slated for appraisal around mid-1999. Building local and central institutional capacities forplanning and implementing development projects is crucial for Djibouti, a country burdened with weakcentral capacity and an inefficient civil service. Through experimentation and piloting, the LIL helpsidentify the best institutional/implementation arrangements and helps assess local capacity for future(reintegration as well as other) operations.

A further element of innovative design relates to the expansion of access to micro-project grants beyondex-combatants to include dependents and civilians. Indeed, encouraging the formation of mixed/diversegroups augurs well for the reconciliation of communities suffering from the effects of war. Thisinnovation goes to the heart of building social cohesion and addressing issues of exclusion - anunderlying cause of conflict in the first instance.

The ground has already been laid through Government efforts, and CGovernment is firmly committed tofacilitating the reintegration process. A LIL - requiring modest funds and preparation time - lendsmomentum to such commitment, and addresses the urgent need to provide assistance to ex-combatantswho lack immediate reintegration assistance, including information and counseling. As such, the LILcould well serve as a key intervention in preventing the recurrence of conflict - given Djibouti's fragilepost-war society and continuing threat of internal and external conflict - by establishing small butmultiple successful examples of harmonious integration of ex-combatants into communities.

The mechanics of involving stakeholders in planning and implemenlation will be constantly improvedthrough monitoring and evaluation, in particular: (i) the carrying out of studies that aim at betterunderstanding the economic and social dynamics at the local level and (ii) a comprehensive managementinformation system for real-time learning (also see Section C.5). The final evaluation will determine thedegree of achievement of the project's objective and outputs. If thie project was deemed successfulregarding design, implementation and financial management; if the beneficiaries (ex-combatant familiesand communities alike) were highly satisfied with project outcomes and procedures; and if Governmentremained committed to inclusive development through ex-combatant reintegration, a follow-upintervention in the form of a related operation could be envisaged, covering some or all of the remainingex-combatants.

3. Major related projects financed by the Bank and/or other development agencies

Recently, initiatives have been started by IDA, the ADB, IFAD and LUNOPS. Although these initiativestarget different sectors, they mainly use social fund/AGETIP-type approaches for implementation. Allinitiatives are currently either being planned or under preparation; they are being coordinated by theNational Monitoring and Coordination Committee (Comite National de Suivi et de Coordination desR6formes). It is likely that ex-combatants will be among the beneficiaries of these interventions. Hence,once operational, the SDR will closely cooperate with these complementary strategies, especially in thearea of (self-) employment generation, to avoid duplication of efforts.

In particular, the project complements the Bank's proposed Civil Works and Social Development Project(CWSDP), which is currently under preparation. The CWSDP will not include support to micro-enterprises, the mainstay of the reintegration project, and the latter does not finance larger-scale labor-intensive public works, the major focus of the CWSDP.


Sector issue Project Latest Supervision (Form 590)Ratings (Bank-financed projects)

IP DO

Bank-financed

Poverty reduction Civil Works and Social Development Project; ID n/a n/a44584; objective: improve living standards of thepoor, including low-skilled unemployed and ex-combatants, through employment generation andimproving access to basic services; under preparation.

Technical assistance Technical Assistance Project to Support Economic S SReform Project (PATARE); ID 44174; Credit 2934-DJ; US$ 6.5 million; closing date: 06/30/00; financesExecutive Secretariat for Demobilization andReintegration.

Urban infrastructure Urban Development Project II; ID 616; Credit 2203- HU HUDJ; US$ 11.2 million; closed: 6/30/98.

Capacity building Manpower Training Project (completed); ID 614; Outcome: marginallyCredit 2080-DJ; US$ 5.8 million; closed 10/31/95. satisfactory; sustainability:

uncertain; institutionaldevelopment: moderate; Bankperformance: marginallysatisfactory.

Other development agencies

Demobilization PAAC, co-funded by Government, IDA, the Caisse Until September 1998, someFrancaise de Developpement, the European Union and 7,700 combatants have beenthe African Development Bank; US$ 17.8 million demobilized; discharge(plus US$ 9.0 million financed by Government 1993- modalities are very effective;96); expected completion (demobilization financial administration is verycomponent): early 1999. efficient (with French technical

assistance).

Poverty reduction African Development Bank: Social Development n/a n/aFund Project; under preparation

Rural development International Fund for Agricultural Development; n/a n/adefinition and scope to be determined.

Post-war UN Office for Project Services: rehabilitation of war- n/a n/areconstruction effected areas; US$ I million available from UNDP.

IP: implementation progress; DO: development objectives.IP/DO Ratings: HS (highly satisfactory), S (satisfactory), U (unsatisfactory), HU (highly unsatisfactory), n/a (notapplicable).

4. Lessons learned and reflected in the project design

The Bank has been assisting various countries in preparing and implementing demobilization andreintegration programs. Such assistance has often taken the form of technical advice and/or financialsupport through reallocations from ongoing projects as well as through budget support programs. In


addition, the Bank undertook best practice work on the experience with such programs in selectedAfrican countries (see Annex 8, Colletta et al.). The Bank's operational and analytical work points to anumber of lessons around which the project has been designed. Among the issues relevant to this projectare:

ECONOMIC REINTEGRATION

Ex-combatants constitute a specially vulnerable group in need of priority targeted assistance. They shouldbe assigned to target groups and sub-groups on the basis of their main economic activity and, thus, ontheir differing needs and aspirations. This allows for the development of a differentiated, relevant, andcost-effective approach. Disabled ex-combatants commonly require tailored training and employmentassistance, and their special medical needs should be met through the provision of specialized services.

Ex-combatants should receive no more support than is necessary to help them attain the standard of livingof the communities into which they reintegrate. To avoid the creation of a dependency syndrome,assistance should have a specific time horizon. Information, counseling and referral services can assistex-combatants in crucial ways. Apprenticeship in the informal sector combines the benefits of vocationaltraining and employment at the lower end of the market and is, thus, a feasible and cost-effective option.Micro-credit schemes can help ex-combatants secure their economic independence and self-employment.They are, however, also the most expensive interventions and the most difficult to manage. Micro-grantschemes are, therefore, preferable.

SOCIAL REINTEGRATION

Social reintegration is often eased by the support of an extended faimily network, and ex-combatantsmight well be encouraged to reintegrate in the vicinity of their extended families. Informal networks ofex-combatants - discussion groups, veterans associations, joint economic ventures -- are key elements tosuccessful economic and social reintegration. Efforts to strengthen social capital enable communities totake development into their own hands and facilitate the reintegration of ex-combatants.

Care should be taken that ex-combatants are not stigmatized as unfit for military service or as conveyersof disease, violence and misbehavior. Community sensitization and political awareness are paramount inthis effort, though the fears and needs of communities related to ex-combatant reintegration must not beneglected. Furthermore, a community support program that provides visible benefits to the community isa critical adjunct to assistance for ex-combatants.

INSTITUTIONAL CONCERNS

Central program coordination by one civilian agency with overall responsibility, balanced bydecentralization of implementation authority to districts and communities through existing organizationalstructures makes for a powerful institutional arrangement. Ex-combatant counselors, as well as field-besed staff, can perform crucial roles in facilitating reintegration. Local communities should be involveddirectly in decision-making, especially on important local matters, so that scarce public resources areallocated in a transparent and socially accountable manner.

To put scarce resources to optimal use, reintegration assistance measures should be ranked by simplicityof implementation, with the simplest components first on the list, in particular counseling and communitysensitization. Once the major program objectives have been fulfilled, remaining activities should beintegrated into the government's mainstream development efforts. It: is advisable both to use existing


government and NGO manpower, technical resources, and infrastructure and to avoid duplication ofexisting structures and programs. The effectiveness of program interventions in relation to ongoingdevelopment initiatives is maximized by careful coordination within government and among other projectpromoters.

5. Indications of borrower commitment and ownership

Military downsizing, coupled with facilitating the transition into civilian life of the retrenched soldiers, isamong the Government's top priorities. Since 1995, the Government, through the Technical Committeefor Demobilization and Reintegration and later the Executive Secretariat for Demobilization andReintegration, has been spearheading efforts at devising and implementing a comprehensive program.The PAAC submitted to donors at the 1997 Round Teble as well as the PRAC have been prepared byGovernment. It is in response to the Government's lead role and request that the Bank has been providingtechnical assistance and has initiated preparations for the project.

6. Value added of Bank support in this project

The Government has been relying on the Bank to provide guidance in the conception of the PAAC andthe PRAC since October 1995. At the same time, Bank advice ana institutional support proved critical toassure donors of an implementable and quality program, evideneced by their co-funding of the PAAC inthe amount of US$ 15.9 million. Hence, Government commitment and Bank input have been key factorsfor launching this initiative.

The recent revision in the calculation of the departure allowance (see Section B.2) essentially crowds outany reintegration support envisaged in the PAAC. Donor funding for the PAAC has been forthcomingonly with difficulties (see Section F.3), and it is highly unlikely that the reintegration program - as criticalas it is - would find further financial support. Nor would Government be in a position to finance suchcosts, given the constraints of its economic reform program. Hence, the project enables the Governmentto implement measures mitigating the effects of military downsizing and war-to-peace transition that maybe harmful to both society and the individual.

E. Summary Project Analysis

1. Financial

There will be no direct recurrent costs resulting from project activities. However, the SDR will cooperateclosely with other Government departments regarding recurrent cost implications under community socialservices sub-projects. Furthermore, the project will fund sub-projects through micro-grants, not micro-credits. Hence, no arrangements for credit recovery are required. The Government's counterpartcontribution is 2% of total project costs, with another 12% being contributed by beneficiaries in cash or inkind as part of all approved activities under the social and economic reintegration . .nds and the disabledcomponent (15% of each activity funded). Modalities for the payment of the Government's counterpartcontribution are included in the project implementation manual.

2. Institutional

The SDR was established and staffed prior to the implementation of the PAAC but requiresreorganization. Staff needed for the execution of the project at the central and local level will be hired


before the project starts. Efforts will be made to employ within the local offices qualified ex-combatantswho are trusted by their peers and communities alike. Staff training at the central and local levels, inparticular for counseling, sub-project management and monitoring and reporting, will be among thecritical start-up activities. Such training will focus on imparting practical problem-solving techniques.

The depth of the involvement of the district committees and local NGOs (including veterans associations)will depend on their human resource and institutional capacity. Such needs will be identified during start-up, and appropriate training programs will be developed and provided during implementation with a viewto foster people-centered, inclusive development. These activities will be closely linked to ongoing andplanned efforts by donors and NGOs.

3. Social

Socio-economic, political, cultural, institutional and social factors that affect the project at the local levelwill be continuously monitored during implementation. Close coolperation will be sought with localleaders (traditional, religious, modern) and local civil society to identify these factors and to deviselocally adequate conflict resolution measures. Such measures will enhance mutua! understanding andbuild trust between ex-combatants and communities, thereby mininnizing possible disruptions of, andmaximizing the project's positive impact on, the community social fabric.

4. Environmental assessment

Environmental Category: []A L] B [x] C

None of the activities financed by the project are expected to have an environmental impact.Nevertheless, appropriate environmental aspects will be included in appraising sub-projects under theeconomic and social reintegration funds. Specific environmental evaluation criteria are included in theproject implementation manual.

S. Participatory approach

The design of interventions aimed at economic and social reintegration benefited from a series ofconsultations with ex-combatants. For instance, a socio-economic survey of combatants was undertakenbefore discharge to determine, among others, their level of professional qualifications and theiraspirations once demobilized. Furthermore, focal group and key infornant interviews were carried out inall parts of the country to better understand the economic and psycho-social dimensions of reintegration.Lastly, veterans associations have actively participated in various project planning sessions.

Stakeholders Preparation Implementation Operation

Beneficiaries/community groups COL COL COL

Partner agencieslNGOs COL COL COL

Training institutions CON COL COL

Local and central government COL COL COL

Other donors and agencies CON COL COLIS: information sharing; CON: consultation; COL: collaboration.


F. Sustainability and Risks

1. Sustainability

The project will be implemented over 18 months to facilitate the reintegration of approximately 3,800 ex-combatants during this critical transition period. Its sustainability will be viewed in terms of socialcohesion and the stabilization of the ex-combatants' economic situation vis-a-vis the general population.Factors critical to achieve these goals are continued social peace and a favorable economic environment.

The project addresses these sustainability issues through, among others, (i) a sensitization program toinform the general public (using public and popular folk media, workshops, etc.); (ii) the participation ofthe local population in the decision-making process; and (iii) close links to employment-generatinginterventions within a coordinated approach to long-term, inclusive development. Depending on itssuccess and on sustained Government commitment, a related operation benefiting (but not necessarilylimited to) remaining ex-combatants could follow.

It is worth noting, nevertheless, that reintegration is a long and complex process without a clearconclusion. Many veterans, and in particular those not reached by the project, may remain or becomepoor, requiring longer-term assistance through mainstream operations. Long-term sustainability is also afunction of regional developments, Government progress on basic economic issues, and longer-termgrowth as a consequence of the development of the social sectors. The impact of the project, even ifsuccessful, is thus recognized to be modest, limited to the demonstration value of improved communityacceptance, reduced banditry, and increased near-term social and economic welfare of ex-combatants.

2. Critical risks

Risk Risk Rating Risk Minimization Measure

1. Outputs to Objective

Beneficiaries cannot rebuild their social M Social mobilization program: communitycapital. sensitization, public information campaign;

social counseling: settling with close relatives,counseling on rights and duties as a civilian;devising local conflict mediation mechanisms.

Beneficiaries suffer from a dependency S Extended counseling that reintegrationsyndrome. assistance: is not a right, is time-bound;

coverage of longer-term needs through otherprograms and projects.

Concurrent strengthening of community social S Close collaboration with relevant Governmentservices not undertaken. departments; recommendation on budgetary

allocation.

2. Components to Outputs

Local economies cannot absorb ex-combatants. H Link to other interventions that expand thelocal resource base; monitoring resourceallocation mechanisms whether they disfavorex-combatants; economic counseling andreferral and attendant information collection.


continued

Risk Risk Rating Risk Minimization Measure

Insufficient capacity of local NGOs to assist in S Identification of capacity building needsimplementation. during stlrt-up; development and provision of

appropriate training program.

Legal framework hinders development of the M Review of legislation regarding informal sectorinformal sector. activities; recommendation to authorities if

legislation restrictive.

Overall Risk Rating S Learning and adaptation based on continuousmonitoring will contribute to riskminimization.

Risk Rating - H (high risk), S (substantial risk), M (modest risk), N (negligible or low risk).

3. Possible controversial aspects

PAAC financing. Following Round Table discussions, demobilization under the PAAC was planned inthree phases under financing from (i) France (last quarter of 1997), (ii) the EU (first quarter of 1998), and(iii) the ADB (second quarter of 1998). France already provided approximately US$ 4.9 million for thedemobilization of a total of 2,785 soldiers. Demobilization underEU funding commenced in June 1998,allowing for the payment of the departure allowance for a further 2,850 soldiers, including 228FRUD ex-combatants. Funding for the departure allowances of the other 272 eligible FRUD ex-combatants, whofor administrative reasons had not been included in the PAAC, remains yet to be identified. Unless theirclaims are addressed in due time, they are likely to become a source of instability.

The ADB has tied its contribution to the PAAC to an ESAF with the IMF, which has been postponedfrom 1998 to 1999. This link will lead to a delay in payment and possibly outright cancellation, ifESAFconditions are not met in due time. The consequences for demobilization would be substantial. Thedemobilization of the remaining, approximately 3,000 combatants is now not envisaged before the firstquarter of 1999. If it stalled, Government would not be in a position1 to cover the shortfall, which mayamount to around US$ 5.0 million.

Such a delay would not jeopardize the rationale and implementation of the project as the reintegrationneeds of the combatants already demobilized, as well as of the FRUD ex-combatants, remain to beaddressed. However, it would severely strain the Government's financial situation and may lead to thetemptation of using the project for financing the remaining departunr allowances. In addition, measuresmay be drawn up that alleviate the short-term budgetary pressure but that do not respect the principles offairness and equity in treating ex-combatants. Such a scenario could lead to social unrest. It could alsolead to the putting on hold by the AND and FNP of further discharge operations if they resent suchunequal treatment.8 The Bank is assisting the Government and concerned donors iin finding a mutuallyagreeable solution for the 272 FRUD ex-combatants and the final phase of demobilization.

Identification. During the civil war, membership in any of the forces transcended colonial boundaries. Agood part of those already demobilized by the AND and FNP are said to have returned to their homeland.Yet foreigners mobilized into the government forces were granted Dj iboutian nationality upon discharge.

8 An extended conflict between Eritrea and Ethiopia could likewise lead to a postponement ofdemobilization. It is to be noted, however, that Djibouti has a defense agreement with France in which Franceassures military assistance in case of external aggression.


The project does not extend benefits to non-citizen ex-combatants unless they are legally resident inDjibouti. During start-up of operations, ex-combatants will be required to register to be eligible forproject benefits.

Prior to discharge, AND and FNP ex-combatants have been issued with identification cards, and each willbe required to produce this card, as well as supplementary documentation (discharge certificate and/ornationality/residency card) upon registration. This system will help prevent leakages. In addition, localauthorities could be asked to cooperate and verify whether a particular person is known to reside at thestated address. The identity of FRUD ex-combatants will be ascertained by verification missions to thedistricts at project start-up. Supplementary documentation will be used to the extent possible, e.g. listsprepared during FRUD disarmament.

G. Main Loan Conditions

1. Agreements to be reached during negotiations

* Institutional structure and implementation arrangements at central and local levels.* Financial management, disbursement, audit and procurement procedures.* Procedures regarding identification of ex-combatants.* Extent of beneficiary contribution for approved sub-projects.* Areas of technical assistance and content of staff development program.

2. Conditions for approval by Bank management

* Decree reorganizing the Executive Secretariat.* Finalization of project implementation manual acceptable to IDA.* Receipt of a letter from Government containing a policy statement that: (i) constraints for

informal sector development will be removed to facilitate the absorption of ex-combatants; and(ii) public and private training providers will have autonomy to design and implement modular,short-term courses for ex-combatants.

a Adoption of text on framework for establishing the district committees (specifying especiallytheir responsibilities and composition).

* Selection of the ten most severely affected communities, following procedures acceptable toIDA.

3. Effectiveness conditions

* Staffing of the Executive Secretariat, including liaison offices and antenna, and physicalestablishment of district committees in all districts.

* Establishment of a satisfactory financial management system.

H. Readiness for Implementation

[ ] The procurement documents for the first year's activities are complete and ready for the start ofproject implementation.

[x] The Project Implementation Manual has been appraised and found to be realistic and ofsatisfactory quality.

Ex-Ccombatants Reintegration Project 19

1. Compliance with Bank Policies

[x] This project complies with all applicable Bank policies.

Task Team Leader: Mr. Markus Kostner

ctor anager: Mr. Nat Colletta

Cou Director: Mr. Michael Sarris

Annex 1Project Design Summary

Narrative Summary Key Performance Monitoring and Critical AssumptionsIndicators Evaluation

Sector-related CAS 1. Revitalization of local * ESW in social sectors, (Goal to Bank Mission)Goal: production and poverty, social assessment * Sustainable economicSocial and economic employment opportunities; (periodic). reform and external debtreintegration of ex- 2. Social cohesion in management;combatants into civilian communities; * Regional integrationlife. 3. Availability of in the Horn of Africa;

adequate social services * Sustainable humanfor the poor and resources strategy.vulnerable populationgroups.

Project Development 1. Acceptance of * Beneficiary and (Objective to Goal)Objective: beneficiaries and their community assessments * Local economy can

To demonstrate that families by communities; (mid-term and final); absorb beneficiaries;targeted, multi-sectoral 2. Degree of beneficiary monitoring reports. * Complementarityassistance to ex- participation in between and sequencingcombatants, including the community social life; of related donordisabled, can be effective. 3. Incidence of crime interventions;

related to ex-combatants; * Stabilized national

4. Level of poverty among and regional securitybeneficiary households; situation.

5. Level of dependency ofdisabled ex-combatants onfamily/community andpublic services;

6. Assessment regardingreplicability of activities.

Outputs: (Outputs to Objective)1. Communities 1. Level of 1. Beneficiary and . Beneficiaries do notinformed about project; understanding by community assessments suffer from dependencybeneficiaries take community of project (mid-term and final). syndrome;informed decisions about rationale and * Concurrentfindig (self-) employment responsibilities; strengthening ofand show acceptable social assessment by community social servicesbehavior. beneficiaries of advice (personnel, recurrent costs,

received; assessment by production of prostheses,communities of ex- etc.);combatants' conduct.

2. Beneficiaries engaged 2. Degree of cost- 2. Monitcring reports; * Beneficiaries rebuildin sustainable and gainful efficiency and continuity sub-project completion their social capital.economic activities. of economic activities reports.

after sub-projectcompletion; number ofsub-projects financed.

21

22 Annex I - Project Design Summary

Narrative Summary Key Performance Monitoring and Critical AssumptionsIndicators Evaluation

3. Additional 3. Assessment by 3. Communitycommunity social services communities of the assessments (mid-term andprovided to facilitate the improved capacity of final).absorption of settling ex- social services aftercombatants. settling of ex-combatants

4. Targeted assistance 4. Effective provision of 4. Beneficiary andprovided to disabled ex- medical services and community assessmentscombatants. prostheses, rehabilitation (mid-term and final).

of center and adaptation ofhouses.

5. Capacity established 5. Level of quality and 5. Monitoring reportsin SDR for effective timing of monitoring and (monthly); financial auditimplementation, evaluation activities; rate reports.monitoring, and evaluation of rejection of projectof the project; competent proposals; rate of projectssub-project cycle with deviations; level ofmanagement. quality of financial

management; staffdevelopment programactivities undertaken;studies completed.

Project Inputs: (budget for each (Components toComponents/Sub- component, including Outputs)components: contingencies)

1. Social mobilization: 1. US$ 0.16 million. * Disbursement reports * Sufficient capacity of. Information and (monthly); local and international

sensitization; NGOs to assist in* Information, implementation;

counseling andreferral.

2. Economic 2. US$ 1.83 million. * Monitoring reports * Legal frameworkreintegration fund: (monthly). fosters development of* training; informal sector.. micro-projects;

3. Social reintegration 3. US$ 0.30 million.fund:* basic health;. adult education.4. Assistance to disabled 4. US$ 0.44 million.ex-combatants:. medical services;* prostheses and other

aids;. special training;* special services.5. Project 5. US$ 0.44 million.implementation.

/

Annex 2Detailed Project Description9

A. Social Mobilization

Background and Justification

Although demobilization was initiated first in 1993, and despite the fact that acceptance by the hostcommunities is a key element to the program's success, the demobilization and reintegration program wasnever fully discussed by Government in public. As a result, the local population has never been properlyinformed about, and prepared for their important role in, the reintegration process. At the same time, sucha program has a national dimension as it affects society as a whole. Hence the need to inform andsensitize the population about the objective and rationale of the program.

Ex-combatants commonly lack information about the economic opportunities available to them on theirreturn to civilian life. Furthermore, the longer their service in the military, the more used they are to theexigencies of military life. Their social capital - which can be a circle of friends or peers providinginformation, a sympathetic ear, credit and access to other productive assets - also diminishes over time.Hence the need to provide information and social and economic counseling services to ex-combatants.

Objectives

- To inform the general public about the program's objective and rationale and sensitize them about thechallenge and responsibilities during the reintegration process for both ex-combatants and hostcommunities.

T To inform and counsel ex-combatants about project benefits, opportunities for economic reintegrationand their rights and duties as civilians and to refer ex-combatants to employment opportunities.

Sub-Components

INFORMATION AND SENSITIZATION

Information and sensitization activities will be undertaken throughout project implementation. Use of thefollowing media is envisaged: radio broadcasts (bi-weekly), televis:ion broadcasts (quarterly), informationbrochures (quarterly), and a veteran pamphlet (including information on special topics, e.g., on how toprepare a micro-project). In addition, regular seminars and meetings will be held throughout the country,and field visits by high government officials to the districts will be carried out periodically. All relatedactivities will be organized by the SDR and its liaison offices and amtennas, and diistrict committees. Costsare estimated at US$ 91,000.

The radio broadcasts will not only provide basic information about the program but will also be acomprehensive source of information for ex-combatants, their families and the population at large. Theywill address problems of all affected population groups, could give tips on day-to-day life, relate greetingmessages from one ex-combatant to another, supplement the colLnseling services with project-related

9 Implementation mechanisms for each component and sub-component are included in the projectimplementation manual. Beneficiaries (ex-combatants, communities, etc.) will provide 15% in cash or in kind for allsub-projects approved under the economic and social reintegration funds and the disabled component.

23

24 Annex 2 - Detailed Project Description

information upon request (e.g. how to search for a job), and present a few games (e.g. a crate of soda tothree winners per district every quarter). Such activities are expected to increase the popularity of theprogram, increase listenership and thus generally increase awareness of this aspect of civil life.

The project also includes the use of popular folk media to present the many facets of social and economicreintegration in a manner that effectively catches - and retains - the interest of the audience. Socialdrama is proposed as alternative to classical teaching methods. It transfers the messages in the locallanguages in a simple, easily understandable and entertaining manner to both adults and children. Afterthe development of the play (including equipment), the program will be shown in each district at leasttwice per year. As entertainment is only the means to achieve the major objective of civic education,several accompanying measures could be envisaged to complement the social drama, such as special (andadditional) radio programs, letters to politicians, or the preparation and distribution of an illustratedbooklet about the play. A local theater group will be contracted to implement this sub-component.

INFORMATION, COUNSELING AND REFERRAL

The information, counseling and referral service will assist ex-combatants in crucial ways. First, it willprovide answers to questions about access to reintegration entitlements and other more general issues;counseling on job-seeking strategies; information and counseling on training and employmentopportunities; and advice on micro-project identification, preparation and implementation. Second, it willoffer a means for linking ex-combatants to such opportunities, thereby also integrating the education,training, employment, and micro-project sub-components of the project.

Importantly, the service will also refer ex-combatants to labor-intensive public works programs financedthrough other interventions. Finally, it will provide critical psycho-social support during the difficulttransition phase. The information, counseling and referral service will be implemented by the liaisonoffices and antennas. A qualified counselor will be recruited in each liaison office. In all districts, ex-combatant counselors will undertake outreach activities, visiting ex-combatants in the villages andhelping to solve reintegration problems sur place. Costs are estimated at US$ 72,000.

B. Economic Reintegration Fund


Discharge from military service signifies the loss of the main source of income for most ex-combatanthouseholds. Coupled with the fact that many ex-combatants have neither finished formal education noracquired marketable skills, the economic outlook for many an ex-combatant is bleak indeed. Thechallenge of economic reintegration is intensified by the extremely weak natural resource and economicbase of the country. Reintegration options into agriculture are essentially non-existent, and absorption inthe formal sector, including the civil service, is beyond the reach of unskilled or functionally illiterate ex-combatants. Hence the need to offer options for economic reintegration, in particular in the informalsector.

Annex 2 -- Detailed Project Description 25

Objective

- To provide ex-combatants with (i) opportunities to acquire ancl employ marketable skills and (ii)financial assistance for proposed income-generating activities in order to enable them to lead gainfuland productive lives.

Sub-Components

SKILLS ENHANCEMENT

'he project provides opportunities for (i) vocational training and 6ii) apprenticeships. Forvocationaltraining, the SDR will contract existing training sul pliers for preparing and implementing short, modulartraining courses that correspond to (i) the limited educational background of ex-combatants and (ii) theneeds of the labor market. In addition, in order to ensure that training is demand driven and enhancesconsumer choice, the use of vouchers will be encouraged, enabling ex-combatants to purchase thetraining they want. Implicitly, vouchers diversify and increase the relevance in the local training market.The project does not finance the establishment of new training infrastructure.

Informal sector apprenticeships, i.e. the financing of training expenses incurred by artisans who train ex-combatants, move the training provision closest to the point of emiployer, stressing learning by doing.While they do not guarantee employment in and of themselves., they do place the trainee in anenvironment which increases the opportunity for informal business skill acquisition and networking forlonger-term employment. In order to increase the employability of ex-combatants, tool kits for differenttrades (such as plumbing, carpentry, and bicycle repair) will be provided after completion of the trainingor apprenticeship.

Ex-combatants who fulfill the skills requirements for a particular job in theformal sector will also besupported with apprenticeships. These will constitute incentive schemes designed to encourage formalsector hiring as well as entry into pre-service occupation. Cooperation with the private sector will beparamount in this respect, as employment opportunities in the civil service and in public enterprises arevery limited.

Local labor and product market assessments will be undertaken by the district offices, identifying wheredemand for training and labor is the strongest. Regarding the formal sector, the SDR will be responsiblefor contacting prospective employers and forwarding this informnation to the district offices to match theparticular job and personal profiles. Given the low literacy level of most ex-combatants, vocational andinformal sector training will contain a functional literacy component which could be offered through theadult literacy program (see below). The skills enhancement sub-component will be implemented byindependent, public and private training providers in coordination with the Ministiy of Labor. Costs areestimated at US$ 896,000.

MICRO-PROJECTS

The project will finance micro-projects of/for ex-combatants on a grant basis in any sector, such aslivestock, fishing, commerce or manufacturing. An NGO or private sector firm will assist ex-combatantsin all phases of the project cycle, if needed. Only ex-combatant groups will be eligible for such support,and the inclusion of qualified civilians in these groups will be erncouraged for the sharing of skills.Furthernore, ex-combatants will be required to contribute financially to the sub-project, in particularthrough the use of their departure allowance.


Sub-project approval, by the SDR following recommendations from district committees, will be precededby a transparent appraisal process considering a range of criteria, such as financial, economic, social andenvironmental aspects. Sub-projects that do not meet these criteria will be returned to the applicants witha detailed explanation. Close adherence to this process will be important for ensuring the quality of sub-projects and, hence, their sustainability. The sub-project cycle and implementation airangements areoutlined in Section C.5 and are presented in detail in the project implementation manual. Costs for thissub-component are estimated at US$ 937,000.

C. Social Reintegration Fund


Communities are challenged by the return of ex-combatants in two ways. Firstly, communities have toabsorb the increased demand for local social services, in particular in basic health. Resource-scarcecommunities may be ill prepared to cope with such an increase. Secondly, there may be uncertainty, evenprejudice, about the personal conduct of ex-combatants who are uneducated and used to a military way oflife. Hence the need to assist communities in reintegrating ex-combatants. The ten most affectedcommunities (villages) are eligible to receive support; these have been identified by the SDR incooperation with the Ministry of the Interior on the basis of two criteria: (i) the percentage of ex-combatants in the community's overall population and (ii) the level of poverty in the community.

Objectives

-. To strengthen local social infrastructure to absorb the increased demand emanating from returningex-combatants.

v To strengthen social cohesion through community activities, including education for peace.

Sub-Components

BASIC SOCIAL INFRASTRUCTURE

Social infrastructure in Djibouti is largely deficient, in particular in rural areas. The project will,therefore, strengthen basic social infrastructure in the ten most affected communities. Activitiesenvisaged under this sub-component could include: the rehabilitation of primary schools, dispensariesand markets; the construction of water points and latrines; and activities pertaining the environment, forinstance anti-erosion measures.

Specific sub-projects will be identified by the eligible communities and be prepared with the assistance ofspecialized local and/or international NGOs. These services will be open for the entire population of theparticular community. This sub-component enhances the capacities of the existing system; it does notreform the system or create parallel structures. It will be implemented by specialized NGOs incollaboration with the respective ministry.

COMMUNITY ACTIVITIES

The project finances activities that strengthen community social capital, including adult educationprograms, civic and peace education, music and sports groups, the rehabilitation of religious centers, etc.

Annex 2 - Detailed Project Description 27

The local population will benefit from such activities directly or indirectly, and the sub-component, thus,contributes to the Government's efforts at reinforcing social cohesion. The various activities will beidentified by ex-combatants and community members and be implemented by ex-combatants, mixedgroups, private and public schools and specialized NGOs. Costs for both sub-components are estimated atUS$ 300,000.

D. Assistance to Disabled Ex-Combatants


Assistance to disabled ex-combatants is important for two reasons. Firstly, as handicapped persons, theirreintegration into a community is more difficult, both economically and sociallly. Secondly, havingsacrificed their future for inclusive development in a united country, they expect compensation in return.Responding to these particular needs, the disabled AND and FNP solldiers have already been examinedand placed into three categories: (i) those with disabilities of less than 10% (less severely disabled); (ii)those with disabilities of between 10% and 50% (moderately disabled); and (iii) those with disabilities ofover 50% (severely disabled). Disabled FRUD ex-combatants will be examined at start-up. Assistanceprovided under this component differs by degree of disability.

Objective

> To help disabled ex-combatants recover (most of) their basic mental and physical faculties to becomeactive and productive members of society.

Sub-Components

MEDICAL SERVICES

The project makes available to all disabled ex-combatants of the AND, FNP and FRUD free drugs,medical consultations and other services, through a contract with a specialized service provider. Thesemedical services will be offered through existing facilities of NGOs arid the Ministry of Health and SocialAffairs. Costs are estimated at US$ 117,000.

PROSTHESES AND OTHER AIDS

Depending on the type of disability, ex-combatants will receive prostheses, including necessary surgery,physiotherapy re-fitting and, if required, replacement of prostheses. Furthermore, the severely disabledex-combatants will be provided with a wheelchair. These services will also be offered through existingfacilities of NGOs and the Ministry of Health and Social Affairs. Costs for this sub-component areestimated at US$ 97,000.

SPECIAL TRAINING

The country's only rehabilitation center is deficient in both staff and equipment. However, without suchre-education and rehabilitation assistance, the moderately and severely disabled ex-combatants may notacquire, again, some physical capabilities which make it possible for them to carry out professionalactivities. The same holds true for the other disabled. The projiect, therefore, reinforces existingcapacities, through specialized NGOs and the Ministry of Health and Social Affairs, of the rehabilitationcenter to the benefit of all disabled persons. Costs are estimated at US$ 113,000.


Though disabled ex-combatants, or one of their household members, are eligible to receive support forvocational or apprenticeship training, their needs in terms of skills enhancement are often distinctlydifferent. Hence, the project provides supplementary financing to training providers and artisans toaccommodate these special needs (tool kits, facilities, etc.). Costs are estimated at US$ 56,000.

SPECIAL ASSISTANCE

Severely disabled ex-combatants have particular housing needs. Having been provided with a wheelchair,their houses need to be adapted without draining scarce household resources. The project, therefore,includes support for accommodation, e.g. for the purchase of building materials and the hiring of labor.This sub-component will be implemented through NGOs and/or private contractors and is estimated tocost US$ 60,000.

E. Project Implementation


Due to the project's very nature, local administrative capacities for implementing a demobilization andreintegration program are very limited. To establish such capacities, the Bank has been supporting theGovernment through the financing of the Executive Secretariat, including its district offices. However,the project not only consolidates, but also extends operations. Hence the need to reinforce localcapabilities for project implementation.

Objective

- To ensure the appropriateness, efficiency and effectiveness of project implementation while at thesame time strengthening local capacities for longer-term, people-centered and inclusive development.

Sub-Components

EXECUTIVE SECRETARIAT

The SDR has already been provided with office equipment and vehicles. However, to allow closerproximity to the beneficiaries, the project will supply motorcycles to all outreach staff (ex-combatantcounselors) in the field offices, as well as a vehicle for each liaison office. Communications and basicoffice equipment will also be provided to the antenna in Yoboki. Operating costs (including personnel)are covered by the PATARE credit until December 1999 and will be financed by the project thereafter.Costs for this sub-component are, thus, estimated at US$ 296,000, including equipment.

CAPACITY STRENGTHENING

Skills of project staff will be strengthened through the provision of a staff development program. Suchstaff training will focus in particular on counseling and practical problem solving as well as onmonitoring and reporting. Training sessions will be repeated during implementation to sharpen theacquired skills. Furthermore, local NGOs and associations, including veteran associations, will play a keyrole in sub-project preparation and implementation. However, their capacities are more often than notseverely limited. The project, therefore, includes district-level training sessions targeted at both district-

Annex 2 - Detailed Project Description 29

based project staff and representatives from local groups. Specialized NGOs and/or consultants will becontracted to prepare and carry out these training programs. Costs are estimated at US$ 80,000.

CONSULTANT SERVICES

Special consultant services will be required throughout implementation to review and evaluate projectprogress and to enhance the knowledge base about the economic and social reintegration of ex-combatants. Such services include: two external audits, two community and beneficiary assessments andtwo external evaluations (mid-term and final). In addition, a limited number of other studies will becarried out, e.g. a social and an institutional assessment. Specialized, mainly local consultants (individualsor firms) will be contracted to undertake these assignments. Costs are estimated at US$ 60,000.

Annex 3Estimated Project Costs

Project Component Local Foreign Total----------------------- US$ million --------------------

Social mobilization 0.15 0.15Economic reintegration fund 1.67 - 1.67Social reintegration fund 0.27 - 0.27Assistance to disabled ex-combatants 0.40 - 0.40Project implementation 0.27 0.13 0.40

Total Baseline Cost 2.76 0.13 2.89

Physical Contingencies 0.14 0.01 0.14Price Contingencies 0.14 0.01 0.14

Total Project Cost 3.04 0.14 3.18

31

32 Annex 3 - Estimated Project Costs

Table ADisbursement Schedule

(in US$, including contingencies)

CategorySltem FY99 FYOO Project IDA Counterp.

A. Social mobilizationA.1 Information and sensitization 30,310 60,619 90,929 73,559 17,369

A.2 Information, counseling and referral 24,000 48,000 72,000 72,000 -

sub-total 54,310 108,619 162,929 145,559 17,369

share/cumulative 54,310 162,929 5% 89% 11%

B. Economic reintegration fundB.l Skills enhancement 298,750 597,500 896,250 761,813 134,438

B.2 Micro-projects 312,500 625,000 937,500 796,875 140,625

sub-total 611,250 1,222,500 1,833,750 1,558,688 275,063

share/cumulative 611,250 1,833,750 58% 85% 15%

C. Social reintegration fundC. I Basic social infrastructure/community activities 100,000 200,000 300,000 255,000 45,000

sub-total 100,000 200,000 300,000 255,000 45.000

sl. e/cumulative 100,000 300,000 9% 85% 15%

D. Assistance to disabled ex-combatantsD.1 Medical services 39,000 78,000 117,000 99,450 17,550

D.2 Prostheses and other aids 97,000 - 97,000 82,450 14,550

D.3 Special training 169,000 - 169,000 122,933 46,067

D.4 Special services 60,000 - 60,000 51,000 9,000

sub-total 365,000 78,000 443,000 355,833 87,167


E. Project implementationE.A Equipment, materials and supplies 127,000 - 127,000 127,000

E.2 Operating costs - 169,131 169,131 145,792 23,339

E.3 Capacity strengthening 26,800 53,600 80,400 80,400

E.4 Consultant services 30,000 30,000 60,000 60,000

sub-total 183,800 252,731 436,531 413,192 23,339


Grand total 1,314,360 1,861,850 3,176,210 2,728,272 447.937

Share/cumulative 1,314,360 3,176,210 100% 86% 14%

Annex 4Executive Secretariat for Demobilization and Reintegration

Organigram

Inter-Ministerial Commissionfor Demobilization and Reintegration

Chair: Prime MinisterSecretary: Director

Director

Administration Secretariat

Management Informnation, Reintegration/Accounting lnfornation System Counseling, and Operations

l __________________Referral l

DistrictCom.mitees I Aiann offices

Project TechnicalCounseling Assistance

Ex-CombatantSecretariat Counselor

Yoboki: Two ex-combatant counselors only. 33

Annex 5Procurement and Disbursement Arrangements"'

1. Procurement

General

Goods and works financed by IDA will be procured in accordance with IDA Guidelines for Procurementunder IBRD and IDA Credits dated January 1995 and revised in January 1996, August 1996 andSeptember 1997. Consultancy services financed by IDA will be procured in accordance with IDAGuidelines for the Selection of Consultants by World Bank Borrowers dated January 1997 and revised inSeptember 1997. The Executive Secretariat for Demobilization and Reintegration (SDR) will beresponsible for procurement. It will receive assistance from the PATARE project unit, which is familiarwith Bank procurement procedures. PATARE will ensure that SDR is adequately trained to manage theprocurement arrangements.

At negotiations, assurances have been obtained from Government that the procurement arrangementsoutlined below will apply for the implementation of the project. In addition, a General ProcurementNotice (GPN) is to be transmitted to IDA for publication in the United Nations Development Business toadvertise for major consulting assignments. This notice is to be updated every year during the executionof the project until all contracts have been procured. Procurement methtods and prior review arrangementsare indicated in Tables A and B of this Annex.

A. Procurement Methods

Micro-projects. Micro-projects consisting of activities in livestock, iFishing, commerce, manufacturing,community social activities, etc. involving works, goods and services not expected to exceed US$ 10,000per activity for an aggregate amount of US$ 1.60 million will be procured competiitively in accordancewith procedures defined in the project implementation manual.

Civil Works. Civil works to be carried out under the project consist of the (re-) construction of small-scalesocial infrastructure, the rehabilitation of the rehabilitation center for ithe disabled, and the remodeling ofhouses for severely disabled ex-combatants. In view of the small cost of each contract, the workscontracts will be procured under NCB procedures provided that each contract does not exceed US$150,000 and that the aggregate amount of such contracts does not exceed US$ 0.40 million.

Goods. Goods, consisting of prostheses and wheelchairs, publications, tool kits, furniture and officeequipment, above US$ 30,000 per contract for an aggregate of US$ 0.13 million will be procured underICB procedures. Procurement of prostheses and wheelchairs may be tndertaken using direct contractingwithout competition on the basis of reasonable prices. Remaining iteims below USSi 30,000 per contractup to an aggregate of US$ 0.19 million will be procured on the basis of national shopping procedures(minimum of three quotations from eligible suppliers) in accordance with the project implementationmanual.

10 The project implementation manual provides detailed procedures for procurement, financial managementand disbursement.

35

36 Annex 5 - Procurement and Disbursement Arrangements

Prior review arrangements. Goods and works contracts costing more than US$ 100,000 per contract andthe first three micro-project contracts per liaison office will be subject to prior review by IDA. All othercontracts will be subjected to post review.

B. Consultancy Services and Training

Recruitment offirms. Consultancy services for studies, technical assistance and training requiring therecruitment of firms will be procured in accordance with Bank Guidelines. Most of these services will berecruited on the basis of the Quality and Cost Based Method (QCBS). Exceptions to the QCBS methodwill be for the following: (i) the Least Cost Selection Method will be used for financial audits. Forcontracts based on a shortlist of consultants estimated to cost US$ 50,000 or less, the shortlist may consistentirely of national consultants if a minimum of three qualified consultants are available. For contractsinvolving the use of NGOs for social mobilization, training and hiring community agents, the shortlistmay consist entirely of NGOs.

Recruitment of individuals. Individuals will be recruited in cases where a firm is not needed. Suchindividuals will be recruited on the basis of qualification and experience in accordance with BankGuidelines.

Prior review arrangements. All procurement documents for consulting contracts with firms, individualsor NGOs for amounts exceeding US$ 50,000 per contract will be subject to prior review by IDA.However, terms of reference and direct contracting will be subject to IDA prior review regardless ofcontract amount. All other contracts will be subjected to post-review.

2. Disbursement

Use of statements of expenses

Use of statement of expenses (SOEs) will be made for expenditures valued under US$ 100,000 for goodsand civil works and under US$ 50,000 for consultants. Such use is contingent upon the recruitment of aqualified accountant responsible for financial management, including maintenance of proper accounts andpreparation of project progress reports, ability to process and maintain SOE documentation, andsatisfactory annual audit arrangements. Provided this conditionality is met, SOEs will be used for allexpenses related to sub-projects, and expenses relating to contracts below prior review thresholds will beclaimed on the basis of SOEs to be available for review by Bank supervision missions at any time.Supporting documentation will be retained by the SDR.

Special account

The Government will open a Special Account in US$ in the name of the SDR, with theBanque Nat.onalede Djibouti to which project funds will be transferred. The SDR will receive an initial advance tocommence operations. The advance will be kept initially to a limited amount, while the project activitiesget underway, but will be increased once full execution begins. For further disbursements, the SDR willsubmit appropriate justification (bank reconciliation statements and other reasonable documentation) toIDA. An interim audit of the Special Account will be performed nine (9) months into the project fiscalyear to provide a detailed and comprehensive review of the project internal control system and makepractical recommendations for its improvement. A final audit will be undertaken at the end of the projectfiscal year.

Annex S - Procurement and Disbursement Arrangements 37

Sub-Projects

The SDR will contract a large number of groups and associations for the: carrying out of sub-projects andspecial assignments (e.g. preparation of staff development and adult literacy programs, provision ofprostheses and production of social drama). A prerequisite for all these activities will be the submissionof a detailed payment schedule which will be approved by the SDR. All payments under the contracts willbe made directly by the SDR. The liaison offices will only have access to petty cash to cover operationalexpenditures. Implementers will generally receive an initial advance, to be followed by further tranchessubject to timely submission of appropriate justification.

Financial management for the sub-projects will be undertaken by the beneficiaries assisted by acompetent NGO or private sector firm. Unless an ex-combatant group has a bank account and adequatefinancial management capabilities, payments incurred under such sub-projects will be effected by theSDR on behalf of the beneficiary. Such payments will be to the account of the NGO or supplier inaccordance with contract payment terms.

38 Annex 5 - Procurement and Disbursement Arrangements

Table A: Project Costs by Procurement Arrangements(in US$ million equivalent)

Expenditure Category Procurement Method Total Cost(including

contingencies)ICB NCB Other N.B.F.

1. Micro-projects - - 1.59 - 1.59(1.35) (1.37)

2. Civil works - 0.40 - - 0.40(0.32) (0.32)

3. Goods 0.13 - 0.19 - 0.31(0.13) (0.16) (0.29)

4. Consultant services - - 0.70 - 0.70(0.62) (0.62)

5. Operating costs - - 0.17 - 0.17(0.15) (0.15)

Total project costs 0.13 0.40 2.65 - 3.18(Financed by IDA) (0.13) (0.32) (2.28) (2.73)

N.B.F. means non-Bank financed.Figures in parenthesis are the amounts to be financed by IDA.

Table B: Thresholds for Procurement Methods and Prior Review

Expenditure Contract Value Procurement Prior Review ContractsCategory (Threshold) Method

US $ US $ millions1. Micro-projects NA Competitive 1/ 0.102. Civil works < 150,000 NCB 0.403. Goods > 30,000 ICB 0.13

< 30,000 Quotations 0.194. Consultant services > 50,000 Shortlist/3 CVs 0.205. Operating costs NA NA NA

Total: 1.02See project implementation manual.

Total value of contracts subject to prior review: US$ 1.02 million.

Table C: Allocation of Loan Proceeds

Expenditure Category Amount in US$ million Financing Percentage 1/

1. Micro-projects 1.35 852. Civil worl 0.32 803. Goods 0.29 914. Consultant services 0.62 895. Operating costs 0.15 86

Total 2.73 86I/ The disbursement percentages have been calculated to exclude Bank financing of local taxes and import duties. Thepercentages to be applied to each invoice total.

Annex 6Timetable for Training, Monitoring and Consultants

Activity Date/Period Responsible

Training 1. Quarterly staff development SDR will contract local trainingsessions throughout project provider(s).implementation.

2. Quarterly district-level trainingsessions throughout projectimplementation.

Monitoring (technical and 1. Baseline monitoring information 1. SDRfinancial) on ex-combatants. 2. Liaison office.

2. Monthly district implementation 3. SDR.progress reports. 4. Implementers.3. Monthly financial andmonitoring reports. 5. SDR.

4. Quarterly sub-project reports. 6. SDR.

S. Quarterly situation analysis.

6. Mid-term project progressreports.

Studies 1. Beneficiary and community SDR will contract loca'assessment after 9 and 18 months consultant(s).of operation.

2. Two studies after 9 months ofoperation to further the knowledgebase regarding the social andeconomic reintegration of ex-combatants.

External evaluations 1. External mid-term evaluation SDR will contract localfourth quarter of 1999 (followed by consultant(s) for externalBank mid-term review). evaluations.

2. Final evaluation second quarterof 2000.

External audits 1. End of nine months - interim SDR will contract external auditorsaudit (fouDth quarter of 1999). acceptable to the Bank.

2. End of 12 months (first quarterof 2000).

39

Annex 7Project Processing Budget and Schedule

A. Project Budget (US$ 000) 1/ Planned Actual(At final PCD stage)

108.6 83.4

B. Project Schedule Planned Actual(At final PCD stage)

Time taken to prepare the project (months) 5 5First Bank mission 2/ 11/09/1997 11/09/1997Appraisal mission 06/06/1998 06/06/1998Negotiations 06/20/1998 10/05/1998Planned Date of Effectiveness 10/01/1998 01/01/1999

(expected)

I/ Including funds from the Social Compact and short-term consultancies financed under the PATARE project.

2/ The project was identified during a supervision mission of the PAAC. The SDR commenced preparationsfor the reintegration program thereafter.

Prepared by: Executive Secretariat for Demobilization and Reintegration

Bank staff who worked on the project included:

Ncrme SpecialtyMarkus Kostner Economist-Social Scientist/Task Team LeaderManorama Gotur Operations AnalystEly Dieng ResearcherBertrand Ah-Sue Procurement SpecialistDavid Freese/Paul Vandenheede Disbursement OfficersSidi Boubacar Counsel

41

Annex 8Documents in the Project File

A. Project Implementation Manual

I. Executive Secretariat for Demobilization and Reintegration. 1998. Projectimplementation manual.

B. Bank Staff Assessments

I . Aide-Memoire, Assistance Program for the Demobilization and Reintegration of Ex-Combatants; October 1995.

2. Aide-Memoire, PAAC preparations; July 1996.

3. Aide-Memoire, PAAC supervision; April 1997.

4. Aide-Memoire, PAAC supervision; November 1997.

5. Aide-Memoire, project appraisal; June 1998.

C. Other

1. Colletta, Nat J., Markus Kostner and Ingo Wiederhofer. 1996a. The Transition from Warto Peace in Sub-Saharan Africa. Directions in Development. Washington, DC: WorldBank.

2. Colletta, Nat J., Markus Kostner and Ingo Wiederhofer. 1996b. Case Studies in War-to-Peace Transition. The Demobilization and Reintegration of Ex-Combatants in Ethiopia,Namibia, and Uganda. Discussion Paper No. 331. Washington, DC: World Bank.

3. Comite Technique de Demobilisation et de Reinsertion. 1996a. "Perspectives deRKinsertion des Demobilises". Djibouti.

4. Comite Technique de Demobilisation et de Reinsertion. 1996b. "Bilan de la Reinsertiondes Anciens Demobilises". Djibouti.

5. Comite Technique de Demobilisation et de Reinsertion. 1996c. "Institutional Frameworkand Implementation Arrangements". Djibouti.

6. Cullen, Michelle. 1998. The Deconstruction of Conflict in D)jibouti. Mimeo.

7. Secretariat Executif de Demobilisation et de Reinsertion. 1998. Programme deRdinsertion Economique et Sociale des Demobilises. Djibouti.

8. Secretariat Executif de Demobilisation et de Reinsertion. 1997. Programme d'Assistanceaux Anciens Combattants. Djibouti.

43

Annex 9Statement of Loans and Credits

Difference Betweenexpected

Original Amount in US$ Millions and actual Last PSRFiscal disbursements a/ Supervision Rating b/

Project ID Year Borrower PurposeIBRD IDA Cancellations Undisbursed Orig Frm Rev'd Dev Obj Imp Prog

Number of Closed Projects: 8

Active ProjectsDJ-PE-44174 1997 GOVERNMENT TECHNICAL ASSISTANCE 0.00 6.50 0.00 5.18 3.89 0.00 S S

Total 0.00 6.50 0.00 5.18 3.89 0.00

Active Proiects Closed Projects TotalTotal Disbursed (IBRD and IDA): 1.11 45.64 46.75

of which has been repaid: 0.00 1.53 1.53Total now held by IBRD and IDA: 6.50 39.77 46.27Amount sold: 0.00 0.00 0.00

Of which repaid: 0.00 0.00 0.00Total Undisbursed: 5.18 .05 5.23

a. Intended disbursements to date minus actual disbursements to date as projected at appraisal.b. Following the FY94 Annual Review of Portfolio performance (ARPP), a letter based system was introduced (HS = highly Satisfactory, S = satisfactory, U = unsatisfactory, HU highly unsatisfactory): see proposed Improvements in Project and

Portfolio Performance Rating Methodology (SecM94-901), August 23, 1994.

Note:Disbursement data is updated at the end of the first week of the month.

45

Annex 10Djibouti at a Glance

1011196

Sub- Low__POVERTY and SOCIAL Saharan mIdd_e-

Djibouti Afriea Income Dewlopient damond'1997Populaton, mid-year (millions) 0 64 614 2.285 Life expectancyGNP per capita (Atlas method, US 500 1,230 YGNP (Atlas method, USS billions) .. 309 2,018

Average annual growth, 1991-97

Populabon (I%) 3.0 2.7 1.2Labor force (%) 2.6 1.3 GPe Gross

Most recent estimate labtestyear avalalebb 1991-97) jcapita enrollmnent

Poverly (% of population below national poverty line) 45 . jUrban population (% oftotalpopulation) 83 32 42Life expectancy at birth (years) 50 52 69Infant mortality (per 1,000 live births) 106 90 36Child malnutrition (% of children under 5) 23 Access to safe waterAccess to safe water (% of population) 24 44 84Illiteracy (% ofpopulation age 15+) 54 43 19Gross primary enrollment (% of school-age population) 38 75 11i lDjiouti

Male 44 82 116 Lower-middle-income goupFemale 33 67 113

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1976 1986 1996 1997Economic mtioas

GDP (US$ billions) .. 0.37 0.49 0.50Gross domestic investmentVGDP 9.2 9.5 TrdExports of goods and services/GDP 41 3 41.3 radeGross domestic savings/GDP -7.7 4.2Gross national savings/GDP -0.5 -0.5

Current account balane/GDP .. .1 -6.4 Domestic 4nveshntInterestpayments/GDP 0.8 0.6 0 6 4stic- ' sTotal debt/GDP 34.2 49.7 48.6 n9sTotal debt servicelexports 4.9 6.9Present value of debt/GDP 28.2Present value of debtexports 81.2

Indebtedness197646 1987-97 1996 197 199602

(average annual growth)GDP -3.1 -5.1 05DjibouiGNP per capita -- Lower-middle-income groupExports of goods and services

STRUCTURE of the ECONOMY1976 1986 1996 1997 Growth rae of output and Investment 1%)

(% of GDP)Agriculture 3.6 3.6 2Industry 20.4 20.5 o _

Manufacturing 5.7 5.7 *. 2?Services 76.1 75.8 4

Private consumption 74.2 78.3 4tGeneral govemment consumption 33.5 27.9Imports of goods and services 58.2 57.0 GDI GDP

197646 1987-97 1996 1997(average annual growth)AgricultureIndustry

ManufacturingServices

Private consumptionGeneral govemment consumptionGross domestic investmentImports of goods and servicesGross natonal product

Note: 1997 data are preliminary estimates.

The diamonds show four key indicators in the country (in bold) compared with its income-group averagi. If date are missing, the diamond villbe incomplete.

47

48 Annex 10 - Djibouti at a Glance

PRICES and GOVERNMENT FINANCE1976 1986 1996 1997 Inflation (%)

Domestic pricese(% change)Consumer prices 16.4 4.2 2.0 sImplicit GDP deflator .. 4.1 2.6 4

Govemment finance 2-

(% of GOP, includes current grants) aCurrent revenue 29 5 27 5 92 93 94 95 96 97

Current budget balance .- 19 -3 8 - GDP apIator t CPI

Overall surplus/deficit -5.8 -81

TRADE

(US$ millions) 1976 1986 1996 1997 Export and import levels (US$ millions)

Total exports (fob) .. 40 43 300

Other foodn.a. 200

Manufactures 2|

Total imports (cif) 200 203 |||

Food 100JEFuel and energyCapital goods °

91 92 93 94 95 9e 97

Export price index (1995=100)Import price index (1995=100) . Exports Imports

Terms of trade (1995=100) -- _l

BALANCE of PAYMENTS

(US$ millions) 1976 1986 1996 1997 Current account balance to GOP ratio (%)/ l

Exports of goods and services 223 231 0

Imports of goods and services . 287 291Resource balance -64 -60

-10Net income -3 -3Net current transfers 38 32

Current account balance -29 -32 -20

Financing items (net) 31 20Changes in net reserves . -1 12 3

Memo:Reserves including gold (US$ millions) .. . 157 145Conversion rate (DEC. local/US$) 177.7 177 7 177.7 177.7

EXTERNAL DEBT and RESOURCE FLOWS1t976 1986 1996 1997

(US$ millions) Composition of total debt, 1997 (US$ millions)Total debt outstanding and disbursed 17 125 241 243

IBRD 0 0 0 0 GilIDA 0 11 46 46 B 46

Total debt service 1 9 '1 16IBRD 0 0 0 0 C4IDA 0 0 1 1

Composition of net resource flows E 90

Official grants 12 51 42 50Official creditors 7 21 6 2Private creditors 0 -2 0 0Foreign direct investment 0 1 5 5Portfolio equity 0 0 0 0

World Bank programCommitments 0 0 0 7 A -IBRD E-BilateralDisbursements 0 4 1 3 B - IDA D - Other multilateral F - PrivatePrincipal repayments 0 0 0 0 C - IMF G - Shorl-term

Net flows 0 4 1 3Interest payments 0 0 0 0Net transfers 0 4 1 3

Development Economics 10/1/98

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