Country Partnership Framework for R O M A N I A for the period FY19-23 Document of The World Bank Group FOR OFFICIAL USE ONLY Country Partnership Framework for R O M A N I A for the period FY19-23 May 21, 2018 Europe: Central, South & Baltics Country Management Unit Europe and Central Asia The International Finance Corporation Europe and Central Asia The Multilateral Investment Guarantee Agency Report No. 126154-RO This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank Group authorization. Contents EXECUTIVE SUMMARY 7 I. INTRODUCTION 11 II. COUNTRY CONTEXT AND DEVELOPMENT AGENDA 12 Country Context 12 Recent Economic Developments and Prospects 13 Poverty Profile 17 Institutional Assessment and Key Development Challenges Identified by the SCD 21 Reform Priorities for Inclusive Growth 23 III. WORLD BANK GROUP PARTNERSHIP FRAMEWORK 25 A. Government Program and Medium-term Strategy 25 B. Proposed WBG Country Partnership Framework 25 Lessons from FY14-18 CPS Completion Report 25 Lessons from Public Consultations 26 Overview of World Bank Group Partnership Framework 27 Focus Areas and Objectives Supported by the WBG Program 31 Focus Area I: Ensure Equal Opportunities for All 31 Focus Area II: Catalyze Private Sector Growth and Competitiveness 34 Focus Area III: Build Resilience to Shocks 39 C. Implementing the FY19-23 Country Partnership Framework 41 Managing Program Implementation 42 Citizen Engagement and Gender 43 Partnerships and Donor Coordination 44 IV. MANAGING RISKS 45 Annex 1. Results Monitoring Matrix 47 Annex 2. Selected Indicators of Bank Portfolio Performance and Management 53 Annex 3. Operations Portfolio (IBRD/IDA and Grants) 54 Annex 4. Statement of IFC’s Held and Disbursed Portfolio 55 Annex 5. CPF Consultations 56 Annex 6. Romania Citizen Engagement Roadmap FY19-23 58 Annex 7. Roma Roadmap 59 Annex 8. Country Risk Profile 60 Annex 9. Completion and Learning Review for the Romania Country Partnership Strategy (FY14-18) 61 The date of the last Country Partnership Strategy (CPS) was April 28, 2014, Report No. 84830-RO and the date of the last Performance and Learning Review of the CPS was November 3, 2016, Report No.108785-RO. Currency equivalents (Exchange Rate Effective as of May 10, 2018) Currency Unit = New Romanian Lei, (RON) RON 3.91 = US$ 1.00 US$ 1.42 = SDR 1.00 Fiscal year January 1 - December 31 Abbreviations and Acronyms IFC International Finance MoH Ministry of Health Corporation MoJ Ministry of Justice IFI International Financial MoLFSPE Ministry of Labor, Family, Social Institution Protection and the Elderly IMF International Monetary Fund MoLSJ Ministry of Labor and Social INPCP Integrated Nutrient Pollution Justice Control Project MoNE Ministry of National Education IPF Investment Project Financing MoPF Ministry of Public Finance ISP Institutional Strategic Plan MoU Memorandum of Understanding IT Information Technology MRA Miscellaneous Reimbursable IUDS Integrated Urban Development Arrangements Strategy MSME Micro, Small and Medium JRP Judicial Reform Project Enterprises LLL Lifelong Learning MTI Ministry of Transport and Infrastructure M&E Monitoring and Evaluation NACS National Agency for Civil MA-IB Managing Authorities- Servants Intermediate Bodies NAFA National Agency for Fiscal MARD Ministry of Agriculture and Administration Rural Development NAPCRA National Authority for MDRPA Ministry of Regional Protection of Children’s Rights Development and Public and Adoptions Administration NAPSI National Agency for Payments MIGA Multilateral Investment and Social Inspection Guarantee Agency NEETD Not in Education, Employment, MIS Ministry of Information Society Training or Disabled MOESR Ministry of Education and NGO Non-Governmental Scientific Research Organization 4 FY19-23 Country Partnership Framework for Romania NIS National Institute for Statistics RNCMNR Romanian National Company SA of Motorways and National NPL Non-Performing Loan Roads NUTS2 Nomenclature of Territorial ROF Regulations for Organization Units for Statistics and Functioning OECD Organization for Economic RON Romanian Leu Co-operation and Development ROP Regional Operational Program PFR Program for Results ROCS Report on the Observance of PHRD Policy and Human Resources Standards and Codes Development Fund ROSE Romania Secondary Education PIM Public Investment Management Project PISA Program for International RSB Roma Sounding Board Student Assessment SA Social Assessment PIU Project Implementation Unit SASM Social Assistance System PLR Performance and Learning Modernization Project Review SCD Systematic Country Diagnostic PMU Project Management Unit SME Small- and Medium-scale PNDL National Local Development Enterprise Program SOE State-Owned Enterprise POCU Human Capital Operational Program TA Technical Assistance PPP Public-Private Partnership TEN-T Trans-European Transport Network PPS Power Purchasing Standards TF Trust Fund PPSD Project Procurement Strategy for Development TRACE Tool for Rapid Assessment of City Energy PSD Social Democratic Party UNCITRAL United Nations System in The RAMP Revenue Administration Field of International Trade Law Modernization Project UNPD United Nations Procurement RAS Reimbursable Advisory Services Division RCC Romanian Competition Council USD US Dollar RCoA Romanian Court of Accounts VAT Value Added Tax REF Roma Education Fund VMI Minimum Insertion Income RIA Regulatory Impact Assessment Program RMS Revenue Management System WBG World Bank Group IBRD IFC MIGA Vice President: Cyril Muller Georgina Baker Keiko Honda Director: Arup Banerji Wiebke Schloemer Merli Margaret Baroudi Task Team Leader: Tatiana Proskuryakova Thomas Lubeck Gianfilippo Carboni Aimilios Chatzinikolaou Gero Verheyen Abbreviations and Acronyms 5 EXECUTIVE SUMMARY i. Romania has achieved impressive successes, yet it continues to face formidable chal- lenges. Romania’s economic growth has been one of the highest in the EU since 2010, with an average growth rate of 2.8 percent during 2010-2017. However, the foundations of growth are weak: wage increases are outstripping productivity growth, investments are volatile, and there are demographic challenges, with an aging and shrinking population and around 20 percent of its labor force living and working abroad. While Romania also boasts one of the lowest levels of debt in the EU, macroeconomic policy is erratic. Despite 11 years of EU membership, infra- structure is in a poor state, constraining investment and productivity in sectors such as man- ufacturing, agriculture and tourism. The private sector, while dynamic, is small, with limited access to finance, particularly for Micro, Small and Medium Enterprises (MSMEs); Romania has one of the lowest levels of financial intermediation in the EU, both in banking and cap- ital markets. Most worryingly, despite strong growth, average incomes have not converged with the EU, poverty reduction has been lackluster, and social and regional divides are stark and widening. ii. This growing divide is, in effect, producing two very different Romanias. Of Romania’s 42 counties, 18 are considered lagging behind other regions, with a GDP per capita lower than 75 percent of the national average. According to Eurostat, all Romanian NUTS-2 regions1 , with the sole exception of Bucharest–Ilfov, have a per capita GDP lower than 60 percent of the EU average, with the North-East at only 34 percent. Disparities in living standards between urban and rural areas are especially striking: the urban-rural income gap is the second-highest in the EU, with mean urban income almost 50 percent higher than the mean rural income. Many communities throughout the country (including a disproportionate share of the Roma) have no access to basic services such as piped water, sanitation, internet or electricity. The uneven quality of education risks perpetuating these divides and undermines Romania’s future com- petitiveness: while the education system produces many excellent professionals succeeding at home and abroad, 40 percent of 15-year-olds are functionally illiterate and ill-prepared for future labor market demands. Social segregation has been increasing, with poorer students attending lower quality schools. iii. Significant risks of climate and natural disaster events threaten the country’s economic resilience, and require urgent policy reform and infrastructure investment. Romania’s exposure to significant climate and natural risks, particularly to earthquakes and floods, is resulting in substantial social, physical and financial impacts across the country (70 percent of the assets of the poor are vulnerable to destruction). Estimates of the impact of climate-related hazards on critical infrastructure in Romania indicate that expected annual damage to infra- Executive Summary 7 structure alone would double by 2020. Polices aimed at increasing resilience and improving access to early warning systems as well as reducing exposure and vulnerability of assets could reduce well-being losses by 16 percent and asset losses by 13 percent. iv. The recently completed Systematic Country Diagnostic (SCD) identifies the most criti- cal constraints to sustainable economic growth and shared prosperity. Incomplete insti- tutional transition and high political and legislative volatility over the past 25 years have reduced trust in the state, effectively undermining the social contract. This has limited the Government’s ability to implement important public policies to boost the economy’s growth potential, build key economic infrastructure, create equal opportunities and jobs for all cit- izens, and improve resilience to natural disasters. Shortcomings in public service delivery, especially to the poor, are often caused by large underperforming State-Owned Enterprises (SOEs), but also by inefficient policies and low administrative capacity. Institutional weak- nesses also prevent the country from taking full advantage of the financial support provided by the European Commission: in the 2007-13 programming period, Romania had one of the lowest absorption rates of EU funds, and as of January 2018 (more than halfway through the implementation of the 2014-20 programming period) only around 10 percent of its EUR31 bil- lion allocation had been used. v. Private institutions also face challenges. Financial markets are shallow and do not mobilize sufficient resources to fuel sustained growth; insurance services face regulation and capital- ization issues; and the private sector relies on a small number of established firms, many of which struggle to innovate, in part due to a lack of access to financial resources. An unstable business environment, a direct consequence of institutional failures, is a significant challenge to private sector growth. Romania is ranked 45th in Doing Business 2018, yet frequent changes in the fiscal code (200 in the past 2 years alone), lack of consultation with the private sector, and the short time given to businesses to adapt lead to delays in investment decisions. Due to their size and scarce resources, MSMEs tend to be more affected by the regulatory burden. Continuation of business enabling reforms and their efficient implementation is paramount to increase private sector investments and a renewed FDI inflow, to enhance innovation and productivity, and to improve the country’s competitiveness and EU convergence. vi. The World Bank Group (WBG) is uniquely positioned to support Romania by helping to strengthen its institutions and accelerate the country’s convergence with more advanced EU states. Strengthening institutions for improved service delivery and creating or deepen- ing markets for the private sector are areas where the WBG has comparative advantage, play- ing a selective, catalytic and innovative role. Future WBG activities would have to show that they build essential institutional capacity and/or bring clear IFC additionality. WBG financ- ing would be assessed using the following three additional filters: (i) developing innovative solutions that benefit the most poor and vulnerable, including Roma; (ii) maximizing finance for development, including catalyzing private sector investment or leveraging additional resources (e.g., better absorption of EU funds); and/or (iii) contributing to regional and global public goods. In other words, WBG will support investment, advisory or knowledge operations in Romania that help build institutions and markets for sustainable and broad-base growth, and share global knowledge. vii. The FY19-23 CPF proposes a selective program that addresses the main constraints iden- tified in the SCD. A One WBG approach will be employed to leverage impact in support of the overarching goal—building institutions fit for a prosperous and inclusive Romania—the first SCD priority. To achieve this goal, the WBG will deploy the full range of financing and 8 FY19-23 Country Partnership Framework for Romania advisory instruments, including continued development and implementation of a significant reimbursable advisory services (RAS) program. The planned WBG program will focus on all priority areas identified in the SCD, with the first, building institutions, serving as the pre- requisite for advancing on the other three: (i) ensure equal opportunities for all; (ii) catalyze private sector growth and competitiveness; and (iii) build resilience to shocks (Figure 1). viii. The proposed CPF is more focused than previous ones, drawing on the lessons learned to fit the specific policy environment of Romania. The Completion and Learning Review (CLR) provides guidance for how the WBG could help Romania strengthen its institutions more effectively. First, set modest objectives: past projects targeting complex and ambitious reforms did not adequately factor in issues related to political and legislative volatility and weak capacity. Second, leverage all instruments: successes were achieved using a mix of instruments—lending and advisory—for impact. Third, support the implementation of strat- egies for real institutional change: a greater emphasis on hands-on implementation support embedded in investment operations is an effective complement to ongoing capacity building efforts through a broad RAS program. The five-year WBG engagement will be aligned with the implementation of the current EU programming period. The Bank and IFC will pursue more focused interventions, with clear indicators to show progress and mobilize support for further reform. MIGA will look to strategically support investments which are consistent with the Maximizing Finance for Development (MFD) approach and the priorities under this CPF. A Progress and Learning Review in the third year of CPF implementation will take stock and make course adjustments as necessary. Figure 1. Focus Areas Ov r rchin o l: BUILD INSTITUTIONS FIT FOR A PROSPEROUS AND INCLUSIVE ROMANIA Focus Ar I. Focus Ar II. Focus Ar III. Ensur Equ l Opportuniti s C t l Priv t S ctor Build R sili nc for All Growth nd Comp titiv n ss for Shocks Obj ctiv 1. Obj ctiv 4. Improv tr nsition to Str n th n c p cit t rti r duc tion for to build tr nsport th poor nd vuln r bl infr structur Obj ctiv 2. Obj ctiv 5. Obj ctiv 4. Improv cc ss to Boost subn tion l Improv pr p r dn ss mod rn h lth c r c p cit to ttr ct to n tur l dis st rs priv t inv stm nt nd clim t ch n Obj ctiv 3. Obj ctiv 6. Conn ct th poor Acc l r t c pit l nd vuln r bl to jobs m rk t d v lopm nt nd cc ss to fin nc Executive Summary 9 I. INTRODUCTION 1. The proposed Country Partnership Framework (CPF) for Romania covers a five-year period from July 2018 to June 2023.2 The CPF is aligned with the objectives of the country’s development strategy and is rooted in the findings and recommendations of the World Bank Group (WBG) Systematic Country Diagnostic (SCD) for Romania, which contains an analy- sis of key challenges and institutional constraints for inclusive and sustainable growth. It also builds on the lessons and results of the previous World Bank Group Country Partnership Strategy (CPS) for FY14-18. 2. The CPF is focused on building institutions fit for a prosperous and inclusive Romania, while being highly selective and introducing three additional filters for WB operations. All IBRD operations, knowledge and financing, will have an explicit goal of strengthening Romania’s institutions and/or creating deeper private markets. In addition, WBG financing would be assessed using the following filters: (i) developing innovative solutions that bene- fit the most poor and vulnerable, including Roma; (ii) maximizing finance for development, including catalyzing private sector investment or leveraging additional resources (e.g., better absorption of EU funds); and/or (iii) contributing to regional and global public goods. 3. The Government has made a strong case that IBRD financial engagement remains impor- tant in Romania due to the knowledge and institution-building that is imparted through the design and implementation of lending operations. Consequently, the proposed CPF is sharply focused on institutional strengthening through knowledge-based engagements, and seeks to maximize financing for development opportunities and develop innovative financing instruments where modest IBRD resources can be leveraged to catalyze additional private and public-sector financing, including from EU institutions. Introduction 11 CONTEXT II. COUNTRY AND DEVELOPMENT AGENDA Country Context 4. Romania’s decade-long membership in the European Union has triggered positive socio-economic transformations. Romania joined the European Union on January 1, 2007 and has witnessed a continuous increase of prosperity, with a per capita GDP (PPS) in 2017 standing at 61 percent of the EU-28 average compared to 30 percent in 1995. The benefits of free movement of capital and labor associated with EU membership have opened the door for fundamental societal changes and Romania’s modernization anchored in Western economic markets and institutions. 5. Romania’s presidency of the Council of the European Union (January-June 2019) and the celebration of the Centennial of the Great Union (December 1, 2018) are defining oppor- tunities in building the country’s vision for a more prosperous, competitive and inclusive society. The country will be presiding for the first time over the Council of the EU, marking an important opportunity to influence the EU agenda. Celebrations marking 100 years since the Great Union and the creation of modern Romania could rally all political actors behind a national vision to further modernize the country and bridge existing gaps with other EU member states. 6. The latest parliamentary elections were held in December 2016. A governing coalition composed of the Social Democratic Party (PSD) and the Liberal-Democratic Alliance (ALDE) appointed a new Cabinet led by Viorica Dăncilă on January 29, 2018. The Cabinet is a coalition government with 27 ministerial portfolios. The Government’s priorities for 2017–20 include investments in infrastructure, health care, education, agriculture, job creation, and small and medium enterprise development, in addition to tax and pension reforms. Prime Minister Dăncilă, the first woman to lead the Romanian Government, is strongly committed to gender equality in the workplace, in education and in politics. One of her top priorities since taking office has been to advance legislation to combat domestic violence and to promote inclusion for people with disabilities and vulnerable groups. 12 FY19-23 Country Partnership Framework for Romania Recent Economic Developments and Prospects 7. Romania bounced back quickly from the 2008 global crisis thanks to decisive government action that restored market confidence and reignited growth. The Romanian Government implemented one of the largest post-crisis fiscal consolidation efforts in the EU during 2009- 15. Relying heavily on spending cuts, but also on tax increases, consolidation rapidly reduced imbalances and placed economic growth on a strong footing. 8. Romania’s economic growth has been one of the highest in the EU since 2010, driven by investment by the private sector. During 2010-17 Romania’s economic growth averaged 2.8 percent, spurred by investment and, at times, by exports and private consumption (Figure 2). During this interval, gross fixed capital formation (GFCF) averaged 25 percent of GDP, of which the contribution of the private sector was around 82 percent (Figure 3), complemented by grant funding from the EU for public investment. Figure 2. Romania: drivers of growth Figure 3. Private GFCF is one of the highest in EU 2010-17, percent 2017, percent of GDP 8 25 6 20 4 2 15 0 10 -2 5 -4 2010 2011 2012 2013 2014 2015 2016 2017 0 Public Consumption Gross fix d c pit l form tion LV AT LT IT PT FR HR PL SK CZ IE BE RO EE DE ES EU28 HU BG SI N t xports Priv t Consumption GDP Source: Eurostat. Source: Eurostat. 9. Anchored in EU integration, private investment benefitted from foreign direct investment (FDI). The reforms associated with EU accession launched after 2000 boosted Romania’s credibility with investors, who saw it as an attrac- tive destination. In the pre-crisis period, FDI inflows Figure 4. Romania’s exports have become averaged 5 to 6 percent of GDP per year, but declined more technology intensive to around 2 percent after the crisis as competition for 100% global investment tightened. FDI went mostly into 90% manufacturing, construction and the financial sec- 80% tor. FDI boosted Romania’s exports to 41.4 percent of 70% GDP in 2017, and enhanced their technological com- 60% plexity. Thus, medium technology exports increased 50% from 23 percent in 1996 to 46 percent in 2016 (Figure 40% 4). However, high-tech exports have accounted for 30% less than 10 percent of total exports in every year 20% over the past two decades. After 2009, export growth 10% relied more on the intensive margin (i.e. exports of 0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 the same products to the same markets). The contri- bution of new export products to total export growth Low t chnolo M dium t chnolo Hi h t chnolo declined from 44.5 percent in the period 1996-2008 Prim r products R sourc b s d to 4.7 percent during 2008-16. Source: UNCOMTRADE. Country Context and Development Agenda 13 10. Prior to the crisis, growth was led by total factor productivity (TFP); however, productivity growth slowed down in recent years. The drivers of Romania’s growth have been gradually changing since 2000. In 2000-08 the bulk of economic growth (80 percent) was associated with TFP, reflecting efficiency gains from the gradual correction of resource misallocation during transition to a market economy. Positive contributions were also made by physical capital (38 percent) and human capital (3 percent), while labor made a sizeable negative contribution (-22 percent) due to emigration and ageing. Since 2009, the sources of growth have shifted, with a reduction of the TFP contribution (to 50 percent), an increase in the contribution of physical capital (to 56 percent) and a negative contribution of labor and human capital (Figure 5). After the crisis, productivity growth slowed substantially, to an average of 2.5 percent per annum, down from around 8 percent in the pre-crisis period (Figure 6). Figure 5. Since 2008 Romania has Figure 6. Since 2008 the sources of growth experienced a decline in productivity growth have shifted labor with a reduced contribution Annual average labour productivty growth (percent) of TFP 9 100% 8 90% 80% Sh r of R l GDP Growth 7 70% 38 56 50 6 60% 3 5 50% 3 40% 4 30% 80 68 50 3 20% 2 10% -1 0% -5 1 -10% -22 -22 0 -20% 2000-2016 2000-2008 2009-2016 -1 PL RO BG SK CZ HR EU28 SI HU C pit l Stock (α * gK) L bor ((1-α) * gL *) 2016-2008 2008-2000 Hum n C pit l p r L bor ((1-α) * gh) Tot l F ctor Productivit ( A) Source: Eurostat. Source: Eurostat, World Bank calculations. Based on a human capital-adjusted Solow model. 11. Macroeconomic imbalances have Figure 7. Fiscal policy has become pro-cyclical begun to widen again. Since 2016, (% GDP) procyclical fiscal policies increased 39 the Government deficit to close to 38 3 percent of GDP (Figure 7) driven 37 by a series of tax cuts and increases 36 35 in public sector wages and pensions. 34 Expansionary fiscal policy boosted 33 private consumption, which has 32 become the main driver of growth. 31 30 Excess demand in turn has put pres- 29 sure on the internal and external bal- 0 ances. Inflation is on an upward trend -1 and has reached 5 percent in March -2 2018, while the current account defi- -3 -4 cit widened to 3.4 percent of GDP at -5 end-2017. Public debt according to -6 EU methodology remains among the -7 2010 2011 2012 2013 2014 2015 2016 2017 lowest in the EU, at 35.0 percent of GDP3 at the end of 2017, but it is not R v nu s Exp nditur s Fisc l b l nc stabilized at current deficit levels. Source: MFMod. 14 FY19-23 Country Partnership Framework for Romania 12. The economy is projected to continue to grow above potential in 2018. GDP will likely expand by around 5.1 percent in 2018, driven by the fiscal stimulus and aided by a resur- gent EU. Continued growth in consumption is expected to widen the current account deficit to 4.3 percent in 2018. Inflation is set to peak at around 5 percent reflecting excess domestic demand and the fading out of the base effect of tax cuts. The National Bank of Romania (NBR) anticipates a gradual subsequent decline in inflation towards 3.5 percent at the end of 2018, due to a slowdown in private consumption as no further fiscal boost to households’ real dis- posable income is envisioned. 13. Fiscal measures passed in 2017 have put pressure on the consolidated budget deficit. In the absence of corrective measures, the fiscal deficit is projected to reach 3.3 percent of GDP in 2018, which would place Romania on a trajectory to reenter the Excessive Deficit Procedure of the EU. However, the Government has stated that, like in 2017, it would be ready to take adjustment measures should the deficit near the 3 percent ceiling. Given economic growth and budget deficits below 3 percent of GDP in the medium term, public debt according to EU methodology is expected to reach around 35.5 percent of GDP by the end of 2020; still, it remains one of the lowest in the EU. Strong private consumption aided by expansionary fis- cal policy and continued growth in real wages, partly supported by minimum wage increases, should boost real incomes and lead to further declines in poverty. Table 1. Key Macroeconomic Indicators and Projections 2015 2016 2017 2018f 2019f 2020f Real GDP growth, at constant market prices 3.9 4.8 6.9 5.1 4.5 4.1 Private Consumption 5.5 7.3 9.0 8.1 7.2 6.6 Government Consumption -0.7 3.3 2.8 5.9 5.4 5.1 Gross Fixed Capital Investment 8.3 -3.3 4.7 6.2 5.1 4.8 Exports, Goods and Services 5.4 8.3 9.7 8.3 7.1 7.0 Imports, Goods and Services 9.2 9.8 11.3 9.7 8.4 8.1 Real GDP growth, at constant factor prices 3.6 4.6 6.9 5.1 4.5 4.1 Agriculture -11.1 -0.8 18.3 3.0 2.1 2.0 Industry 6.1 0.4 8.0 6.1 5.2 4.6 Services 4.3 8.1 5.0 4.8 4.4 4.1 Inflation (Consumer Price Index, avg.) -0.6 -1.5 1.3 3.7 3.2 3.0 Current Account Balance (% of GDP) -1.2 -2.1 -3.4 -4.3 -4.7 -4.9 Financial and Capital Account (% of GDP) 1.4 2.7 3.5 4.4 4.8 5.0 Net Foreign Direct Investment (% of GDP) 2.2 2.7 2.4 3.1 3.0 3.0 Fiscal Balance (% of GDP) -1.3 -2.4 -2.8 -3.3 -3.0 -3.0 General government debt, ESA (% of GDP) 37.7 37.4 35.0 35.4 35.8 35.5 Primary Balance (% of GDP) -0.1 -1.1 -1.6 -2.0 -1.7 -1.7 Upper middle-income poverty rate ($5.5 in 2011 PPP) 26.1 25.0 23.6 22.6 21.7 20.9 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices, MoPF. Notes: e = estimate, f = forecast. Calculations based on EU-SILC harmonization, using 2007-EU-SILC, 2012-EU-SILC, and 2015-EU-SILC. Projection using annualized elasticity (2007-2012) with pass-through = 0.7 based on GDP per capita in constant LCU. Actual data: 2015. Nowcast: 2016 - 2017. Forecast are from 2018 to 2020. Country Context and Development Agenda 15 14. Financial intermediation across all financial segments is low and declining, hampering private sector growth. The financial sector has significant challenges for supporting the real economy, both households and enterprises. Financial sector is dominated by banks, which hold 75.3 percent of all financial sector assets. The banking sector, with assets amounting to 52.7 percent of GDP as of September 2017, is one of the shallowest in the EU and has been declining relative to the economy (72.5 percent of GDP in 2010). Low financial intermedia- tion is reflected in the low penetration of bank deposits and loans. Financial inclusion is also low: only 61 percent of adults have an account in financial institutions, below the average for regional peers (75 percent) and upper-middle-income countries (70 percent), exacerbated by poor financial literacy. Demand for credit is limited due to the relatively small number of pri- vate sector enterprises, high share of foreign-owned firms compared to peer countries, and relatively low private investment. Access to finance is restricted for small and medium-sized enterprises, start-ups, and in rural areas. There is little alternative financing, and capital mar- kets have yet to play a meaningful role in corporate financing (See Box 1). Box 1. Capital Markets in Romania The capital market in Romania is one of the shallowest in the region. Listed stock and debt securities amounted to 37.1 percent of GDP at the end of 2016, vs. 105.1 percent in Croatia, 95.3 in Hungary, 87.6 in Poland and 219.9 average in the EU. Equity market, accessible to more established companies, is lagging that of regional peers. The Bucharest Stock Exchange (BVB) had 92 listed companies as of end-2016, with total market capitalization in Roma- nia amounting to 8.9 percent of GDP compared to 42.4 in Croatia, 18.8 in Hungary, and 28.3 Poland and 65.7 percent in the Euro area as of end 2016 (source Eurostat). The secondary market also has a very low liquidity. Private equity, including venture capital, is nascent. The Romanian authorities undertook a broad range of reforms to develop domestic capital markets, advanc- ing in the aim of moving Romania from Frontier to Emerging Market (EM) Status. The Romanian Financial Supervisory Authority (ASF) has been streamlining and modernizing the regulatory framework, harmonizing with EU capital market standards, and implementing risk-based supervision. It has also engaged in capacity building to improve the understanding of new market practices and participants. Progress has been supported by the Govern- ment, which used BVB to privatize SOEs. Thanks to the pension reform that helped deepen domestic institutional investor base, BVB has been placed on the FTSE Emerging Market watch list and now meets all requirements except liquidity. Once this is resolved, Romania could be included in MSCI EM indexes, which could bring up to USD 1.3 billion in additional investment (including mutual funds, exchange-traded and institutional funds). Further poten- tial privatizations (e.g. Hidroelectrica, Bucharest Airport) would be important steps toward emerging market status, although these are not currently planned. Government bond market development efforts led to the inclusion of Ro- manian government bonds in the Barclays and JP Morgan indexes, and provided a significant boost for the market, increasing medium and long term foreign institutional investment. Despite a positive momentum, key challenges remain. There are key challenges preventing capital markets from supporting private sector financing solutions and bringing in institutional investors. Concerns regarding corporate governance of SOEs risk reversing the progress made to date. The reduction in the Pillar 2 pension contribution from 5.1 to 3.75 percent of gross salary could reduce the institutional investor base and affect long term saving. There are also market level issues that need to be addressed to further increase liquidity and successfully introduce new products. Further development of domestic capital markets could have significant benefits for Romania. Developing local capital markets can improve the availability of long-term financing for firms, municipalities, and priority sectors, spurring growth and job creation. Deeper domestic capital markets would also provide investible assets for domes- tic institutional investors to match their long-term liabilities. Increasing the variety of financial instruments (includ- ing covered bonds to be launched as a new asset class) will further help deepen the market. 15. Romania currently enjoys access to international capital markets at reasonable terms, but this access is vulnerable to market volatility and depends on the underlying macro-fiscal stability of the country. The country is currently rated BBB- by Standard and Poor’s, which is the lowest investment grade. While the country has adequate conditions to meet its financial 16 FY19-23 Country Partnership Framework for Romania commitments, this capacity could be weakened with adverse economic shifts. Current yields are low. The latest international bond issuance took place in February 2018, when the gov- ernment raised EUR 750 million from a 12-year bond sale with a yield of 2.585 percent and EUR 1.25 billion from a 20-year bond with a yield of 3.45 percent; both were oversubscribed, with investors seeking EU sovereign risk. However, the country suffered from a lack of access in the aftermath of the global financial crisis. Romania was downgraded BB+ in 2008 and did not access the markets at all in 2009 likely due to prohibitive rates, while in the following two- year period it only accessed the market with medium-term issuances totaling 2.5 billion EUR at higher coupons of 5.0 percent (in 2010) and 5.25 percent (in 2011). Poverty Profile 16. Poverty has gradually declined, yet remains significantly above regional peers. The EU accession was a major boon for poverty reduction, but ten years on, Romania is still by far the poorest country in the EU. The at-risk-of-poverty (AROP) rate fell steeply from 23.6 percent in 2007 to 16.5 percent in the first two years following Romania’s EU accession. However, the 2008 crisis led to large-scale job losses and many of the poor fell back on agriculture as a means of last resort, resulting in a setback of almost a decade. With a slow recovery at the bottom of the income distribution, income growth of the bottom 40 percent was negative between 2009-2015. Poverty as of 2015 is still above pre-crisis levels as post-crisis recovery has not brought down inequality, which remains among the highest in the EU. Figure 8. Poverty remains higher Figure 9. Social transfers are not effective than peers at reducing poverty (At risk of poverty and social exclusion AROPE4), percent 2015, percent 70 35 60 30 50 25 40 20 30 15 20 10 10 5 0 0 BG RO HR HU PL SI SK CZ HR RO LT BG EE LV EU28 HR SI PL SK CZ 2007 2016 B for soci l tr nsf rs Aft r soci l tr nsf rs Source: Eurostat Source: Eurostat 17. Romania’s inclusion challenge is predominantly a rural problem, with 70 percent of the poor living in rural areas.5 With an incomplete structural transformation, around 45 percent of the population resides in rural areas where poverty is a full 20 percentage points higher than in urban areas. Consequently, poor regions in Romania are also where most of the poor live. This strong duality is a manifestation of unequal opportunities and unequal access to markets that has no parallel in any other EU country: disparities in endowments (notably human cap- ital) and various factors that influence the returns on endowments combine to contribute to high levels of social and regional variation (Figure 10). Disparities in living standards between urban and rural areas are especially striking: the urban-rural gap in mean equivalized net Country Context and Development Agenda 17 Figure 10. At-risk-of-poverty rates at NUTS3 level reveal substantial regional variation 3.90 3.90–17.46 17.46–22.00 22.00–22.90 22.90–27.75 27.75–29.70 29.70–32.17 32.17–43.66 Source: World Bank (2016) income is the second-highest in the Figure 11. A large share of the poorest EU, with mean urban income almost and most vulnerable do not work or rely 50 percent higher than the mean on subsistence agriculture rural income. Poverty rates vary sig- percent nificantly across regions, with poverty 100 rates in some counties in the North- 90 East being more than ten times higher 80 than that in Bucharest. To counter 70 the consequences of a shrinking and 60 aging population, driven mainly by 50 40 external migration of its working-age 30 population, Romania faces an imper- 20 ative to enhance the equality of 10 opportunities, between groups and 0 across regions, to foster broad-based Q1 Q2 Q3 Q4 Q5 improvements in living standards Not workin A ricultur Industr /m nuf cturin and create a virtuous cycle of inclu- S rvic s Construction sive growth and development. Source: World Bank staff calculation using EU-SILC 2016 18 FY19-23 Country Partnership Framework for Romania 18. 4.5 percent of Romania’s population (over 900 thousand people) live in extreme pov- erty in marginalized areas (3.2 percent of urban and 6.2 percent of rural population). Marginalized areas are, by definition, areas that combine low human capital, high unemploy- ment, and inadequate housing conditions.6 These areas suffer from a combination of dirty or nonexistent streets, concentration of households in extreme poverty, very low levels of educa- tion, poor health, a preponderance of single or teenage mothers, large numbers of children, poor quality and/or segregated schools, and a high rate of petty crime. Public services are lacking or are of low quality. People in marginalized communities have few opportunities to get better education or a decent job. As a rule, these areas tend to be underrepresented on local political decision-making bodies.7 19. Inclusion of the Roma population remains one of Romania’s biggest challenges. Poverty and material deprivation among the Roma have declined but remain high, particularly in spa- tially segregated Roma neighborhoods. According to EU-MIDIS II, the share of Roma at risk of poverty8 was 70 percent in 2016 (FRA, EU MIDIS II9, declining from 84 percent in 2011 (UNDP/World Bank/EC Regional Roma Survey).10 However, the gap to the national average of 25 percent remains substantial. Income poverty among the Roma strongly correlates with residential concentration, i.e. poverty levels are more pronounced in neighborhoods where all or most residents are Roma. Strikingly, 68 percent of Roma report living in such segre- gated neighborhoods. Severe material deprivation is widespread, and 62 percent of surveyed Roma households find it difficult to make ends meet. About a third of Roma live in households that experience hunger (at least one person went to bed hungry at least once in the previous month). 20. Inequality has a profound effect on children, impeding economic mobility and the coun- try’s long-run growth potential. About 4 out of 10 Romanian children are poor, the high- est number in the EU. Many children accumulate disadvantages that are the direct result of poverty and deprivation: for example, external migrants disproportionately originate from poorer regions, which leads to the breakdown of families, with close to 100,000 children left behind. Romania still has one of the largest number of children in the child protection system, though progress is being made in transferring them from institutional to community-based care. The situation of Roma children is especially dire: being Roma increases the chances of poverty more than any other factor. The integration of Roma in education is a challenge and is closely associated with social inclusion and employment. The participation of Roma in early childhood education and care decreased form 45 percent in 2011 to 38 percent in 2016. At the same time, the proportion of early school leavers among the Roma remains high at 77 percent (2016), and 64 percent of Roma aged 16 to 24 are out of employment or education. Recent research suggests that a large share of income inequality can be traced back to unequal starts, especially in countries like Romania that spend less on education as a share of GDP, particu- larly at the pre-primary level. 21. Institutional and policy constraints hinder social inclusion and poverty reduction despite high economic growth. The Government has made important progress in areas such as dein- stitutionalization of children, reduction of error and fraud on social benefits and pensions, and improving administrative efficiency of the social assistance system. Nevertheless, improving equity is still work in progress; to this end, four important policies need to be implemented. First, the Minimum Insertion Income Program (VMI)11 – already approved by the parliament – to not only ensure long-term impacts in reducing inequality and poverty, but also further improve efficiency of the social assistance system. Second, the integration of social services and case management at the local level to support the poorest and most vulnerable families Country Context and Development Agenda 19 through a personalized support and better provision of social services. Third, the improve- ment of the system for identifying the needs of the persons with disabilities and the elderly (including through the harmonization of the medical and psychosocial eligibility criteria for disabilities) together with the development of specialized and support services that would answer to those needs. Fourth, the improvement of the efficiency of the special protection services to make sure that the children in public care remain in the system for the shortest period possible and that during their stay they receive high-quality services needed for their complete integration in society, and the development of preventive community-based ser- vices to prevent the entrance of children into the protection system in the first place. 22. Gender divides persist despite recent progress. Recently completed Romania Country Gender Assessment12 finds that while progress has been made in endowments (health and education), challenges persist, even more so among Roma women and women living in rural areas. Labor force participation among women is low, and the gender gap in labor participa- tion in Romania is significantly larger than in other EU countries. Other dimensions of con- cern are related to women’s agency: high teenage pregnancy rates and gender-based violence (see Box 2). While overall gender gaps in education have largely closed in Romania, they per- sist among the Roma population. The gender assessment also finds that while overall there is no significant gender gap related to the rate of early leavers, gender gaps among NEETs (young people aged 15 to 24 neither in employment nor in education) are large (14.1 percent for boys versus 21.8 percent for girls) and even larger among rural populations (16.8 versus 26.1 per- cent respectively).13 Box 2. Summary of Romania Country Gender Assessment (2018) A Country Gender Assessment for Romania reviewed the state of equality between women and men in Roma- nia in endowments, economic opportunities, and voice and agency. With regards to gender equality, Romania made substantial progress, including in health and education. For example, unlike many other EU countries, Roma- nian women participate more in traditionally male dominated fields of study. In addition, Romania has advanced in its legal and institutional framework. However, Romania still lags in other areas – much of which is driven by rural and ethnic inequalities. Challenges persist in some dimensions of human endowments. For instance, Romania’s maternal mortality rate (MMR) remains one of the highest amongst EU member states: In 2014, it was 31 deaths per 100,000 live births, which was almost four times the EU’s average, and it is about 15 times higher among Roma women than among non-Roma women. While overall gender gaps in education have largely closed in Romania, gender gaps in this dimension are still persistent among the Roma population. Women in Romania continue to face challenges with regards to economic opportunities. Only 56.2 percent of women report being economically active compared to 74.8 percent of men. Care provision seems to pose significant constraints on women’s ability to participate in the labor market: almost 30 percent of working-age women (18-64) report “looking after the family/house” as one of the main reasons for not looking for a job, whereas only 10 percent of men do (LITS 2016). Finally, high prevalence of gender-based violence and of teenage pregnancy are issue of serious concern in Romania. 30 percent of women in Romania have experienced physical and/or sexual violence since the age of 15 and only 23 percent of victims reported the most serious incident to the police. 32 percent of women have also ex- perienced sexual harassment. Moreover, only 74 percent of the respondents in Romania (compared to 96 percent from the 28 EU member states) believe that domestic violence against women is unacceptable and should always be punishable by law. Another manifestation of the lack of agency among women is the relatively high adolescent fertility rate. At 34 births per 1,000 women (ages 15 to 19) it is notably higher than both the Europe and Central Asia (17.2) and EU (10.4) averages. Adolescent fertility and child marriage are phenomena affecting Roma girls even more: 10 percent of Roma girls have their first child when they are between the ages of 12-15 and 48 percent of them become first-time mothers when they are between the ages of 16-18. Approximately 28 percent of Roma women between the ages of 15 and 19 are married, while only two percent of the non-Roma population in Romania between these ages are married. 20 FY19-23 Country Partnership Framework for Romania Institutional Assessment and Key Development Challenges Identified by the SCD 23. Romania’s transformation has been a tale of “two Romanias” – one urban, dynamic, and integrated with the EU; the other rural, poor and isolated. Reforms spurred by EU accession boosted productivity and integrated Romania into the EU economic space. GDP per capita rose from 30 percent of the EU average in 1995 to 61 percent in 2017. Today, over 70 percent of the country’s exports go to the EU and their technological complexity is increasing. Yet, Romania remains the country with by far the largest share of poor people in the EU, with over a quarter of the population living on less than USD5.5 a day. There are widening disparities in economic opportunity and poverty across regions and between urban and rural areas. While Bucharest has already exceeded EU average income per capita and many secondary cities are becoming hubs of prosperity and innovation, Romania remains one of the least urbanized countries in the EU. Access to public services remains constrained for many citizens, particu- larly in rural areas, and there is a large infrastructure gap, which is a drag on international competitiveness of the more dynamic Romania and limits economic opportunities in lagging and rural areas 24. The SCD provides an in-depth assessment of the significant remaining institutional weak- nesses that limit Romania’s ability to make sustainable progress towards reducing pov- erty and shared prosperity for the benefit of all citizens. Growth is constrained by weak commitment to policy implementation and an adverse environment for investment; equal opportunities by uneven local service delivery; and resilience to natural disasters and climate change by lack of coordination between central and local authorities. If such institutional challenges remain unaddressed, it will not be possible to sustain the impressive growth per- formance of recent years, share prosperity among all the citizens, and improve the country’s resilience to natural hazards. 25. To create a business environment conducive to sustained growth and private investment, as well as to promote inclusion and bridge social and economic divides, Romania needs to focus on overcoming its key institutional challenges: 26. At the national level, enhanced capacity for consistent and evidence-based policy making is a crucial foundation for inclusive and sustained growth. • Ad-hoc policy changes are creating an unstable policy environment that hurts citizens, trade unions and private companies alike, while also affecting investment decisions and business planning. 82 percent of surveyed firms in Romania agree that fast-changing leg- islation and policies are a problem when doing business. Legislative proposals lack real impact studies and are frequently issued on the basis of trial and error. Policy volatility is seen in the frequent use of “emergency ordinances,” which are implemented before receiv- ing parliamentary approval and are often subsequently amended. Fiscal legislation is fre- quently amended, creating significant challenges for firms’ accountants and uncertainties for potential investors, while ultimately curtailing the ability of firms to make investment decisions. • Governance improvements have not yet been transformative, despite the EU accession pro- cess. There has been progress, such as in establishing a legislative framework for fighting corruption. The Romanian National Anti-Corruption Directorate (DNA), created in 2002, Country Context and Development Agenda 21 addresses medium and high-level corruption cases, and is one of the most trusted institu- tions in Romania. Yet frequently, de jure reforms were poorly implemented, as old institu- tions resisted change. According to the World Economic Forum’s Global Competitiveness Report, Romania’s institutional evolution has stagnated over the past decade, with gains only witnessed in terms of transparency, while Romania continues to perform poorly in terms of government favoritism, wastefulness, and diversion of public funds. Romania has not managed to consistently reform its state to increase the capacity needed for better pub- lic service delivery and growth sustainability. • Fragmentation of sector responsibilities leads to diffuse accountability and poor coordi- nation. Policy planning units in line ministries, for example in health and education, are weak and do not connect strategic and budget planning to day-to-day operations. Setting and monitoring measurable results is rare, leading to perpetuation of suboptimal policies, such as poor targeting of social transfers. • Capacity constraints in project planning and implementation lead to investment delays. For example, in 2015 public investment was 25 percent below plan, and as of March 2018, Romania used only 17 percent of the EUR 30.9 billion of the EU funds allocated for the 2014-20 programming period. Transport sector showcases the underlying capacity con- straints and lack of funding prioritization; as a result, Romania’s road infrastructure costs remain high compared to EU average, with persistently low quality. Similarly, capacity constraints put at risk the implementation of other EU funding, such as the EUR4.7 billion Human Capital Operational Program (POCU) for the 2014-20 programming period • Reforming and depoliticizing public administration would create professional senior man- agement, reduce staff turnover and speed up decision making. Commitment to compet- itively recruit civil servants for non-political positions to manage policy, operations and service delivery is necessary to create a functional civil service that provides implementa- tion stability across changes in political leadership. 27. At subnational level, a greater capacity to foster private investment and improve the quality of public service delivery is essential for overcoming regional divides and boosting prosperity of the people. • Many municipalities do not have the capacity to prioritize, plan or manage capital invest- ments, which curtails their access to funding and delays improvements in key economic infrastructure. Another issue is the lack of experience in leveraging key public assets. Poor planning and often unclear property rights lead to stranded assets that could be used to unlock private sector potential. • Romania has no urban development policy, and there are no state budget programs for urban development. There are however considerable EU funds available for this purpose, and some cities have been able to raise own revenues for capital investment. Ability to mobilize resources and attract private investment varies considerably across municipal- ities, but most lack focus on strengthening private sector. • Cities often provide reliable public services, although significant gaps remain. For example, most municipalities have struggled to keep district heating systems operational or efficient. Only Bucharest, Oradea, and Constanța have managed to keep a significant share of house- holds branched to the district heating system, while others (Cluj-Napoca, Iași, Sibiu) have 22 FY19-23 Country Partnership Framework for Romania witnessed significant de-branching (with people installing individual heating units), and some cities have closed their district heating systems altogether (Brașov, Brăila, Baia Mare, and Vaslui). Public service delivery is spotty in rural areas, with 1,990 of 2,189 communes having no sewage, and 672 communes having no piped water. Reform Priorities for Inclusive Growth 28. Sustained growth requires addressing supply side constraints and strengthening institu- tions. To maintain high growth rates in the medium term and keep converging with the living standards of Europe, Romania needs to revamp the drivers of growth, with more and better labor, better capital investment and more efficient allocation of resources. Stronger public institutions and more stable and predictable policy environment are a necessary ingredient of this work. 29. On the labor market side, boosting potential growth requires increasing labor force participation to mitigate the effects of aging and emigration, as well as improving the skills of the workforce. Romania lags among peers in number of graduate students in sci- ence, technology, engineering and math (STEM) disciplines in the population aged 20 to 29. Unemployment remains high for the young (18.3 percent) and the unskilled, and labor short- ages are increasingly affecting both skilled and unskilled occupations in the context of rapidly rising labor costs (14.8 increase in the average wage in 2017). Better labor market policies and stronger education system would help address this challenge. 30. On the capital side, there is a need to promote private investment, while more efficient public investment could be complemented by a greater use of public-private partnerships (PPPs) to address the infrastructure gap. Unpredictable policy and business environment is the top-rated constraint to long-term investment, as demonstrated for example by the European Investment Bank (EIB) Investment Survey (2016).14 Second most important concern is the lack of adequate transport infrastructure, which is cited as a major obstacle for invest- ment by 45 percent of Romanian firms, compared to 12.9 percent of firms in Poland. Romania lags in terms of available motorways and railways relative to its population and land area. Factor misallocation needs to be addressed, for example, by reconsidering the role of SOEs in key sectors, such as energy and transport, where they remain dominant, while the business environment should become more supportive of domestic and foreign investors, especially by ensuring predictability of the legislative framework. This would allow more productive and innovative Romanian firms to take full advantage of the EU Single Market. 31. The SCD proposes ten development priorities for Romania that will help enhance equity and shared prosperity. These fall into four broad areas, of which the first – increasing the effectiveness and efficiency of the institutions in public service delivery – is the prerequisite for advancing on the other three (Table 2). Country Context and Development Agenda 23 Table 2. SCD Priorities Priority Expected impact Increasing the effectiveness and efficiency of the institutions in public service delivery Increase trust in institutions and coop- Increase transparency and access to information to enable collective action eration of citizens to contribute to the and enhance accountability. financing of the provision of public goods Improve efficiency of public spending, Develop a management framework for public investment for budgetary and EU provide adequate supply of infrastruc- funds. tures and public services across the country Increase efficiency and productivity of Reform the civil service aiming to depoliticize the public administration. the public administration Catalysing private sector growth and competitiveness Enhance infrastructure and connectivity by increasing investment in large Increase productivity, support job crea- transport infrastructure and mobilizing private financing instruments. tion and economic growth Create a vibrant business environment by cutting red tape, reconsidering the role of SOEs, reducing regulation of product markets, securing land titles and Reduce misallocation of resources and property rights, developing sustainable agribusiness and relevant value chains, support productivity and economic strengthening financial intermediation and access to finance for MSMEs and growth maintaining a prudent economic policy management. Reduce labor market shortages, mismatches and rigidities by increasing labor force participation especially among women and the Roma, enhancing internal Increase labor force participation, labor mobility for better allocation of labor and improving the minimum wage setting productivity and economic growth mechanism. Ensuring equal opportunities for all Promote human capital development by investing in early childhood education and closing the gap in early school leaving; promoting vocational education and training (VET), achieving higher attainment in tertiary education and fostering Support inclusive growth lifelong learning; improving health outcomes and resolving inequities in access to high-quality health care through expanding primary care; Achieve equitable access to high-quality public services by improving access to municipal infrastructure and delivering a robust social safety net that provides Support inclusion effective social assistance and integrated social services for the poor and mar- ginalized groups yet preserves work incentives. Building resilience for sustainable growth Make the policy, legal and institutional environment risk-informed by en- Reduce the physical, social and financial hancing readiness, reforming policies and strengthening institutions for better impact of disasters disaster preparedness Strengthen adaptation to climate change by enhancing and implementing Reduce climate change vulnerabilities cross-sectoral adaptation policies, measures and financing options 24 FY19-23 Country Partnership Framework for Romania III. WORLD BANK GROUP PARTNERSHIP FRAMEWORK D. Government Program and Medium-term Strategy 32. The Government’s program15 for 2018-20 focuses on supporting economic growth and poverty reduction. It aims at boosting Romania’s medium-term competitiveness, promot- ing sustainable employment and strengthening social cohesion, while preserving macroeco- nomic stability. Sector priorities include improving key economic infrastructure, in particular transport and digital infrastructure, as well as a better quality of health and education. To boost private sector growth, the Government launched programs supporting companies’ integra- tion in the European value chains by reducing their tax burden, facilitating access to finance, with focus on MSMEs, and simplifying regulations. Through a series of increases in the public pensions and wages promoted in 2017 the Government aims to also boost social cohesion and reduce poverty. Further measures to enhance the competitiveness of the Romanian compa- nies and bridge the gap between the leading and lagging communities are envisaged over the coming years. The objectives of the Fiscal-Budgetary Strategy of the Government for 2018-2016 are to promote a smart, sustainable and inclusive economic growth, promote investment and fiscal stability and predictability and sustainably boost the revenues of the vulnerable cate- gories of population. The priorities of the proposed CPF are aligned with the Government’s program. E. Proposed WBG Country Partnership Framework Lessons from FY14-18 CPS Completion Report 33. The WBG can continue to serve as a stable, neutral convener and knowledge broker in Romania to help identify development solutions and provide support for their implemen- tation. The changing scope of the RAS program, which evolved substantially during the CPS period from mainly small, timebound analytical pieces to large and longer duration technical assistance and capacity building tasks, allows the Bank to respond quickly to client requests for advice and provide support that could not otherwise be funded within the Bank’s own budget. Strategically leveraging this role to achieve high-priority institutional reforms should be the centerpiece of the WBG program going forward. World Bank Group Partnership Framework 25 34. More effective engagement will require a sharper focus with more clearly articulated WBG priorities and carefully selected instruments. The CPF should target a manageable number of objectives and result indicators that can be more directly linked to WBG interventions, and take advantage of a timely Progress and Learning Review (PLR) to adjust them to evolving needs. Complementarity and coordination among knowledge and financing instruments as well as across IBRD and IFC engagements is important, with possibly also strategic partici- pation by MIGA to support private sector development. The European Commission and key international financial institutions (IFIs) will be consulted regularly to ensure coordination and complementarity. 35. Close attention should be paid to supporting the implementation of institutional reforms under the new CPF. Formal “supply-side” achievements such as the adoption of new laws and strategies are not sufficient alone for facilitating sustainable institutional changes. Regular communication with Government counterparts, the identification and enabling of champi- ons, hands-on technical assistance, and other implementation support will likely prove crit- ical for achieving needed institutional reforms. Relative political stability at the local level could allow the Bank to pilot new approaches to regional development. 36. IFC has faced challenges in supporting the development of PPPs and in expanding munic- ipal finance partnerships. An overarching issue in enabling IFC to support the development of PPPs in Romania is the absence of a functioning PPP Law, that is currently discussed in the parliament, as well as lack of the associated institutional capacity to support implementation. In municipal finance, issues such as governance, as well as availability of competitively priced finance domestically, restrict IFC’s footprint. Lessons from Public Consultations 37. WBG team conducted extensive consultations on both the SCD and CPF with major stake- holders, which yielded a consistent and widely shared set of priorities and opportunities for Romania and informed the proposed WBG program. Face-to-face SCD consultations were held in five cities (Bucharest, Iasi, Cluj-Napoca, Timisoara and Constanța) in October- November 2017 and online consultations were open to the public between October 15 and November 30. Face-to-face CPF consultations were held in February-May 2018 in Alexandria, Craiova, Iasi, Vaslui, Resita, Caransebes, Dej, Cluj-Napoca, Turda and Bucharest, as well as in Brussels with the representatives of EU Commission and different think tanks. An online survey asking participants to identify Romania’s key development challenges and prioritize WBG engagement ran between April 11 and May 15. Key stakeholders included national and local public authorities, private sector actors, national and local-level civil society organiza- tions, opinion-makers and influencers, professors, students and representatives of the inter- national community. The top three concerns emerging from these consultations are the need for consistent and predictable public policy; urgent need to improve the state of infrastructure, especially roads; and address the shortage of skills. At the same time, participants shared an optimistic outlook for the country, with an overwhelming majority of respondents preferring to live, work or study in Romania, rather than seek opportunities abroad. 38. The World Bank Group is widely seen as an independent and reliable development partner for Romania. Stakeholders would like the WBG to focus on supporting improved Government capacity for predictable and consistent policy making, as well as help the authorities at all lev- els to prioritize and implement investment projects, particularly in infrastructure. Participants 26 FY19-23 Country Partnership Framework for Romania also urged the WBG to continue focusing on health and education as essential areas for human development. Many stakeholders supported a greater outreach to local authorities, and wel- comed efforts by IBRD, IFC and MIGA to leverage private funding. Overview of World Bank Group Partnership Framework 39. The proposed CPF is focused on the most pressing constraints identified in the SCD, in areas where the WBG has comparative advantage and there is a demand from the Government of Romania. The SCD clearly sets out weak institutions and poor governance as the most critical binding constraint to Romania’s sustainable economic development and shared prosperity. Accordingly, the CPF will focus on the single overarching goal – building institutions fit for a prosperous and inclusive Romania. This focus on addressing institutional constraints will help set Romania on a path for eventual IBRD Graduation. 40. The Government and WBG have agreed to deploy the full range of financing and advisory instruments, including continued development of a significant RAS program and activi- ties funded by the EC’s Structural Reform Support Service (SRSS). The planned WBG pro- gram will cover all four priority areas identified in the SCD (Table 3), yet within these it will focus on specific aspects where WBG is best positioned to add value. 41. To ensure selectivity and maximize the use of WBG resources, any future financial engage- ment in Romania will have to demonstrate that it builds essential institutional capacity or deepens private markets. In addition, potential financing would be assessed using the following filters: (i) developing innovative solutions that benefit the poorest and most vul- nerable, including Roma; (ii) maximizing finance for development, including catalyzing pri- vate sector investment or leveraging additional resources (e.g., better absorption of EU funds); and/or (iii) contributing to regional and global public goods. In other words, the WBG will support advisory, knowledge or financial operations in Romania that help build institutions and markets for inclusive sustainable growth, and share global knowledge. Table 3. Link between CPF Objectives and SCD Priorities CPF Objectives SCD Priorities Increasing the effectiveness and efficiency of the state in public service delivery Overarching Goal: Build Institutions Fit for a Prosperous • Increase transparency and access to information and Inclusive Romania • Develop a management framework for public investment • Reform the civil service Focus Area I. Ensure Equal Opportunities for All Ensure Equal Opportunities for All Objective 1. Improve transition to tertiary education for the poor and vulnerable • Promote human capital development • Achieve equitable access to high-quality public Objective 2. services Improve access to modern health care Objective 3. • Reduce labor market shortages, mismatches and Connect the poor and vulnerable to jobs rigidities World Bank Group Partnership Framework 27 CPF Objectives SCD Priorities Focus Area II: Catalyze Private Sector Growth and Competitiveness Catalyze Private Sector Growth and Competitiveness Objective 4. • Enhance infrastructure and connectivity Strengthen capacity to build transport infrastructure Objective 5. Boost subnational capacity to attract private investment • Create a vibrant business environment Objective 6. Accelerate capital market development and access to finance Focus Area III. Build Resilience to Shocks Build Resilience for Sustainable Growth • Make the policy, legal and institutional environ- Objective 7. ment risk-informed Improve preparedness to natural disasters and climate change • Strengthen adaptation to climate change 42. The CPF covers five years to align the WBG engagement to the Romanian EU funds cycle. As a member-state of the European Union, Romania benefits from European Structural and Investment Funds (ESIF) provided on a seven-year funding cycle basis. Such funds can be used up to three years beyond each cycle. For the EU programming period 2014-20, Romania has been allocated EUR30.8 billion in European Structural and Investment Funds to be used until the end of 2023 for priority investments and reforms in various areas, as outlined in the Country’s Partnership Agreement 2014-20. This is the largest source of non-reimbursable funds available for Romania’s development and convergence to EU standards. Challenges in EU funds absorption during the 2007-13 period and delays in preparation for accessing funds under the 2014-20 EU programming period have revealed institutional bottlenecks, weak capacity in managing funds and implementing projects. The Government requested Bank support to address these challenges mainly through RAS. It reconfirmed the valuable part- nership with the Bank through the MoU signed in 2016 and the high demand for RAS in the past two years. Romania has one of the largest RAS programs under implementation within the WBG. Building on the previous advisory services program that focused on strategic prior- itization and planning, the focus has now shifted to implementation support and hands-on institutional capacity building, assisting the Government in the implementation of priority programs, including those financed by EU funds. 43. The proposed CPF is more selective and focused than the previous one, drawing on the lessons learned to fit the specific policy environment of Romania. Building better public and private institutions remains the key prerequisite for achieving sustainable and inclusive growth, and the new CPF will direct all future WB engagements towards this overarching goal. While knowledge interventions (mostly in the form of RASs) are a mainstay of this CPF, IBRD financial engagement in selected areas remains important, as the design and implementa- tion of lending operations has proven to contribute effectively to transfers of know-how and institution building in the Romanian context. Financial operations will be additionally fil- tered for inclusion, financial leveraging and global public goods. These filters will also, to the extent appropriate, be applied to RAS and analytical and advisory services (ASA), as shown in Table 4. Given persistent political volatility and evolving client demand, the WB program pro- poses a flexible approach to the WBG Pipeline beyond FY19, within the parameters defined by the selectivity filters. 28 FY19-23 Country Partnership Framework for Romania Table 4. Examples of Application of Filters to WB Program (proposed and current) Project Institutional filter Other filters met CAT DDO Strengthen Romania’s institutional and Contribute to regional and global public goods by (USD465m proposed) legal framework to effectively manage integrating climate change considerations into the physical, social and fiscal impacts of sector priorities. natural disasters and climate change. Strengthening Disaster Strengthen Government’s capacity in Contribute to regional and global public goods by in- Risk Management IPF disaster risk reduction and climate tegrating climate change considerations into sector (USD58.6m proposed) change adaptation. priorities; leverage other funding by maximizing the use of EU funds for Energy Efficiency. Institutional Capacity Strengthen the capabilities of Romania’s Leverage other funding by developing a financial and Knowledge national road sector institutions for strategy and leverage EU, private and/or other for Motorway preparing major projects and structuring funds for construction phase. Construction TA IPF a programmatic investment approach (USD35m proposed) to deliver the national road sector infrastructure. Justice Quarter and Strengthen the capacity of the Govern- Leverage other funding by unlocking stranded land Esplanada District IPF ment of Romania and the City of Bucha- assets and create potential public private collab- (USD250m proposed) rest to unlock stranded assets, leverage oration; contribute to regional and global public the value of land for local economic devel- goods by integrating energy efficiency, resilience opment and improved fiscal management. and adaptation considerations into the project. POCU RAS Capacity building of institutions involved Leverage other funding by improving absorption of (USD10m ongoing) in the design and implementation of EU funds under the Human Capacity Operational Human Capacity Operational Program by Program through support in the appraisal and providing hands-on assistance in imple- evaluation of calls. menting and supervising POCU-funded investments, as well as supporting impact evaluations of a subset of projects. Agriculture Sector Strengthen the capacity of the Govern- Inclusion by focusing on the lagging regions where Engagement ASA ment of Romania to improve rural liveli- the majority of the poor and vulnerable live. (proposed) hoods in mountainous regions by bringing global knowledge and best practice to Romanian stakeholders 44. In line with the selectivity filters applied in the WBG CPF, IFC will strategically prioritize interventions across key sectors that catalyze private investments or mobilize other fund- ing from both domestic and international sources; contribute to regional or global public goods to increase development impact on the poor and most vulnerable. IFC will develop new engagements to strengthen the financial sector and develop further capital markets to diversify financing options and improve access to long term capital, particularly for MSMEs, to strengthen entrepreneurship and employment growth. In infrastructure, an area where IFC, World Bank and MIGA can operationalize MFD, IFC will aim to support privatization of select assets and aim to increase the participation of private sector through investments and facilitation of PPPs, to help with the development of new and modernization of existing infrastructure, both at the national and municipal levels, to improve connectivity and access to services. IFC’s program, in infrastructure in particular, depends greatly on the dedication of the Government to the continuation of structural reforms, a functioning PPP framework being in place, improvement of the business enabling environment, strengthening of institu- tions and governance. Furthermore, IFC will be reacting to demand and continue to explore new investment opportunities in agribusiness, manufacturing and services and in order to increase regional development and cross-border competitiveness, by enabling innovation and technological upgrades that lead to increased productivity and standards, development and strengthening of value chains, improved access to commerce and development of trade. World Bank Group Partnership Framework 29 45. The CPF will address the inclusion of marginalized and disadvantaged Roma by contin- uing to mainstream Roma sensitivity into WB portfolio. To achieve this, Bank teams will continue to apply the Roma Sensitivity Enhancer (RSE) to facilitate the provision of Roma- sensitive technical inputs to improve the impacts of Bank-supported activities on disadvan- taged and marginalized Roma. It also aims to help the country management team monitor the extent to which Roma sensitivity is mainstreamed in its portfolio (see Box 3). The World Bank will also continue supporting the Roma Sounding Board (RSB), which serves as a platform for more effective communication and engagement between civil society organizations work- ing on the Roma agenda in Romania, the World Bank, and other external stakeholders. The RSB consists of eight civil society organizations active at the national level and eight Roma- organizations active at the local or regional level, with one NGO representing each region of Romania. The World Bank will continue to engage with RSB to improve efficiency and effec- tiveness of Roma mainstreaming in the country portfolio. Box 3. Roma Sensitivity Enhancer Roma Sensitivity Enhancer (RSE), or Roma Filter, is a tool that has been applied to all operations in WB Romania program since 2015. The objective of the RSE is to help task teams of World Bank operations identify: (a) specific challenges and circumstances that could impede marginalized and disadvantaged Roma from benefiting from Bank supported activities; (b) potential negative impacts of Bank-supported activities on marginalized and disadvan- taged Roma; (c) opportunities and measures to increase the Bank-supported activities’ positive impacts on mar- ginalized and disadvantaged Roma and promote their social inclusion; and (d) measures to avoid or mitigate the potential negative impacts of Bank-supported activities on marginalized and disadvantaged Roma. The RSE takes the form of a semi-structured questionnaire, like the questions used for gender mainstreaming in World Bank activities. The questionnaire comes in two versions, one for financing operations (IPF, DPF, PforR) and another for analytical and advisory activities (RAS, TA, ESW). Both versions help task teams increase Roma sensi- tivity in three dimensions: (a) analysis, (b) actions, and (c) monitoring and evaluation. The RSE guides task teams to take these Roma-related aspects into consideration when they are designing and implementing project activities. It also helps teams to incorporate Roma-specific project monitoring indicators to track results related to Roma. This activity will feed into the CPF monitoring process by providing the necessary data on progress on Roma agenda at CPF level. 46. This proposed Joint WBG CPF is underpinned by the MFD approach. It has benefited from inputs from the IFC Industry Groups as part of a joint workshop on January 11, 2018 that identified specific activities for collaboration like capital markets development, preparing the Institutional Capacity and Knowledge for Motorway Construction Project or the Justice Quarter and Esplanada Urban Development Project as well as possible productive alliances in the agriculture sector. For example, the Institutional Capacity and Knowledge for Motorway Construction Project is an IBRD loan to finance the preparation and detailed design of the motorway to improve the capacity of the road agency and develop financing models for trans- port infrastructure construction. Subsequent construction of the motorway (estimated USD2 billion) will be financed with EU structural funds, EIB and other resources, including a possi- ble IBRD loan. IFC could help identify areas for private sector participation. MIGA could look to support private sector investments into appropriate areas and sectors as identified. 30 FY19-23 Country Partnership Framework for Romania Focus Areas and Objectives Supported by the WBG Program Overarching Goal: Build Institutions Fit for a Prosperous and Inclusive Romania 47. Making public institutions and public policy more resilient to political shocks, such as changes in the composition of Government, is critically important for the country’s long- term economic and social success. Globally, countries that have grown rapidly and escaped the middle-income trap have had strong public institutions, national visions and goals that are embodied in national strategies and translated into budget realities. Government should provide a stable investment climate giving entrepreneurs the confidence to invest for the long term, building and growing stable businesses that create jobs and add value. Romania’s cur- rent public policy environment remains far from this ideal. Reforms are hindered by a stop and go approaches to policy-making correlated with the election cycle. Too many policies are passed without a rigorous impact assessment, clear budget allocations or proper consulta- tive processes. Uncertainties in administrative procedures – particularly on procurement and financial management – as well as institutional capacity bottlenecks (particularly ex post con- trols) negatively affect the performance of programs financed from both the national budget and ESIF, curtailing the absorption rate and the impact of EU-funded programs in Romania. 48. Through our RAS engagements on strengthening the center of the Government and agen- cies involved in the implementation of EU-funded programs, the Bank supports improved policy-making by developing the strategic management function, strengthening the cul- ture of evidence-based policy-making and moving towards medium-term, results-based budgeting, and smarter management and implementation of EU-funded programs. While the POCU RAS aims to address a subset of these issues in the short to medium term (with a priority focus on human development), additional engagements such as the Human Resources Management RAS will, in the long run, help to improve the capacity of the civil service. The Regulatory Impact Assessment (RIA) RAS aims to increase the capacity of the Romanian administration to do impact assessments for evidence-based policy making. The planned technical assistance to the Romanian Competition Council will increase the capacity of the state aid grantors to conduct ex-post assessments of the state aid schemes and to use the lessons learnt to optimize future schemes. The planned Reform of the National Statistical System RAS will contribute to the development of an integrated, IT-based statistical system informed by the best practice processes to help mainstream evidence-based policy making. The planned Modeling the Romanian Economy RAS will help the Government evaluate the impact of policy changes and shocks on the economy. Focus Area I: Ensure Equal Opportunities for All 49. To bring together the “two Romanias,” it is important to create opportunities for those left behind. Building the human capital for the poorest and most vulnerable is essential to give everybody in Romania a chance to succeed and benefit from the country’s economic growth. Although unemployment is low and many companies are looking for workers, many of the poorest and most vulnerable are discouraged or unable to take advantage of these opportuni- ties and improve their welfare. World Bank Group Partnership Framework 31 Objective 1: Improve transition to tertiary education for the poor and vulnerable 50. The quality of education in Romania lags EU and OECD countries, while underachieve- ment in basic cognitive skills is due to educational factors and equity challenges. OECD Program for International Student Assessment (PISA) scores show that about 40 percent of Romanian students are functionally illiterate, in contrast with roughly 23 percent of students in the EU.17 Romanian students are one and a half years of schooling behind the EU countries average.18 This points at systemic education quality issues that do not foster the development of skills required for a successful transition to the labor market or to tertiary education. At the same time, significant performance differences equivalent to three years of schooling on PISA 2015 are found among students from the top and bottom socioeconomic quintiles. Also, social school segregation has been increasing over the years with poorer students attending lower quality schools. As technological change raises the demand for strong cognitive skills, undera- chievement in reading, math and science carries long-term risks for Romania’s economic and social convergence.19 51. Significant disparities persist between urban and rural areas. Only 1 percent of high per- forming schools and about 83 percent of low performing schools are in rural areas. Persistent disparities are also evidenced by the high difference between early school leaving rates in rural (26.6 percent) and urban areas (6.2 percent in cities and 17.4 percent in towns and suburbs). In addition to socio-economic and urban-rural inequalities, constant underfinancing of the education sector will have long-term implications for the country’s human capital and eco- nomic development. 52. The World Bank program will focus on supporting better education outcomes for the poorest and the most vulnerable. The ongoing Romania Secondary Education Project (ROSE) seeks to address education system issues and is particularly focused on students at risk of failing in the transition to tertiary education. The project design has been calibrated to sup- port the needs of at-risk students, more often from rural communities, lower socioeconomic groups, and/or Roma. A series of three ongoing RAS operations seeks to increase sector capac- ity to monitor and evaluate the implementation of education strategies, including measures for most disadvantaged categories, enhancing quality assurance in higher education, as well as supporting informed decision making on education infrastructure. The RAS to support the implementation of the Human Capital Operational Program (POCU) is focusing on lifelong learning, education, qualification and training programs. Objective 2: Improve access to modern health care 53. Most premature deaths in Romania are from chronic diseases that can be prevented or slowed down with modern healthcare. Early deaths from preventable diseases are concen- trated amongst the poor and vulnerable and rob them of peak productivity years, as well as the opportunity to realize investments in human capital. The Bank can help Romania improve the quality of health services through support for modern equipment and regulatory processes that drive quality improvement in health facilities. High-quality treatment for patients with common diseases such as heart disease and cancer will be supported by the modernization of equipment and through increased access to outpatient services, given that optimal manage- ment of chronic diseases starts outside the hospital. The Bank’s Health Sector Reform Project 32 FY19-23 Country Partnership Framework for Romania (EUR250 million) supports Romania’s transition to a more balanced and integrated health system that will improve the quality of care delivered to all social groups. Expected benefits include better emergency care and radiation therapy for cancer. 54. Romania spends 5.6 percent of its GDP on healthcare. This has increased considerably from 4.7 percent in 2010, but is still below the average 6.0 percent for upper-middle income countries and the 8.6 percent world average. The public sector finances 80.3 percent of health spending, paying for care delivered by both public and private sector providers. The private sector finances the balance of 19.7 percent almost entirely through out-of-pocket spending, with almost no private health insurance. Romanian healthcare remains underfunded com- pared to most of the European Union countries and is ranked close to the bottom of its peer group and well below Western European countries, despite high level of bed capacity. In the context of a resource-constrained public system, the demand for private healthcare is strong. The private medical services market, which emerged in the mid-1990s, has grown in size and sophistication over the past decade. The state is increasingly supportive of the private health- care sector as it seeks to improve efficiency and outcomes of healthcare spending. IFC will remain engaged in the health sector with the goal to support projects which increase access to affordable and quality healthcare services, with a focus on supporting (i) scalable businesses that provide quality healthcare and aim to reach underserved cities and regions; (ii) “centers of excellence” in more immature businesses that have a strong demonstration effect or that set new standards or bring new technologies or services to the market. IFC can help facilitate increased private sector participation in the sector through direct investments and facilitation of PPPs where appropriate. Objective 3: Connect the poor and vulnerable to jobs 55. Improving Romanians’ access to good jobs is a key driver of continued inclusive growth. Jobs mean more than just an income. Beyond improving living standards, they also contribute to the self-esteem and dignity of the individual, and provide a positive outlook for the entire family. Jobs in Romania are available for many, and indeed unemployment has been declining as the economy grew. However, with an activity rate of 65.6 percent in 2016, significantly below the EU average, many Romanians are excluded from the labor market. Lack of job opportuni- ties particularly affects women, young people, the Roma, and people living in the lagging rural areas. Against the backdrop of a radical demographic shift driven by the combined effect of an aging and shrinking population and emigration, which means that working-age population by 2050 will be 20 percent smaller than today, these missing cohorts are a tremendous potential driver of continued growth that Romania cannot afford to ignore. Moreover, with the highest rate of working population at risk of poverty in the EU (18.6 percent in 2015), Romania needs to facilitate investment in better jobs that can contribute to inclusive growth. 56. Romania needs to close the gap between the available jobs and the people that are – or can be – available for work. To this end, Romania needs to invest in employment support and skills improvement programs, particularly targeting those who are disproportionately affected by lack of employment opportunities: women, youth, rural population and those living in lagging and marginalized communities, particularly the Roma. Moreover, Romania needs to implement the Minimum Insertion Income Program (VMI, already approved by the parlia- ment) that provides stronger incentives for the poor to get back to work and reduces in-work poverty. At the same time, additional investments are needed to improve outreach efforts for World Bank Group Partnership Framework 33 identifying those Romanians in poverty that are currently excluded from the labor market and are facing overlapping labor market barriers. For example, a significant share of young women in the Romanian labor market have care duties as well as low education levels and lack of job experience. Roma women are particularly affected by overlapping labor market barriers that are often triggered by social norms and family roles that tend to lead to early school leaving, further curtailing their labor market opportunities. The World Bank will help address these challenges through the ongoing POCU RAS, which focuses on improved impact of activa- tion, employment support and skills development programs targeting vulnerable jobseek- ers, including the Roma and women. We will also explore opportunities for new operations, including lending, to promote the identification and mobilization of the inactive, employment support for the most vulnerable, including the Roma and women, as well as informing the Government’s vision for improved quality jobs through subnational jobs diagnostics. Focus Area II: Catalyze Private Sector Growth and Competitiveness 57. To sustain growth and poverty reduction, Romania needs to overcome the obstacles that are hampering private investment. Private investment is lagging despite economic growth due in part to the relatively small business density and a persistently high number of under- capitalized firms. Companies overwhelmingly cite the lack of transport infrastructure as well as unpredictable legal and regulatory environment as reasons to delay or forego further invest- ment. Companies also complain about the lack of financial support to researchers and entre- preneurs in proving the concepts and commercial potential of their innovations, and about delays in financing innovative firms through EU or national funds. Bucharest firms are more successful than firms in other regions of Romania at accessing EU funds for research and innovation. Stranded assets and lack of prioritization at the subnational level prevent munic- ipalities from attracting private capital, and small and medium companies – by far the largest group in the private sector – are not innovative and have trouble accessing financial services. Objective 4: Strengthen capacity to build transport infrastructure 58. Romania’s 700 km of motorways are in poor condition and offer sparse coverage, while the rest of the main road network is also in poor condition and not adequately maintained, leaving several core domestic and international corridors ineffective. The country ranks last in the EU on most infrastructure indicators, making it less attractive for investment. In fact, the lack of core transport infrastructure is consistently named among the binding constraints to investment and private sector development, and is a major cause of persistent regional divides in Romania. To address these challenges, the Government of Romania approved the General Transport Master Plan (GTMP), which provides the strategy for the development of Romania’s transport sector for the next 20 years. The Master Plan targets EUR27 billion in road sector invest- ment until 2030 to build 11 motorways, 19 expressways, and dozens of smaller projects, with over EUR2 billion worth of investment per year. Only a fraction of financial resources needed to implement the GTMP has been identified. To make this plan a reality, Romania would need to acquire (i) capacity to prepare and implement large capital investment projects at a scale that would help it bridge its considerable infrastructure gap vis-a-vis the rest of the EU and (ii) capacity to mobilize public and private sources to finance the development of the network. 34 FY19-23 Country Partnership Framework for Romania 59. The World Bank Group will assist the Government of Romania in implementing this ambi- tious program by strengthening the country’s capacity to prepare and implement high quality infrastructure investments, and by developing a financial strategy for the sector to maximize finance for development. The initial USD35 million proposed IBRD project will finance the preparation of the 110 km Ploiești-Brașov Motorway, which is included in the GTMP and forms part of the comprehensive Trans-European Transport Network (TEN-T). The project would complement the existing 60 km Bucharest-Ploiești Motorway and would link Bucharest with the regional center of the Brașov area, fundamentally changing con- nectivity between the capital and one of Romania’s most economically vibrant areas. More importantly, the project will be the vehicle for developing a functioning model of motorway construction and mobilizing financing for infrastructure, unlocking many future investments in the sector. The Bank will work closely with the IFC and major development partners, such as the EC, EIB and EBRD, to develop a viable funding proposal for the construction phase, as well as a broader strategy for sector financing. 60. IFC will be assessing engagement opportunities in the transport sector by facilitating PPPs and supporting privatization. Motorway PPPs have been successfully tendered and financed in many countries in Europe, including Eastern Europe. However, a pathfinding bankable project to build new or upgrade existing motorway is still to be successfully ten- dered in Romania. Bringing Romanian motorway infrastructure closer to the EU average will require both public investments (including EU funds) and private capital, which cannot be achieved without a functioning PPP market. Furthermore, privatizations in air and freight transport could improve overall efficiency of the sectors that already benefit from private sec- tor participation. Overall PPPs in the transport sector (ports, highways and airports) hold significant potential in bringing significant financial benefits and operational efficiencies. Establishing a well-structured PPP law and tendering infrastructure projects in a transparent manner could unlock private sector participation. However, strong Government leadership, institutional capacity and long-term vision are key. With an appropriate regulatory and legal framework in place, MIGA could leverage its experience with PPPs to support projects in this sector. 61. Romania plays an important and growing role in regional energy trade and integration. In natural gas, Romania has attracted foreign direct investments (around USD1.5 billion) for expansion of its off-shore gas production. To bring the new gas to markets and to further integrate the Romanian gas market with regional markets, Romania must both expand and strengthen the internal gas networks and develop gas corridors connecting Romania with its neighbors. The main gas corridors include BRUA (Bulgaria – Romania – Hungary – Austria), which is an EU priority project, and regional interconnections with Serbia and Moldova. The investment program in gas transportation is valued at EUR1.6 billion over 2017-26 time- frame. In electricity, a more resilient electricity grid infrastructure is needed where Romania is preparing for the interconnection with Ukraine and Moldova. Romania is leading the European Association of Power Transmission System Operators (ENTSO-E) activities in preparing the synchronization between the EU power grid and Ukraine and Moldova. This entails significant investments in Ukraine and Moldova, but it will also require completion of the electricity transmission ring connecting northern and southern parts of the Romanian grid. The WBG will support the energy trade and integration agenda through technical assis- tance/reimbursable advisory services and financing support on Romanian PPP Financing Program for regional energy trade and integration. World Bank Group Partnership Framework 35 Objective 5: Boost subnational capacity to attract private investment 62. The functional urban areas of Bucharest and the 40 county capitals are home to 58 per- cent of the total population and 80 percent of people with higher education, gener- ate 90 percent of firm revenues in Romania and account for 61 percent of the overall employment. These are the country’s economic growth and development engines, and if they do not function well, neither does the economy of the country. Evidence suggests that urban areas are facing many challenges. Foreign direct investment in Romanian cities is the lowest among the new EU Member States; the areas covered with brownfields (“stranded” urban assets) are among the largest in Europe – ranging from around 30 percent of the city area in Craiova, Cluj-Napoca, Timișoara, or Bucharest, to over 40 percent in Brăila, Giurgiu, or Călărași. Even dynamic cities like Bucharest, Cluj-Napoca, Timișoara, or Constanța have severely under-invested in urban infrastructure according to budget execution numbers. Improved capacity and strategic investment at municipal level could stimulate significant private sector growth. 63. The World Bank Group is working directly with local administrations through policy dialogue and RAS operations to provide capacity support for: 1) a better use of local resources and a clear prioritization of local interventions; 2) bringing underused assets to productive use; 3) strengthening connections with and engagement of private sector actors. This work will be continued closely with IFC and in addition, discussions are underway on a proposed investment operation to unlock stranded land asset in the center of Bucharest by preparing a comprehensive urban development plan that would attract private sector investment, creating an “anchor investment” in the justice quarter to maximize finance for development. During the CPF consultations, mayors expressed to the WBG their aspiration to develop PPPs to address municipal infrastructure needs. However, there is no functioning PPP law, and the understanding of the role and value added of PPPs is very limited. In some cases, EU funding is the better option for municipalities to finance infrastructure projects, but IFC will continue to explore engagement opportunities in select municipalities, through municipal finance and facilitation of PPPs, once a functioning law is in place, to modernize infrastructure including urban transport systems, water supply and sanitation, solid waste management, and district heating. IFC will also explore opportunities to support energy effi- cient municipal buildings, thermo-modernization, waste-to-power, and street lighting pro- jects. In addition, IFC will try to intervene with targeted investments and advisory to help make some of the municipal and state-owned companies more efficient and commercial. 64. The WBG will support the Government and selected municipalities in improving sustain- ability and efficiency of district heating (DH) systems. DH is an important source of heat- ing for Romanian households and businesses, covering 15 percent of the total heat demand in the country and around 1.25 million largely urban households. Romania has tried vari- ous models such as concession and management contract of private participation in DH. As a result, the DH sector is fragmented and recent attempts to harmonize DH regulation across the country and assure sustainability of DH systems have not yet proven success- ful. The 2016 Energy Strategy calls for a gradual increase in the number of DH connections, improvement in DH services and energy efficiency, which requires regulatory reforms and significant investment of over EUR1 billion to upgrade existing infrastructure. Government and municipalities require help in mobilizing financing for the modernization and upgrading of the DH network to increase efficiency, including potential commercialization or private participation in select SOEs. The WBG will assist Government through technical assistance, 36 FY19-23 Country Partnership Framework for Romania preparation facility and financing support. These activities will help prepare a District Heating Action Plan for Romania and an investment prospectus for public and private participation in DH sector over a 5–10-year timeframe. Objective 6: Accelerate capital market development and access to finance 65. Expanded financial intermediation is much needed to support micro, small and medium enterprises (MSMEs), which make up 99.5 percent of all private companies. As Romanian companies are predominantly funded by retained earnings and/or sale of assets, bank loans remain one of the least used financial sources (by only 17 percent of enterprises). Moreover, access to finance is highly uneven at the regional level, especially for smaller firms whose access is significantly lower than that of larger companies; only 14 percent of MSMEs apply- ing for financing receive the desired amount in full, compared to 41 percent for large com- panies. Factors that limit MSME access to finance include high financing costs, short tenor, high collateral requirements, and undercapitalization. Financial products such as risk cap- ital, venture capital and mezzanine instruments are largely absent. Supporting access to finance for under-served segments of the economy is key to enabling private investment and regional growth. 66. Romania has one of the lowest financial inclusion rates in the European Union. Only 60 percent of the population aged 15 and over have a bank account, lower than Bulgaria (63 percent), Poland (78 percent), and Hungary (72 percent). This is much lower for the poorest 40 percent, and the Roma. This is accentuated by a relatively high mistrust in the financial sector and financial illiteracy, one of the highest among EU members. Low financial inclusion (as well as literacy) contributes to lower savings, higher risks, lower investment in education and health. In the long run, lower financial inclusion adversely affects investment and growth. Supporting financial inclusion is key to enabling households to have access to financial services and encouraging entrepreneurship. 67. To address some of the shortcomings in the financial sector, IFC will continue to support the development of capital markets to diversify financing options and improve access to long term capital, engage in addressing distressed assets portfolios of banks so as to improve the health of the financial sector and support on-lending to MSMEs through banks and non-banking financial institutions, so as to enable further entrepreneurship and employment opportunities, particularly in rural areas and among women. Expanded and more diversified financial intermediation is much needed to support access to credit for underserved segments. For example, IFC’s work in supporting gender finance has helped a bank become the first financial institution in Romania with a focus on on-lending to wom- en-owned or managed MSMEs. Key findings from the 2015 Expanded Project Supervision Report (XPSR) include that the gender finance tranche of the 2011 loan was “well balanced” , and the project enjoyed “active excellent collaboration between the IFC portfolio team and the Bank” . The XPSR report added that IFC’s support is helping the client in 2015 become “one of the top contributors to IFC’s Global Banking on Women (BoW) program. Increasing the variety of financial instruments, including by increasing the role of non-banking finan- cial institutions and the introduction of covered bonds and subordinated bonds as new asset classes, would help deepen the market. Bond finance would provide healthy competition to bank loans for the financing of firms and provide more efficient longer-term financing than banks. World Bank Group Partnership Framework 37 68. The World Bank remains engaged in the support of the development of financial sec- tor and capital markets by enhancing regulatory framework. This includes assisting the authorities in drafting a new law that will allow the creation of real estate, private equity and venture capital funds. In addition, some technical assistance has been provided to the capital market authorities to convert to a risk based supervisory approach and improve its supervi- sory process of market intermediaries and asset managers, in line with the relevant EU pru- dential and business conduct rules. Technical assistance will also be provided to the capital markets’ authorities to improve the review of the financial information disclosed by publicly listed companies, contributing to the transparency of capital markets. 69. Improving the quality of Romania’s growth model will require creating space for more private-sector led investments in key productive sectors and services. Continued eco- nomic growth, bridging the gap between the “two Romanias” and enhancing convergence with more advanced countries in the EU calls for a stronger private sector participation in key domestic industries that would improve productivity, a key theme of the SCD, as well as com- petitiveness and regional integration. 70. There is a significant untapped potential in Romania’s agriculture sector. Agriculture still accounts for about 25 percent of employment yet contributes only 4 percent to GDP, with Romania’s large agricultural area standing out in the EU for its low productivity despite having more arable land as a percentage of surface area than Germany. Romania has not yet been able to establish a viable, commercially-oriented farming sector, with very fragmented farm structures, incomplete cadaster, significant informality and tax evasion of agricultural landholdings, and weak financial intermediation and access to credit, particularly affecting MSMEs and small farmers. Recent rapid growth in the agri-finance market signals the need for new agricultural investments (e.g., in warehouse finance) and for working with non-tra- ditional investors (e.g., non-bank financial institutions, micro financial institutions) focused in agri-financing to reach these segments. Competitiveness of grains production and export potential is an important theme, including how small farmers interact with larger farms as competitors, suppliers, or employees. The role of sustainable agribusiness is key in organiz- ing farming activity with renewed focus on improved standards and productivity, developing and strengthening competitive value chains, and enhancing access to markets and regional integration. Steps should be taken towards increasing the value added of agricultural prod- ucts – for example, by moving from export of raw materials to exports of agricultural processed goods. Depending on domestic and global market factors, specific opportunity segments, such as wine, oilseeds, pork, wheat and corn, could improve Romania’s trade imbalances in agricul- ture. IFC will continue to assess supporting projects which create jobs, increase investment in underserved regions, and contribute to the growth and competitiveness of local agribusiness firms, as well as in enabling infrastructure, such as transport and logistics. Encouraging more efficient land ownership structures as well as developing sources of revenue from medium- and high-skilled industries in the agricultural sector would contribute to increasing productiv- ity and the value added by the sector as well as its contribution to GDP formation. 71. Development of manufacturing, retail and business enabling infrastructure in Romania is key in supporting the competitiveness of the economy and bridging the regional gap. A modernized retail sector entails organized retail, which benefits from scale and promotes high standards of food quality and safety, and importantly, supports the development of local and regional supply chains. Modern retail contributes to economic development through a broad range of channels including (i) creation of sustainable employment opportunities; (ii) provision of a robust market for national agricultural production; and (iii) increased food 38 FY19-23 Country Partnership Framework for Romania security and safety through reduction in wastage and improvement in quality, efficiency, pro- ductivity, and affordability. Furthermore, expansion of retail infrastructure is key in improving access to goods, particularly in remote parts of the country. The development of commercial and business enabling infrastructure supports business development and entrepreneur- ship supporting local supply chains and local corporate activity, including MSMEs, also in areas outside Bucharest. IFC will assess opportunities for engagement in retail and business infrastructure development with a view to also promote energy efficiency standards. IFC will also selectively support projects that help boost employment, innovation and technological upgrades in Romania’s manufacturing and IT sectors. 72. Romania’s housing finance system could contribute more to economic growth than it presently does. The demand for mortgage loans in Romania is driven by an increase in con- sumer confidence, low mortgage loan interest rates, and housing prices showing early signs of growth after a long period of continuous decline. Nevertheless, the country’s 6.7 percent ratio of outstanding residential mortgage debt to gross domestic product (GDP) is the lowest among EU countries and trails significantly below the EU-28 average of 50 percent. Housing is a key strategic area for the World Bank Group as access to housing finance contributes to a healthy cycle of domestically driven employment, growth, and savings. The WBG will explore opportunities in Romania to support housing finance by encouraging the extension of long- term financing, introduction of new capital market instruments, and by promoting residential mortgage on-lending to end-borrowers. Focus Area III: Build Resilience to Shocks Objective 7: Improve preparedness to natural disasters and climate change 73. Romania is highly exposed to floods and earthquakes, with past events resulting in bil- lions of direct damages alone. Institutional reforms and recent investments have improved emergency response capacity, but the potential impact of disasters on infrastructure and the most vulnerable populations remains extremely high. For example, the 2010 floods affected more than 12,000 people and caused at least EUR1.1 billion in damage. A repeat of the 1977 earthquake would result in EUR11 billion in damages, and EUR25 billion in economic losses, with 250,000 people left homeless for months. 74. Severe storms, drought, wildfire and extreme temperature events are becoming more frequent and intense as the climate warms. Fortunately, a disaster is not the inevitable consequence of a natural hazard and measures can be taken to protect vulnerable popula- tions, strengthen buildings and infrastructure and to reduce the financial shock on house- hold and sovereign budgets. To achieve this, almost all Government institutions at national and sub-national levels must take responsibility for the systematic reduction of disaster risks, dedicate budgets and policies to risk management and preparedness, and establish coordi- nation mechanisms with other institutions. Unfortunately, Romania does not have a national program to systematically reduce disaster risks in public buildings and infrastructure; while emergency and disaster response is the responsibility of the Ministry of Interior and General Inspectorate for Emergency Situations, ensuring the continuity of energy supplies rests with the Ministry of Energy. World Bank Group Partnership Framework 39 75. With the proposed CAT-DDO and Emergency Preparedness and Risk Reduction IPF the World Bank Group will help the Government of Romania to systematically reduce existing disaster risks, avoid the creation of new risks and improve financial resilience through policy reform and prioritized investment in risk reduction. This will also provide a plat- form, system and robust analysis that will also support future investments by the EU and IFIs in risk reduction. 76. As an EU member state and signatory to the Paris Agreement, Romania is a party to the mitigation and adaptation commitments made in the EU’s collective National Determined Contribution (NDC). Romania also adopted a National Climate Change Strategy for 2013-20 in 2013, followed by the National Climate Change and Low Carbon Green Growth Strategy for 2016-30 and the associated Action Plan on Climate Change for 2016-20 in 2015. Each of these documents establishes sectoral priorities for responding to climate change in energy, trans- port, agriculture and rural development, forests, biodiversity, urban development, and water and waste management. Greater preparedness, improved response capabilities and specific investment and development actions to reduce hydro-meteorological disasters are critical to the short and long-term management of climate risks. 77. The impact of climate change is already being felt in Romania with more intense floods, droughts and extreme heat events in the past decade. Moreover, analysis highlights that expected annual average damage to infrastructure alone would double by 2020 and by 2080 could be six times higher. The 2007 drought, for example, was the worst in more than 60 years and resulted in a 60 percent drop in crop yields due to insufficient irrigation. This highlights the importance of well managed and maintained dam, flood and irrigation infrastructure to adapt to climate change in Romania. There is an urgent need to reduce the impacts of climate disasters now, and prepare for future more severe climate events. However, existing disaster and climate risk information in Romania does not include future climate change scenarios which means land use and development planning and investment designs cannot consider long term adaptation. Furthermore, there is a missed opportunity to generate significant cli- mate change adaptation and mitigation benefits by considering disaster and climate resilience and energy efficiency measures during the design and implementation of all new investments in Romania. 78. The WBG will work with the Government of Romania to integrate climate change consid- erations into sector priorities, from water management (with a planned Water Security IPF) to agriculture (possible Agriculture Modernization IPF), to disaster risk manage- ment (CAT DDO and Emergency Preparedness and Risk Reduction IPF). This requires robust data and information that considers future climate uncertainty and yet also provides clear short- and long-term cost-benefit analysis to support action orientated decision mak- ing. Moreover, deepening of financial instruments, such as insurance, contingent financ- ing, and scalable social safety nets, will support greater financial resilience at the household and sovereign levels. The WBG can also support Romania to ensure that future investment of Government and EU funds yields the maximum climate change and disaster resilience co-benefits, for example, by integrating energy efficiency, resilience and adaptation con- siderations into the planned Esplanada project and other possible municipal infrastructure investments. At the municipal level, IFC will explore opportunities to support energy efficient municipal buildings, thermo-modernization, waste-to-power, and street lighting projects. 40 FY19-23 Country Partnership Framework for Romania F. Implementing the FY19-23 Country Partnership Framework 79. The World Bank Group program will be strongly focused on knowledge engagements, including RAS, and strengthening local capacity. As described in para 50, the extensive ongoing RAS program designed to bolster public sector capacity in key areas will be comple- mented by several planned new engagements (see Table 5). Choice of engagements will be determined by the criticality of the capacity constraint to be addressed; client demand and support by a credible champion; and ability of the WBG to add value. We will prioritize knowl- edge engagements that create positive spillovers beyond Romania, such as the Web-Based Guide created as part of the Public Procurement Strategy RAS, or monitoring tools developed as part of the Development of Plans for De-Institutionalization of Children RAS, which are relevant to many countries around the world. 80. IBRD financing will prioritize investments that have a catalytic role in institutional capacity change for the public sector and private markets. IBRD lending will be consid- ered for investments that meet at least two of the CPF filters: build institutional capacity and (i) benefit the poor and vulnerable, including the Roma; (ii) maximize finance for develop- ment by catalyzing private investment or other funds (including EU) and/or (iii) contribute to regional and global public goods. The Government has requested IBRD financing for invest- ments of high national priority. The FY18-19 lending program includes: (i) a Catastrophe Deferred Drawdown Option DPL (USD465 million) to build climate and disaster resilience for one of Europe’s most earthquake- and flood-prone countries; (ii) Strengthening Disaster Risk Management IPF (USD58.6 million) to address vulnerabilities in Romania’s disaster and emergency response infrastructure; and (iii) the Institutional Capacity and Knowledge for Motorway Construction Project IPF (USD35 million) that would address the current capac- ity gap for preparing “bankable” transport sector projects. Discussions are also underway on possible other operations that would strengthen Romania’s capacity to mobilize finance for development. For example, the proposed Justice Quarter and Esplanada District Project would demonstrate the potential for public-private collaboration for urban redevelopment and regeneration. Actual lending for operations meeting the CPF objective and filters would depend on the availability of IBRD resources globally, demand from other clients, and perfor- mance of the existing portfolio. Table 5. Actual and planned activities (IBRD) Activity Name Type FY Completion Status Establishment of a Strategy Unit RAS 2019 Active Assistance to the MoESR for Informed Decision-Making on Investments in RAS 2019 Active Infrastructure Development of Plans for De-Institutionalization of Children RAS 2019 Active Strengthening Planning & Budgeting Capacity and Supporting the Introduction RAS 2019 Active of Performance Budgeting Assistance to the MoESR for Capacity Development for M&E Implementation RAS 2019 Active of Education Strategies SWAP Transactions in Romania RAS 2019 Active Enhancing Partnerships for Social Inclusion of Marginalized ASA - non-RAS 2019 Active and Disadvantaged Roma World Bank Group Partnership Framework 41 Activity Name Type FY Completion Status Capital Market Supervision Enhancement ASA - non-RAS 2019 Active Agriculture Sector Engagement in Romania ASA - non-RAS 2019 Active Bank Resolution Crisis Simulation ASA - non-RAS 2019 Active Support to the Implementation of the Public Procurement Strategy RAS 2020 Active Developing a Unitary Human Resources Management System RAS 2020 Active Increase the Capacity Building for Assessing the Impact of State Aid Schemes ASA - non-RAS 2020 Active Accelerating DRM and Climate Resilience in Romania ASA - non RAS 2020 Active Revenue Administration Modernization Project IPF 2021 Active Health Sector Reform Project IPF 2021 Active Afforestation of Degraded Agricultural Land Proto-Carbon TF 2021 Active Enhance Quality Assurance in the Higher Education System in Romania RAS 2021 Active Constanta Urban Development RAS 2021 Active Supporting the Implementation of POCU 2014-20 RAS 2021 Active Bucharest – Sector 5 Urban Development RAS 2021 Active Brașov Urban Development RAS 2021 Active Supporting Innovation in Romanian Catching-up Regions ASA - non-RAS 2021 Active Integrated Nutrient Pollution Control Project IPF 2022 Active Romania Secondary Education Project IPF 2023 Active Justice Services Improvement Project IPF 2024 Active Institutional Capacity and Knowledge for Motorway Construction Project IPF TBC Pipeline Strengthening Disaster Risk Management and Emergency Response IPF TBC Pipeline Building Disaster and Climate Resilience in Romania DPF TBC Pipeline Justice Quarter and Esplanada District Development Project IPF TBC Pipeline Development of an M&E System to Inform Policies on Social Inclusion RAS TBC Pipeline and Poverty Reduction Strengthening the Capacity of the Government to Produce RAS TBC Pipeline and Use Reliable Statistics Managing Program Implementation 81. There is room to improve implementation and impact of the WBG program. The Completion and Learning Review (CLR) provided guidance on how to strengthen institutions most effec- tively. First, set modest objectives: past projects targeting complex and ambitious reforms did not adequately factor in issues related to political volatility and low capacity. Second, leverage all instruments. Successes were achieved using a mix of instruments (lending and advisory) for impact. Third, support the implementation of strategies for real institutional change. A greater emphasis on hands-on implementation support embedded in investment operations is an effective complement to ongoing capacity building efforts through the RAS program. 82. The five-year WBG engagement will be aligned with the implementation of the current EU programming period. The Bank and IFC will pursue more focused interventions that seek to resolve one problem at a time, with clear indicators to show progress and mobilize sup- 42 FY19-23 Country Partnership Framework for Romania port for further reform, with a Progress and Learning Review in the third year of CPF imple- mentation to take stock and make course adjustments as necessary. The WBG program will require consistency and commitment at all levels of Government, with flexibility to respond to growing opportunities for expanding our relationships at subnational level, which is particu- larly important in terms of bridging regional disparities. A greater coherence among the many instruments, closer links within the WBG and consistent coordination with development part- ners around a small number of objectives will ensure greater impact of all WBG interventions. 83. The FY19-23 CPF is consistent with the value proposition of the WBG in Romania. This includes a sharp focus on knowledge-based engagements, delivered through one of the Bank’s largest RAS programs. The CPF also reflects enhanced collaboration with IFC to link its trans- actional and advisory work with the Bank’s policy reform competencies to support private sector engagement. As a result, the CPF program is expected to develop innovative financing instruments where modest IBRD resources can be leveraged to catalyze additional private and public financing, including from EU institutions. Finally, the CPF features a stronger global public goods delivery through engagements that maximize climate-related benefits, for exam- ple, through the ongoing Integrated Nutrient Pollution Control Project and proposed CAT- DDO and Disaster Risk Management IPF. 84. The WBG will adjust the lending portfolio by moving towards more focused projects and by making greater use of comprehensive capacity assessments, as well as stakeholder and political economy analysis during project design and appraisal. The existing operating environment does not seem to sufficiently enable the implementation of large and complex institutional reform projects. Political instability leads to shifting priorities and undermines long-term reform perspectives. Besides, fundamental weaknesses in project implementa- tion planning cause disbursement problems. Project implementation arrangements need to be more streamlined, with responsibility for implementation resting with a single entity with proven implementation capacity wherever possible. Citizen Engagement and Gender 85. A Citizen Engagement (CE) Country Roadmap along with a Roma Country Roadmap have been developed and build on the experience of the last CPS and are tailored to suit the upcoming focus areas. In addition to developing effective voice and accountability platforms in service delivery, the Roadmap prioritizes innovative platforms of engagement in relation to private sector development (in access to MSME financing and CE in supporting local capacity to promote private sector development), and a new platform for CE in disaster risk mitigation and climate change adaptation. These platforms will provide models for engage- ment that can be adapted elsewhere. A central tenet of the CE approach will be addressing the “two Romanias” – ensuring inclusion of all Romanians through mechanisms which are adapted and relevant for different groups. This approach has been prioritized during CPF consultations. Moreover, the CE Roadmap integrates the opportunities provided by the Roma Sounding Board (RSB). 86. The WBG will use its convening power at both national and subnational level to bring together key stakeholders to raise awareness and promote knowledge exchange on issues related to gender equality and citizen engagement. To ensure that activities implemented under the WBG engagement in Romania will not only benefit women and men equally, but beyond that aim to close or narrow existing gender gaps, the country team is currently World Bank Group Partnership Framework 43 preparing a Country Gender Action Plan (CGAP). The CGAP foresees concrete activities to address some of the critical gender gaps identified in the Country Gender Assessment (Box 2). For instance, related to the issue of women’s low agency (reflected in high rates of teen- age pregnancy, gender-based violence and acceptance of traditional gender norms), the Bank will launch a communication strategy, aiming to broadly advocate for gender equality, high- lighting prominently the importance of gender equality, its benefits for the whole population, poverty reduction and economic growth. This may involve the sharing and dissemination of Bank research and evidence addressing the traditional social norms through communications (blogs and social media). With regards to women’s limited access to economic opportunities, the Bank will promote women’s access to jobs through the POCU project. And finally, gender issues among the Roma population will be addressed through systematic gender mainstream- ing across the Romania operational pipeline, taking into consideration the gender discrepan- cies specific to the Roma population. For that purpose, the Roma Sounding Board will advise on gender issues and challenges within the Roma communities; facilitate consultations with stakeholders on Roma gender issues; identify channels through which best to address those challenges; directly support implementation efforts and support monitoring of progress and evaluation of results. Furthermore, the Justice Services Improvement Project will boost access to justice services for vulnerable populations (including women, disabled, and the Roma) through inter alia, improvement of court operations mainly in first instance courts20,training of judges and prosecutors on unconscious biases, and awareness raising campaigns among citizens on the law and the justice system specifically addressing interests and needs of those populations. Partnerships and Donor Coordination 87. The WBG will continue to coordinate with EU and international financial institutions on key reform areas and overall country engagement. The WBG brings technical and analyt- ical depth, global knowledge and experience, objectivity and credibility with partners such as the EC, EIB, EBRD, IMF and other international organizations. The overall coordination of technical assistance and financing operations of the WBG with other key partners’ programs proved to be a good practice for advancing and supporting reform areas. The WBG will work in partnership with the EC in its capacity of donor (WBG managing EU trust funds), as well as advisor in key reform areas, to ensure alignment of EU views and priorities with country strate- gic priorities and WBG support. The WBG will continue to collaborate with key IFIs, in particu- lar with EIB and EBRD, in the context of the memoranda of understanding signed in 2016 for the provision of advisory services paid by the Government using mainly EU funds under the 2014-20 period. This will allow to identify synergies and complementarity, and avoid potential overlaps of IFIs support in Romania. Bilateral exchanges will remain the regular tool of coordi- nation with the EC and IFIs in areas of common interest and joint work. 44 FY19-23 Country Partnership Framework for Romania IV. MANAGING RISKS 88. Overall risk to the achievement of the CPF results is rated Substantial. Three key poten- tial risks may impact the achievement of CPF results (Table 6): political uncertainty, macro- economic vulnerability, and insufficient commitment to a sustainable policy framework for continued poverty reduction and shared growth. These risks are elaborated below. Both the intentional CPF flexibility in choice of instrument and level of support, and the PLR, provide means for the WBG to adjust its program should any of these risks materialize. Table 6. Risks to the CPF Objectives in Romania Risk Categories Rating (H, S, M, L) 1. Political and governance High 2. Macroeconomic Substantial 3. Sector strategies and policies Moderate 4. Technical design of project or program Substantial 5. Institutional capacity for implementation and sustainability Substantial 6. Fiduciary Substantial 7. Environment and social Moderate 8. Stakeholders Moderate Overall Substantial 89. Political and Governance risk is rated High. As described elsewhere in the document, the high degree of political volatility and frequent changes in government are key challenges to the design and implementation of the WBG program in Romania. Should this volatility continue, both the preparation of new operations and the implementation of existing portfolio will be affected. Continuous country dialogue at policy and technical levels as well as the built-in flexibility of the new CPF partly mitigate this risk. It is encouraging that the new Government of Prime Minister Dăncilă has pledged to consolidate the stability and predictability of public policy. The extensive ongoing and planned RAS program aimed at developing tools for evi- dence based policy making is explicitly designed to support this intention. Managing Risks 45 90. Macroeconomic risk is rated Substantial. While the current fiscal position of the Government is manageable, procyclical policies have triggered mounting pressure on the budget, which already leads to constrained allocations to WB operations. Inability to disburse existing and new loans as planned will affect the achievement of their development results and, together with limited borrowing space, could jeopardize future operations. The Bank team is work- ing closely with the client to mitigate effects on the portfolio. Dialogue is also underway on options for structural reforms that would need to be put in place should fiscal situation deteri- orate, which could underpin future development policy lending. 91. Technical design risk is rated Substantial. Among the main lessons of implementing the previous Country Partnership Strategy is that project design has been ill adapted to the policy and institutional environment in Romania, as evidenced by a high share of problem projects and large disbursement lags in current portfolio. We will manage this risk by simplifying the design of future operations, focusing on a smaller number of clearly measurable objectives, with clear implementation accountabilities. We may also try the use of results based disburse- ment mechanisms to improve implementation performance. 92. Institutional capacity risk is rated Substantial. As amply emphasized in the CPF, and as thoroughly documented in the Systematic Country Diagnostic, institutional capacity is the key constraint to Romania’s development. The overarching goal of this CPF is to address this constraint, and entire WBG program is devoted to this objective. 93. Fiduciary risk in rated Substantial. While financial management, internal control and pro- curement arrangements for IBRD projects have been adequate, the 2017 Fiduciary Portfolio Review revealed several factors which hamper the effective and efficient implementation of projects, including (i) limited options for financing preparatory activities, such as advance procurement, prior to loan effectiveness; (ii) lengthy internal approval processes even for small investments; (iii) use of the state budget funds first for investment projects financed by IBRD loans, which often creates a financing gap between the amounts needed by the pro- ject and the pre-financing funds actually available; and (iv) limited capacity of some Project Implementation Units to implement complex projects. We will address this risk through continued joint portfolio management with the client as well as by providing support for the improvement of the overall procurement and financial management capacity in the country, including through the RAS program. 46 FY19-23 Country Partnership Framework for Romania Annex 1. Results Monitoring Matrix Focus Area 1. Ensure Equal Opportunities for All To bring together the “two Romanias” , it is important to create opportunities for those left behind. Building human capital for the bottom 40 percent of the income distribution (B40) is essential to give everybody in Romania a chance to succeed and benefit from the country’s economic growth. Although unemployment is low and many companies are looking for workers, many in the B40 are discouraged or unable to take advantage of these opportunities and improve their welfare. CPF Objective 1: Improve transition to tertiary education for the poor and vulnerable Intervention Logic Overcoming Romania’s inclusion challenge critically depends on closing its human capital gap. Through support provided by IPF, RAS, and ASA, the WBG program aims to improve institutional capacity for more effective deci- sion-making in the education sector and better use of EU funds, while directly targeting improved performance of under-performing schools and students at the secondary school and tertiary levels. While education is a funda- mental building block of human capital, significant disparities persist between urban and rural areas and across socio-economic groups. The quality of education in Romania lags EU and OECD countries, while underachievement in basic skills is due to educational factors coupled with equity challenges. OECD PISA scores show that about 40 per- cent of Romanian 15-year-old students are functionally illiterate, in contrast to roughly 23 percent of students in the EU. Romanian students are broadly one-and-a-half years of schooling behind students in EU countries. Most WBG activities directly target poor and disadvantaged students in the Bottom 40 percent (ROSE IPF, POCU RAS, Informed decision-making RAS) or support institution building that will indirectly benefit them (M&E RAS). CPF Objective Indicators Supplementary Progress Indicators WBG Program Average graduation rate in ROSE Average percentage of students Portfolio: supported high-schools of ROSE-supported high schools • Romania Secondary • Baseline: to be computed for 2017 benefiting from remedial, tutoring or Education (ROSE) IPF • Target: 93% in 2023 counseling activities • Baseline: 0 • RAS for Capacity Average Baccalaureate passing rate Development of the MoNE for in ROSE supported high schools. • Target: 40% by June 30, 2020 Monitoring and Evaluating • Baseline: to be computed for MoNE effectively monitoring and (M&E) the Implementation of 2017 evaluating implementation of Education Strategies (ex-ante • Target: 59% in 2023 education strategies conditionalities) and for Average retention rate in first year • Baseline: M&E system not in place Improving Education Policies of tertiary education in ROSE (2018) • Target: M&E system in place • RAS for Assistance to Enhance supported faculties Quality Assurance in the • Baseline: to be computed for 2017 Methodology for external assessment Higher Education System in • Target: 84.5% of higher education institutions Romania updated. • Baseline: no (2017) • RAS for Assistance to the • Target: yes (2020) MoNE for Informed Decision- Making on Investments in Strategy for modernizing education Infrastructure infrastructure adopted • Baseline: no (2017) • RAS for Supporting the • Target: yes (2019) Implementation of Romania’s Human Capacity Operational Improved capacity of Intermediary Program (POCU) 2014-20 Body on Human Capital Operational Program for managing programs on education and skills. • Baseline: no (2017) • Target: yes (2020) CPF Objective 2: Improve access to modern health care Intervention Logic Most premature deaths in Romania are from chronic diseases that can be prevented or slowed down with mod- ern healthcare. Early deaths from preventable diseases are concentrated in the B40 and rob them of peak pro- ductivity years, as well as the opportunity to realize investments in human capital. The Bank can help Roma- nia improve the quality of health services through support for modern equipment and regulatory processes that drive quality improvement in health facilities. High quality treatment for patients with common diseases Annex 1 47 such as heart disease and cancer will be supported by the modernization of equipment and increased access to out- patient services given that optimal management of chronic diseases starts outside hospital. The Bank can help Romania to transition to a more balanced and integrated health system that will improve the quality of care delivered to all social groups. IFC will remain engaged in the sector with the goal to support investment projects that increase access to affordable quality healthcare services and can help facilitate increased private sector participation in the sector through facilitation of PPPs where appropriate. CPF Objective Indicators Supplementary Progress Indicators WBG Program Expand access to safe and modern Number of public radiotherapy units Portfolio: radiotherapy for cancer patients equipped with linear accelerators: • Health Sector Reform Project • Baseline: 12% • Baseline: 0 • ASA • Target: 80% by 2020 • Target: 10 • 547091 MedLife (IFC) Increase percentage of public hos- Number of public hospitals with Pipeline: pitals that have been accredited by emergency departments provided • Potential IFC PPPs National Authority for Management with major emergency equipment of Quality in Health (ANMCS) (e.g., monitor, ventilator and defibril- • Baseline: 1 linear accelerators per lator) through the project: million inhabitants • Baseline: 0 • Target: 2.2. linear accelerators • Target: 78 per million inhabitants Number of operational burn units IFC: Number of patients accessing supported through the project: quality private healthcare services • Baseline: 0 • Baseline (2016): 2.37 million • Target: 4 • Target (2020) 2.5 million CPF Objective 3: Connect the poor and vulnerable to jobs Intervention Logic Romania’s progress on shared prosperity is constrained by a persistent inequality of opportunity, which has strong geographic (urban vs. rural, growth pole vs. lagging region, east vs. west) and social dimensions particularly affecting women, young age cohorts and the Roma. Romania has the lowest labor force participation in the EU (66 percent) re- sulting from weak participation of women and the less educated. Increasing participation through better activation measures is key to improving access to productive jobs and making progress on shared prosperity. Through an on-going RAS focused on building the capacity of the Managing Authority of the Human Development Operational Program (POCU) and other ASA, the WBG program will focus on helping to support the increased use of EU funding for closing the gap between the available jobs and the people that are – or can be – available for work. Be- sides increasing the institutional capacity of the POCU Managing Authority to manage and monitor these programs, efforts will be made to increase knowledge on effective policymaking in improving employability. CPF Objective Indicators Supplementary Progress Indicators WBG Program Number of POCU beneficiaries par- Share of POCU funds under contract Portfolio: ticipating in activation measures. • Baseline (2018): 22.25% • RAS for Supporting the • Baseline:0 • Target (2023): 100% Implementation of Romania’s • Target: (2023): 866,223 Human Development o/w women: 433,113; Operational Program (POCU) o/w rural: 117,000; 2014-20 (Investing in Inclusive o/w Roma: 67,944 Growth in Romania) • ASA on Leveraging Skills for Competitiveness in Europe Focus Area 2. Catalyze Private Sector Growth and Competitivenes To sustain growth and poverty reduction, Romania needs to overcome the obstacles that are hampering pri- vate investment. Companies overwhelmingly cite the lack of transport infrastructure as a major reason to delay or forego further investment. Stranded assets and lack of prioritization at the subnational level prevent municipalities from attracting private capital, and MSMEs – by far the largest group in the private sector – have trouble accessing financial services. CPF Objective 4: Strengthen capacity to build transport infrastructure Intervention Logic Overcoming Romania’s inclusion challenge critically depends on closing its human capital gap. Through support provided by IPF, RAS, and ASA, the WBG program aims to improve institutional capacity for more effective deci- sion-making in the education sector and better use of EU funds, while directly targeting improved performance of under-performing schools and students at the secondary school and tertiary levels. While education is a funda- mental building block of human capital, significant disparities persist between urban and rural areas and across 48 FY19-23 Country Partnership Framework for Romania socio-economic groups. The quality of education in Romania lags EU and OECD countries, while underachievement in basic skills is due to educational factors coupled with equity challenges. OECD PISA scores show that about 40 per- cent of Romanian 15-year-old students are functionally illiterate, in contrast to roughly 23 percent of students in the EU. Romanian students are broadly one-and-a-half years of schooling behind students in EU countries. Most WBG activities directly target poor and disadvantaged students in the Bottom 40 percent (ROSE IPF, POCU RAS, Informed decision-making RAS) or support institution building that will indirectly benefit them (M&E RAS). CPF Objective Indicators Supplementary Progress Indicators WBG Program Ploiești-Brașov Motorway ready for Pipeline civil works bidding • Institutional Capacity and • Baseline: No Knowledge for Motorway • Target: Completed by end of Construction Motorway TA project IPF National roads revenue and • Potential IFC investments, financing strategy adopted by the PPPs and privatization Government support • Baseline: No • Target: Completed by end of project CPF Objective 5: Boost subnational capacity to attract private investment Intervention Logic Local administrations can play a key role in laying the foundations for the growth of the private sector. Besides en- suring the availability of critical public infrastructure, such as roads, water and sanitation, gas and electricity, local administrations need to identify and provide access to investment sites, and to formulate local spatial planning reg- ulations to remove bottlenecks to private sector growth. Though willing, local administrations in Romania often lack the capacity to unleash the potential for private investment. A program of Bank RAS paid for directly by municipalities assists them in spatial planning, urban development strat- egies and asset management—all with the intention to make anchor investments to encourage and maximize private sector investment. This assistance will be complemented by IFC as it continues to explore engagement opportunities in select municipalities, through municipal finance and facilitation of PPPs, under a functioning law, to modernize infrastructure including urban transport systems, water supply and sanitation, solid waste management, and district heating. Furthermore, IFC will explore opportunities to support energy efficient municipal buildings, thermo-mod- ernization, waste-to-power, and street lighting projects. In addition to focusing on potential PPPs in the municipal space, IFC will try to intervene with targeted investments and advisory to help make some of the municipal and state- owned companies more efficient and commercial. In addition, the WBG will work to address constrained access to finance, particularly for MSMEs. Expanded finan- cial intermediation is much needed to support access to credit for individuals and small businesses that make up the most critical segment of the economy. As Romanian companies are predominantly funded by retained earnings and/or sale of assets, bank loans remain one of the least used financial sources (by only 17 percent of enterprises). Moreover, access to finance is highly uneven at the regional level, especially for smaller enterprises, whose access is significantly lower than that of larger companies. IFC credit lines will focus on increasing lending to MSMEs, par- ticularly outside Bucharest. CPF Objective Indicators Supplementary Progress Indicators WBG Program Increase firm revenues at the local Increase local capacity to prioritize Portfolio: level public investments • Constanta RAS • Baseline (2016) • Baseline (2018) Constanta: EUR502 million Constanta: No list of priority • Brașov RAS Brașov: EUR598 million projects • District 5 RAS Sector 5: EUR598 million Brașov: No list of priority projects Pipeline • Target (2016) Sector 5: No list of priority Constanta: EUR658 million projects • Justice Quarter and Esplanada Brașov: EUR784 million • Target (2020) IPF Sector 5: EUR687 million Constanta: List of priority projects • Potential IFC PPPs at the Private investment leveraged by for a total amount of around municipal level, potential selected municipalities EUR347 million targeted investment and • Baseline (2018) Brașov: List of priority projects for Advisory Services Constanta: 0 a total amount of around EUR351 • Trust Fund Supporting Brașov: 0 million Innovation in Romania Sector 5: 0 Sector 5: List of priority projects Catching-up Regions • Target (2020) for a total amount of around Constanta: at least one invest- EUR277 million ment of at least EUR5 million leveraged Brașov: at least one investment Annex 1 49 of at least EUR5 million Increase local capacity to do spatial leveraged planning Sector 5: at least one invest- • Baseline (2018) ment of at least EUR5 million Bucharest – Esplanada Site: No leveraged zonal urban plan in place Private investment in underutilized Constanta: No updated spatial urban assets plan in place • Baseline (2018) Brașov: No updated spatial plan Bucharest – Esplanada Site: 0 in place Constanta: 0 Sector 5: No updated spatial plan Brașov: 0 in place Sector 5: 0 • Target (2020) • Target (2020) Bucharest – Esplanada Site: Bucharest – Esplanada Site: at Zonal Urban Plan in place for the least one private investment Esplanada Site leveraged in the Esplanada Site Constanta: Updated spatial plan Constanta: at least one private in place, elaborated according investment in an underutilized to best practices in the field urban asset and conducive to private sector Brașov: at least one private investments investment in an underutilized Brașov: Updated spatial plan urban asset in place, elaborated according Sector 5: at least one private to best practices in the field investment in an underutilized and conducive to private sector urban asset investments Sector 5: Updated spatial plan in place, elaborated according to best practices in the field and conducive to private sector investments Increase local capacity to manage under-utilized assets • Baseline (2018) Bucharest – Esplanada Site: No strategy for the development of the Esplanada Site Constanta: No strategy for the management of under-utilized assets Brașov: No strategy for the man- agement of under-utilized assets Sector 5: No strategy for the man- agement of under-utilized assets • Target (2020) Bucharest – Esplanada Site: Strategy for the development of the Esplanada Site Constanta: Strategy in place for the management of under-uti- lized assets Brașov: Strategy in place for the management of under-utilized assets Sector 5: Strategy in place for the management of under-utilized assets CPF Objective 6: Accelerate capital market development and access to finance Intervention Logic To help address some of the prevailing shortcomings in the financial sector, the WB will continue to support financial sector deepening by supporting the development of capital markets through technical assistance, funded by SRSS, and IFC interventions. Technical assistance will be provided to enhance the regulatory and supervisory framework of the capital market regulator as well as to build the supervisor’s capacity, contributing to diversified financing options and improved access to long-term capital. The WBG will also contribute to the stability of the financial sector by helping test the operational preparedness of the authorities to respond to banking distress and to strengthen access to finance by helping authorities develop a strategy for enhancing financial inclusion. IFC will continue to support the development of capital markets to diversify financing options and improve access to long-term capital, engage in addressing distressed assets of banks to improve the health of the financial sector and support on-lending to MSMEs through banks and non-banking financial institutions, to enable further entrepreneurship and employment opportunities particularly in rural areas and among women. IFC will continue to assess supporting projects which 50 FY19-23 Country Partnership Framework for Romania create jobs, increase investment in underserved regions, and contribute to the growth and competitiveness of local agribusiness firms, as well as in enabling infrastructure, such as retail and business services, transport and logistics. Furthermore, IFC will explore opportunities in Romania to support housing finance by encouraging the extension of long-term financing, still limited in the market, and by promoting residential mortgage on-lending to end-borrowers. CPF Objective Indicators Supplementary Progress Indicators WBG Program Improved regulatory and supervi- Portfolio (IFC): sion capital markets framework • 518265 Transilvania Bank • Baseline (2017): No regulation for alternative investment funds • 676905 Garanti Bank Ro • Target (2018): Regulation on • 689286 Agricover Credit alternative investment funds • 778891 GarantiLeasingRO • Baseline (2017): Compliance- based supervision for market • 764462 UniCredit Romania intermediaries • 807070 UC Leasing ROM • Target (2018): Methodology, • 599367 ECA SME Bnkg (Alpha manual, and enhanced capacity Bank SME advisory) for risk-based supervision of market intermediaries • TA to ASF to ensure regulation • Baseline (2018): Gaps in of capital markets is aligned enforcement of disclosure of with EU best practices; and financial information of issuers to enhance capital markets • Target (2019): Enhanced supervision enforcement of disclosure of Pipeline: financial information in line with EU best practices • TA to strengthen the capacity of banking supervisory and Enhanced capacity in bank reso- resolution authorities to lution respond to banking distress. • Baseline (2018): Untested bank resolution framework • TA on financial inclusion • Target (2019): Crisis simulation and literacy with focus exercise and enhanced crisis on underserved regions/ mechanism segments Number of MSMEs loans[i] support- • TA to ASF to enhance the ed by IFC operations (#); review of the financial • Baseline (2016): 78,000 loans information disclosed by facilitating US$4.42 billion; publicly listed companies, in • Target (2021:) 100,000 loans accordance with newly EU facilitating US$6.26 billion. (Transparency Directive) and IFRS rules. Number and volume (US$) of out- standing housing finance portfolio • Potential new IFC investments • Baseline (2015): 23,000 loans for in agribusiness, services, US$1 billion; manufacturing, IT • Target (2020): 27,500 loans for US$1.2 billion IFC: Agri-finance SME loans: • Baseline (2016): 3,000 loans for US$158 million; • Target (2021): 4,000 loans for US$250 million Focus Area 3. Build Resilience to Shocks A natural or economic shock can reverse years of growth and poverty reduction. Romania faces high seismic risk and a high and growing exposure to climate change. Volatility in its policy environment is a major challenge to sustained progress, and could undermine the country’s ability to respond to shocks. CPF Objective 7: Improve preparedness to natural disasters and climate change Intervention Logic Romania is highly exposed to floods and earthquakes, with past events resulting in billions of direct damages, and the average annual damage to infrastructure is expected to double by 2020. Institutional reforms and recent invest- ments have improved emergency response capacity, but the potential impact of disasters on infrastructure and the most vulnerable populations in Romania remains extremely high. Moreover, the severity, intensity and frequency of storms, floods, droughts, wildfire and extreme temperature events are increasing as the climate warms. There is an urgent need to reduce the impact of climate disasters now, and prepare for more severe climate events in the future. Fortunately, a disaster is not the inevitable consequence of a natural hazard and measures can be taken to protect vulnerable populations, strengthen buildings and infrastructure and to reduce the financial shock to household and Annex 1 51 sovereign budgets. To achieve this, almost all institutions at national and sub-national levels must take responsibility for the systematic reduction in disaster risks, dedicate budgets and policies to risk management and preparedness, and establish coordination mechanisms with other institutions. Unfortunately, Romania does not have a national program to systematically reduce disaster risks in public buildings and infrastructure; moreover, as available disaster and climate risk information does not include future climate change scenarios, long-term adaptation cannot be built into land use and development planning and investment design. With the proposed CAT DDO and Emergency Preparedness and Risk Reduction IPF, the World Bank Group will help the Government of Romania to systematically reduce existing disaster risks, avoid the creation of new risks and im- prove financial resilience through policy reform and prioritized investment in risk reduction. Considering lessons learned on risks of slow project implementation, the first IPF will be focused on rehabilitating the most critical infra- structure needed for emergency response within the Ministry of Interior, with expectations to add additional invest- ments when implementation of the initial project successfully gets underway. The program of actions through the CAT-DDO and IPF will also provide a platform, system and robust analysis that will support potential investments in risk reduction by other key partners, such as the EU and IFIs. There is also an opportunity to generate significant cli- mate change adaptation and mitigation benefits by considering disaster and climate resilience and energy efficiency measures during the design and implementation of all new investments in Romania. The WBG will work with the Government of Romania to integrate climate change considerations into sector priori- ties, from water management (with a planned Water Security IPF) to agriculture (possible Agriculture Modernization IPF) to disaster risk management (CAT DDO and Emergency Preparedness and Risk Reduction IPF). The WBG can also support Romania to ensure that future investment of Government and EU funds yields the maximum climate change and disaster resilience co-benefits, for example, by integrating energy efficiency, resilience and adaptation considerations into the planned Esplanada project and other possible municipal infrastructure investments. CPF Objective Indicators Supplementary Progress Indicators WBG Program Critical disaster and emergency Government awareness campaign are Portfolio: response buildings, personnel and successfully completed equipment are fully operational in • Baseline: 0 • Accelerating DRM and the event of disaster. • Target: 3 campaigns completed Climate Resilience TF • Baseline: 0 National Building Code for Seismic • Strategies and Options to • Target: 35 buildings (by 2022) risk in existing building is issued Reduce Housing Sector Risks Population served by resilient in ECA countries TF All new permits consider new regula- energy response buildings. tion in compliance with the Building Pipeline: • Baseline: 0 Code • Disaster Risk Management • Target: 4 million (by 2022) Fiscal budgetary strategy is informed Project IPF Information on disaster and by disaster risks • Building Disaster and Climate climate risks is available at national New disasters and risk information Resilience Program CAT DDO and sub-national level to avoid the creation of new risks and reduce analysis • Reducing Risk on Ambulance existing risks. • Baseline:0 and Police stations IPF • Baseline: 0 • Target: 3 new analyses • Municipal investments • Target: 3 new reports completed (Esplanada, etc.) National programs and policy • Water RAS reforms aimed at reducing disaster • RAS on EU Flood Directive risk and improving the physical, (to ensure inclusion of climate social and financial resilience are change and a prioritized and in place costed investment program • Baseline: 0 for risk reduction) • Target: 5 • ASA/RAS on scalable social Building improvements in seismic safety nets safety include energy efficiency improvements (and vice versa) • Baseline: 0 • Target: 35 buildings Integration of disaster and climate resilience and mitigation measures in all WB projects and increase of these measures in Government and EU investments. • Baseline: 0 • Target: All Bank projects are disaster and climate informed 52 FY19-23 Country Partnership Framework for Romania Annex 2. Selected Indicators of Bank Portfolio Performance and Management As of 04/24/2018 Indicator FY15 FY16 FY17 FY18 Portfolio Assessment Number of Projects Under Implementation a 7.0 6.0 7.0 5.0 Average Implementation Period (years) b 4.8 6.6 3.8 4.8 Percent of Problem Projects by Number a c 71.4 33.3 42.9 60.0 Percent of Problem Projects by Amount ac 51.1 64.0 51.5 63.9 Percent of Projects at Risk by Number a d 71.4 33.3 42.9 80.0 Percent of Projects at Risk by Amount ad 51.1 64.0 51.5 71.7 Disbursement Ratio (%) e 3.4 2.7 3.9 16.6 Portfolio Management CPPR during the year (yes/no) Supervision Resources (total US$) Average Supervision (US$/project) Memorandum Item Since FY80 Last Five FYs Proj Eval by OED by Number 89 4 Proj Eval by OED by Amt (US$ millions) 9,473.4 1,533.3 % of OED Projects Rated U or HU by Number 20.2 25.0 % of OED Projects Rated U or HU by Amt 16.4 1.6 a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank’s country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank’s portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, except for Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. Annex 2 53 Annex 3. Operations Portfolio (IBRD/IDA and Grants) As of 03/31/2018 Closed Projects: 101 IBRD/IDA* Total Disbursed (Active) 109.72 of which has been repaid (1) 32.84 Total Disbursed (Closed) 7,039.28 of which has been repaid 3,915.90 Total Disbursed (Active + Closed) 7,149.00 of which has been repaid 3,948.74 Total Undisbursed (Active) 734.54 Total Undisbursed (Closed) 92.35 Total Undisbursed (Active + Closed) 826.895 Active Projects Difference Between Last Expected and PSR Actual Supervision Original Amount Disburse- Rating in US$ Millions ments a Develop- Implemen- Project Fiscal Frm Project Name ment tation IBRD IDA Grants Cancel. Undisb. Orig. ID Year Rev’d Objectives Progress P145174 Health Sector Reform MU MS 2014 338.8 0.0 0.0 310.8 184.1 74.2 Int. Nutrient Pollution P093775 MS MU 2008 120.5 0.0 2.3 51.6 6.9 10.5 Control Justice Services P160751 MS MS 2017 67.0 0.0 0.0 67.0 2.5 0.0 Improvement Project P130202 RAMP U U 2013 91.8 0.0 0.0 69.2 61.1 17.6 Romania Secondary P148585 S MS 2015 243.1 0.0 0.0 236.0 47.9 26.0 Education Project Overall Result 861.2 0.0 2.3 734.5 302.6 128.3 * Disbursement data is updated at the end of the first week of the month. a. Intended disbursements to date minus actual disbursements to date as projected at appraisal. 54 FY19-23 Country Partnership Framework for Romania Annex 4. Statement of IFC’s Held and Disbursed Portfolio As of 03/31/2018 (In USD Millions) Committed Disbursed Outstanding FY **Quasi Partic- **Quasi Partic- Approval Company Loan Equity Equity *GT/RM ipant Loan Equity Equity *GT/RM ipant FY17 AGRICOVER CREDIT 18.53 0.00 0.00 0.00 0.00 18.53 0.00 0.00 0.00 0.00 FY17 ALPHA BANK ROM 60.82 0.00 0.00 0.00 0.00 60.82 0.00 0.00 0.00 0.00 FY17 BANCA ROMANEASCA 0.00 0.00 0.00 2.30 0.00 0.00 0.00 0.00 0.00 0.00 FY16 DARP SPV ROMANIA 0.00 0.00 45.64 0.00 0.00 0.00 0.00 45.64 0.00 0.00 FY16 DARP SPV URSA 0.00 0.00 18.61 0.00 0.00 0.00 0.00 18.36 0.00 0.00 FY14 GARANTI BANK RO 18.49 0.00 0.00 0.00 0.00 18.49 0.00 0.00 0.00 0.00 FY18 GARANTI BANK RO 30.82 0.00 0.00 0.00 0.00 30.82 0.00 0.00 0.00 0.00 FY15 GARANTILEASINGRO 4.93 0.00 0.00 0.00 0.00 4.93 0.00 0.00 0.00 0.00 FY17 GARANTILEASINGRO 6.78 0.00 0.00 0.00 0.00 6.78 0.00 0.00 0.00 0.00 FY18 GARANTILEASINGRO 8.63 0.00 0.00 0.00 0.00 8.63 0.00 0.00 0.00 0.00 FY18 GREI LTD 61.15 0.00 0.00 0.00 0.00 61.15 0.00 0.00 0.00 0.00 FY12 LIDL ROMANIA 31.70 0.00 0.00 0.00 0.00 31.70 0.00 0.00 0.00 0.00 FY07 MEDLIFE SA 0.00 1.24 0.00 0.00 0.00 0.00 1.24 0.00 0.00 0.00 FY10 MEDLIFE SA 3.23 0.00 0.00 0.00 0.00 3.23 0.00 0.00 0.00 0.00 FY17 MEDLIFE SA 11.30 0.00 0.00 0.00 0.00 11.30 0.00 0.00 0.00 0.00 FY17 NEPC 61.05 0.00 0.00 0.00 0.00 61.05 0.00 0.00 0.00 0.00 FY14 RAIFFEISEN ROM 0.00 0.00 23.83 0.00 0.00 0.00 0.00 23.83 0.00 0.00 FY15 SMITHFIELD ROMAN 57.11 0.00 0.00 0.00 0.00 27.11 0.00 0.00 0.00 0.00 FY14 TEAMNET 0.00 4.30 8.32 0.00 0.00 0.00 4.30 8.32 0.00 0.00 FY16 TEAMNET 0.00 6.42 0.00 0.00 0.00 0.00 6.25 0.00 0.00 0.00 FY14 TIMISOARA MUNI 22.98 0.00 0.00 0.00 0.00 22.98 0.00 0.00 0.00 0.00 FY05 TRANSILVANIABANK 0.00 2.44 0.00 0.00 0.00 0.00 2.44 0.00 0.00 0.00 FY09 TRANSILVANIABANK 1.16 0.00 0.00 0.00 0.00 1.16 0.00 0.00 0.00 0.00 FY11 TRANSILVANIABANK 0.00 0.18 0.00 0.00 0.00 0.00 0.18 0.00 0.00 0.00 FY13 TRANSILVANIABANK 0.00 3.99 0.00 0.00 0.00 0.00 3.99 0.00 0.00 0.00 FY15 TRANSILVANIABANK 0.00 0.00 0.00 5.00 0.00 0.00 0.00 0.00 0.00 0.00 FY16 UC LEASING ROM 39.71 0.00 0.00 0.00 0.00 39.71 0.00 0.00 0.00 0.00 FY13 UNICREDIT ROMANI 68.84 0.00 0.00 0.00 0.00 68.84 0.00 0.00 0.00 0.00 Total Portfolio: 507.23 18.57 96.40 7.30 0.00 477.23 18.40 96.15 0.00 0.00 Annex 4 55 Annex 5. CPF Consultations The Romania CPF benefited from extensive consultations undertaken jointly by IBRD and IFC teams. Consultations involved face-to-face discussions with a broad range of stakeholders including central and local government, academia, civil society organizations, the interna- tional community and private sector. Online and social media outreach and surveys aimed to capture the views of the Romanian public about the country’s key development challenges and priority areas for World Bank Group areas of engagement. The focus of the consultations and targeted discussions with the EU and other major development partners, was to ensure selectivity of interventions for greater impact. Stakeholders consulted Rom Priv t Europ n Loc l C ntr l CEOs Soundin Univ rsiti s Emb ssi s IFIs S ctor Commision Authoriti s Gov rnm nt Bo rd Consultations for the CPF took place from February-May 2018, and addressed the country’s key challenges, SCD priorities and proposed areas of engagement. IBRD and IFC collabora- tion was strong prior and during the consultation process and ensured alignment with MFD priorities, as well as targeted outreach to private and financial market actors in Bucharest. SCD consultations (October-November 2017) and stakeholder discussions as part of the CLR were critical to strengthening the quality of outreach during the CPF process. Face-to-face consultations covered geographically the main regions of the country and cap- tured the full array of themes covered by the CPF, including a strong focus on understanding the challenges of poor and marginalized communities. Consultations involved 13 cities of varying sizes in 9 counties, and a diverse group of CSOs, academia, local mayors, county authorities and public service providers, com- munity and private sector leaders. Stakeholders consulted Discussions with Romania’s main external partners, including the European Commission and inter- Counti s wh r national think-tanks, aimed to vali- th WBG h ld date findings and define main areas CPF consult tions of WBG engagement. Proposed selectivity criteria were endorsed by most stakeholders, including the European Commission. One of the main findings of this extensive consultation process was that there was a strong collective agreement concerning Romania’s develop- ment challenges. Across public, private and non-governmental sec- tors, stakeholders highlighted three major areas of challenges facing the country. First, it was noted that the 56 FY19-23 Country Partnership Framework for Romania quality of education doesn’t prepare graduates for the labor market and this is visible in terms of the poor quality of skills across various sectors of the economy. Second, Romania faces the debilitating challenge of inadequate transport infrastructure. Lack of adequate highways and secondary roads limits access to markets and public services, and discourages investments and greater economic activity. Third, policy unpredictability and lack of continuity limit the appetite of companies to invest and expand, add costs and discourage long-term business planning. In addition to traditional face-to-face consultations, the WBG conducted online and Facebook consultations. An online survey was promoted through Facebook from April-May to gauge the public’s views of key challenges hindering Romania’s development and priority areas for WBG engagement in the new CPF. The survey highlighted three top challenges facing Romania – poor quality of education, health and infrastructure - and emphasized these as top areas for WBG support going forward. A social media-tailored video diary aimed to provide instant feedback and reactions to issues and challenges raised in discussions with various counter- parts and encouraged extensive public responses. International partners expressed great appreciation for the WBG involvement in the country and endorsed the Focus Areas of the proposed CPF for FY2018-2023. Annex 5 57 Annex 6. Romania Citizen Engagement Roadmap FY19-23 3 STEP STRATEGY 1. IMPROVE ENGAGEMENT IN COUNTRY ENGAGEMENT (CPF) CYCLE CPF Consult tions CPF F db ck PLR nd CLR Discussions CPF Consult tions Innov tiv consult tiv pl tform on r sults on pro r ss & ff ctiv n ss includ s CE proc ss s 2. ENHANCE QUALITY OF CITIZEN ENGAGEMENT IN PRIORITY CPF FOCUS AREAS TRANSFORMATIONAL CE IN DESIGN OF NEW PROJECTS Educ tion • D v lop structur d loc l nd n tion l pl tforms with Brid soci l opportuniti s for nuin n m nt. nd conomic • Enh nc link s b tw n d m nd (civil soci t ) nd divid s b H lth suppl -sid ( ov rnm nt) ctivit . inv stin in • Ensur nnu l fr qu nc . Inclusiv str t i s d v lop d for urb n nd rur l Rom ni hum n c pit l ENGAGING ALL ROMANIANS IN CITIZEN ACTIVITIES Jobs for th poor • Provid multipl ch nn ls for f db ck. • Op n m ch nism for n f db ck with tim l ovt r spons . Tr nsport+En r Infr structur • D v lop inclusion str t i s for ROMA, wom n nd vuln r bl roups. C t l Priv t S ctor Growth Priv t S ctor D v lopm nt DEVELOP NEW MODELS OF nd Comp titi- Prioriti n w pl tform of CE in public priv t CE IN PRIVATE SECTOR v n ss p rtn rships, priv t s ctor fin ncin nd c p cit buildin • St p up qu lit of SME-r l t d CE • Support CE in subn tion l Subn tion l c p cit Fin nci l s rvic s sp. SMEs PPPs. LEAD NEW PLATFORMS OF CE IN POLICY REFORM AND N tur l Dis st r Pr p r dn ss INFRASTRUCTURE INVESTMENT Build r sili nc • Loc l citi n n m nt ctivit link d to N tion l to shocks polic di lo u . Clim t Ch n Ad pt tion • Dr w on lob l l ssons of CE in Clim t Ch n mobili in loc l communiti s for loc l ch n . 3. SUPPORT PIUs TO IMPLEMENT GENUINE CITIZEN ENGAGEMENT FOR IMPROVED IMPACT AGREE AND ENSURE CITIZEN SUPPORT CITIZEN ENGAGEMENT MONITOR CITIZEN ENGAGEMENT ENGAGEMENT MINIMUM IMPLEMENTATION IMPLEMENTATION IMPROVE STANDARDS • Provid r ul r c p cit buildin REPORTING • Improv fr qu nc nd opportu- to ll PIUs to unblock • Improv PIU nd B nk r portin niti s for b n fici r f db ck impl m nt tion ch ll n s • Introduc CE Monitorin in nnu l • R mov n r strictions on scop . • Support PIUs to impl m nt portfolio r vi ws with ovt. inclusiv ppro ch s. 58 FY19-23 Country Partnership Framework for Romania Annex 7. Roma Roadmap 2 STRATEGIC GOALS CONCRETE ACTIONS 1. SELECT PRIORITY CPF FOCUS AREAS WITH HIGH IMPACT FOR ROMA SENSITIVTY • Consid r Rom s nsitivit for urb n r d v lopm nt in Justic Qu rt r & Espl n d District IPF th Justic Qu rt r nd Espl n d District IPF Brid soci l • Support soci ll -inclusiv nd cc ssibl courts nd nd conomic int r t loc l l v l f db ck of Rom communit divid s b Justic S rvic s Improv m nt IPF m mb rs in th Justic nd S rvic Improv m nt IPF Support nd int nsif Rom s nsitivit in r l v nt s ctor r forms, IPFs & ASAs inv stin in • Improv Rom s nsitivit und r POCU RAS to m k MAINSTREAMING ROMA SENSITIVITY ACROSS COUNTRY PORTFOLIO hum n c pit l mor ff ctiv nd ffici nt us of r sourc s from th POCU RAS Hum n D v lopm nt Op r tion l • Int r t Rom s nsitivit risk ss ssm nt nd id ntif priorit r s for sp cific ctiviti s in th Str n th nin Str n th nin DRM DRM IPF Build r sili nc • An l nd ddr ss sp cific inform tion, communic - to shocks tion nd tr inin n ds of Rom und r th public INPC AF w r n ss r isin nd tr inin compon nt of th Int r t d Nutri nt Pollution Control AF 2. SUPPORT THE ROMA SOUNDING BOARD (RSB) AS A PLATFORM FOR EXPERTISE, ADVICE & PARTNERHSIPS FOR THE ROMA AGENDA • Continu s st m tic pplic tion of th Rom filt r to th whol portfolio • Promot th Rom Filt r s ood pr ctic x mpl & sh r its xp ri nc with oth r d v lopm nt D v lop Rom dim nsion p rtn rs (incl. with Gov rnm nt & th EC) in ll r l v nt WB ctiviti s • Tr ck pro r ss on Rom s nsitivit cross th countr portfolio nd ddr ss it in nnu l portfolio r vi ws b r portin on Rom s nsitivit r sult indic tors in r l v nt op r tions • Us th RSB to improv ffici nc nd ff ctiv n ss of Rom m instr min in th countr portfolio • En throu h th RSB bro d n twork of support rs to th Rom nd , incl. priv t s ctor D v lop n twork & xch n inform tion & b st pr ctic s of support rs • D v lop ff ctiv communic tion ctiviti s on Rom s nsitivit , includin c p cit buildin with to th Rom nd s l ct d PIUs • Link th RSB b n fici r f db ck with th Citi n En m nt (CE) Consult tions (in coordin tion with th corpor t CE m nd t nd th Rom ni CE Ro dm p) • Or ni m ss-m di c mp i n for pr v ntin nd comb tin th n tiv st r ot p s bout Improvin th im th Rom in th public sp c of th Rom in th public • Or ni m ss-m di c mp i n for buildin up th Rom thnic s lf- st m s n tion l sp c minorit th t contribut s to th Rom ni n soci t Annex 7 59 Annex 8. Country Risk Profile Source: The Global Facility for Disaster Reduction and Recovery (GFDRR) – Disaster Risk Profiles 60 FY19-23 Country Partnership Framework for Romania Annex 9. Completion and Learning Review for the Romania Country Partnership Strategy (FY14-18) Date of CPS (FY14-17): April 28, 2014 (Report No. 84830-RO) Date of CPS Progress Report: November 3, 2016 (Report No. 108785-RO) Period Covered by the Completion and Learning Review: FY14-18 I. INTRODUCTION 1. This Completion and Learning Review (CLR) evaluates the outcomes and implementation of the World Bank Group’s Country Partnership Strategy (CPS) for Romania 2014-18. The CLR assesses the achievement of the CPS objectives, the quality of the program’s design and implementation, and alignment of the CPF with the corporate goals. The results framework from the Performance and Learning Review (Attachment 1) is used as the basis for assess- ing the achievement of objectives. A new analytical tool, the Institutional Change Assessment Method (ICAM), allowed for a systematic review of institutional impacts of WBG interventions to inform the ratings and to derive lessons for future engagement. The ICAM rating scale and supporting evidence for each CPS objective are appended (Attachments 2 and 3). 2. The CPS was designed to help accelerate Romania’s structural reforms to support the country’s convergence with the European Union (EU), but political instability under- mined the achievement of key reforms. Despite the CPS’s flexible framework, Government turnover, including five changes in prime ministers and at least one new minister a year for Bank-supported projects, crippled portfolio performance and made sustained institutional change elusive. In November 2016, the Performance and Learning Review (PLR) extended the CPS period and adjusted the CPS objectives and results framework to align with shifting gov- ernment priorities. 3. Although the WBG program steeply increased in volume and depth across all instruments and contributed to achievement of important CPS objectives, IPF and DPL under-de- livered while RAS grew exponentially against original expectations. With 27 agreements worth US$71.65million signed, Romania’s cumulated RAS revenues during the CPS period were the highest Bank-wide. At the same time, Government focus on absorbing EU funds and weak project preparation and management capacity, combined with an inability to sustain the ambitious pace of structural reforms planned at the beginning of the CPS period, resulted in the delivery of US$2.8 billion in new lending commitments, half of the indicative, ambitious lending plan which had been discussed with the Government at the beginning of the CPS and in a more stable political environment. IFC investments were robust, totaling US$1.2 billion, out of which about US$1.1 billion has been for own account and the balance in mobilization. Of own account commitments, US$684 million has been in long-term finance and the remain- der in short-term finance. 4. The RAS program became the cornerstone of the Bank’s engagement in Romania. During the CPS period, the Government of Romania faced a dual institutional capacity related chal- lenge: low absorption rate of EU funds under the 2007-13 period and delayed preparations for Annex 9 61 closing the 2007-13 programming period and setting the grounds for EU funds management under the 2014-2020 period. The Government relied heavily on Bank’s support in preparing key strategic documents, enhance its organizational efficiency and effectiveness for better man- agement of EU funds, and undertake key structural reforms to support the EU convergence agenda. Bank’s support contributed to Romania’s fulfilment of ex-ante conditionalities that enabled access to a EUR40 billion allocation. The RAS program contributed to the fulfilment of actions related to 111 out of 36 conditionalities for Romania (Attachment 9) and to informing the preparation of the Partnership Agreement and of some Operational Programmes. A new Memorandum of Understanding to reconfirm the partnership between the Government and the Bank was signed in 2016 to facilitate Government institutions’ access to Bank’s RAS, mostly paid using EU funds. The strengthened partnership led to an unprecedented volume of the RAS (the program peaked in FY18), positioning Romania amongst the top RAS programs Bank wide. More than 20 line ministries and agencies benefited from the Bank’s advice during the CPS period. 5. The overall Development Outcome rating is Moderately Satisfactory. Eight of 14 objec- tives were achieved (4) or mostly achieved (4) (Table A9.1) with a MS rating for Pillar 1 and 2 and MU for Pillar 3. Table A9.2 summarizes the ratings by pillar. Intensive support for public administration reform under Pillar 1 facilitated access to more than EUR5 billion in EU funds under the 2014-20 programming period and helped make important gains in improved public debt management, program-based budgeting, and inter-municipal, metropolitan planning. Nonetheless, key reforms in revenue administration and health service delivery did not mate- rialize. Pillar 2, focused on smart and sustainable growth, improved the foundations for access to finance by resolving non-performing loans and making important institutional improve- ments to facilitate competition. Progress was less evident regarding strengthening skills and education programs for labor market inclusion. Under Pillar 3, fundamental reforms sup- ported by a DPL and IPF to reduce poverty and social exclusion were not implemented within the timeframe envisaged, notably the Minimum Inclusion Income Program. However, RAS support for Community-Led Local Development (CLLD) helped to mobilize over EUR200 million, and key steps were taken to increase the voice of Roma such as through the Bank’s creation of the Roma Sounding Board, a platform for more effective communication and engagement between civil society organizations working on the Roma agenda in Romania, the World Bank, and other external stakeholders. Table A9.1. Summary of Ratings for CPS Objectives No. of Mostly Partially Not Pillar Rating Achieved objectives Achieved Achieved Achieved Creating a 21st Century Government MS 6 2 2 2 0 Smart and Sustainable Growth MS 6 2 2 2 0 Social Inclusion MU 2 1 0 0 1 OVERALL CPS MS 14 4 (28.5%) 4 (28.5%) 4 (28.5%) 2 (14.5%) 1. In the areas of: early school leaving, tertiary education, lifelong learning, social inclusion and poverty reduction, active aging, education infrastructure, children deinstitutionalization, public procurement, public administration, digital agenda, Roma inclusion 62 FY19-23 Country Partnership Framework for Romania Table A9.2. Romania FY14-18 CPS Pillars, Objectives Rating Objectives Rating Pillar I: Creating a 21st Century Government (Moderately Satisfactory) Objective 1.1: Revenue and expenditure administration improved Partially Achieved Objective 1.2: Strengthened debt management Achieved Objective 1.3: Improved strategic planning, prioritization and evidence-based policymaking Mostly Achieved Objective 1.4: Enhanced strategy formulation, operationalization and monitoring and evaluation Achieved in preparation for the 2014-20 period and beyond Objective 1.5: Improved governance, organizational functioning and efficiency of public institutions Mostly Achieved and SOEs Objective 1.6: Improved health service delivery Partially Achieved Pillar II: Smart and Sustainable Growth (Moderately Satisfactory) Objective 2.1: Creating an improved business environment and a competitive economy Partially Achieved Objective 2.2: Improved performance of the RCC for promoting and enhancing market competition Achieved Objective 2.3: Strengthening the effectiveness of skills and education programs for labor market Partially Achieved inclusion Objective 2.4: Make it easier for business to entry and exit the market Mostly Achieved Objective 2.5: Enhanced environment and climate action in line with EU requirements Mostly Achieved Objective 2.6: Improved energy efficiency Achieved Pillar III: Social Inclusion (Moderately Unsatisfactory) Objective 3.1: Support an ambitious and successful program to tackle social inclusion and poverty Achieved reduction of the population including the Roma Objective 3.2: A more streamlined, better targeted and more cost-efficient social protection system Not Achieved 6. Overall WBG performance is Good. Shortcomings in the design included CPS objectives that did not frame clear priorities and an IPF portfolio that was overly ambitious in targeting complex institutional reforms despite persistent political changes. However, these shortcom- ings were compensated through adaptive implementation support. The WBG was responsive in addressing shifting government priorities. Teams used proactive tactics, working tirelessly when leadership shifted to rebuild the demand for key reforms to deliver the program. Close engagement with the Ministry of Public Finance (MoPF) and the Ministry of European Funds (MEF) included regular “deep dives” into the portfolio, annual RAS reporting to the client, and an ex-post independent evaluation of RAS results using the newly-developed ICAM. This effort to measure the institutional impact of Bank RAS was exceptional and helped to elucidate how knowledge services play an important role in strengthening institutions. Annex 9 63 II. PROGRESS TOWARDS CPS OBJECTIVES AND COUNTRY OUTCOMES Key Macroeconomic Developments 7. During the CPS period, Romania experienced robust growth. During 2014-17, Romania’s economic growth averaged 4.7 percent, a gradual pick-up after the 2008-09 crisis. Growth was supported by steady increases in exports, mostly to the EU, the gradual recovery of private investment which had been severely affected by the crisis, and increased absorption of EU funds. In 2016-17 growth was consumption-based, spurred by large cuts in taxes and increases in public sector wages and pensions. 8. The fiscal situation improved considerably between 2009 and 2015, but expansionary fis- cal policies widened the deficit since 2016. The budget deficit declined from 9.5 percent of GDP in 2009 to 0.8 percent in 2015 allowing the country to reach its medium-term objective of a 1 percent structural deficit in 2014, which it maintained in 2015. However, fiscal stimuli introduced in 2016, including large tax cuts and increases in the minimum wage, public-sector salaries and pensions, pushed the fiscal deficit towards 3 percent in 2016-17. Pillar 1—Creating a 21st Century Government: Moderately Satisfactory 9. Support for public administration reform was central to the CPS. The WBG program included a broad mix of instruments to advance progress toward six CPS objectives linked to 22 outcome indicators. While most indicators reflected notable progress, key reforms to modern- ize revenue administration and improve health service delivery were only partially achieved. CPS Objective 1.1: Revenue and expenditure administration improved—Partially Achieved 10. The procurement of a Revenue Management System (RMS) was not completed under the Revenue Administration Modernization Project (RAMP) due to the loss of the original reform champion early on in implementation and the inability to rebuild the commitment given seven changes in Ministers of Finance and four presidents of the National Agency for Fiscal Administration (NAFA). However, support through RAMP and the DPL-DDO enabled some efficiency gains, increasing revenue collected per staff member by 19 percent. 11. RAS support contributed to important progress toward performance-based budgeting with the adoption of a framework for program-based budgeting. The General Secretariat of Government (GSG) has adjusted its structure and functions to implement a new methodology for developing institutional strategic plans (ISPs) linked to program budgets. This progress was supported by various Bank engagements, notably the DPL-DDO, an IDF Grant, and five RASs with the GSG and the Ministry of Public Finance2. The mix of instruments and programmatic approach sustained the engagement over the medium term. 2. Delivery Unit RAS, Planning and Budgeting RAS, Strategy Unit RAS, Regulatory Impact Assessment (RIA) RAS, and the Public Investment Management RAS 64 FY19-23 Country Partnership Framework for Romania 12. Cost savings in the health sector improved expenditure administration. The Fiscal Effectiveness and Growth Development Policy Loan (FEG-DPL) program widened the scope for using centralized procurement in health, with 40 centralized tenders for medicines, devices, and other products launched in 2015. The resulting fiscal savings per tender, aver- aging 25 percent per year, could be channeled to underfunded health programs. However, most purchases in public hospitals continued to be procured locally with different unit prices for the same items. The expansion of centralized procurement under the FEG-DPL2 secured savings of at least 15 percent on medicines of participating public institutions. CPS Objective 1.2: Strengthened debt management—Achieved 13. The MOPF has strengthened public debt management. With FEG-DPL and RAS support, the MOPF approved a public debt management strategy for 2014-16 aligned to international sound practice and linked with its 2014 Annual Borrowing Plan (ABP), laying the founda- tions for the government securities market. Since 2014, the strategy has been updated annu- ally and public debt is the fifth lowest in the EU3. External exposure also declined, with the share of external public debt in total public debt decreasing from 46.2 percent in 2014 to 40.1 end-November 2017. A RAS on the use of derivatives and swap transactions continues to sup- port the strengthening of the country’s debt management. CPS Objective 1.3: Improved strategic planning, prioritization, and evidence-based policymaking—Mostly Achieved 14. RASs supported the introduction of a new, coordinated and transparent approach to strategic planning, early steps to align strategic objectives and reform initiatives from national to program levels, and a simplified framework for regulatory impact analysis (RIA). The GSG has now integrated the strategic planning and budgeting processes in 13 min- istries, with a central dashboard populated with baseline data to monitor key indicators for tracking progress toward program objectives. Since 2014, the Bank has worked with the GSG to review the legal and institutional framework for RIA, conduct RIA in pilot ministries, and strengthen the capacity of the Romanian administration for evidence-based policy making by carrying out five impact assessment studies in selected institutions. 15. A RAS for Harmonizing State and EU-funded Projects with the Ministry of Regional Development and Public Administration helped redesign the largest state-budget funded investment program, with a portfolio of around EUR8 billion, following best practices of EU-funded operational programs. Multi-annual planning and budgeting, clear prioritiza- tion criteria and simple monitoring and evaluation indicators have now been introduced cov- ering all public investments under the program. 16. The Bank’s RAS program helped to strengthen strategic planning at the local and regional levels. The Ploiești Growth Pole RAS supported the development of an integrated urban devel- opment strategy (IUDS) with a short priority list of projects through 2023. The Ploiești IUDS, 3. 37.6 percent of GDP (in ESA terms) at end-2016 (according to the EU methodology) Annex 9 65 viewed as one of the best sub-national development strategies in Romania since 1989, has served as a model for strategy development in Brașov, Iași, Cluj, Constanta, and Targoviste. More effective inter-municipal investment planning and project selection criteria have been applied in at least three cities. Following support provided under the Spatial Planning RAS, Alba Iulia is promoting inter-municipal planning with nearby cities such as Sebeș and Vintu. Constanta is implementing metropolitan coordination with 15 surrounding localities, and Brașov is working to develop a similar system with Bank support. Three RAS with the munic- ipalities of Constanta, Brașov and Bucharest District 5 are building upon previous work and supporting in strengthening their capacity for capital investment planning and management. CPS Objective 1.4: Enhanced strategy formulation, operationalization and monitoring and evaluation in preparation for the 2014-2020 period and beyond—Achieved 17. The RAS program played a critical role to support strategy formulation and M&E to access EU funds under the 2014-20 period, helping Government meet ex-ante conditionalities in 11 out of 36 areas (Attachment 9) and going beyond initial expectations. Support included diagnostics and the development of strategies in six areas, with five strategies adopted to satisfy ex-ante conditions.4 Additional Bank support also helped Government meet ex-ante conditions for the deinstitutionalization of children, updating of the M&E framework for the National Strategy on the Digital Agenda, and the operationalization and M&E of strategies in the education sector. Another important achievement is the technical assistance provided by the Bank to the development of a web-based guide for the implementation of the national public procurement strategy which contributed to the fulfillment of an ex-ante action highly monitored by the European Commission. CPS Objective 1.5: Improved governance, organizational functioning and efficiency of public institutions and SOEs—Mostly Achieved 18. A performance appraisal system for Government officials managing EU funds is in place. A new performance appraisal system, developed with Bank’s assistance through RAS, has been adopted and applied to Government officials managing EU funds since 2015. The adop- tion and implementation of such system was a critical condition imposed by the European Commission to the Government ahead of the start of the 2014-20 EU programming period for the personnel managing EU funds. 19. Achievements related to the HR management in the Ministry of Public Finance are now being challenged by the recent legislative changes. The MOPF adopted a Human Resources Management (HRM) strategy in 2014 following Bank’s support through RAS. The strategy’s implementation is challenged by the changes to the unitary pay law and changes in the national legal framework by the National Agency for Civil Servants (NACS) are required. Such chal- lenge is expected to be addressed by a new comprehensive RAS on HRM in the civil service. A major objective of this new RAS is to move beyond a piecemeal approach and improve the 4. These included: early school leaving, tertiary education, lifelong learning, active aging, reducing poverty and social inclusion, and investments in education infrastructure (not yet complete). 66 FY19-23 Country Partnership Framework for Romania coordination for implementing the national Strategy to Strengthen the Public Administration (2014-2020). 20. The RAS program facilitated systemic reforms to improve the organizational function- ing and efficiency of public institutions. In the education sector, the Ministry of National Education adopted new regulations for organization and functioning with enhanced account- ability in 2017 covering all units in the ministry and expert-level positions in the pre-univer- sity school system, including school inspectorates in all 42 counties. With support through the Romania Competition Council (RCC) RAS, the RCC revised and adopted a new business architecture to increase operational effectiveness. 21. RAS and an IPF in the judicial sector supported the overhaul of the legislative framework, with the Ministry of Justice updating the civil and criminal codes and related procedural codes. As noted by the 2017 Cooperation and Verification Mechanism (CVM), the adoption of these codes led to the acceleration of court proceedings, greater consistency in judicial deci- sions, and enhanced respect for the right to a fair trial. Civil works completed through the IPF have also improved efficiency with the rehabilitation or construction of 16 courthouses; five pilot courts rehabilitated under the project documented a 77 percent increase in the number of court hearings. The addition of nine council rooms in rehabilitated courts allowed faster proceedings, including allowing accused persons to consult their lawyers in private and to ensure a better protection of minors’ relation with courts. Continued progress is expected under the new Justice Services Improvement Project, approved in 2017. 22. Results of efforts to reform the governance of state-owned enterprises (SOEs) have been mixed, particularly in transport. As part of the DPL-supported reform agenda, the govern- ment has adopted measures to improve the ownership and oversight framework for SOEs, including a new law on the corporate governance of SOEs approved by Parliament in 2016. However, the implementation of the current SOE governance framework is delayed, with only few SOEs using approved procedures to appoint professional boards and management in line with good practice. CPS Objective 1.6: Improved health service delivery—Partially Achieved 23. The main reforms originally envisioned in the Health Sector Reform IPF have not been implemented due to the complex political economy of the sector and frequent changes in leadership of the MOH. The ratio of public and private acute beds per 1,000 inhabitants increased since the end of 2013, partly due to decreases in the population, but mostly due to stalled reforms. No progress was made on introducing a new basic package of services for primary care professionals. 24. Centralized procurement was achieved, and IFC’s commitment of US$15.9 million in Medlife SA, a leading Romanian healthcare provider, helped increase access to affordable and quality healthcare in secondary cities with outpatient consultation, diagnostic test- ing, and day-surgery services. This investment increased Medlife’s reach from 1.9 million to 2.3 million patients served in the CPS period. Annex 9 67 Pillar 2—Smart and Sustainable Growth: Moderately Satisfactory 25. The WBG Program included a mix of instruments to advance progress toward six CPS objectives linked to 15 outcome indicators for smart and sustainable growth, the foun- dation for Romania’s Europe 2020 Strategy. Notable progress was achieved for improving access to finance for micro, small, and medium enterprises (MSMEs); strengthening the legal and regulatory framework for promoting market competition; and helping banks reduce their share of non-performing loans. However, progress in education, insolvency and climate change did not yield adequate results for the respective CPS objectives. CPS Objective 2.1: Creating an improved business environment and a competitive economy— Partially Achieved 26. Doing Business indicators (2018) for paying taxes showed improved performance for Romania from 36 to 14 payments per year, better than the overall ECA average of 16.5, however, the direct contributions by the joint IBRD-IFC advisory services to this change remain unclear. IFC did increase access to finance for MSMEs. Through engagements with financial institutions, IFC provided financial services to 75,000 MSMEs and facilitated more than US$4bn in MSME finance as of end 2016. 27. A new financing and operational framework is being established for the Cadaster Agency to accelerate the process of land registration. Support via the DPL and the Real Estate RAS led to key milestones during the CPS period, including the approval of the operational and financial independence of the National Agency of Cadaster and Land Registration (ANCPI) in 2014 and amendments to the legal framework through Emergency Ordinance (35/2016) for a more streamlined and improved process for the systematic registration. Nonetheless, the current legal framework remains overly complex and the Government has prepared a compre- hensive Law on Cadaster and Real Estate Registration to consolidate and harmonize currently disparate provisions, strengthen ANCPI’s independence and governance structure, and sim- plify registration rules to support a national program for systematic land registration. Coverage of urban real estate registration is on track to be completed by 2023, having expanded from 39 percent at the end of 2013 to 57 percent in 2017. CPS Objective 2.2: Improved performance of the RCC for promoting and enforcing market competition—Achieved 28. The RCC RAS helped enact a revised legal and regulatory framework covering unfair competition, state aid and competition law, with measurable benefits, and a new merger regulation, adopted in 2014, resulted in a 23 percent decrease in average wait times to complete a merger. Adoption of the Competition Law in 2015 eliminated the 40 percent threshold for the presumption of dominance, limited the parties’ right to challenge access to file and confidentiality before the courts, and created the Independent Procedural Officer role separate from the enforcement team within the RCC. 68 FY19-23 Country Partnership Framework for Romania CPS Objective 2.3: Strengthening the effectiveness of skills and education programs for labor market inclusion—Partially Achieved 29. Bank support in education focused mainly on developing strategies and administrative capacity for the Ministry of National Education. RAS activities enabled the adoption of national strategies for reducing early school leaving, tertiary education attainment, and life- long learning, however, their implementation has been slow. This is especially the case of the Strategy to Reduce Early School Leaving, mainly due to delays related to the launch of calls under EU funds, making the national target of 11.3 percent reduction unachievable by 2020. Implementation of the ongoing Secondary Education IPF is nascent and did not produce results during the CPS. 30. Education indicators show mixed results. Overall, tertiary education attainment in Romania has increased, with the share of 30-34-year-olds who have completed a higher education degree increasing from the baseline of 21.8 percent (2012) to 25.6 percent (2016). However, reducing early school leaving has proven more difficult, particularly for women. The share of 18-24-year-olds who have at most lower secondary education and are no longer in any edu- cation or training program increased from the baseline of 17.4 percent (2012) to 19.1 percent (2015) before starting to move in the right direction (18.5 percent in 2016). For women, the rate increased from 2014 (16.7 percent to 2016 (18.7 percent). CPS Objective 2.4: Making it easier for business to enter and exit the market—Mostly Achieved 31. IFC is supporting Romanian banks in their efforts to restructure their balance sheets, reduce non-performing loan (NPL) ratios and cure high volumes of NPLs built up in the aftermath of the financial crisis. As of 31 December 2017, approximately 16,500 NPLs have been resolved from IFC supported projects, helping over-indebted consumer and SME borrowers in Romania to become free of debt and re-enter the financial system. As part of IFC’s Distressed Asset Recovery Program, IFC has co-invested alongside major international investors in five NPL portfolios sold by three of the leading banking groups in Romania. These acquisitions, which include a EUR1.2billion MSME NPL portfolio in 2015 and a EUR600 million consumer unsecured NPL portfolio in 2016, represent landmark transactions in the Romanian and Central and Eastern Europe region and have helped to develop the market for NPLs across Central and Southern Europe. IFC, together with its co-investment partners, has enabled over EUR2.5 billion of NPLs to be removed from bank balance sheets. This has been a significant catalyst in the reduction of the NPL ratio in the Romanian banking system from a high of 24 percent of gross loans in 2014 to close to 7 percent at the end of 2017. 32. IFC has also facilitated market entry through other investments. To help the growth of agri- business and retail sectors, IFC invested in the only financial institution in Romania exclu- sively focused in agriculture financing and in a leading pork producer and processor to help expand its farm and processing facilities and implement environmental, food safety, and ani- mal husbandry best practices. IFC’s food safety advisory program to fruit and vegetable suppli- ers was successfully completed with all 18 Romanian fruit and vegetable farms being awarded GLOBAL G.A.P. (Good Agricultural Practice) certificates. To address bottlenecks to growth and improve access to markets, IFC invested EUR50 million in 2017 in a EUR500 million senior unsecured corporate Eurobond issue for the development of energy efficient property devel- Annex 9 69 opment and acquisitions. In 2016, an IFC investment in transport and warehousing delivered complete logistical solutions, strong contacts, customer loyalty and rigorous cost control. 33. Nonetheless, the WBG program was not able to reduce the time taken to resolve insol- vencies. With support from the JRP since 2012, the insolvency framework and related mech- anisms were strengthened with the first national Insolvency Code, adopted at the start of the CPS period in line with European ROSC standards. The World Bank’s Doing Business data indicate some improvement in terms of recovery rates and distance from the frontier for resolving insolvency; however, indicators for time, cost and outcome have remained stagnant. 34. Critical progress has been achieved for improving the functioning of capital markets. Parliament has adopted amendments to the capital markets law (268/2015) to modernize the regulatory landscape and enhance the governance and accountability of the Financial Supervisory Authority (ASF). CPS Objective 2.5: Enhanced environment and climate action in line with EU requirements—Mostly Achieved 35. RAS assistance provided the foundation for sustainable growth and climate change miti- gation, as well as integrated development for the Danube Delta region. One RAS included inputs for the National Climate Change and Low Carbon Green Growth Strategy for 2016-2020 and the National Action Plan on Climate Change for 2016-2020. Another RAS supported the elaboration of a strategy for the integrated development of the Danube Delta region, one of the most environmentally sensitive ecosystems in Europe. There are delays in implementing the strategies due to the various stakeholders involved and which require greater coordination. An important supplemental product to this effort was the Bank’s completion of the Sustainable Urban Development Guide providing the framework for how EUR1.4. billion in EU funds could be spent during 2014-2023 to drive economic growth aligned with the mandate for enhanced environment and climate action. 36. Bank support has enabled Romania to meet the EU Nitrates Directive. The Integrated Nutrient Pollution Control IPF (INPCP) has achieved important milestones for reducing the discharge of nutrients (nitrogen and phosphorous) into water bodies flowing to the Danube River and Black Sea through integrated eco-friendly agricultural, land and water management practices. The results of the assessment of Romania’s last report to the EU on meeting the EU Nitrates Directive requirements are not yet available. 37. IFC’s subnational investments have contributed to renewable energy and climate change mitigation in municipal services. This included the commitment of long-term financing (US$ 41.9 million) to rehabilitate heating systems and transport infrastructure in Timisoara and Botosani municipalities, and an investment in Cernavodă and Pestera which helped these companies to produce 428.4 Gwh of renewable power generation in 2015, benefiting about 103,000 customers and contributing to the avoidance of 252,656 metric tons of CO2 emissions in 2014. 70 FY19-23 Country Partnership Framework for Romania CPS Objective 2.6: Improved energy efficiency—Achieved 38. Through DPL support and TA, the Bank has helped the Energy Regulatory Authority (ANRE) to complete the liberalization of the nonresidential gas and electricity market, and full liberalization of the residential market was completed in January 2018. Wholesale electricity and gas prices for nonresidential consumers are now determined by market par- ticipants in the energy market via centralized trading platforms. Liberalization of the nonres- idential gas market has led to improvements in energy efficiency and reduced the domestic consumption of gas, with the amount of natural gas traded at centralized platforms increasing from zero in 2013 to 2 billion cubic meters in 2017. 39. Improvements in energy efficiency are also expected to be achieved through the new inte- grated approach to urban development. The Growth Poles RAS applied the Tool for Rapid Assessment of City Energy (TRACE) in seven cities: Ploiești, Brașov, Iasi, Cluj-Napoca, Craiova, Constanta, and Timisoara. Pillar 3—Social Inclusion: Moderately Unsatisfactory 40. Support on social inclusion yielded limited results. The WBG Program included a mix of instruments to advance progress toward two CPS objectives linked to six outcome indica- tors. While most indicators reflected notable progress to tackle social inclusion, the expected implementation of key reforms related to the social assistance system have been delayed beyond the CPS period. CPS Objective 3.1: Support an ambitious and successful government program to tackle social inclusion and poverty reduction of the population including the Roma— Achieved 41. The National Roma Inclusion Strategy was adopted in 2015 using inputs from a RAS diag- nostic study. Another RAS enhanced the administrative and technical capacity of the Roma Education Fund (REF) in Romania and four NGO partners implementing the ‘Ready Set Go’ project. The increased capacity of the REF, particularly related to M&E, is now being applied in other projects with substantial early childhood development components. The RAS Informing Project Evaluation provided knowledge on Roma and non-Roma marginalized communities, challenges and instruments. 42. An ASA engagement resulted in the development of a Roma Filter for mainstreaming Roma-sensitivity across the Bank’s Romania portfolio. Application of the Filter over three fiscal years has confirmed that Roma issues are highly relevant to the Romania portfolio and have cross-GP relevance. In 2017, the Bank formed the Roma Sounding Board (RSB) to serve as a platform for more effective communication and engagement between civil society organ- izations working on the Roma agenda in Romania, the World Bank, and other external stake- holders. The RSB consists of eight civil society organizations active at the national level and eight Roma-organizations active at the local or regional level, with one NGO representing each region of Romania. Annex 9 71 43. Gender-informed activities yielded mixed results. IFC’s work in gender finance has helped a bank establish the first on-lending scheme for women-owned or managed MSMEs. Key find- ings from the 2015 Expanded Project Supervision Report (XPSR) noted that the gender finance tranche of the 2011 loan was “well balanced,” the project enjoyed “active excellent collabora- tion between the IFC portfolio team and the Bank,” and that IFC support helped the client in 2015 become “one of the top contributors to IFC’s Global Banking on Women (BoW) program” . Since 2011, IFC has granted six loans, amounting to EUR 102 million in total, to Garanti Bank and Garanti Leasing, aiming to finance local MSMEs. Moreover, out of the six, five IFC loan agreements targeted to support women entrepreneurship and leadership, and facilitate their access to finance for further business development. In this respect, Garanti Bank and Garanti Leasing received EUR 47.5 million total long-term loan tranches (approximately 76% of these granted during CLR period) allocated to women controlled entrepreneurs and both financial institutions have been offering specific gender finance products. However, the original CPS’s vision of gender as a transversal issue for Bank operations did not materialize, with limited evidence of progress in operations where gender was explicitly addressed (health, social pro- tection, justice) due to implementation delays. 44. At the core of the Government’s agenda to reduce poverty and promote social inclusion is the National Social Inclusion and Poverty Reduction Strategy, developed with the support of the Bank and adopted in 2015. Subsequently the Government passed a comprehensive anti-poverty package of 47 measures to combat poverty that are currently under implemen- tation. Key social inclusion measures – in line with those outlined by the National Strategy and Strategic Action Plan – have been included in various Operational Programs. The Bank’s RAS program informed the preparation of the Human Capital Operational Program (POCU), which addresses challenges of human development in an integrated approach and lays out the funding for the EU programming period 2014-2023. All five ex-ante strategies – on social inclusion and poverty reduction, active aging, early school leaving, tertiary education, and on lifelong learning – along with other strategic documents informed the drafting of Romania’s Partnership Agreement with the EU 2014-2020 document, and their Action Plans provided the basis for POCU. 45. The Bank has provided critical guidance for increasing economic, social, and territorial cohesion in Romania. The Community Led Local Development (CLLD) instrument is a new tool for sub-regional engagement during the 2014-2020 programming period to make more efficient and targeted use of the European Structural and Investment funds by strengthen- ing synergies between local actors and matching the needs of the local area. The RAS for the Elaboration of Integration Strategies for Poor Areas and Disadvantaged Communities pro- duced deliverables that informed the preparation of the CLLD approach. CLLD programs leveraging these Bank deliverables have mobilized more than EUR200 million for local devel- opment under POCU and the Regional Operational Program (POR). 46. The Bank has contributed to the deinstitutionalization of children through the develop- ment of an operational plan and methodology for closing residential centers. A flagship initiative to strengthen social services for child protection was first proposed as part of the National Strategy for Social Inclusion and Poverty Reduction and is now supported by a fol- low-on RAS. The operational plan was approved by the National Authority for the Protection of Child’s Rights and Adoption in 2017, and local authorities will submit proposals to receive funding starting in January 2018. The closure of up to 50 centers is expected to be funded from 2018 to 2020 using the new methodology. 72 FY19-23 Country Partnership Framework for Romania CPS Objective 3.2: A more streamlined, better targeted and more cost-efficient social protection system—Not Achieved 47. Romania has made inadequate progress in reforming its social assistance system dur- ing the CPS period. With support through the FEG-DPL2 and Social Assistance System Modernization Project (SASMP), a minimum inclusion income (VMI) scheme was approved in 2016 with the potential to serve as one of the best pro-poor laws in the ECA region. The VMI consolidates three existing social assistance programs which have high administrative costs and are not targeted well to reach the poorest quintile. However, the Government has recently postponed the implementation of the VMI program until 2019. The Bank has supported the government to better distribute resources following a pro-poor approach, including changes to the means test and eligibility thresholds for various poverty targeted benefits. The effect of parametric reforms implemented through the support of SASMP will likely be evident follow- ing the analysis of the latest household survey in April 2018. 48. Despite these setbacks, promising gains have been made for reducing error and fraud in Romania’s social assistance system and improving performance management. With sup- port from SASMP, Romania has developed a system to reduce error, fraud, and corruption which covers all cash allowances to ensure a more effective distribution of benefits. This is becoming an international best practice. In addition, the restructuring in January 2017 defined new disbursement-linked indicators to accelerate improvements in performance manage- ment for the social assistance system. III. WBG PERFORMANCE 49. The overall assessment of WBG performance is Good. Key shortcomings in the overall pro- gram design were compensated for through adaptive implementation support and a flexible framework that could respond to shifting priorities. Some structural reforms targeted through the IPF portfolio were overly ambitious and the CPS results framework did not act as an effective tool for monitoring progress. Nonetheless, the WBG was proactive in responding to persistent political changes, establishing new selectivity criteria and filters for engagement, rapidly expanding the RAS portfolio to address short-term priorities, and collaborating with the Government to calibrate engagement as needed for better results. Design 50. The CPS provided a flexible, coordinated framework to facilitate and support Romania’s economic convergence with the EU. The CPS objectives were highly relevant for helping Romania achieve key results of the Europe 2020 agenda for smart, sustainable, and inclusive growth. Urgent short-term priorities of the Government focused on meeting the EU ex-ante conditionalities that enable access to EU funds for the 2014-2020 period, and the WBG engage- ment and use of instruments shifted as needed to address these demands. 51. However, the portfolio was too ambitious in undertaking large, complex IPFs designed to be the reform tool for the sector. The frequently changing political environment, turn- over in leadership of key counterpart agencies, and systemic issues in the public adminis- tration presented substantial challenges. For example, the in-depth portfolio review in FY16 Annex 9 73 documented systemic issues related to Romania’s existing public financial control system. The Romanian Court of Accounts (COA) has the authority to verify compliance of the project management unit with Bank procurement regulations and guidelines, as well as to pursue damages in case of non-compliance. Given the threat of strict and inflexible COA inspections, many public institutions have established complex internal approval procedures involving numerous decision points and multiple signatures even for minor transactions. Together, the changes in leadership and persistent systemic challenges help to explain why implementation progress faltered when efforts focused on addressing the key binding constraint in the sector (e.g., for revenue administration, health, social assistance, etc.). 52. IFC’s engagement was strategic to add value in the mix of WBG instruments. Over FY14-18, IFC’s delivery of investment commitments supported primary processors and retail, access to finance for women-owned/ managed MSMEs, the development of the health care sector, cap- ital markets development/ alternative financing, distressed asset relief, sub-national invest- ments which address climate change issues in municipal infrastructure, and energy efficiency. IFC has been a significant player in providing liquidity and risk coverage to banks in the after- math of the crisis by supporting US$547 million over some 640 transactions in trade finance from FY14 to end-December 2017. IFC remains selective in its engagements so that private sector players are not displaced, and its clients are supporting over 25,000 jobs, of which over 60 percent are for women. 53. The development objectives and associated CPS results framework did not adequately reflect the expected impact of the WBG program. Priorities were difficult to decipher amidst the 14 CPS objectives and 43 indicators articulated in the results framework follow- ing the PLR. The absence of clear goals and the proliferation of CPS objectives at the PLR stage made it difficult to discern the main contributions of the WBG program in relation to both country-level goals and the WBG goals focused on ending extreme poverty and boosting shared prosperity. An adequate M&E framework that articulates overall program priorities and monitors progress remains critical for demonstrating success and adjusting program implementation as needed. 54. Overall, the risks identified in the CPS remained relevant and moderate. The political and governance risk was substantial and materialized. Since the elections in December 2016, three governments have been in place. The risk of stop-and-go approach to the unfinished reform agenda, low administrative capacity and vested interests adversely affected the sustainability of some CPS supported reforms. The Bank had a continued dialogue with each government to discuss the short and medium-term priorities. The Bank also worked to mitigate govern- ance shortcomings by scheduling early briefings for incoming officials and working with per- manent staff of relevant ministries as possible to provide program continuity. To mitigate the low institutional capacity, the Bank adapted its approach by shifting from short RAS engage- ments to programmatic and longer-term engagements with built in components on capacity building. Implementation risks materialized but the Bank continued to proactively address them through (i) increased joint supervision with the Government; (ii) the preparation of new detailed project implementation plans, jointly monitored, and (iii) in depth financial man- agement and procurement reviews. Such implementation mitigation measures proved to be adequate and contributed to improved disbursement rate (more than 15% in FY18 compared to 3.9% by the end of FY17). The Bank continued engaging and consulting with a broad range of stakeholders as part of its program to mitigate some of the risks identified in the CPS. 74 FY19-23 Country Partnership Framework for Romania 55. Some measures were included to mitigate risks that materialized during the CPS period. The Bank’s engagement was flexible so that the Bank could prioritize support for public admin- istration reform and strengthening Romania’s capacity to absorb EU funds. The ability to rap- idly expand RAS delivery was a key feature of this flexibility. As the RAS program matured, the selectivity and design criteria were improved by learning from the lessons of previous RAS implementation and the comprehensive evaluation of the RAS portfolio (i.e. shift from input- based agreements to output-based agreements, addition of the Roma filter and other criteria). 56. However, additional mitigation measures could help cover critical risks. Frequent changes in Government and shifting priorities undermined the focus on key reforms. An in-depth look at the political economy could have helped to explain the lack of Government’s will to pursue bold reforms (revenue administration, health) and underscored the need to set less ambitious objectives. In addition, institutional capacity remains a major constraint to devel- opment, a challenge that should have been factored in more during the design stage of ear- lier RAS program. 57. The design of the CPS incorporated important lessons. Following the 2009-13 CPS in Romania, the WBG program was envisioned to continue its evolution from lender to technical adviser and knowledge broker, while keeping still a good mix of instruments, an important role for addressing tensions between short-term challenges and longer-term targets. As a trusted partner of both Romania and the EU, the Bank was well situated to support the EU agenda by helping to improve Romania’s ability to use EU funds and facilitating institutional changes for achieving EU standards. In addition, a citizen engagement review of the Romania portfolio was undertaken to inform this CLR and the forthcoming CPF (Attachment 8). Since corpo- rate requirements were introduced in FY14, all the IPF projects approved by the Board have included a citizen-oriented design, and 75 percent included a beneficiary feedback indicator in the results framework. The quality of this engagement is comparatively strong when com- pared with the ECA portfolio. Implementation 58. Ongoing systematic collaboration and consultation with development partners and other stakeholders has been an integral part of the WBG program implementation. For the DPL series, the Bank collaborated closely with the EC, ECB and the IMF throughout design and implementation; with the European Bank for Reconstruction and Development on SOE‐related issues; with the European Investment Bank (EIB) on public investment man- agement; with the World Health Organization on centralized procurement in health; with UNICEF on the deinstitutionalization of children and Norway Grants on education. The Bank team also discussed reforms with social partners, including unions, business associations, women and Roma communities and stock market participants as well as other stakeholders, including the Parliament and political parties, when appropriate. Similarly, in the example of public procurement reform, the World Bank team for the RAS on Support to the Public Procurement Strategy has worked closely with the EIB team providing advisory support to the National Public Procurement Agency under a separate agreement to ensure consistency and complementarity. 59. The Bank worked proactively to improve implementation during the CPS period. The use of selectivity criteria and filters for continued engagement helped to improve overall portfo- lio performance. During the CPS period, the Bank team actively explored what approaches Annex 9 75 worked best, and one effective approach was to introduce benchmark mechanisms that allow parts of the loan amount to be cancelled if agreed milestones were not reached. The perfor- mance of the Judicial Reform and Health Sector Reform IPF projects improved after such mile- stones were introduced during restructuring. This helped to reinforce the filters used during design related to ensuring adequate implementation capacity and pursuing a more program- matic approach. 60. IFC’s aggregate commitment volume output met what was strategically envisaged. For FY14-18, IFC committed US$1.2 billion, of which US$1.1 billion has been for own account and the balance in mobilization. Of own account commitments, US$684 million has been in long- term finance and the remainder in short-term finance. This performance surpassed the planned range of IFC’s investments of between US$150 million and US$250 million annually. As of end-January 2018, IFC’s committed own account portfolio ranks third in IFC’s Europe & Central Asia region, while NPLs are low. The portfolio amounts to US$579 million across 32 projects. There is just one NPL in the portfolio due to financial troubles the IFC’s investment client encountered caused by corruption charges filed against the client company CEO. 61. IFC adjusted implementation plans given the absence of a functioning PPP Law and lack of adequate institutional capacity to support implementation. IFC’s District Heating PPP advisory engagement with Bucharest was dropped following the completion of the first phase because of the adverse political environment, marked by multiple changes in decision makers and strategies, and a lack of stakeholder consensus as to the structure of the proposed trans- action. Municipal finance issues and the availability of competitively priced finance domesti- cally restricted IFC’s footprint in this space, exemplified by the cancellation of a 2014 loan to Bucharest for the modernization of Romana Square and the decision not to invest in the city’s municipal bond issuance of 2015. 62. The PLR conducted in 2016 was instrumental for reviewing the Bank’s priorities and effec- tiveness within the current country context and refining expectations. The timing of the PLR was set strategically to align with changes in government and with the EU funding cycle. Unfortunately, in a context of Government changes every six months, even though the PLR advocated for a one-year extension of the CPS, insufficient time remained to implement the adjusted program and fully achieve key CPS objectives related to major reforms. 63. To mitigate fiduciary risks, the Bank engaged in regular meetings with the government to take stock of progress in implementing the WBG program. For the growing RAS program, the Bank participated in joint coordination meetings organized by the Ministry of European Funds, exchanged monthly updates, provided annual progress reports on the implementation of the overall RAS program, and conducted an in-depth evaluation of the RAS program for the 2012-2015 period to inform future design and implementation decisions. The Bank also fre- quently consulted the European Commission on specific topics to ensure alignment of views on the content of our program and implementation. 64. CPS implementation relied heavily on the RAS program, which expanded dramatically during the CPS period. In response to evolving short-term needs of the Government, 27 new RAS agreements worth US$71.65million were signed. This led to Romania having the largest RAS program Bank wide in terms of cumulated revenues generated throughout the CPS imple- mentation. The Government’s partnership with the Bank in terms of provision of advisory ser- vices has been reconfirmed through the signing of a new Memorandum of Understanding in 2016, valid until the end of 2023. 76 FY19-23 Country Partnership Framework for Romania 65. The evolution of the RAS program proved critical for supporting effective implementation of the CPS. RAS evolved from short duration engagements of about six months focused on one major output in a single sector to longer, cross-sectoral activities spanning more than two years. Some complex activities required the mobilization of large teams, with coordination and collaboration among experts from different sectors within the Bank and across ministries. Overall, this was a positive change, allowing the engagements to go beyond the production of studies and reports to provide more comprehensive TA and capacity building. This evolu- tion led to a rethinking of time-based agreements for RAS, and the agreement templates were revised starting in 2016 to support an output-based approach instead. IV. ALIGNMENT WITH WBG CORPORATE GOALS 66. Achieving the twin goals of reducing poverty and boosting shared prosperity was a key driver for the design of the CPS. The CPS pillars were informed by the Romania Country Economic Memorandum (CEM) in 2013 that identified a broad set of challenges that would need to be addressed for a more sustainable pattern of growth underpinned by job creation. Building a well-functioning public administration was recognized as a central requirement to overcome inefficiencies and poor quality public investment, as well as shortcomings in the utilization of EU funds. Other priorities informed by the CEM analysis focused on improv- ing the business environment, developing a skilled and innovative workforce, and promoting social protection and social inclusion. 67. The PLR informed modest improvements in the CPS objectives for better alignment with the WBG corporate goals. Some changes in the CPS pillars and objectives were needed to reflect the evolving program. Objectives related to public administration reform were added to articulate the changes targeted for effective public institutions and public financial manage- ment. The strategic pillars of the CPS remained relevant, but the second one was reformulated to reflect broader support for sustainable growth. Added indicators under the Pillar 3 signaled the expanded focus on the social inclusion of vulnerable groups. Nonetheless, the revised results framework—developed to some extent in response to immediate government needs— could have reflected more focused priorities for reducing extreme poverty and increasing shared prosperity. V. KEY LESSONS 68. The WBG can continue to serve as a stable, neutral convener and knowledge broker in Romania to help identify development solutions and provide support for their implemen- tation. Regular communication and coordination with the Government, a flexible engagement through a mix of instruments, and the opportunity presented by the PLR to respond to evolv- ing circumstances all proved critical for effectively serving these roles. The changing scope of the RAS program, which evolved substantially during the CPS period from mainly small, timebound analytical pieces to large and longer duration technical assistance and capacity building tasks, allowed the Bank to respond quickly to client requests for advice and provide support that could not otherwise be funded within the Bank’s own budget. Strategically lever- aging this role to achieve high-priority institutional reforms should be the centerpiece of the WBG program going forward. Annex 9 77 69. The next CPF will need to be built around the growing dominance of RAS in the program. The Bank should continue to explore how best to respond selectively to client demand for new RAS to ensure cohesiveness of the WBG program. The evaluation of the RAS program helped to elucidate lessons for effective collaboration to achieve development objectives. High-level (political) and technical level commitment by the client is necessary but not sufficient. Other key success factors include frequent communication between the Bank and client teams, a local Task Team Leader or senior specialist available on the team to facilitate collaboration, and relevant international expertise to bring in best practice examples. The use of local experts helps to ensure that any diagnosis and examples are appropriate for the current context. 70. More effective engagement will require a sharper focus with more clearly articulated WBG priorities. The Government’s urgent focus on short-term needs limited the opportu- nities for defining a longer-term vision, and the broad and ambitious reform agenda made it difficult to foster and maintain adequate client ownership for each of the CPS objectives. Instead, the next CPF should target a management number of objectives and results indica- tors that can be more directly linked to WBG interventions. In general, progress under the CPS was achieved through the pursuit of modest objectives planned in sequence. Continuity in engagements or helping to leverage follow-on support for Government’s specific priorities where the WBG offers comparative advantage has proven most effective for helping to ensure sustainable results. 71. Careful deliberation is needed for the right selection of WBG instruments to achieve development objectives. Complementarity and coordination across different engagements provided effective support for some reforms, such as those focused on strengthening debt management and strategic planning within the public administration. The articulation of a WBG CPF provides an important opportunity to plan a coordinated response to ensure the complementarity across IBRD and IFC engagements, with possibly also strategic participation by MIGA to support private sector development. 72. Continual attention should be paid to implementation support under the new CPF. Supply- side achievements such as the adoption of new laws and strategies are not sufficient alone for facilitating sustainable institutional changes. Regular communication with government counterparts, the identification and enabling of champions, hands-on technical assistance, and other implementation support will likely prove critical for achieving needed institutional reforms. 73. The Romania program has provided good practice examples at the subnational level which have been used or replicated in other EU countries. Relative political stability at the local level allowed the Bank to more effectively contribute to and pilot new approaches and resources for regional development. As a convener and knowledge broker, the Bank has been well positioned to facilitate a multiplier effect by helping to disseminate lessons and guid- ance, both within Romania and to other EU member states. The city of Constanta pursued its own funding sources to engage with the Bank on integrated urban development planning and inter-municipal coordination. Regional development approaches are being replicated in Poland. Investment guides developed with Bank assistance helped Romania to prioritize investment at the local level, and these are now available to inform investment decision-mak- ing at the local level in other EU countries. 74. IFC has faced challenges in supporting the development of PPPs and in expanding munic- ipal finance partnerships. An overarching issue in enabling IFC to support the development 78 FY19-23 Country Partnership Framework for Romania of PPPs in Romania is the absence of a functioning PPP Law, as well as lack of the associated institutional capacity to support implementation. Furthermore, governance quality issues and frequent political turnaround also affect municipalities’ commitment to a PPP agenda. IFC’s District Heating PPP advisory engagement with Bucharest was dropped following the comple- tion of the first phase, because of the adverse political environment within the administration of the municipality, marked by multiple changes in decision makers and strategies, and a lack of stakeholder consensus as to the structure of the proposed transaction. In municipal finance issues such as governance, as well as availability of competitively priced finance domestically, have proven to restrict IFC’s footprint in this space, exemplified by the cancelation of a 2014 loan to Bucharest for the modernization of Romana Square and the decision not to invest in the city’s municipal bond issuance of 2015. 75. Finally, in the next CPF cycle, it will be critical to undertake the PLR in a timely manner to assess implementation with sufficient time remaining to implement the recommenda- tions. The opportunity for midcourse corrections gains importance in the context of persistent political instability and should be supplemented with other mitigation measures as possible. Key priorities of the WBG program should be articulated by clear CPF objectives, underpinned by specific political economy analysis as needed, and revisited through the PLR to help ensure optimal WBG contributions to development outcomes in Romania. Indicators will be chosen carefully to measure the achievement of objectives, with relevant sources of information and with an evident link to WBG program. Annex 9 79 Attachment 1. Updated CPS Results Matrix Status of CPS Objectives and Indicators5 WBG Program Pillar 1: Creating a 21st Century Government—Moderately Satisfactory CPS Objective 1.1: Revenue and expenditure administration improved - Partially Achieved (i) Revenue Management System is procured – not met WBG completed activities • Procurement of the RMS will not be completed during this CPS period, DPO Development Policy Operation as planned. The RAMP project is in problem status and under review for potential cancellation or restructuring. Fiscal Effectiveness and Growth DPL(s) • It is directly supported by our IPF on Revenue Administration RAS Better Solution for Clarifications, Modernization Project and ASA Interpretations and Rulings on Tax Issue (ii) Framework for introducing results informed budgeting, (Baseline RAS Fiscal Policy Formulation 2013: no framework; Target 2018: framework in place) – partially met (on RAS Developing an Integrated Financial track to be met before end FY18) Management System in MARD • Framework for results-informed budgeting has been drafted by the end of 2017 and it is in the process of clearances and approvals within RAS Enhancement of Risk Based Systems the Government; adoption is expected before end FY2018; internal of the POSDRU organizational matters related to its implementation were adopted ASA Policy note on health • Supported directly by the RAS program with MoPF, GSG and Bank- TF Strengthening Financial Accountability financed ASA ASA Public Finance Review (iii) Centralized procurement introduced for health medicine (2014: 0; 2017: yes) - met WBG ongoing activities • MoH approved a centralized procurement plan for 2016, which IPF RAMP project included 31 antibiotics and 12 oncology medicines. The price for centrally procured drugs and devices decreased from average unit price IPF Health Sector Reform project of Ron 22.2 (baseline 2015) to average unit price of Ron 20.0 (2017).6 RAS Constanța Urban Development • Supported directly by the FEG-DPL II RAS Bucharest District 5 Urban (iv) IFC investments in sub-nationals (Yes/No) - met Development • Yes--IFC committed long-term financing (U$ 41.9 M) to rehabilitate WBG Pipeline Activities heating systems and transport infrastructure in Timisoara and Botosani municipalities RAS Brașov Urban Development • Directly supported by the IFC program IFC – PPPs - investments at subnational level CPS Objective 1.2: Strengthened debt management – Achieved Debt management strategy adopted and updated yearly in line with best WBG completed activities practice (Yes/No) – met DPO Fiscal Effectiveness and Growth • Yes--Romania’s Public Debt Management Strategy for 2014-2016 DPL(s) was confirmed by the EU and IMF as being aligned to international ASA on developing government yield sound practice as defined by the Public Debt Management Guidelines curve produced jointly by the World Bank and IMF. Strategy is updated annually since 2015, and public debt remains manageable. A fully RAS Strengthening Debt Management electronic auction system for the primary government securities WBG ongoing activities market also became fully functional in 2014 with an interface with RAS Swap Transactions the debt management system to provide real-time access to primary market data. FEG-DPL2 supported the implementation of an electronic trading and quoting platform for the secondary market to strengthen cash and liability management which was launched in January 2017. • Directly supported by the DPL and completed and ongoing RAS 5. Unless otherwise specified, indicators reflect target for 2018 6. Baseline was moved to 2015 because the National Catalogue for Medicine Prices was significantly revised in 2015. The average unit prices are calculated for the basket of medicines included in the 2016 centralized procurement plan for antibiotics and oncology drugs, excluding VAT. 80 FY19-23 Country Partnership Framework for Romania Status of CPS Objectives and Indicators WBG Program CPS Objective 1.3: Improved strategic planning, prioritization and evidence based policymaking – Mostly Achieved (i) Development and use of a central dashboard in the Chancellery of WBG completed activities the Prime Minister for monitoring high-level ISP priorities of selected TF IDF grant for M&E of Policy Making ministries – met • Central dashboard developed within the General Secretariat of the RAS Analysis of Capacity Building Government and functional since June 2017; it has been populated Activities in Public Administration with baseline data for high-level ISP priorities in 13 ministries and is RAS Strengthening RIA Framework in used by the GSG. The reporting on ISP implementation expected to Romania start in mid-2018 RAS Support to Establish a Delivery Unit (ii) Simplified framework for more effective implementation of regulatory RAS Danube Delta Sustainable analysis –met Development Strategy • Regulatory Impact Assessment framework updated. Prime Minister decision 297/2016 adopted and published in the Official Journal on RAS Ploiești Growth Pole updated guidance for filling in the public policy proposal following WB RAS PPP in transport recommendations under the RIA RAS. RAS Strengthening Strategic Planning in (iii) 100% of public investment projects selected based on improved the Transport Sector evaluation and selection criteria under PNDL (from 0 to 4000 projects RAS Enhance Spatial Planning amounting EUR90M) - met • All projects selected under the PNDL program since 2016 are assessed RAS Update Growth Poles using a new set of selection criteria. Ministerial Order 947/2015 RAS Strategic Planning for the Agricultural updated the guidance on implementation of the PNDL and introduced Administration the selection criteria. MDRAP website published in January 2018 the list of priority investments counting 6,814 intervention projects across ASA Assistance to Alba Iulia Romania. This list was approved on January 17, 2018 by Minister’s order. RAS Harmonizing EU and state budget • Through the regional development RAS program, the Bank provided funded projects recommendations on prioritization of investments, introducing RAS Public Investment Management multiyear budgeting, budgeting by program and proposed selection criteria options; the client(MDRAP) has adopted all our RAS regional development program recommendations except for the selection criteria which only partially RAS National Framework for Public followed the Bank’s recommendations. Investment Projects (iv) More effective intermunicipal investment planning and project selec- RAS Integration of urban marginalized tion criteria applied in at least three cities - met communities • The Bank has been supporting municipalities of Alba Iulia, Constanta, ASA Knowledge mapping Ploiești, Brașov through RAS engagements and Bank-financed technical assistance on strategic planning and prioritization of investments. The ASA/MRA Roads Safety cities have access to EU funds but had limited knowledge on how to plan TF Strengthening Financial Accountability and prioritize. Based on World Bank’s recommendations and technical of the Public Sector (Dropped) assistance, Alba-Iulia is promoting now inter-municipal planning with ASA Public Finance Review nearby cities such as Sebeș and Vintu; Constanta is implementing metropolitan coordination with 15 surrounding localities; Brașov WBG ongoing activities currently developing similar system and benefiting from WB support DPO Fiscal Effectiveness and Growth (v) Digital maps drive investments for increased access to broadband – DPL(s) partially met RAS Assistance for the Strategy Unit • New mapping tool was developed and used to identify tailored solutions for matching broadband supply and demand; however, no RAS Development of the Capacity of the funding available to use maps and implement solutions. Central Administration for Impact Studies • The Bank supported the development of the M&E Manual for digital RAS Planning and Budgeting Capacity agenda that allowed the Government to meet the ex-ante conditionality RAS Support to Public Procurement for the use of the European Funds for 2014-2020. In addition, the Strategy Bank conducted a thorough market and competition analysis of the Romanian ICT markets, studied the country specificities and carried RAS Constanța Urban Development out a restricted but transparent consultation process with the private IFC – PPPs and public ICT stakeholders. This exercise resulted in a coverage gap WBG pipeline activities analysis identifying uncovered areas, categorizing different level of public interventions needed to expand coverage (e.g. regulatory, legal, RAS Brașov Urban Development financial), and finally highlighting regulatory constraints to be removed IPF Ploiești-Brașov Motorway Preparation to facilitate the deployment of broadband infrastructure. Annex 9 81 Status of CPS Objectives and Indicators WBG Program CPS Objective 1.4: Enhanced strategy formulation, operationalization and monitoring and evaluation in preparation for the 2014-20 period and beyond - Achieved (i) Five strategies adopted and contribute to Government’s meeting EU WBG completed activities ex-ante conditionalities for accessing EU funds under the 2014-20 period RAS Romania Judicial Functional Review (2013:0,2018:5) - met • The Bank provided input into drafting the strategies, corresponding RAS Danube Delta Sustainable action plans for strategies have been developed together with the client Development Strategy institutions and based on Bank’s recommendations. The adopted RAS Climate Change strategies were: RAS Assistance for Strengthening the Agri- • National Strategy for reducing the early school leaving – adopted food Sector Strategy Formulation on June 19, 2015 (Government decision 439/2015) • National strategy for enhancing lifelong learning - adopted on June RAS Enhanced Spatial Planning 3, 2015 (Government decision 418/2015) RAS Strengthening Debt Management • National strategy for enhancing the tertiary education attainment - RAS Assistance to the Cadastre Agency adopted on July 28, 2015 (Government decision 561/2015) • National strategy for promoting social inclusion and poverty RAS Early School Leaving Strategy reduction - adopted on May 27, 2015 (Government decision RAS Tertiary Education Strategy 383/2015) • National strategy for promoting active aging - adopted on July 15, RAS Lifelong Learning Strategy 2015 (Government decision 566/2015 RAS Social Inclusion and Poverty • All ex-ante conditionalities that included the five strategies have been Reduction Strategy fulfilled by the end of 2016. On November 11, 2016, the European RAS Active Aging Strategy Commission confirmed the fulfilment of conditionalities through a press release. RAS Digital Agenda • Another important achievement is the staged development of the web- ASA Assistance to Alba Iulia based guide for the implementation of the national public procurement RAS Ploiești Growth Pole strategy which contributed to fulfilment of an important ex-ante related to public procurement ASA Public debate on the priorities in the • Five RAS supported directly the drafting of the above-mentioned Romanian agri-rural space strategies. RAS Informing Project Evaluation • The RAS program contributed to the fulfilment of actions related WBG ongoing activities to eleven out of 36 conditionalities for Romania, in the following areas: early school leaving, tertiary education, lifelong learning, IPF Romania Secondary Education Project social inclusion and poverty reduction, active aging, education RAS Education Infrastructure Strategy infrastructure, children deinstitutionalization, public procurement, public administration, digital agenda, Roma inclusion. RAS M&E of the strategies in education • Two follow up RAS are now being carried out to enhance the capacity RAS Enhance Quality Assurance in Higher of the relevant ministries (Ministry of Labor, Ministry of Education and Education System in Romania related agencies) for monitoring and evaluation of these strategies RAS Supporting the Implementation which are now implemented. The implementation of the strategies is of Romania’s Human Development ongoing, in some cases with some delays. Operational Programme 2014-2020 (ii) M&E framework updated for the strategy on digital agenda - met RAS Constanța Urban Development • The digital agenda RAS supported directly the preparation of the M&E framework for the national strategy for digital agenda. Bank’s RAS Brașov Urban Development recommendations have been fully integrated in the M&E framework RAS Romania: Developing a Unitary approved by the Ministry of Communication and Information Society. Human Resources The European Commission assessed as fulfilled the related ex-ante conditionality upon the finalization of the M&E framework (press release of the Commission on November 11, 2016 CPS Objective 1.5: Improved governance, organizational functioning and efficiency of public institutions and SOEs - Mostly Achieved (i) MoPF Human Resources Management strategy adopted and in imple- WBG completed activities mentation – partially met IPF CESAR • MoPF HRM strategy adopted through the Minister of Finance’s Order no. 564, dated July 10, 2014 but its implementation has now IPF Judicial Reform Project been challenged by the latest unitary pay law. Changes to the legal TF Strengthening Financial Accountability framework by NACS are needed RAS Establishment of a Performance • The HR strategy was a direct result of the Bank’s assistance to the Appraisal System for Government Officials Ministry of Finance through RAS. The changes further needed to the Managing EU Funds legislation by the National Agency for Civil Servants is supported by the Bank through a RAS on enhancing the national HR management RAS Implementation of an Internal system Management System at the MARD and its Subordinated Structures 82 FY19-23 Country Partnership Framework for Romania Status of CPS Objectives and Indicators WBG Program (ii) Performance appraisal system adopted and applied to Government RAS Developing an Integrated Financial officials managing EU funds –met Management System at the MARD • New performance appraisal system adopted in August 2015 and RAS Strategic Planning for the Agricultural implemented to date. Its sustainability has been challenged by the Administration amendments to the new pay law effective January 1, 2018. Specific amendments to the unitary pay law have been made for staff managing RAS Improvement of HR Management EU funds such that the performance management system remains in for MoPF place. RAS Fiscal Policy Formulation • The performance system and performance indicators were developed RAS A Better Solution for Providing through RAS engagement. The Bank will continue to support the Clarifications, Interpretations and Rulings HR management reform agenda under the next CPF through a RAS on Tax Issue recently signed and which will provide recommendations on the HR system for the next two years RAS Administrative Capacity of the MoESR (iii) Improved delegation of authority capacity in the MoESR piloted and RAS Assistance to the Competition new Regulations for Organization and Functioning (ROFs) adopted - met Council • Improved delegation of authority capacity in the MoNE piloted and RAS Assistance to the Cadastre Agency new ROFs adopted (September 16, 2015, through a Minister’s Order) RAS Strengthening Public Investment for organizational units at the MoNE and all job holders in the school Management system at the management and expert levels. The ROFs continued to be applied since their adoption. Moreover, the next Minister integrated RAS MA-IB Collaboration even more the Bank’s recommendations and the updated ROFs were RAS Strengthening Debt Management approved through Minister’s Order no.3748 dated May 9, 2016 and used in this 2016 format. RAS Enhanced Spatial Planning • Recommendations on improving the delegation of authority and the ASA Assistance to the Financial piloting were provided through RAS activities. The recommendations Surveillance Authority were internalized by the Ministry of Education and are still implemented RAS Strategic planning in transport (iv) RCC revised and adopted business architecture to increase opera- RAS Preparation and implementation of tional effectiveness - met PPP in the transport sector • Operational effectiveness improved in RCC after recommendations of the Bank were incorporated to restructure the business architecture ASA Roads safety • The time to process complaints has been reduced because of ASA Anticorruption the business architecture adjustments for increased operational WBG ongoing activities effectiveness adopted by the RCC management following the RAS recommendations. Such changes were the direct result of the support RAS Strategy Unit provided by the Bank to the Romanian Competition Council through ASA Assistance to ASF RAS RAS Education Infrastructure Strategy • RAS recommendations under the assistance to the Romanian Competition Council led to the adoption of a new merger regulation RAS M&E of the strategies in education on September 30, 2014, allowing for the more efficient use of fast- RAS Deinstitutionalization of Children track procedures. This resulted in an average length of 1.8 months to complete a merger case in 2014, representing a 23 percent decrease in RAS Swap Transactions the amount of time required compared to 2013. RAS Public Procurement Strategy (v) Increase in court hearings in courts rehabilitated and increase in IPF Justice Services Improvement Project number of council rooms since 2014 - met RAS TA to Enhance Quality Assurance in • 16 courts have been built or renovated since 2014; the total number of Higher Education System in Romania court hearings has been tracked in 5 of the renovated courts to show an increase of 77% over 2008 baseline. Nine additional council rooms have RAS Constanța Urban Development been added (128%) since 2010. ASA TA to increase the capacity building • Support has been provided directly by the Bank through IPF (Justice for assessing the impact of state aid Reform project, justice services improvement project) schemes (vi) Law adopted on SOEs corporate governance (to approve the Emer- ASA Transport SOE Sector Note gency Government Ordinance 109/2011) in line with OECD principles ASA Status Review of the National (baseline 2014: drafted; target 2017: adopted) – met Program for Cadastre and Land Book • Government has adopted various measures to improve the ownership and oversight framework for SOEs and clarify the roles ASA Public Finance Review and responsibilities of public institutions involved. This includes new RAS Supporting the Implementation of law on corporate governance of SOEs approved by the Parliament in Romania’s POCU 2014-2020 May 2016. However, implementation of the law is lagging the expected timeline. ASA Capital Markets Supervision • Support in legislation preparation has been provided through RAS and WBG pipeline activities DPL RAS Brașov Urban Development RAS Romania: Developing a Unitary HR management system IPF Justice District / Esplanada Project IPF Ploiești-Brașov Motorway Preparation Annex 9 83 Status of CPS Objectives and Indicators WBG Program CPS Objective 1.6: Improved health service delivery - Partially Achieved (i) Reducing the ratio of public and private acute beds per 1,000 inhabit- WBG completed activities ants from 5.5 to 4.8 (by 2018) – not met DPO DPL DDO • Ratio of public acute beds per 1,000 inhabitants has not been reduced to 4.5 (from baseline of 5.5 in December 2013). In 2014 the ratio WBG ongoing activities increased to 5.8 and to 5.9 in 2015 and 2016, this being generated by the IPF Health reform project increase in the number of beds and the sudden decrease in population. ASA Supporting the role of regional • Progress in implementing the Health reform project was limited hospitals in Romania (ii) Introducing a new basic package of health care services with addition- IFC investments al roles and payment incentives for primary care professionals – not met • No new basic package of health care services with roles and payment incentives for primary care professionals will be introduced during the CPS period. (iii) centralized procurement introduced for health medicine (2014: no; 2018: yes) - met • MoH approved a centralized procurement plan for 2016, which includes antibiotics and oncology medicines. Average unit price for centrally procured drugs and devices decreased from Ron 22.2 (baseline 2015) to average unit price of Ron 20.0 (2017). (iv) IFC’s health sector investments - met • IFC committed investment of U$ 15.9 M in Medlife SA, a leading Romanian healthcare provider, to increase the supply of high quality hospital services in Romania. This investment increased the outreach provided by Medlife from 1.9 million to 2.3 million patients served in the CPS period. IFC also supported Medlife becoming the first healthcare company to be successfully listed on the Bucharest Stock Exchange in December 2016, which was also the largest IPO of a private company that had ever taken place on the stock exchange. Pillar 2: Smart and Sustainable Growth—Moderately Satisfactory CPS Objective 2.1: Creating an improved business environment and a competitive economy - Partially Achieved (i) Improved performance in Doing Business indicators that meets the WBG completed activities current ECA averages in paying taxes (Number of payments reduced from RAS Assistance to the Romanian 36 to 29) - met Competition Council • Doing Business indicators for paying taxes in Romania reduced from 36 to 14 per year and is below ECA average of 16.5. RAS Real Estate Basis for National and EU • However, the direct contribution of the WB program to this change Policies during the CPS period is unclear. The DPL and RAS engagements RAS Competitiveness enhancement and introduced a new framework for regulatory impact assessment (RIA) smart specialization which has been piloted but not widely implemented. RAS Strengthening RIA Framework • IFC’s efforts to foster a competitive economy by supporting the development of the private sector in Romania included improving RAS Digital Agenda access to finance for underserved MSMEs. Engagements with ASA Assistance to the Financial financial institutions provided financial services to 75,000 MSMEs Surveillance Authority as of end 2016. IFC’s investments also include a US$55 million loan ASA Subnational Doing Business to support mortgage lending and help expand access to finance for prospective home owners, as well as the first local currency loan to ASA Smallholder Inclusion in Agri-food a leasing company to help the sustainable development of Romania’s Value Chains growing leasing market. WBG ongoing activities • The subnational Doing Business study completed for Romania in 2017 documented notable variations in business regulations and DPO Fiscal Effectiveness and Growth their implementation at the local level, highlighting the potential for series Romanian cities to replicate good practices. IPF RAMP project (ii) updated framework for integrated cadaster system (2015: law of 1996 RAS Development of the Capacity of the applicable; 2018: adoption of the new Cadaster law to set framework for Central Administration for Impact Studies the integrated approach) - partially met ASA Follow up to Assistance to the • Government adopted Emergency Ordinance 35/2016 amending Financial Surveillance Authority Law 7/1996 on cadaster and real estate registration to accelerate the implementation of the National Program for Cadaster and Land Book RAS Constanța Urban Development that should be implemented during 2015-2023. However, the current ASA Status Review of the National legal framework is overly complex, and the Government has prepared a Program for Cadastre and Land Book comprehensive Law on Cadaster and Real Estate Registration to 84 FY19-23 Country Partnership Framework for Romania Status of CPS Objectives and Indicators WBG Program • consolidate and harmonize currently disparate provisions, strengthen RAS Brașov Urban Development ANCPI’s independence and governance structure, and simplify ASA Laser Valley registration rules to support a national program for systematic land registration. This new law has not yet been approved. WBG pipeline activities • A RAS supported ANCPI with inputs to the framework and IPF Justice District / Esplanada Project recommendations on how to strengthen institutional capacity through IFC sub-national financing. a functional review CPS Objective 2.2: Improved performance of the RCC for promoting and enforcing market competition - Achieved (i) An updated Competition Law is adopted - met WBG completed activities • RAS assisting the Romanian Competition Council provided RAS Assistance to the Romanian recommendations that informed a new competition law which was Competition Council prepared and adopted in 2015. Changes include eliminating the 40 percent threshold for the presumption of dominance; limiting the parties’ right to challenge access to file and confidentiality before the Courts; and creating the Independent Procedural Officer role specialized in the disposition of access to file, confidentiality and other procedural matters separate from the enforcement team within the RCC. (ii) A new merger regulation adopted - met • RAS recommendations to the Romanian Competition Council led to the adoption of a new merger regulation on September 30, 2014, allowing for the more efficient use of fast-track procedures. This resulted in an average length of 1.8 months to complete a merger case in 2014, representing a 23 percent decrease in the amount of time required compared to 2013. CPS Objective 2.3: Strengthening the effectiveness of skills and education programs for labor market inclusion. - Partially Achieved (i) Increasing the share of 30-34-year-olds who have completed a higher WBG completed activities education degree from the 2012 baseline of 21.8% - met RAS Reducing Early School Leaving • The share of 30-34-year-olds who have completed a higher education degree increased from the 2012 baseline from 21.8% to 25.6% (2016). RAS Tertiary Education • The RAS program has supported only the preparation of the strategy RAS Lifelong Learning for increasing the tertiary education in Romania, the implementation RAS Administrative Capacity of the MoESR of this strategy is ongoing. However, it is difficult to link the WB program to the evolution of the indicator and the Bank did not have RAS Preparation of a Draft National Strate- any intervention that would directly affect the evolution of the share of gy Regarding Elderly and Active Aging 30-34-year-old who have completed a higher education degree. ASA Europe 2020 Romania: Evi- (ii) Reducing early school leaving (share of 18 to 24 years old who have at dence-based Policies for Productivity, most lower secondary education and are no longer in education or train- Employment, and Skills Enhancement ing) from 2012 baseline of 17.4% - not met RAS Support to the Roma Education Fund • The share of 18 to 24 years old who have at most lower secondary for the Implementation of “Ready Set Go” education and are no longer in education or training has increased WBG ongoing activities from 2012 baseline of 17.4% to 18.5% (2016). • The RAS program has supported only the preparation of the strategy for IPF Romania Secondary Education Project reducing early school leaving in Romania; the implementation of this RAS Assistance for Education Infrastruc- strategy is ongoing. However, it is difficult to link the WB program to the ture evolution of the indicator and the Bank did not have any intervention that would directly affect the evolution of the share of 30-34-year-old RAS Assistance for Capacity Development who have completed a higher education degree. These results did not for Monitoring and Evaluating the Imple- depend on WB activities given that the Bank was not involved in the mentation of Education Strategies implementation of strategy per se. ASA TA to Support Design of a Youth Em- ployment Intervention for Roma Youth ASA Agriculture Sector Engagement in Romania CPS Objective 2.4: Making it easier for business to entry and exit the market - Mostly Achieved Indicators set for this objective focus mainly on exiting the market rather WBG completed activities than entry and only limited progress was achieved under CPS implemen- ASA Banking Sector – Romania Outlook tation for reducing the time for resolving insolvencies. ASA on insolvency and credit rights (i) Adopting a new insolvency code in line with the ROSC principles - met ASA Subnational Doing Business Annex 9 85 Status of CPS Objectives and Indicators WBG Program • Based on ongoing efforts since 2012, a new law regarding insolvency ASA Capital Market Supervision proceedings (law 85/2014) was adopted near the start of the CPS period Enhancement (July 2014) that follows best practice guidelines set at an international ASA Romana FSAP Update level by the UNCITRAL Legislative Guide on Insolvency Law, the Principles and Guidelines for Effective Insolvency and Creditor WBG ongoing activities Rights System established by the World Bank and the “Report on DPO fiscal effectiveness and growth the observance of standards and Codes” (“ROSC”). This reform was IFC investments supported by the Judicial Reform project. (ii) Reducing the time taken to resolve insolvencies from 3.3 to 2.75 years – not met • 2018 Doing Business indicator shows that the time taken to resolve insolvencies remains at 3.3. (target not met). Several factors influence the time to resolve insolvencies and limited action has been taken in this area as part of the WBG program. (iii) Supporting Romanian financial institutions in the disposal of their non-performing portfolio (at least 3000 NPLs from the acquired portfolio to be resolved by 2020, from a baseline of 0 as of 2015) - met • IFC has co-invested alongside major international investors in five NPL portfolios sold by three of the leading banking groups in Romania. These acquisitions, which include a EUR1.2bn SME NPL portfolio in 2015 and a EUR600m consumer unsecured NPL portfolio in 2016, represent landmark transactions in the Romanian and CEE region and have helped to develop the market for NPLs across Central and Southern Europe. IFC, together with its co-investment partners, has enabled over EUR2.5bn of NPLs to be removed from bank balance sheets. This has been a significant catalyst in the reduction of the NPL ratio in the Romanian banking system from a high of 24% of gross loans in 2014 to close to 7% at the end of 2017. As of 31 December 2017, approximately 16,500 NPLs have been resolved from IFC supported projects, helping over-indebted consumer and SME borrowers in Romania to become free of debt and re-enter the financial system. (iv) Amendments to the capital markets law approved – met • Parliament has adopted amendments to the capital markets law (Law 268/2015) to modernize the regulatory landscape and enhance the governance and accountability of the Authority for Financial Surveillance (ASF). CPS Objective 2.5: Enhanced environment and climate action in line with EU requirements - Mostly Achieved (i) Climate change strategy updated and adopted – met WBG completed activities • Government approved the National Climate Change and Low Carbon RAS Climate Change and Low Carbon Green Growth Strategy for 2016-2020 and the National Action Plan on Green Growth Program Climate Change for 2016-2020 through Government Decision 739/2016 • Direct assistance provided by the Bank through the Climate change RAS Danube Delta Integrated Sustainable RAS for the development of the background studies and development Development Strategy of the strategy and its action plan RAS Capacity Development of ADI ITI (ii) Danube Delta sustainable development strategy updated and adopt- Danube Delta ed - met ASA Advice on Implementing EU Water • Danube Delta Integrated Development Strategy was approved via Directive Government Decision 602/2016 TF Afforestation of Degraded Agricultural • Direct assistance provided by the Bank through the Climate change Land Proto-Carbon RAS for the development of the background studies and development of the strategy and its action plan WBG ongoing activities (iii) Favorable assessment of the EU on meeting the EU Nitrates Directive IPF INPCP requirements across the country – partially met ASA Diagnostic of Romania Water Sector • Romania received a favorable assessment from the EC for 2008-2011 ASA Accelerating DRM and climate and expects a favorable assessment for 2012-2015 given continued resilience in Romania through policy investments with INPCP support. The next assessment will be available reform, investment in risk reduction and during the next CPF. The INPCP project target for nutrient load civil society engagements reduction (600 tons of nitrogen/year) is expected to be achieved at the beginning of the next CPF. WBG pipeline activities • The EU Environmental Implementation Review Country Report – IPF Strengthening Disaster Risk ROMANIA of the European Commission (February 3, 2017) appreciated Management in Romania Government’s initiative to apply a whole territory approach instead of nitrates vulnerable zones, and that there are IPF Building Disaster and Climate Resilience in Romania 86 FY19-23 Country Partnership Framework for Romania Status of CPS Objectives and Indicators WBG Program • significant improvements: “Since 2013, Romania has a revised action programme in place implementing the nitrates directive and applying to the whole national territory. The revised legislation has brought significant improvements as compared to the previous action programme implementing the Nitrates Directive. The Romanian authorities decided to apply whole territory approach instead of nitrate vulnerable zones designation and changed some measures of the Action Programme, with significant improvements.” CPS Objective 2.6: Improved energy efficiency – Achieved Outcome indicator: WBG completed activities (i) Tool for rapid assessment of city energy for growth poles in place - met RAS Regional development program • TRACE studies served as basis for the development of integrated urban ASA Subnational Doing Business development tools in 7 growth poles: Ploiești, Brașov, Iasi, Cluj-Napoca, Craiova, Constanta and Timisoara. WBG ongoing activities (ii) Orders issued by ANRE to fully liberalize the nonresidential gas and DPO fiscal effectiveness and growth electricity market - met ASA Romania: Assessment of the • Deregulation of the energy market was done ahead of schedule, with Challenges and Prospects of the District nonresidential gas and electricity markets already liberalized and full Heating System liberalization of household market completed in January 2018. Pillar 3: Social Inclusion—Moderately Unsatisfactory CPS Objective 3.1: Support an ambitious and successful government program to tackle social inclusion and poverty reduction of the population including the Roma - Achieved (i) An updated national Roma strategy adopted and implemented. – met WBG completed activities • The National Strategy for promoting Roma inclusion was adopted on DPL Fiscal Effectiveness and Growth January 14, 2015 through Government Decision no. 18/2015 • The RAS diagnostic study provided inputs for the National Roma RAS Elaboration of Integration Strategies Integration Strategy. Several programs supporting Roma communities for Poor Areas and Disadvantaged are planned or under implementation under Priority Axes 3-6 of the Communities Human Capital Operational Programme. Between FY15 and FY17, RAS Study on Diagnostics and Policy the Roma Filter has been systematically applied to the WBG Romania Advice for Roma Integration country portfolio, with focus in the third year on targeted support to RAS Harmonizing RAS two new projects identified to be high impact for increased attention to the Roma agenda, including the INPCP (additional financing) and the RAS Social Inclusion and Poverty Justice Services Improvement Project. Reduction (ii) National strategy on social inclusion and poverty reduction is adopt- RAS Support to the Roma Education Fund ed and implemented (baseline: no strategy in 2014; target: adopted by for the Implementation of the “Ready Set 2016) - met Go” Project in Romania • The National Strategy for Social Inclusion and Poverty Reduction WBG ongoing activities was adopted in May 2015, and the Government subsequently ASA Support for Roma Partnership passed a comprehensive anti-poverty package with 47 measures. Implementation is ongoing and key social inclusion measures, in line RAS Deinstitutionalization of Children with those outlined by the strategy, have been included in operational ASA Technical Assistance to Support programs. Design of a Youth Employment • Support for the elaboration of the strategy has been supported through Intervention for Roma Youth a RAS and other ASA. RAS Supporting the Implementation (iii) Mapping of urban marginalized communities inform the preparation of Romania’s Human Development of priorities and Operational Programs for 2014-20 - met Operational Programme (POCU) • Regional development RAS outputs provided a detailed implementation 2014-2020 framework for the Community Led Local Development (CLLD) approach, which has directly contributed to the mobilization of more IFC: PPPs; subnational financing; gender than EUR 200 million for local development under POCU and POR – financing programmes that are being implemented and guide the management of EU funds in the social and regional aspects. (iv) Draft operational plan for closing residential centers and proposing alternatives to institutional care for children - met • The operational plan and methodology for closing residential centers was developed through a RAS and it was approved by NAPCRA in 2017. Local authorities will submit proposals to receive funding starting in January 2018 in line with operational plan. The closure of up to 50 centers is expected to be funded from 2018 to 2020. Annex 9 87 Status of CPS Objectives and Indicators WBG Program CPS Objective 3.2: A more streamlined, better targeted and more cost-efficient social protection system - Not Achieved (i) Government consolidates three means-tested programs and reduces WBG completed activities disincentives for work by changing the benefit formula to avoid penaliz- RAS social inclusion and poverty ing work by 2018. – not met reduction • Implementation has been delayed and the target will not be reached in 2018. SASM activities designed to improve the targeting accuracy of IPF SASMP the social assistance system, by changing the program mix, changing TF PHRD grant the eligibility and benefits parameters of selected programs, and WBG ongoing activities harmonizing the institutional framework to have a single, consolidated program for low-income households. ASA Romania CEQ (ii) Increasing the coverage of means-tested programs to 70 percent of the ASA Romania Pensions poorest 20 percent of households by end FY2018. – not met WBG pipeline activities • Implementation of the Minimum Insertion Income (VMI) has been RAS Romania: Support to the delayed and is now planned for 2019. development of an M&E System to inform policies on social inclusion and poverty reduction 88 FY19-23 Country Partnership Framework for Romania Attachment 2. Institutional Change Assessment Method (ICAM) World Bank interventions target three types of institutional challenges impeding progress toward a development goal: • Weak stakeholder ownership—low priority is attached to the development goal by key stakeholders, leading to problems in the sociopolitical environment (e.g. poor commit- ment of leaders, low transparency, limited demand for accountability, etc.). • Inefficient formal incentives—administrative rules, laws regulations, standards, and other policy instruments are not efficiently guiding stakeholder actions to achieve the development goal • Ineffective organizations—organizations charged with the achievement of the develop- ment goal have weak performance. Progress for addressing each institutional challenge is rated by selecting the highest level along the continuum below that is supported by available evidence. 1. No outputs: Limit d or no ctions w r t k n for ddr ssin id ntifi d institution l ch ll n . 2. Ch n initi t d: Activiti s or products w r d liv r d to ddr ss institution l ch ll n but th r is no vid nc t of n r sultin ch n s. 3. Knowl d in d: E rl r sults of ctiviti s or products indic t m r in ch n s in knowl d , skills, or r l tionships of r l v nt st k hold rs. 4. Knowl d us d: N w knowl d , skills, or r l tionships r b in ppli d to support institution l ch n . 5. St k hold r own rship 5. Form l inc ntiv s ch n d: 5. Or ni tion ch n d: promot d: N w str t , polic , rul s, N w proc ss s, s st ms or oth r Institution l ch n is und rw st nd rds or oth r polic ch n s in or ni tion l ( . ., n w m ch nism st blish d instrum nt(s) r und r rr n m nts r und r to incr s tr nsp r nc , impl m nt tion. impl m nt tion. p rticip tion, ccount bilit , tc.). How v r, th ff cts of How v r, th ff cts of th ch n How v r, th ff cts of th ch n th ch n c nnot c nnot t b m sur d. c nnot t b m sur d. t b m sur d. 6. St k hold r own rship 6. Form l inc ntiv s improv d: 6. Or ni tion improv d: str n th n d: Evid nc confirms b n fits Evid nc confirms b n fits Evid nc confirms b n fits from institution l ch n . from institution l ch n . from institution l ch n . Annex 9 89 Attachment 3. ICAM Evidence Tables, by CPS Objective The tables below provide additional evidence to support the achievement ratings for each CPS objective. Because the Romania CPS 2014-2018 focused heavily on needed institu- tional changes, progress in addressing institutional challenges is rated using the Institutional Change Assessment Method (ICAM) described in Attachment 2. The list of targeted institu- tional changes included is intended to show the main progress under each CPS objective and does not provide an exhaustive list of outcomes for all WBG interventions. In addition, the ICAM evidence tables indicate the perceived sustainability of the reported progress: • Sustainability = HIGH if there is currently adequate commitment, capacity, and access to resources for continuing the institutional change beyond the current WBG engagement. • Sustainability = LOW if there is not adequate commitment, capacity, and access to resources for continuing the institutional change (or if we do not know). Pillar 1—Creating a 21st Century Government: Moderately Satisfactory CPS Objective 1.1: Revenue and expenditure administration improved—Partially Achieved Note: See also table for Objective 1.3. given some overlap of targeted institutional changes. WBG Institutional ICAM Rating and Evidence Sustainability Intervention Challenge From 1 (no outputs) to 6 (institutional change confirmed) Rating Ineffective organization— High 3- Knowledge gained. NAFA started implementation of its Low administrative costs, weak compli- change management strategy but has made only limited pro- ance among taxpayers, and oppor- gress toward organizational restructuring. The Large Taxpayers tunities for corruption underscore Office was upgraded and Medium Taxpayers Offices estab- the need to improve the efficiency lished at regional level; however, alignment with EU best prac- and effectiveness of revenue col- tices not yet confirmed and there has been no progress on the lection. Key milestones for the consolidation/closure of local offices. Barriers to applying Bank reform of NAFA include the con- guidance might include resistance by key stakeholders (e.g., tax solidation of local offices and the collectors). increase in electronic filing. The procurement of RMS has been substantially delayed de- spite updates to the procurement plan and an active bidding process. More than 50 NAFA staff are involved in the evaluation process, using criteria that are too complex and detailed. This Revenue long delay has triggered additional implementation challenges Administration related to the lack of maintenance and licenses for NAFA’s IT Modernization systems. Project (RAMP) Weak stakeholder ownership— 2-Change initiated: Coordination Council was established for Low Past efforts to pursue comprehen- making key strategic decisions and ensuring interagency co- sive reform failed due to lack of ordination. Project activities included creating a consultative political consensus, and frequent technical panel with taxpayer representation and periodic fo- turnover among leadership threat- rums for external consultation to support increased transpar- en continuity of reform despite ency and accountability. However, no evidence is available of expressed commitment by current any knowledge transfer for strengthening stakeholder owner- administration. In addition, NAFA ship. NAFA management has backed away from its expressed has limited transparency and ac- commitment to consolidate local offices and has not dedicated countability to taxpayers. adequate resources for project coordination. The Bank team has requested the close involvement of the Ministry of Public Finance and the Prime Minister’s Office to provide strong po- litical support, and the project is under review for cancellation. 90 FY19-23 Country Partnership Framework for Romania WBG Institutional ICAM Rating and Evidence Sustainability Intervention Challenge From 1 (no outputs) to 6 (institutional change confirmed) Rating Inefficient formal incentives— 4- Knowledge used: The RAS has helped to inform proposed Low The introduction of perfor- changes to the legal framework; however, the Government De- mance-based budgeting in the cision for Establishing the Planning and Monitoring Process public sector will require changes has not yet been adopted. The process of linking the budget to in the legal framework to link pub- programs through the development of institutional strategic Planning and lic programs to budgets as part of plans is proceeding with varying efficacy across 13 ministries Budgeting RAS an integrated strategic planning given that it is recommended but not mandated. Adoption of process. the Government Decision is expected in 2018. (see also changes noted for Ineffective organization —The 4-Knowledge used: RAS activities have supported the GSG in High Obj. 1.3) General Secretariat of the Govern- integrating the strategic planning and budgeting processes in ment (GSG) lacks the capacity to 13 ministries, with a central dashboard populated with the in- support and monitor an integrated stitutional strategic plans and baseline data for tracking budget strategic planning process across use and progress toward program objectives. Implementation the public sector for effectively as- and monitoring of the ISPs is expected to start in 2018. signing budgets to programs and tracking performance. Inefficient formal incentives— 5-Formal incentives changed: The RAS facilitated the devel- High Romania’s public procurement opment of the strategy and action plan and provided technical process was unclear and ineffi- inputs. The strategy was finalized in July 2015 in line with EU cient, with a national Public Pro- requirements to satisfy ex-ante conditionality. The RAS also curement Strategy pending and helped to design the monitoring system for the new Public Pro- overdue. The strategy was an curement Agency. Evidence of improvements to the procure- ex-ante conditionality for access- ment system is expected to emerge as the strategy and monitor- Delivery Unit ing EU funds ing system are implemented. RAS Ineffective organization —the 5-Organization changed: The RAS supported NAFA in launch- High Tax Administration (NAFA) has ing an online taxpayer platform, accompanied by a citizen inefficient systems for collecting feedback campaign. The DU also developed a risk assessment taxes, with low compliance among model for the VAT funds. Evidence shows mixed results so far, taxpayers. with improved efficiency of tax audits but limited progress in improving taxpayer compliance. NAFA is still developing sys- tems for using performance data. Inefficient formal incentives— 5-Format incentives changed: Bank analytical inputs provid- High changes are needed in the current ed since 2012 helped to inform improvements for public invest- legal and regulatory framework, ment management. A new legal framework was adopted for the including the prioritization of prioritization of large investment projects with a methodology large investment projects, changes to operationalize investment priorities. The methodology was to strengthen MoPF’s quality as- applied to all ongoing and new significant investment projects surance and independent review in 2016. Evidence of measurable benefits is expected to emerge functions for supporting portfolio over time in terms of increased absorption of EU funds, fiscal rationalization, and introducing space, and economic growth. multi-annual commitment appro- Public priations. Investment Management Ineffective organization —the 4-Knowledge used: The RAS provided input for a PIM reform High RAS, FEG-DPL MoPF needs an effective and effi- strategy and action plan to address the need for a more effec- cient PIM system with a clear link tive Public Investment Evaluation Unit, a stronger gatekeeper between prioritized projects and role for the coordination and preparation of new public invest- resources from EU funds and the ments, adequate information systems to guide decision-mak- state budget. ing, improved capacity to plan PPP projects, and clear criteria and a methodology for rationalizing the existing public invest- ment portfolio. Recommendations have been challenging to implement in the current context, but the budget allocated to the portfolio of significant public investment projects moni- tored by MOPF increased from Ron 5.7 billion (2014) to Ron 6.1 billion (2017). Ineffective organization —ineffi- 6-Organization improved: Ongoing Bank engagement has Low cient health spending and incon- supported the MoH in developing a centralized procurement sistent local procurement have plan, starting with the Functional Review of the MoH in 2011. Health Sector limited the public funds available Significant expansion of the centralized procurement in 2016 Reform Project/ for providing basic health services covered 31 antibiotics and 12 widely used oncology drugs. The DPL-DDO, FEG- unit price for centrally procured drugs and devices decreased DPL from an average price in 2015 of RON 22.2 to RON 20.0 in 2017. However, current responsibility for centralized procurement in the MOH is no longer clear given a reorganization in late 2017. Annex 9 91 CPS Objective 1.2: Strengthened debt management—Achieved WBG Institutional ICAM Rating and Evidence Sustainability Intervention Challenge From 1 (no outputs) to 6 (institutional change confirmed) Rating Ineffective organization —The 4-Knowledge used: Because of RAS training, the Middle Office High Middle Office of the GDTPD had staff could demonstrate new knowledge and skills in aggregat- limited capacity to design and ing portfolio data, finding information for the forward interest implement a debt management and exchange rates in Bloomberg, and calculating the cost-risk strategy trade-offs. The MO staff drafted the debt management strategy. However, skills for the analysis of the market conditions for both the local and foreign currency securities need to be further de- veloped, requiring continued participation of the Front Office in Strengthening the preparation of the debt management strategy. Debt Manage- ment Inefficient formal incentives— 6-Formal incentives improved: RAS activities and outputs High RAS/FEG-DPL Romania lacked a debt manage- supported the development of Romania’s Public Debt Man- ment strategy formulated with agement Strategy for 2013-2015 and then updated annually clear cost-risk tradeoffs. thereafter. Starting with the 2014-2016 version, the strategy was confirmed by the EU and IMF as being aligned to international sound practice. Debt management decisions are guided by the strategy, and in 2016, all risk indicators remained within the tar- gets set out in the public government debt management strate- gy for 2016 – 2018. Inefficient formal incentives— 6-Organization Improved: DPL and RAS engagement has sup- High Romania lacked a debt manage- ported the MoPF in strengthening debt management. Amend- ment strategy formulated with ments to the legal framework enabled the use of buy-backs and clear cost-risk tradeoffs. exchanges of Government securities. In 2016, the launch of an FEG-DPL electronic quotation and trading platform for Romanian gov- ernment securities helped to increase liquidity and transpar- ently and competitively set the prices for Government securities on the secondary market. Ineffective organization —the 4-Knowledge used: The ASA supported the MoPF in analyzing High MoPF needs additional capacity the domestic market for available price information, developing ASA on pursue reforms related to debt the methodology, and identifying reforms needed to build and Developing management, namely to improve maintain a credible and useful zero-coupon yield curve. The Government the market’s liquidity and trans- methodology is being operationalized in IT systems to generate Yield Curve parency by consolidating the gov- the daily government yield curve for internal purposes (auction ernment securities yield curve. decision making, etc.) but may become available to market par- ticipants. Inefficient formal incentives— 4-Knowledge used: The MoPF provided comments for revising High changes to the existing legal and the draft guidelines for the legal framework and operational operational framework are need- procedures based on RAS products and training. RAS activities ed to allow the MoPF to use inter- and the institutional change process are still underway. est rate and cross currency swaps as part of the Swap Transaction RAS Ineffective organization —MoPF 3-Knowledge gained: RAS training has been delivered to MoPF High staff will need capacity to imple- staff on pricing and valuation of interest rate and currency ment practices for using interest swaps, the assessment and management of various types of rate and cross currency swaps in risks related to derivatives and other relevant topics. The RAS accordance with the new legal and has experienced some delays but will also soon deliver guid- operational framework ance on overall staff and IT capabilities. 92 FY19-23 Country Partnership Framework for Romania CPS Objective 1.3: Improved strategic planning, prioritization, and evidence based policymaking—Mostly Achieved Note: See also table for Objective 1.1. given some overlap of targeted institutional changes. WBG Institutional ICAM Rating and Evidence Sustainability Intervention Challenge From 1 (no outputs) to 6 (institutional change confirmed) Rating Planning and Ineffective organization —Min- 3-Knowledge gained: A new strategic planning process was pi- Low Budgeting RAS istries lack the capacity for effec- loted at the ministry level in the health and education sectors tive strategic planning and pri- under the IDF grant and then refined and rolled out under the (IDF for M&E of oritization for the best use of the RAS. 13 Ministries now have institutional strategic plans devel- Public Policies public budget. oped with RAS support and are expected to start implementa- also contributed) tion and demonstrating increased capacity in strategic planning in 2018. Ineffective organization — The 3-Knowledge gained: The RAS did not establish a Delivery Unit Low Center of Government (CoG) had (DU) within the CoG, capable of operating without external sup- limited authority and effective- port. Intermediate steps toward increasing the effectiveness of ness for supporting results-ori- the CoG for improving the delivery of public services included ented practices in the public increased awareness and motivation of CPM staff for using in- sector and delivering government novative results-oriented methods and a set of concrete lessons priorities (new knowledge) to guide the potential set-up of a DU in Roma- Delivery Unit nia in the future. RAS Ineffective organization — Line 2-Change initiated: The RAS established Delivery Agreements Low ministries lacked capacity for us- with the implementing organizations with performance targets ing results-oriented practices and and regular monitoring, yet the actual use of the performance basing decisions on evidence dashboard was limited. Without the management-level review of performance, institutions did not face consequences for not achieving targets. The DU exposed the institutions to results-ori- ented practices. Ineffective organization — The 2-Change initiated: The RAS was designed to support the estab- Low center of government lacks the lishment of a Strategy Unit within the GSG to coordinate with the capacity to oversee strategic man- public policy units of line ministries based on best practices in Strategy Unit agement of the public sector and other European countries. Outputs have included recommen- RAS coordinate this function across dations on the key functions of the Strategy Unit and a commu- line ministries and other national nications plan to build support for the function. agencies. Weak stakeholder ownership— 2-Change initiated: Awareness raising activities for high level Low stronger political commitment officials, peer events, and the set-up of a community of practice across the public administration among public civil servants responsible for drafting policies are is needed for the integration of designed to increase the demand for evidence-based policy- RIA into the policy-making pro- making. RIA RAS, RAS cess for evidence-based decision to Develop making. the Capacity of the Central Inefficient formal incentives— 5-Formal incentives changed: The GoR tested a simplified Low Administration Updated RIA framework is need- framework for regulatory impact analysis through pilot exer- for Impact ed for consistent evidence-based cises supported by the RIA RAS and changed the legislation to Studies, IDF for decision making in the public allow for the broader use of RIA as part of the regulatory process. M&E of Public sector However, decision-making based on evidence is still not a com- Policies, and mon trend of the public administration. FEG-DPL Ineffective organization—GSG 3-Knowledge gained: RAS activities have helped to enhance Low and pilot ministries needed en- knowledge and awareness in pilot working groups and in the hanced technical capacity to GSG under the first RIA RAS. The follow-up RAS is currently systematically apply RIA meth- supporting the development of 5 impact studies in collaboration odology with selected institutions. Annex 9 93 WBG Institutional ICAM Rating and Evidence Sustainability Intervention Challenge From 1 (no outputs) to 6 (institutional change confirmed) Rating Inefficient formal incentives— 5-Formal incentives changed: The RAS supported the develop- High an integrated development plan ment of an integrated urban development strategy with a pro- is needed to guide the efficient posed institutional framework and a priority project list through implementation of projects in the 2023. However, barriers remain to implementation—including defined metropolitan area inadequate buy-in from local authorities, limited implementa- tion capacity among key stakeholders, and unexpected changes Ploiești to the ROP guidelines. Growth Pole RAS Ineffective organization—local 4-Knowledge used: The IUDS for the Ploiești Growth Pole is High authorities lack adequate capaci- viewed as one of the best sub-national development strategies ty for metropolitan planning in Romania since 1989. It is being used as a model for several other areas, including Brașov, Iasi, Cluj, Constanta, and Targo- viste. More time is needed for evidence to emerge as to how well this resource helps to improve integrated development planning in urban areas. Inefficient formal incentives— 6-Formal incentives improved: RAS activities and outputs High the National Local Development provided a blueprint for integrated planning and development RAS Program (PNDL) did not have any with a coordinated approach and the recommended coordina- Harmonizing formal strategic document as its tion mechanisms are being operationalized by MRDPAEF. The EU and State foundation. It was not coordinat- PNDL now has a multi-annual implementation timeline, mul- Budget ed and harmonized with EU oper- ti-annual budgeting, clear prioritization criteria, and M&E indi- ational programs. cators. These changes are in line with EU best practice. Ineffective organization—re- 4-Knowledge used: EU-funded operational programs are using High gional development actors (na- some of the prioritization criteria and investment guides to im- tional, regional, and local) lack prove outcomes, and several county councils (e.g. Brașov, Cluj, guidelines and tools to coordinate Calarasi) are using the investment guides for developing mul- investments for improving opera- ti-annual investment programs. Metropolitan areas (e.g. Ploieș- tional efficiency and effectiveness ti, Constanta, Craiova, Iasi) are using the guides for identifying through an integrated approach key investment needs in county roads, communal roads, water to development and wastewater, and social infrastructure. Evidence of improved organizational effectiveness from these changes is expected to emerge over time. Ineffective organization—Local 5-Organization changed: RAS activities and outputs have con- High Spatial Planning municipalities have inefficient tributed to improvements in inter-municipal coordination. For and Urban planning with overlapping devel- example, the city of Alba Iulia applied new knowledge to pro- Development opment plans and little project mote inter-municipal planning with nearby cities such as Sebes RAS, Constanta prioritization based on budget and Vintu and to set criteria for project selection and prioriti- Urban zation. Constanta is implementing metropolitan coordination Development with 15 surrounding localities. Changes such as these are likely RAS to improve the operational efficiency of the local public admin- istration. Ineffective organization—MIS 4-Knowledge used: MIS now has mapping tool using village ty- Low would increase effectiveness and pology to determine most appropriate PPP model. The accuracy operational efficiency if it could and level of detail provides the GoR with extensive knowledge Digital Agenda identify tailored solutions for on the supply and demand for Broadband across the country. RAS broadband supply and demand However, no funding is in place for implementing the mapping depending on the community tool to drive investments. profile 94 FY19-23 Country Partnership Framework for Romania CPS Objective 1.4: Enhanced strategy formulation, operationalization and monitoring and evaluation in preparation for the 2014-2020 period and beyond—Achieved WBG Institutional ICAM Rating and Evidence Sustainability Intervention Challenge From 1 (no outputs) to 6 (institutional change confirmed) Rating Inefficient formal incentives—a 5-Formal incentives changed: RAS outputs were used as the Low strategic framework is needed for basis for a new ESL national strategy for 2015-2020. This was reducing early school leaving formally adopted in 2015 to satisfy ex-ante conditionalities for Early School accessing European funds for the 2014-2020 programming pe- Leaving RAS riod. The framework is consistent with related policies and EU standards; however, the MoNE has limited capacity for imple- mentation. Tertiary Inefficient formal incentives —a 5-Formal incentives changed: RAS outputs were used as the High Education strategic framework is needed to basis for a new national strategy for 2015-2020. This was formal- Strategy RAS, improve tertiary education attain- ly adopted in 2015 to satisfy ex-ante conditionalities for access- Romania ment, quality, and efficiency ing European funds for the 2014-2020 programming period. The Secondary framework is consistent with related policies and EU standards, Education and implementation is being supported through the ROSE pro- (ROSE) project, ject and a follow up RAS RAS on Quality Assurance in Higher Education System in Romania Inefficient formal incentives —a 5-Formal incentives changed: RAS outputs were used as the Low strategic framework is needed to basis for a new LLL national strategy for 2015-2020. This was Lifelong support lifelong learning and clar- formally adopted in 2015 to satisfy ex-ante conditionalities for Learning ify roles across programs accessing European funds for the 2014-2020 programming pe- Strategy RAS riod. The framework is consistent with related policies and EU standards; however, the MoNE has limited capacity for imple- mentation. RAS for Capacity Ineffective organization—the 3-Knowledge gained: RAS activities include the development Low Development MoNE needs capacity for the M&E of an M&E framework for the implementation of education of M&E for of 4 education strategies: ESL, ter- strategies and the preparation of methodologies, indicators, Implementation tiary education, lifelong learning, and instruments. An evidenced-based tool will also be estab- of Education and VET. lished within the MoNE to evaluate the quality of policies. Activ- Strategies (RAS ities are underway under the current RAS with some knowledge for Lifelong transfer, but implementation has encountered some resistance Learning, ESL, due to a recent reorganization within the ministry. and Tertiary Education also contributed) Inefficient formal incentives—a 5-Formal incentives changed: The draft strategy and action Low framework is needed to set the plan were the basis for the new national strategy adopted by the strategic directions for the next 6 GoR in May 2015 to satisfy ex-ante conditionalities for accessing RAS Social years to reduce poverty and social European funds for the 2014-2020 programming period. How- Inclusion inclusion ever, implementation is currently not on track. and Poverty Reduction Ineffective organization —MoLSJ 2-Change initiated: Diagnostic documents detailed risks of Low Strategy has limited capacity to implement weak administrative capacity and the four implementation or monitor measures to reduce plans include roadmaps for building capacity related to policy poverty and social exclusion formulation, M&E, MIS use and development, modernization of the payment system, and targeting systems. Inefficient policy instru- 4-Knowledge used: The strategic framework informed the na- Low ments—a coherent strategy need- tional strategy adopted by the GoR in August 2015 to satisfy a RAS Active ed to support active and healthy thematic ex-ante conditionality to access European funds for Aging Strategy aging is behind in implementation the 2014-2020 programming period and to inform the prepara- tion of operational programs. Annex 9 95 CPS Objective 1.5: Improved governance, organizational functioning and efficiency of public institutions and SOEs—Mostly Achieved WBG Institutional ICAM Rating and Evidence Sustainability Intervention Challenge From 1 (no outputs) to 6 (institutional change confirmed) Rating Ineffective organization —More 3-Knowledge gained: RAS activities included the development High strategic management of human of an HR strategy and training on modern HR management ap- resources is needed at the MoPF proaches for managers. The training evaluation indicated that HRM Strategy and subordinated agencies. participants acquired new knowledge and skills and the medi- RAS um-term HR strategy was approved by MoPF order 564/2014. However, implementation cannot proceed without changes in the legal framework by the National Agency for Civil Servants, expected to be addressed under the new HRM RAS. Ineffective organization—Roma- 4-Knowledge used: The transfer of knowledge has been con- High RAS for a nia did not have a unified system firmed as the client piloted the new performance appraisal Performance across organizations for assessing system and then rolled it out to all targeted job functions for Appraisal the performance of officials re- civil servants managing EU funds. The client participated in System for sponsible for managing EU funds. developing the system and took the lead in developing the Government implementation guidelines. However, the new performance Officials appraisal system has been challenged by the new pay law and Managing EU suspended until problems can be resolved under the new HRM Funds strategy. RAS to Ineffective organization—the 5-Organization changed: The RAS produced new Regulations High Develop the pre-university school system does for Organization and Functioning for organizational units of the Administrative not have clearly defined roles, MoNE and all job holders in the school system at the manage- Capacity of functions, and responsibilities ment and expert levels. These ROFs were formally promoted the Ministry as management tools by the Minister in September 2015 and of National adopted in 2017. More time is needed for evidence to emerge Education related to increased effectiveness. Ineffective organization —the 5-Organization changed: RAS recommendations focused on High RCC lacks a coherent and com- improving operational effectiveness through the development prehensive business architecture, of a coherent strategy and simplified organizational processes; leading to the misalignment of aligning the roles of staff with institutional objectives; separat- RAS Assistance staff roles with institutional ob- ing investigative from adjudicative functions; providing clear to the Romanian jectives, a lack of internal and ex- rules for accountability; pushing responsibilities to the lowest Competition ternal transparency, and reduced operational level; and developing an IT strategy that is aligned Council effectiveness. with institutional priorities. The ongoing implementation of the roadmap is expected to enhance administrative capacity of the RCC and provide evidence of increased operational effective- ness and efficiency over time. Ineffective organization—in- 5-Organization changed: Improvements in efficiency in the High creased operational efficiency Romanian courts focused on reductions in backlogs, reductions would be achieved through reduc- in case processing times, upgrades to facilities, optimization of ing the duration of court proceed- workloads, streamlining of processes and a range of training ings and improving the quality of activities that helped increase workplace productivity. Project judgements. data show improvements for 5 pilot courts. Inefficient formal incentives— 6-Formal incentives improved: RAS guidance and IPF support High legislation and procedure were helped the MOJ update the Civil and Criminal Codes and Civil Judicial Reform in urgent need of update, as the and Criminal Procedure Codes, altering how citizens and busi- Project, RAS four fundamental laws had bare- nesses are regulated and how cases are processed in Romania. Romania ly changed in 150 years The 2017 CVM report notes that the adoption of the Codes has Judicial led to the acceleration of court proceedings, greater consisten- Functional cy in judicial decisions, and enhanced respect for the right to Review a fair trial. Weak stakeholder ownership— 4-Knowledge used: Steps to improve the accountability of the High There is limited transparency and judiciary included the introduction of audio recordings in all accountability in the judicial sys- courts, accreditation tests for magistrates, and a range of trans- tem parency initiatives. Modest increases in transparency were documented in terms of the annual publication of basic data, but it is not yet clear the extent to which practices will be insti- tutionalized for informing policymaking and providing public access to data. 96 FY19-23 Country Partnership Framework for Romania WBG Institutional ICAM Rating and Evidence Sustainability Intervention Challenge From 1 (no outputs) to 6 (institutional change confirmed) Rating Inefficient formal incentives— 4-Knowledge used: RAS activities provided training to 293 staff High the lack of a consistent strategic and senior management of the MTI and subordinated agencies vision and clear priorities has led on developing and implementing a medium-term strategic to high uncertainty in the sector, plan. The team drafted an MTI strategic plan and reviewed the poor policy performance, ineffi- existing strategic planning procedures to produce the Strategic cient resource allocation, and un- Planning Guide. Elements of the strategic plan are starting to be sustainable fiscal costs. reflected in operational documents, such as the administrative plans of the railway companies and the draft road and rail per- formance contracts. The new General Transport Master Plan has been finalized and linked to the Master Plan. However, im- plementation of the Strategic Plan cannot start until it has been formally adopted by Ministerial Order. Ineffective organization—MTI 3-Knowledge gained: The RAS team reviewed contractual ar- High has no system to monitor the ef- rangements with CFR SA (Railway Company) and RNCMNR SA fectiveness of road construction (Roads Company), recommended contractual amendments, costs to support informed deci- and drafted multi-annual performance-based contracts. Out- sion-making and accountability puts also included an assessment of final road construction for results. costs compared to estimated costs, a benchmarking of road construction costs, an analysis of the potential impact of re- Strategic forms, and a monitoring methodology for MTI. The method- Planning in ology has not been applied as expected but is expected to be Transport RAS used in the new IPF. Ineffective organization—the 2-Change initiated: Outputs included reviewing the legal Low MTI and transport delivery agen- framework and providing recommendations for transitional cies lack adequate capacity for the arrangements for the Bucharest Metropolitan Transport Au- coordination and strategic plan- thority (AMTB), drafting the AMTB’s first strategic plan, and ning of urban transport in the Bu- providing training and public consultations on urban transport charest metropolitan area. for MTI staff and urban transport stakeholders. Following RAS recommendations, there is now a roadmap and support at the technical level for the transfer for AMTB from MTI to the met- ropolitan level; however, there is not yet sufficient political sup- port to implement recommendations. Ineffective organization—weak 2-Change initiated: RAS provided core recommendations to Low corporate governance of transport reform SOEs, with a key recommendation being the appoint- SOEs has led to long-term mis- ment of professionally managed boards of directors who could management and serious indebt- manage the companies in accordance with business plans. A edness. key output was the Romania Corporate Ownership Guide pre- pared for the MTI. More high-level commitment will be needed to support implementation. Inefficient formal incentives—a 5-Formal incentives changed: A new law on corporate gov- Low clear framework for the oversight ernance of SOEs was approved by Parliament in 2016, but the FEG-DPL of SOEs is needed to clarify roles implementation of the framework is not on track. and responsibilities of the relevant public institutions Ineffective organization—Oper- 2-Change initiated: RAS outputs included the Solution Archi- Low ational weaknesses of the MARD tecture and Migration Plan for an IFMS to improve the coordi- Developing include the need for prioritization nation and integration across financial management functions an Integrated of financial allocations, a more and across subordinated units and agencies at the MARD and Financial efficient use of the budget, and to address the need for automation. To date, the lack of financial Management system to track expenditures on a resources to implement the proposed system has led to there System in MARD regular basis. being no changes in practical terms in the activity of the intend- ed MARD departments. Ineffective organization —the 3-Knowledge gained: RAS outputs provided a comprehen- Low MARD and selected subordinat- sive framework for an improved internal management system RAS on Internal ed institutions need standard which the MARD leaders (at the time) committed to imple- Management processes, systems, and controls ment. The RAS developed an understanding of a sound frame- System at the to guide and monitor the perfor- work of policies, procedures and controls that is neutral to MARD and its mance of organizational functions management changes and provided a staff training plan that Subordinated for increased operational efficien- is compliant with international and European best practice. Structures cy. The lack of funds for the development and implementation of the proposed approach is a key risk to reaching the expected results. Annex 9 97 CPS Objective 1.6: Improved health service delivery—Partially Achieved Note: See also CPS Objective 1.1. for indicator on centralized procurement in the health sector. WBG Institutional ICAM Rating and Evidence Sustainability Intervention Challenge From 1 (no outputs) to 6 (institutional change confirmed) Rating Ineffective organization—Ra- 2-Change initiated: Activities to date have focused mainly Low tionalized inpatient services are on infrastructure investments, such as to improve the quali- needed through reorganization of ty of emergency services and intensive care units. There is no Health Sector the hospital network. Distortions evidence of key learning gains. The first phase of the hospital Reform IPF in the service delivery structure rationalization plan has not been implemented and targets for contribute to ineffective and inef- the rationalization process have not been achieved, such as the ficient health spending. number of merging services and hospitals reshaping schemes. Ineffective organization—inade- 2-Change initiated: Activities to increase out-of-hospital ser- Low quate options for ambulatory care vices and preventative care have focused mainly on procure- and community-based primary ment. The share of elective surgeries performed as outpatient health care cause an inflated and and ambulatory surgeries has not increased, and limited pro- Health Sector inefficient use of inpatient hospi- gress has been achieved for implementing regional radiother- Reform IPF and tal services. apy units, ambulatory diagnostic and treatment centers, and IFC investments regional pathology and cytology laboratories. In the private sec- tor, IFC’s investment ($16.4 million) is enabling Medlife SA, a leading Romanian healthcare provider, to increase its outreach from 1.9 to 2.3 million patients, but the longer term institutional change is not yet clear. Inefficient formal incentives— 6-Formal incentives improved: Ongoing support has been High Improved management control provided to widen the scope for using centralized procure- mechanisms are needed for cen- ment. In 2015, 40 centralized tenders were launched, with the DPL-DDO, FEG- tralized procurement. Most phar- estimated savings averaging 25% per year. Significant expansion DPL and Health maceuticals, medical devices, and of the centralized procurement in 2016 covered 31 antibiotics Sector Reform surgical supplies continue to be and 12 widely used oncology drugs, reflecting about 15% of total IPF procured locally with different spending of public institutions on medicines. The price for cen- unit prices for the same items. trally procured drugs and devices decreased from an average price in 2015 of RON 22.2 to RON 20.0 in 2017. Inefficient formal incentives— 1-No outputs: The planned TA on pay mechanisms and in- Low Payment incentives are needed centives was on hold pending a MoH legislative initiative for to improve performance of the improving payment. Consultancy services are underway for Health Sector health system. These should pro- establishing a performance-based system for hospitals and pri- Reform IPF mote prevention, reduction of risk mary health care but implementation has been limited. factors and priority diseases at the primary level and cost-effective services at the secondary level. Inefficient formal incentives— 4-Knowledge used: The TA for HTA has achieved progress in High Standards and protocols for using organizing and equipping the HTA system to be aligned with Health Technology Assessment EU standards. A Ministerial Order to implement the recom- (HTA) are needed for informing mendations is expected in 2018. a variety of decisions from pric- ing and reimbursement to setting Health Sector health service standards. Reform IPF Weak stakeholder ownership—A 1-No outputs: Plans to implement a communications strategy Low broad behavior shift is needed. to inform the Romanian public about the new health service Preventative services and health delivery model have been deferred, with limited/no activities resources are underused contrib- systematically promoting the use of preventative healthcare or uting to inefficient health spend- ambulatory services. ing and poor health outcomes. 98 FY19-23 Country Partnership Framework for Romania Pillar 2—Smart and Sustainable Growth: Moderately Satisfactory CPS Objective 2.1: Creating an improved business environment and a competitive economy—Partially Achieved WBG Institutional ICAM Rating and Evidence Sustainability Intervention Challenge From 1 (no outputs) to 6 (institutional change confirmed) Rating Inefficient formal incentives—a Knowledge used: RAS outputs contributed to the development Low new financing and operational of a draft legislation on Integrated Cadastre and Land Book Sys- DPL-FEG; RAS framework is needed to acceler- tem appropriate for the Romanian context and aligned to EU Real Estate Basis ate the process of land registra- good practice. Amendments to the legal framework were made for National tion, improve the coverage and in 2015 and 2016 for a more streamlined and improved process and EU Policies; efficiency of the system, increase for systematic registration, but the law remains overly complex TA Real Estate transparency in the economy, and with disparate provisions. The comprehensive law drafted un- Registration and provide equal rights to all land- der the RAS and supported by the TA would harmonize provi- Services owners sions and support a national program, but there is no timeline set for approval given the difficult political context. Limited organizational effec- Change initiated: The RAS conducted an institutional assess- Low tiveness—ANCPI suffers from ment of ANCPI and developed a detailed action plan based on RAS Real political and institutional insta- the review that provides guidance and performance indicators Estate Basis for bility and needs to reform its in- for monitoring progress of actions in 7 thematic areas. The ac- National and EU stitutional framework to develop tion plan was not adopted and will need updating. Frequent Policies adequate capacity for carrying out management changes in ANCPI have resulted in limited buy-in its mandate for implementing the plan in the future. Inefficient policy instruments— Knowledge used: RAS activities included an in-depth com- High Formal mechanisms—such as petitiveness assessment of services and goods sectors in the a regional smart specialization West Region to identify policy measures and interventions to strategy—are needed to address enhance the region’s growth potential. The draft Smart Special- local needs and priorities at the ization Strategy (March 2015) considers the RAS recommenda- national level, and to guide de- tions for improving the automotive, ICT, textile, and construc- cision makers at the county level tion industries. The strategy has not yet been approved nor and potential investors. implemented but it provides the framework for the West Region RAS to use its human, natural, and financial resources to ensure a Competitiveness consistent and sustainable development path. Enhancement and Smart Limited effectiveness of organi- Knowledge used: RAS activities and outputs expanded the High Specialization zational arrangements—The re- available knowledge of one of the fastest growing regions and gional development agency (RDA) can serve as a pilot for other assessments at the regional level. of West Romania lacks skills and Analytical tools were shared with the RDA. The RDA used the access to diagnostic information RAS recommendations to design the draft Smart Specialization to effectively enhance the West Strategy of March 2015 (available online) demonstrating new Region’s growth potential. awareness, knowledge, and skills. It is not yet clear whether these intermediate outcomes have increased the capacity of the RDA for designing and monitoring policies to foster smart spe- cialization over the longer term. Annex 9 99 CPS Objective 2.2: Improved performance of the RCC for promoting and enforcing market competition— Achieved WBG Institutional ICAM Rating and Evidence Sustainability Intervention Challenge From 1 (no outputs) to 6 (institutional change confirmed) Rating Inefficient formal incentives— 6-Formal incentives improved: RAS recommendations in- High the Romanian Competition Law formed a new competition law which was prepared and raises the cost of doing business adopted in 2015. Changes include eliminating the 40 percent with unclear provisions and ad- threshold for the presumption of dominance; limiting the ministrative steps, an undue bur- parties’ right to challenge access to file and confidentiality den on the private sector, and the before the Courts; and creating the Independent Procedur- inability of the RCC to prioritize al Officer role specialized in the disposition of access to file, cases confidentiality and other procedural matters separate from the enforcement team within the RCC. Inefficient formal incentives— 5-Formal incentives changed: RAS advocacy events and con- High the legal framework for unfair sultations on unfair competition law provided recommenda- competition is inconsistent, does tions to amend the legal and regulatory framework. Resulting not clarify roles across agencies, modifications to Romania’s Unfair Competition Law eliminate and imposes high costs on busi- overlapping mandates among the RCC and other agencies, nesses define unfair competition, and clarify the role of the RCC. En- RAS Assistance forcing the law on unfair competition will require lower admin- to the Romanian istrative costs given the establishment of de minimis and oppor- Competition tunity tests, in which the RCC will move to sanction actions only Council if they present a certain degree of social threat that affects either the public interest or market structure. Limited effectiveness of organi- 5-Organization changed: Changes in the Unfair Competition High zational arrangements—the RCC Law described above will allow the RCC to use resources more has limited operational efficiency efficiently. Criteria for prioritizing unfair competition cases to enforce unfair competition law have been established, and the RCC will process complaints re- given the lack of case prioritiza- ceived from individuals or legal entities only to the extent that tion and overlapping competen- they provide evidence about the possible unfair commercial cies with other agencies practice, the legitimate interest, and the risk of damages. Inefficient formal incentives— 6-Formal incentives improved: Following RAS recommen- High merger regulations and proce- dations A new merger regulation was adopted on September dures impose unnecessary ad- 30, 2014, allowing for the more efficient use of fast-track pro- ministrative burden on businesses cedures. This has resulted in an average length of 1.8 months associated with merger review to complete a merger case in 2014, representing a 23 percent and high administrative costs for decrease in the amount of time required compared to 2013. the RCC 100 FY19-23 Country Partnership Framework for Romania CPS Objective 2.3: Strengthening the effectiveness of skills and education programs for labor market inclusion—Partially Achieved WBG Institutional ICAM Rating and Evidence Sustainability Intervention Challenge From 1 (no outputs) to 6 (institutional change confirmed) Rating Inefficient formal incentives—a 5-Formal incentives changed: RAS outputs were used as the Low strategic framework is needed for basis for a new ESL national strategy for 2015-2020. This was reducing early school leaving formally adopted in 2015 to satisfy ex-ante conditionalities for Early School accessing European funds for the 2014-2020 programming pe- Leaving RAS riod. The framework is consistent with related policies and EU standards; however, the MoNE has limited capacity for imple- mentation. Tertiary Edu- Inefficient formal incentives— 5-Formal incentives changed: RAS advocacy events and con- High cation Strategy the legal framework for unfair sultations on unfair competition law provided recommenda- RAS, Romania competition is inconsistent, does tions to amend the legal and regulatory framework. Resulting Secondary not clarify roles across agencies, modifications to Romania’s Unfair Competition Law eliminate Education and imposes high costs on busi- overlapping mandates among the RCC and other agencies, (ROSE) project, nesses define unfair competition, and clarify the role of the RCC. En- RAS on Quality forcing the law on unfair competition will require lower admin- Assurance in istrative costs given the establishment of de minimis and oppor- Higher Educa- tunity tests, in which the RCC will move to sanction actions only tion System in if they present a certain degree of social threat that affects either Romania the public interest or market structure. Tertiary Edu- Inefficient formal incentives —a 5-Formal incentives changed: RAS outputs were used as the High cation Strategy strategic framework is needed to basis for a new national strategy for 2015-2020. This was formal- RAS, Romania improve tertiary education attain- ly adopted in 2015 to satisfy ex-ante conditionalities for access- Secondary ment, quality, and efficiency ing European funds for the 2014-2020 programming period. The Education framework is consistent with related policies and EU standards, (ROSE) project, and implementation is being supported through the ROSE pro- RAS on Quality ject and a follow up RAS Assurance in Higher Educa- tion System in Romania Ineffective organization— 2-Change initiated: After substantial implementation delays, Low Romania Low-performing public high the first batch of identified low-performing schools have re- Secondary schools have low Baccalaureate ceived grants. Lessons from school-based management show Education passing rates and high drop out that accountability reforms can improve student retention and Project (ROSE) rates performance, but evidence of incremental progress is not yet available. Inefficient formal incentives—a 2-Change initiated: RAS activities are under implementation to Low National Strategy for Infrastruc- support the preparation of a draft strategy. Analyses have been ture Investments in Education produced, but feedback from Government has been slow giv- Institutions is needed to inform en a lack of clarity about role of MoNE and strategy given that decisions on infrastructure and MoNE involved in education policies but does not have say in to increase the absorption of EU how local authorities use resources for infrastructure develop- RAS Education funds for the 2014-2020 program- ment. Infrastructure ming period. Investments Ineffective organization—The 4-Knowledge used: A geospatial information system developed High MoNE has limited strategic and under this RAS has been used to support analyses for the draft monitoring capacity to make in- strategy and has proven very useful for decision makers. In the formed decisions on investments future, the MoNE could use this system not just to understand in education infrastructure. infrastructure needs at the local level but also the implications for student performance. ASA Europe Inefficient formal incentives— 2-Change initiated: Diagnostic study conducted with recom- Low 2020 Romania: Policies that affect employment, mendations to inform the National Reform Program for Ro- Evidence-based productivity, and skills enhance- mania. There is no specific evidence provided in the ACS that Policies for ment lack legitimacy--they are not the client gained knowledge-- the report made new knowledge Productivity, informed by evidence and their available and additional data collection is needed to learn what Employment, impacts are not well understood. happened as a result and Skills Enhancement Annex 9 101 CPS Objective 2.4: Making it easier for business to enter and exit the market—Mostly Achieved WBG Institutional ICAM Rating and Evidence Sustainability Intervention Challenge From 1 (no outputs) to 6 (institutional change confirmed) Rating Inefficient formal incentives— 5-Formal incentives changed: The Romanian insolvency High Reforms to insolvency legislation framework and related mechanisms were strengthened through are needed to increase transpar- the elaboration of the first national Insolvency Code, in line with ency and clarity in case process- European ROSC standards. The courts and parties must now ing. send all case documents to the National Office of the Trade Register to publish on an online bulletin available to the pub- lic. The new code clarified issues and streamlined the process Judicial for the liquidation of assets. The World Bank’s Doing Business Reform IPF data indicate some improvement in terms of recovery rates and distance from the frontier for resolving insolvency; however, indicators for time, cost and outcome have remained stagnant. Ineffective organization—insol- 5-Organization changed: The court system has established High vency proceedings have been in- procedures to improve the efficiency of insolvency case pro- efficient due to ambiguous issues cessing. The number of cases has decreased due to the intro- and bottlenecks related to the liq- duction of a new minimum threshold (40,000 RON) and the uidation of assets process to liquidate assets has been streamlined. CPS Objective 2.5: Enhanced environment and climate action in line with EU requirements—Partially Achieved WBG Institutional ICAM Rating and Evidence Sustainability Intervention Challenge From 1 (no outputs) to 6 (institutional change confirmed) Rating Inefficient formal incentives— 5-Formal incentives changed: RAS activities and outputs Low A comprehensive, operational, supported the MEWF in developing a comprehensive strategy updated national climate change and action plan for 2016-2030 that covers both adaptation and strategy is needed with an action mitigation, is based on analyses, and works across key sectors. plan to clarify roles across organ- The GoR approved and published the national strategy in late izations and increase compliance September 2016 with deadlines and budget allocations across with regulatory mechanisms economic sectors. However, the limited capacity of the GoR has presented a challenge for implementing proposed actions. Limited organizational effec- 3-Knowledge gained: The program successfully identified a set Low tiveness—Relevant ministries and of climate actions by sector and assisted the GoR in integrating agencies involved in the climate them into the 2014-2020 operational programs for EU funds, change and green growth agendas which have now been approved by the EU. However, low im- need capacity and skills to plan, plementation capacity remains due to the turnover of MEWF implement, monitor, and evaluate leadership and staff, lack of the right experience and skills in climate change actions line ministries, and limited coordination among relevant line ministries and other stakeholders. RAS Climate Limited organizational effec- 4-Knowledge used: Sectoral and macroeconomic models Low Change and tiveness—The GoR needs an were developed and applied in the strategy and action plan- Low Carbon analytical base for impact assess- ning studies. The CGE model for macroeconomic assessment Green Growth ments and climate-related deci- was transferred to the National Commission of Prognosis. RAS Program sion-making outputs of other sectoral models (energy, transport, urban, and water) were transferred to MEWF and to other relevant agencies through training and workshops. Additional knowledge, skills, and experience is needed among ministry and agency staff to apply sectoral analysis tools and macroeconomic models for policy analysis and decision-making processes. Inefficient formal incentives—A 5-Formal incentives changed: Based on the diagnostics and Low comprehensive integrated strate- elaboration of the strategy delivered by the RAS, MRDPA sub- gy is needed to guide the sustain- mitted the Danube Delta Integrated Development Strategy for able development of the Danube GoR approval. The draft underwent public consultations for Delta local legitimacy and reflects consistency and coordination with EU and national strategies and planning documents. Approval was achieved (Government Decision 602/2016) at the end of the Strategic Environmental Assessment Procedure; however, it is not yet clear that the Danube Delta Intercommunal Develop- ment Association and MRDPA have adequate capacity for effec- tive implementation and monitoring of the strategy. 102 FY19-23 Country Partnership Framework for Romania Pillar 3—Social Inclusion: Moderately Unsatisfactory CPS Objective 3.1: Support an ambitious and successful government program to tackle social inclusion and poverty reduction of the population including the Roma—Achieved WBG Institutional ICAM Rating and Evidence Sustainability Intervention Challenge From 1 (no outputs) to 6 (institutional change confirmed) Rating Inefficient formal incentives— 5-Formal incentives changed: The RAS diagnostic study pro- High Mandates, strategies, reporting vided inputs for the National Roma Inclusion Strategy, which requirements, and budget allo- was successfully updated by the government as part of ex-ante cations for pertinent government conditionality. The RAS diagnostic study also informed the Part- bodies were not consistent, mak- nership Agreement with the EC and operational programs for RAS Study on ing it difficult for responsible par- the 2014-2020 period. Diagnostics ties to implement policies for sup- and Policy porting Roma integration. Advice for Roma Ineffective organization — There 4-Knowledge used: Reports from the RAS team indicated that High Integration is a lack of coordination among some stakeholders gained a clearer sense of their organization’s the institutions tasked with im- mission and roles related to Roma integration, including rep- plementing the National Strategy, resentatives from National Agency for Roma; Ministry of Eu- particularly among sector minis- ropean Funds; MoESR; Ministry of Health; MoLFSPE; and the tries and the National Agency for Ministry of Regional Development. Roma. Inefficient formal incentives—a 5-Formal incentives changed: The draft strategy and action Low framework is needed to set the plan produced through the RAS were the basis for the new na- strategic directions for 2014-2020 tional strategy adopted by the GoR in May 2015 to satisfy ex-ante in reducing poverty and social in- conditionalities for accessing European funds for the 2014-2020 clusion programming period. The framework was informed by a com- prehensive public consultation process and approved by the Social Inclusion EC. However, the implementation of the strategy is not on track. and Poverty Reduction RAS Ineffective organization—The 2-Change initiated: Diagnostic documents detailed risks of Low Ministry of Labor, Family, So- weak administrative capacity and provided four implementa- cial Protection, and the Elderly tion plans including roadmaps for building capacity related to (MoLFSPE) has limited capacity policy formulation, M&E, MIS use and development, moderni- to implement or monitor meas- zation of the payment system, and targeting systems. No action ures to reduce poverty and social has yet been taken by the MoLFSPE to implement changes. exclusion Inefficient formal incentives— 5-Formal incentives changed: The Regional Operational Pro- High RAS on the Policies, strategies, and other for- gram includes a dedicated Community Led Local Development Integration mal mechanisms do not address (CLLD) Priority Axis for the 2014-2020 programming period, of Urban and challenges faced by urban mar- and the new approach and guidelines were heavily informed by Marginalized ginalized communities the Integrated Intervention Tool, the Atlas, and the six concep- Groups tual pilots of the RAS. Evidence of how well programs are ad- dressing marginalization is not yet available. Inefficient formal incentives— A 5-Formal incentives changed: RAS outputs included reports High clearer definition of roles and re- and assessments, including an evaluation of existing resources sponsibilities across agencies and of residential centers and an inventory of community-based an operational plan are needed services among others. These informed NAPCRA priority-set- for the de-institutionalization of ting and the drafting of an operational plan. The operational children. plan and methodology for closing residential centers was ap- proved by NAPCRA in 2017 to be implemented at the county level. The closure of up to 50 centers is expected to be funded RAS for the from 2018 to 2020. De-institution- alization of Weak stakeholder ownership— 4-Knowledge Used: Consultation workshops were held with High Children commitment to close institutions representatives of all CDSACPs targeted by the project; rep- for child protection at the county resentatives from NAPCRA, and the EC were also involved. level varies, and NAPCRA has lim- The Operational Plan for the Closing of Residential Centers ited leverage. Also, the high level approved by NAPCRA includes the suggestions from these and technical staff of NAPCRA stakeholders. Evidence of stronger stakeholder ownership will and other actors with a stake in emerge when proposals are submitted by the CDSACPs in line the de-institutionalization process with the operational plan and implementation of the closure have demonstrated some resist- process starts. ance to change Annex 9 103 CPS Objective 3.2: A more streamlined, better targeted and more cost-efficient social protection system—Not Achieved WBG Institutional ICAM Rating and Evidence Sustainability Intervention Challenge From 1 (no outputs) to 6 (institutional change confirmed) Rating Weak formal incentives—social 4-Knowledge used: Many improvements have been achieved Low assistance equity has deteriorated for existing means-tested programs between 2011 to 2016, with a highly fragmented system. and the Parliament adopted the VMI law to unify 3 existing Consolidating benefit programs means-tested programs. However, there have been significant is a key focus of the Government’s delays in the drafting and approval of secondary legislation social assistance reform. necessary to implement the VMI program. The GoR decided to postpone VMI implementation until at least April 2019; there- fore, no budget was allocated for FY18. Ineffective organization —The 5-Organization Changed: The National Agency for Social Low fragmentation and complexity of Benefits (NASB) has implemented a comprehensive approach Social the social assistance system leads to reduce error and fraud including data matching, risk pro- Assistance to significant levels of error and filing, a uniform sanctioning policy, and investigative powers. System fraud limiting operational effi- The practices instituted in 2017 related to social inspections are Modernization ciency and increasing the fiscal recognized as international best practices, and evidence of in- Project / FEG- cost of social assistance. creased compliance is expected to emerge through implemen- DPL tation. Ineffective organization —The 2-Change initiated: The project has helped to set up a perfor- Low MoLSJ and NASB lack capacity for mance management system; however, evidence of implemen- the implementation and perfor- tation is limited to date. Neither the MoLSJ nor NASB have mance management of the VMI. designed and implemented comprehensive M&E systems or issued related performance reports. The government cancelled the DLI focused on having a performance monitoring system for means-tested programs in place. The adoption and devel- opment of an IT platform for implementing the VMI has been delayed but is still progressing according to a revised timetable. PHRD TA Grant Inefficient formal incentives— 2-Change initiated: The National Agency for Persons with Dis- Low to Improve The revision and harmonization abilities and the Pension Administration Certification Institute Policy-Making of medical and psychosocial cri- have produced a draft version of harmonized criteria but these and Institutional teria for assessing disability will are not yet of adequate quality. Follow-on activities related to Framework for be critical for moving to a modern training, piloting, and dissemination were delayed pending the Persons with approach to support the social in- completion of this output. Disabilities clusion of persons with disabilities 104 FY19-23 Country Partnership Framework for Romania Attachment 4. Romania IBRD Indicative Financing Program Project Title CPS Planned Amount US$M Ap- Pillar Status (anticipated in the CPS) Amount US$M proved during the CPS P1 Health Sector Reform (FY14) 340 340 Approved on March 28, 2014 and became effective on January 22, 2015 P1/P2 First Fiscal Effectiveness 1,020 1,020 Approved on May 22, 2014, became and Growth DPL1.1 (FY14) effective on January 20, 2015 and closed on December 31, 2015 P2/P3 Romania Education Quality 270 243 Board Approval Date March 16, 2015 and Inclusion (FY15) and became effective on October 14, 2015; now called Romania Secondary Education Project (ROSE) P3 Social Inclusion (FY15) 135 Dropped after discussions with the GoR; integrated social services were addressed under the RAS on the de- velopment of the national strategy on social inclusion and poverty reduction which included one flagship tackling this area P1 Second Fiscal Effectiveness 950 558 Board Approval Date:15 Decem- and Growth DPL 1.2 (FY17) ber 2016; Effective: May 31, 2017; amount: EUR500M P1 Justice IPF (FY17) 200 67 Justice Services Improvement Project; Board Approval Date: January 31, 2017 and became effective on August 3, 2017 P2 Additional Financing INPCP 52.4 Not initially envisaged in the CPS (new to CPS, FY16) Board Approval Date: in March 28, 2016; Effective: April 13, 2017 P2 Motorway Preparation 35 (tbc) Board Date expected in FY18 along Ploiești-Brașov (new to CPS, with the new CPF FY18) P2 Disaster Risk Management 465 (tbc) Board Date expected in FY18 along CAT DDO (new to CPS, FY18) with the new CPF P2 Disaster Risk management 58.6 (tbc) Expected in FY19 IPF (in the new CPF) P1/P2/P3 IPF TBC 450 150 (tbc) Justice Quarter and Esplanada District Development Project; amount to be confirmed with the Government; expected in FY19 P2 Energy IPF 250 Not requested under this CPS P2 DPL 2.1 950 Not requested under this CPS P2 DPL 2.2 950 Not requested under this CPS Total 5,515 2,280.4 (2,780 if Motorway and CATDDO incl.) Pillar 1 (P1): Creating a 21st Century Government Pillar 2 (P2): Growth and Job Creation Pillar 3 (P3): Social Inclusion Annex 9 105 Attachment 5. IBRD Advisory Services and Analytics Program FY14-18 Global Practice Project name Status New to CPS Bank-financed Advisory Services and Analytics GHNDR Policy Note on Health Care Provision Completed P147023 GFMST StAR - Romania Engagement Completed P148243 Yes GPVDR Europe 2020 Romania Completed P133519 GFMDR Romania - ICR ROSC Completed P130426 GEEDR Mining Sector Support Completed P147518 Yes GFMDR Banking Sector – Romania (subtask of P146915) Completed P154014 Yes GFMDR Romania - Developing Govt Yield Curve Completed P152800 Yes GFM03 RO Financial Sector TA Completed P151965 Yes GFA03 Priorities in the agri-rural space Completed P154402 Yes Enhanced Competitiveness through effective R&D GTC03 Completed P155786 Yes and Innovation public interventions GEEX2 Mining Sector Support Completed P147587 Yes ECCU5 National Reform TA Completed P154237 Yes GSU09 Romania Decentralization Process Completed P151109 Yes GWA03 Irrigation Prioritization Framework Dropped P157681 GSULN Impact of Rural Land Registration Completed P150499 Yes GSP03 Dissemination of Social Inclusion RAS Outputs Completed P159257 Yes GTC03 National Reform Program Dropped P152746 Yes GWA03 Implementation of EU Water Directives Completed P154609 Yes GGO15 Strengthening Financial Accountability o Dropped P152291 GEE03 Improving heating sector regulation Completed P154400 Yes GSU09 Regional Pilot: ECA-Romania urban regen Completed P159178 Yes GMF03 Part II of Romania Programmatic PFR (subtask of P151510) Ongoing P159644 Yes GMF03 Romania - Public Expenditure Review (programmatic) Completed P151510 Yes GTI03 Romania Transport Sector Project Prep Dropped P158261 Yes GMF03 Programmatic Public Finance Review (subtask of P151510) Completed P159659 Yes GEEX2 Mining Sector Policy Completed P159383 Yes GSULN Real Estate Registration and Services Completed P158399 Yes GSU03 Partnerships for marginalized Roma (programmatic) Ongoing P151295 Yes GFA03 Strengthening Agri-Food Chain Completed P161837 Yes 106 FY19-23 Country Partnership Framework for Romania Global Practice Project name Status New to CPS ECCRO Resources Mapping (programmatic) Ongoing P159033 Yes GFM03 Capital Market Supervision Enhancement Ongoing P160346 Yes GGO15 Anticorruption Completed P161251 Yes GTC03 Romania Laser Valley Ongoing P162373 Yes GFMFP Romania FSAP Update Ongoing P164039 Yes GPV03 Romania CEQ Ongoing P164227 Yes GFA03 Agriculture Sector Engagement in Romania Ongoing P164541 Yes GWA03 Romania water sector diagnostic Ongoing P164763 Yes Romania: Assessment of the Challenges and Prospects of the GMF03 Ongoing P165156 Yes District Heating System GTI03 Transport SOE Sector Note Ongoing P165278 Yes GSP03 Romania Pensions Ongoing P165455 Yes Technical Assistance to increase the capacity building for assess- GTC03 Ongoing P165505 Yes ing the impact of state aid schemes GHN03 Supporting the role of regional hospitals in Romania Ongoing P165988 Yes Status Review of the National Program for Cadastre and Land GSULN Ongoing P166140 Yes Book Technical Assistance to Support Design of a Youth Employment GSP03 Ongoing P166186 Yes Intervention for Roma Youth Accelerating DRM and climate resilience in Romania through policy GSU09 Ongoing P166680 Yes reform, investment in risk reduction and civil society engagements Reimbursable Advisory Services FBS Regional Development Reimbursable Advisory Services (pro- GSURR Completed P143014 grammatic) GSURR FBS Romania Spatial and Urban Strategy (subtask of P143014) Completed P143087 GSURR FBS Romania MA-IB Collaboration (subtask of P143014) Completed P143088 GSURR FBS Romania Project Selection Models (subtask of P143014) Completed P143089 GSPDR Romania Roma diagnostics Completed P145035 GSURR Integration of urban Marginalized groups (subtask of P143014) Completed P143090 GGODR HR Strategy for MOF Completed P144505 GGODR FBS: Administrative Capacity Development and Decentralization Completed P133582 FABDM Romania Strengthening Public Debt Management Completed P133720 GGODR FBS Risk Based Systems Enhancement Completed P133830 Support to Strengthening Strategic and Operational management GFADR Completed P133586 (Programmatic) GFADR Agri-food sector strategy formulation (subtask of P133586) Completed P143673 Annex 9 107 Global Practice Project name Status New to CPS GFADR Internal management system for MARD (subtask of P133586) Completed P143675 GGODR FBS - Romania Judicial Functional Review Completed P129957 GFMDR FBS-21-FY12 West Region Competitiveness Completed P131858 GSURR FBS Romania Growth Poles (subtask of P143014) Completed P132399 GGODR RAS Interpretations on tax issues Completed P144566 GED03 Romania: RAS - TA for Preparing a SFLLL Completed P146632 GTC03 RAS-MAP-Competition Council Completed P131824 GTI03 FBS Romania Transport Strategic Planning Completed P130508 GFADR Strategic planning ARD administration (subtask of P133586) Completed P143674 Integrated financial management system for MARD (subtask of GFADR Completed P143676 P133586) GGODR RAS Tax Policy Formulation Completed P144557 GGO15 RAS Public Investment Management Completed P146782 GTI03 RAS Prioritization of MRDPA Investments (subtask of P147062) Completed P150145 RAS Improving quality of MRDPA investments (subtask of GTI03 Completed P150146 P147062) GGO15 RAS RO Performance Management - EU Funds Completed P147746 GED03 RAS Framework for Increasing Tertiary Education Completed P146187 GSU09 Ploiești Growth Pole Completed P153331 Yes GSU09 Support for the Capacity Development of ADI ITI DD Completed P153436 Yes GGO15 RAS Establishment of a Delivery Unit Completed P147482 GSU09 RAS Danube Delta Strategy/Constanta ITI (programmatic) Completed P146633 Danube Delta Integrated Sustainable Development Strategy and GSU09 Completed P147561 Constanta ITI (subtask of P146633) Romania Danube Delta Integrated Sustainable Development Strat- GSU09 Completed P145417 egy (subtask of P146633) GSU09 RAS Harmonizing State and EU Funded Projects Completed P147062 GSU09 EU and State Projects Coordination (subtask of P147062) Completed P150144 GSU09 Housing Strategy and Social Infrastructure (subtask of P147062) Completed P150147 GSULN RAS Real Estate System Modernization Completed P145716 GTI09 Digital Romania Strategy Support Completed P152542 Yes GSP03 RAS Active Ageing Completed P147650 GEN03 RAS Climate Change (programmatic) Completed P145943 Sector analysis and marginal abatement cost analysis (subtask of GEN03 Completed P146802 P145943) 108 FY19-23 Country Partnership Framework for Romania Global Practice Project name Status New to CPS Economy wide analysis of low carbon green growth (subtask of GEN03 Completed P146803 P145943) Support to government institutions for implementation, mon- GEN03 itoring, and evaluation of climate change actions (subtask of Completed P146821 P145943) Climate change and low carbon green growth strategy and action GEN03 Completed P146697 plan (subtask of P145943) GTI03 FBS RO Public Private Partnership Completed P130510 GSP03 RAS Social Inclusion & Poverty Reduction Completed P147269 GED03 RAS - Develop Admin Capacity of MoNE Completed P143659 GTC03 RAS Strengthening Regulatory Impact Assessment Completed P150017 GED03 RAS - Reducing Early School Leaving Completed P145841 GED03 Capacity Enhancement of REF Romania Completed P154011 Yes GSP03 Children's Deinstitutionalization Ongoing P156981 Yes GSP03 Informing Project Evaluation Completed P161287 Yes Development of the Capacity of the Central Public Administration GTC03 Ongoing P156807 Yes to Carry Out Impact Studies GGO15 Establishment of the Strategy Unit Ongoing P154787 Yes GGO03 Support to Public Procurement Strategy Ongoing P158629 Yes GED03 RAS on Education Infrastructure Ongoing P155507 Yes GED03 Assist MESR for M&E education strategies Ongoing P157670 Yes GMF03 Planning and budgeting capacity Ongoing P156889 Yes GED03 TA to Enhance Quality Assurance in HE Ongoing P157508 Yes FABBK RAS SWAP Transactions in Romania Ongoing P156803 Yes Supporting the Implementation of Romania's Human Development GSP03 Ongoing P162775 Yes Operational Programme (POCU) 2014-2020 GSU09 Constanta Urban Development RAS Program Ongoing P164198 Yes GSU09 Brașov Urban Development RAS Program Ongoing P166263 Yes GSU09 Assistance to District 5 of Bucharest Ongoing P167042 Yes Miscellaneous Reimbursable Arrangements GSU03 MRA Alba Iulia Projects Assessment Completed P151596 Yes GTI03 Romania-Road Safety Capacity Review Completed P157075 Yes Annex 9 109 Attachment 6. IBRD—Portfolio Trends FY 18 Data as of FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 @ Jan 29 PORTFOLIO AND DISBURSEMENTS Active Projects # 12 12 10 8 8 7 6 7 5 1,032.58 1,708.88 2,637.70 2,536.69 3,737.21 2,622.50 1,640.09 2037.498 858.92 Total 429.96 545.02 507.47 485.89 1,843.57 1,322.92 508.38 413.66 96.1 Disbursements $m Total Undisbursed 632.88 1,242.93 2,132.54 2,046.74 1,915.32 1,078.13 1,100.47 1576.62 750.45 Balance $m Disbursements in 164.54 122.75 278.58 120.01 1,476.93 869.92 29.36 31.97 15.92 FY $m Disbursement Ratio for IPF 20.6 18.6 25.0 16.2 15.6 3.0 2.7 3.0 2.1 only % IBRD/IDA Disb 20.6 18.5 25.1 16.2 15.7 3.0 2.5 3.0 2.1 Ratio Slow 33.3 25.0 10.0 12.5 0.0 0.0 0.0 0.0 0.0 Disbursements % PORTFOLIO RISKINESS Actual Problem 5 3 2 2 0 5 2 3 3 Project # Problem Project % 41.7 25.0 20.0 25.0 0.0 71.4 33.3 42.9 60.0 Potential Problem 0 0 0 0 0 0 0 0 0 Project # Projects at Risk # 5 3 2 2 0 5 2 3 3 Projects at Risk % 41.7 25.0 20.0 25.0 0.0 71.4 33.3 42.9 60.0 Commitments at 330.28 303.60 119.09 132.69 .00 1,339.10 1,049.20 1,048.65 548.83 Risk $m Commitments at 32.0 17.8 4.5 5.2 0.0 51.1 64.0 51.5 63.9 Risk % Proactivity % 33.3333 100.0 100.0 50.0 100.0 60.0 100 100 110 FY19-23 Country Partnership Framework for Romania Attachment 7. IFC—Committed and Disbursed Outstanding Investment Portfolio Cmtd - Part Repayment Cmtd - IFC Cmtd - IFC Cmtd - IFC Cmtd - IFC Cmtd - IFC Cmtd - IFC Out - Part Out - IFC Out - IFC Out - IFC Out - IFC Out - IFC Out - IFC QL + QE QL + QE Commitment Institution - IFC ALL ALL ALL RM RM GT GT LN LN LN LN ET ET Fiscal Year Short Name 2017 2012 Agricover Credit 18.72 10.65 18.72 18.72 18.72 2018 2017 2016 2015 Aplha Bank ROM 61.43 3.15 64.58 61.43 3.15 64.58 2017 2016 2015 2009 2006 2004 Banca Comerciala 249.29 2.78 2.78 2.78 2.78 2003 2018 2017 2016 2015 2014 2013 Bancpost 73.30 0.28 0.28 0.28 0.28 2012 2011 2010 2006 2002 1999 2016 2015 2014 2013 2012 2001 Banca Romaneasca 3.29 0.02 2.30 2.32 2016 DARP SPV Romania 46.25 46.25 46.25 46.25 2016 DARP SPV Ursa 15.55 15.55 15.30 15.30 2018 2015 2013 2012 Garanti Bank RO 49.82 49.11 49.82 49.82 49.82 2017 2015 Granti Leasing RO 13.08 2.25 13.08 13.08 13.08 2012 Lidl Romania 33.81 26.62 33.81 33.81 33.81 2017 2012 2010 2007 MedLife SA 14.68 11.40 1.24 15.92 14.68 1.24 15.92 2018 NEPC 62.28 62.28 61.68 61.68 2015 2014 Raiffeisen ROM 24.07 24.07 24.07 24.07 2015 Smithfield Roman 57.39 5.52 57.39 27.39 27.39 2012 2009 2008 TTS Romania 4.61 4.61 4.61 4.61 2016 2014 TeamNet 10.72 8.41 19.13 10.55 8.41 18.96 2014 Timisoara Muni 23.96 5.52 23.96 23.96 23.96 2017 2015 2014 2013 2011 2010 Transilvania-bank 1.17 153.84 8.67 5.00 14.84 1.17 8.76 9.84 2009 2007 2005 2004 2018 UC Leasing ROM 40.11 40.11 40.11 40.11 2014 2013 UniCredit Romania 69.55 69.55 69.55 69.55 Total Portfolio 445.98 590.81 25.24 94.27 6.23 7.30 579.02 415.39 25.08 94.03 6.20 540.69 Amounts in US Dollars Millions Acounting Date as of: 01/31/2018 Annex 9 111 Attachment 8. Citizen Engagement: Progress and Achievements FY14-18 The context for citizen engagement (CE) in Romania has remained relatively consistent over the last decade, though recent developments demonstrate a rising awareness for active citi- zenship that can be harnessed in the development of the next CE country roadmap. Romania`s ranking on the WGI Voice and Accountability Index improved only marginally in 2016 ranked at 61 (out of 204 countries). Compared to other EU member states only a small number of active and sustainable NGOs exist, and they have not yet found a voice in policy-making or governance. However, with improving living standards, a burgeoning service sector and rising educational standards, a clientele and constituency for CSO work is growing incrementally. The unprecedented mobilization of citizens since 2015 reflects this transition of Romania’s civil society. The emerging knowledge society, improved education and access to ICT is encouraging citizens to speak up, especially with regards to corruption, clientelism and polit- ical marginalization. In this enabling environment, a citizen engagement review of the Romania portfolio was undertaken to inform this CLR and the forthcoming CPF. The 2016 PLR introduced a simple framework to implement the Strategic Framework on Mainstreaming Citizen Engagement in WBG Operations and the Romania portfolio has improved since FY14 when the corpo- rate requirements were introduced. Regarding compliance, since FY14, all four IPF projects approved by the Board included a citizen-oriented design, and three included a beneficiary feedback indicator in the results framework. The overall quality of citizen engagement in Romania portfolio, when measured using the ECA Quality Index for Citizen Engagement, Romania scored 2.4, (well above the ECA average for FY17 of 2.0). This index considers: how frequently CE mechanisms enable citizens to provide feedback; the depth of engagement intended by the project (i.e. the opportunity for interaction between government and citizens, pro-activity); the opportunity to use one of several mech- anisms; and any restrictions placed on that feedback (e.g. resettlement). Most projects in the relatively small Romania portfolio offer more than one channel for feedback, there is an effort to move away from passive forms of engagement toward mechanisms that actively engage citizens, service users and beneficiaries (Justice, Environment and Agriculture, Education) through events enabling dialogue and collaboration. Frequency could be improved (Revenue Administration, Pollution Control). Beneficiary Feedback indicators are generally well aligned with the CE activities. A review of implementation was conducted for this CLR to report on the degree to which citizen engagement is being carried out as planned. The review found that implementation has progressed relatively slowly in all respects. The level of design of guidelines and proce- dures to implement the planned CE, the level of budgeting and staffing, execution of systems all needs to be rapidly improved. Moreover, projects need to report on citizen engagement regularly. The DPO consultation processes with a range of civil society, and private sector stakeholders, and the SCD process both provided opportunities to hear from key stakeholders. Most notably, the CPF consultations took a comprehensive, innovative, inclusive approach. Consultations employed a mix of face to face as well as innovative virtual channels for feed- back and comments. A special emphasis was placed on inclusion – getting feedback from mar- ginalized communities in lagging regions, and on Roma-specific consultations. 112 FY19-23 Country Partnership Framework for Romania To promote inclusive citizen engagement processes, the Bank helped establish and supports the Roma Sounding Board (RSB). The RSB serves as a platform for more effective communi- cation and engagement between CSOs working on the Roma agenda in Romania, the World Bank, and other external stakeholders. Established in 2017, its primary roles are to: (i) iden- tify areas for increased policy attention for the Roma; (ii) provide input from the perspectives of the Roma; and (iii) propose potential solutions to improve development outcomes and strengthen the socio-economic inclusion of the Roma. The initiative aims to support the full participation of the Roma in the political, social, and economic development of their commu- nities. National and regional Roma organizations accompanied by non-Roma organizations, form this sounding board platform to provide expertise and advice for the Roma agenda in Romania. Within the portfolio, the achievements of the CPS period include: • Romania Integrated Nutrient Pollution Control Project – AF (P155594) In its efforts to reduce the discharge of nutrients into water bodies and comply with the provisions of the EU Nitrates Directive on a national scale, the 2016 additional financing specifically included opportunities for a broad range of citizens to provide feedback, and the strengthening of mechanisms to analyze feedback and report back to communities. Survey results are now shared with participating communities in a user-friendly format and summaries of public consultations are published. ICT-based tools and social media disseminate information; and enable questions or comments. Three results indicators monitor public participation, citizen engagement and grievance redress mechanisms. • Justice Services Improvement Project (P160751). To help meet the PDO of improving the efficiency and accessibility of targeted justice institutions, the Project included a citizen engagement framework which focuses on feedback from users and potential users of judicial services. Surveys, court open days, community roundtables and workshops also ensure the inclusion of vulnerable groups. Surveys assess levels of user satisfaction with the courts and identify bottlenecks affecting the efficiency and accessibility of justice services; survey results are shared on a regular basis with users, communities and vulnerable groups through a website and public events. Moving forward, the upcoming CPF will learn the lessons of this first phase, and establish several goals to support the CPF pillars in a Citizen Engagement Country Road Map. This will set standards for engagement, identify platforms for enhancing the depth of the citizen engagement activities implement and consider how innovations might help improve voice and accountability. Annex 9 113 Attachment 9. Actions Related to Ex-ante Conditionalities and Status of Bank Support Ex-ante conditionalities were an essential part of the preparations for the 2014-20 program- ming period. They represent pre-conditions that all EU Member States must fulfil and are linked to the effective and efficient use of EU funds. Should ex-ante conditionalities not be ful- filled by the time the Partnership Agreement (PA) has been submitted, EU countries will need to present the European Commission with an action plan and a timetable for implementation. Ex-ante conditionalities must be fulfilled no later than 31 December 2016 (or within two years following the adoption of the PA). The Partnership Agreement for Romania with the European Commission was adopted in August 2014. As many of the ex-ante conditionalities were not ful- filled by that time, action plans have been developed with a firm deadline of December 2016. The table below indicates the areas where the Bank supported the Government: Action related Status of Bank’s support to ex-ante conditionality Digital Agenda and NGN RAS – Completed The Bank provided support for developing the M&E framework and mapping of broadband infrastructure Active aging Two RAS – Completed Social inclusion and poverty Strategies developed with Bank’s input and adopted by the Government reduction New RAS to be signed to help the Government enhance capacity for monitoring and evalua- tion of the strategies under the coordination of the Ministry of Labor and Social Justice Early school leaving (ESL) Three RAS - Completed Tertiary education (TE) The national framework (incl. the strategy, M&E framework) for each area was developed Lifelong learning (LLL) with Bank’s input and the three strategies were adopted by the Government New RAS signed to help the Government enhance capacity for monitoring and evaluation of the strategies in education Education infrastructure One RAS signed in 2016 - Ongoing Assistance for developing the national strategy for education infrastructure 2014-20 through a RAS Public procurement One RAS signed in 2016 - Ongoing Support to the implementation of the national public procurement strategy. The RAS includ- ed a key action (development of web-based guide) which contributed to fulfilling the ex-ante conditionality on public procurement Roma inclusion Completed The Bank provided a background analysis to inform the preparation of the strategy – through a short RAS engagement Deinstitutionalization of One RAS signed in 2016 - Ongoing children Support for deinstitutionalization of children Public administration Ongoing Support for the development of the HR management system at national level (RAS signed in 2018) 114 FY19-23 Country Partnership Framework for Romania Endnotes 1. There are three levels of Nomenclature of Territorial Units for Statistics (NUTS) defined. This category refers to regions belonging to the second level (NUTS 2, also known as NUTS II), which is largely used by Eurostat and other European Union bodies. 2. WBG fiscal years (FY) 2019-23 3. In ESA terms. 4. AROPE - At risk of poverty or social exclusion refers to the situation of people either at risk of poverty, or severely materially deprived or living in a household with a very low work intensity. 5. In this chapter, poverty generally refers to the anchored AROP (at-risk-of-poverty). 6. For the definition of the indicators used to identify the rural and urban marginalized areas see: Teșliuc, E., Grigoraș, V. And Stănculescu, M.S. (coord.) (2016) The Atlas of Rural Marginalized Areas and of Local Human Development in Romania. Bucharest: The World Bank and Swinkels, R., Stănculescu, M.S., Anton, S. Koo, B., Man, T. And Moldovan, C. (2014) The Atlas of Urban Marginalized Areas in Romania. Bucharest: The World Bank. 7. Teșliuc, E., Grigoraș, V. And Stănculescu, M.S. (coord) (2015) Background Study for the National Strategy on Social Inclusion and Poverty Reduction 2015-2020, The World Bank. 8. i.e. have a disposable income below 60 percent of the national equalized median income. 9. If not indicated otherwise data presented in this section comes from the European Union Agency for Fundamental Rights, 2016 EU-MIDIS II survey, which collected information from over 25,500 respondents from different ethnic minority and immigrant backgrounds in all 28 EU Member States. The data are representative for Roma living in nine EU Member States in geographic or administrative units with density of Roma population higher than 10 percent, who self-identify as “Roma” or as members of one of the other groups covered by this umbrella term. In Romania, interviews were conducted in 1,408 Roma households covering 5,764 individuals. 10. All numbers for 2011 are based on data from the UNDP/World Bank/EC Regional Roma Survey 2011 and/or the and FRA Pilot survey 2011; see: http://fra.europa.eu/en/publications-and-resources/data-and-maps/survey-data-explorer- results-2011-roma-survey. 11. If implemented, the VMI Program, will reverse the recent trend of increasing poverty in Romania, which is particularly pronounced in rural areas. It will provide stronger incentives for the poor to get back to work and reduce in-work poverty (in-work poverty in Romania is higher than other EU countries). The VMI law uses a benefit formula like benefits schemes in France, Germany and UK, where the income threshold for program eligibility rises if the beneficiaries start working or work more. This way, the law will stimulate poor beneficiaries to combine social assistance incomes with earnings. Currently, only 50 percent of the poor adults who can work are working. 12. World Bank (2018): Gender Assessment Romania 13. (Eurostat 2016). 14. The annual EIB Group Survey on Investment and Investment Finance (EIBIS) is an EU-wide survey that gathers qualitative and quantitative information on investment activities by small and medium-sized businesses and larger corporates, their financing requirements and the difficulties they face. The survey covers some 12 500 firms and a wide spectrum of questions on corporate investment and investment finance. It thus provides a wealth of unique firm-level information about investment decisions and investment finance choices. 15. http://gov.ro/fisiere/pagini_fisiere/PROGRAMUL_DE_GUVERNARE_2018-2020.pdf 16. http://discutii.mfinante.ro/static/10/Mfp/transparenta/SFB2018_2020_29nov2017.pdf 17. In PISA 2015, 38.5 % of Romanian 15-year-olds failed to achieve a minimum level of knowledge in science (EU-28: 20.6 %), 38.7 % in reading (EU-28: 19.7 %), and 39.9 % in mathematics (EU-28: 22.2 %). 18. A 30-point score difference in PISA 2015 is equivalent to one year of schooling. 19. Ridao-Cano, C. and C. Bodewig (2018), Growing United: Upgrading Europe’s Convergence Machine. Washington, DC: World Bank 20. Sites will be prioritized based on WB poverty-related indicators to ensure focus on poor and underserved populations. [i]. MSME loans are defined as loans with an outstanding balance below US$2 million (based on Romania’s country status). Endnotes 115