The World Bank Sri Lanka Public Sector Efficiency Strengthening Project (P162949) Combined Project Information Documents / Integrated Safeguards Datasheet (PID/ISDS) Appraisal Stage | Date Prepared/Updated: 03-Jun-2019 | Report No: PIDISDSA24719 May 29, 2019 Page 1 of 17 The World Bank Sri Lanka Public Sector Efficiency Strengthening Project (P162949) BASIC INFORMATION OPS_TABLE_BASIC_DATA A. Basic Project Data Country Project ID Project Name Parent Project ID (if any) Sri Lanka P162949 Sri Lanka Public Sector Efficiency Strengthening Project Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) SOUTH ASIA 02-Apr-2019 27-Sep-2019 Governance Financing Instrument Borrower(s) Implementing Agency Investment Project Financing Democratic Socialist Ministry of Finance, Republic of Sri Lanka National Audit Office of Sri Lanka Proposed Development Objective(s) To improve transparency and the efficiency of core government and public financial management functions. Components Strengthening Allocative Efficiency of Public Investments, Programs and Excise Management Improving the Operational Efficiency of Public Expenditures through Procurement Strengthening the Governance, Transparency and Efficiency of Public Services Project management PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 31.00 Total Financing 31.00 of which IBRD/IDA 25.00 Financing Gap 0.00 DETAILS -NewFinEnh1 World Bank Group Financing International Bank for Reconstruction and Development (IBRD) 25.00 May 29, 2019 Page 2 of 17 The World Bank Sri Lanka Public Sector Efficiency Strengthening Project (P162949) Non-World Bank Group Financing Other Sources 6.00 EC: European Commission 6.00 Environmental Assessment Category C-Not Required Decision The review did authorize the team to appraise and negotiate Other Decision (as needed) B. Introduction and Context Country Context 1. Sri Lanka has shown steady growth and poverty reduction over the last decade. Sri Lanka is a lower middle-income country with a Gross Domestic Product (GDP) per capita of USD 4,073 (2017) and a total population of 21.4 million people. Following 30 years of civil war that ended in 2009, Sri Lanka’s economy grew at an average 5.8 percent during the period of 2010-2017, reflecting a peace dividend and a determined policy thrust towards reconstruction and growth; although there were some signs of a slowdown in the last few years, aggravated by the April 2019 terrorist attacks. The economy is transitioning from a predominantly rural-based economy towards a more urbanized economy oriented around manufacturing and services. Social indicators rank among the highest in South Asia and compare favorably with those in middle-income countries. Economic growth has translated into shared prosperity with the national poverty headcount ratio declining from 15.3 percent in 2006/07 to 4.1 percent in 2016. Extreme poverty is rare and concentrated in some geographical pockets; however, a relatively large share of the population subsists on slightly more than the poverty line. Low revenues combined with largely non- discretionary expenditure in salary bill, transfers, and interest payments have constrained critical development spending and squeezed expenditure on health, education and social protection, which is low compared to peer countries. Debt levels are high, and the overall debt portfolio indicate some important risks. 2. The Government’s “Vision 2025� policy statement lays out a strategy to foster sustainable and inclusive economic and social development and to substantially increase prosperity for all Sri Lankans.1 The Vision aims to make Sri Lanka an Upper Middle-Income Country, a social market economy and a knowledge and logistics hub for South Asia. To achieve these objectives, the Government has initiated a reform program of revenue-based fiscal consolidation, towards a stronger macro-fiscal framework, and a more export-oriented and private sector-led growth model. These reforms seek to address the fiscal and efficiency challenges constraining growth: low and inequitable tax revenues; insufficient productive 1 https://news.lk/images/pdf/2017/sep/Vision_2025_English_final.pdf May 29, 2019 Page 3 of 17 The World Bank Sri Lanka Public Sector Efficiency Strengthening Project (P162949) investments; allocative inefficiencies; budget deficits; and public debt crowding out much needed development expenditures and private sector financing. “Vision 2025� reiterates the Government’s commitment to open and inclusive governance based on the principles of public sector transparency and accountability. The 19th amendment to the Constitution introduced additional checks and balances between institutions, granted citizens the Right to Information (RTI) and introduced key accountability institutions, such as the Information, Procurement, and Audit Commissions. These reforms have important implications for the functioning of public sector institutions. Sectoral and Institutional Context 3. Government is committed to fiscal consolidation under a program supported by the International Monetary Fund (IMF)2. Sri Lanka achieved primary surpluses in the fiscal accounts in 2017 and 2018 after many decades but high interest costs continue to mask the overall improvement. Amid slow growth and currency depreciation, the central government debt increased to 84 percent of GDP in 2018. Large foreign currency refinancing requirements – USD 5.5 to 6.0 billion annually, starting from 2019 – and the large volume of debt by State-Owned Enterprises (SOEs) and non-commercial state agencies (such as the Road Development Authority), now estimated at 12 percent of GDP, are important fiscal risks. The Government has started to address these risks, notably by passing the Active Liability Management Act, which provides the legal framework to manage refinancing risks, and by adopting a Medium-Term Debt Management Strategy balancing cost and risks of public debt. The Government aims to better control of the fiscal costs and risks of SoEs through more proactive and enhanced oversight and performance monitoring of SOEs, including through Statements of Corporate Intent and more stringent vetting of the business case of their investments and corresponding State guarantees. 4. Weak tax revenues at just 10.1 percent GDP in 2014 have hampered the implementation of a strategic fiscal policy and constrained financing for productive development and infrastructure investments. In response, the Government initiated important tax policy reforms, increasing the rate and eliminating exemptions under the Value Added Tax (VAT) and the Inland Revenue Act, supported by the IMF. These policies reversed the declining trend and increased tax revenues to 12.5 percent of GDP in 2017. Further reforms are needed if Government is to reach the target of 16 percent of GDP tax revenues by 2025. The Government has launched the second phase of its tax reforms which seek to improve the business environment by simplifying tax procedures and compliance – Sri Lanka ranked 141th out of 190 countries on the Paying Taxes indicators in the 2019 Doing Business. Reforms in include the modernization of excise policies and administration to increase revenues while also improving public health by making alcohol and tobacco products more expensive. 5. Government will address constraints in public investment management through a comprehensive public investment management reform. The recent Public Investment Management (PIM) assessment in Sri Lanka estimated an efficiency gap of 36 percent compared to countries achieving higher infrastructure quality with a similar per capita capital stock. and highlighted effectiveness challenges of the existing PIM institutions (Figure 1) reflected, amongst others, in a low capital budget execution rate of just 63 percent in 2016. The Government prepared its first Public Investment Plan (PIP 2017-2020) in thirteen years in order to improve prioritization and quality of public investments. This is an important effort in a fiscally constrained environment and warrants a strategic use of public investments 2 IMF reached a staff agreement with Sri Lankan authorities on the fifth review of the program with an extension of 1-year. May 29, 2019 Page 4 of 17 The World Bank Sri Lanka Public Sector Efficiency Strengthening Project (P162949) as catalysts for private investments and leveraging public private partnerships (PPP). The next steps include: the development of the legal and regulatory framework for PIM, with rules for project prioritization, appraisal, vetting and selection, supported by an information system for planning and monitoring. These regulations will integrate climate change vulnerability and disaster risk management screening. Figure 1: Effectiveness of PIM institutions Source: World Bank-IMF Public Investment Management Assessment, 2018 6. While Sri Lanka has a relatively sound Public Financial Management (PFM) system and processes, these can be further strengthened to enhance its performance and the efficiency of its public programs and services in a fiscally constrained environment. The 2013 Public Expenditure and Financial Accountability (PEFA) assessment3 identified the following strengths of the PFM system: the budget preparation process, given its orderliness which ensure adequate time for budget preparation, legislative scrutiny and timely approval of the annual budget; relatively high-quality financial information in the annual financial statements; and timely audit of the country’s annual financial statements. It also identified opportunities to improve the PFM system in the areas of budget comprehensiveness and transparency – Sri Lanka ranked 60th among 115 countries on the 2017 Open Budget Index with a score of 44 – budget credibility and predictability budget execution. The Government aims to address these weaknesses through an overhaul of its 1975 public financial management regulations, its information systems and processes. A Public Financial Management Bill that has been approved by the Cabinet and sent to the legal draftsman for finalization and submission to the Parliament. The Bill seeks to modernize public financial management and strengthen budget and public investment management as well as the oversight and accountability of SOEs and agencies. A new Integrated Treasury Management Information System developed with support from an Asian Development Bank -financed project, is being rolled out across ministries and spending agencies in a phased manner. 3 The Sri Lanka PEFA was completed in January 2013 but not published. May 29, 2019 Page 5 of 17 The World Bank Sri Lanka Public Sector Efficiency Strengthening Project (P162949) 7. Public procurement in Sri Lanka is a source of delays, adversely affecting the completion and cost of projects and delivery of public services. Procurement data4 from Bank funded projects shows a time lag of up to one year between the Invitation for Bids for goods and works and the signing of a contract. Delays can be longer in nationally funded projects. The underlying causes of delays are cumbersome and outdated procedures and processes, limited understanding of market approaches and lack of capacity and empowerment among procurement decision makers, causing decisions to be elevated to senior management. In the absence of procurement plans and e-procurement system, the government is missing out on opportunities to aggregate demand to leverage economies of scale or better supplier and contractor performance. The Government is conscious of these challenges and aims to address them through four broad areas of reform: modernization of procurement regulations; improvement and standardization of professional skills of procurement staff; strengthening oversight by the National Procurement Commission; leveraging technology to introduction of e-procurement and data analytics. 8. Sri Lanka has put in place the legislative framework for open and inclusive governance but has made modest progress in implementation. The 19th constitutional amendment introduced the citizen’s right to access information, strengthened the governance framework and accountability institutions. These new constitutional principles and rights have been translated into a Right to Information Act, a new Audit Act and a new procurement policy. Accountability institutions have been strengthened with the establishment of independent Information, Procurement and Audit commissions. Sri Lanka joined the Open Government Partnership (OGP) and adopted its first action plan (2016-2018). However, limited progress has been made in the implementation of OGP commitments – 1 out of 23 has been achieved – and online proactive disclosure of information, with 85 percent of ministries’ disclosure assessed as moderately unsatisfactory or unsatisfactory.5 Reactive disclosure has been uneven across ministries and it is not possible to monitor compliance in the absence of an electronic request tracking system. 9. The ministries in charge of finance and planning will need to adapt to respond to the broader reform agenda and the responsibilities as laid out in recent legislation. The Ministry recognizes the need to respond to the changing context through: greater integration and synergies across departments and reforms; a more open, collaborative and inclusive work culture; a stronger focus on public policy objectives and performance beyond compliance; and automation and integration of financial management information systems, with a greater focus on analytics and delivery of services to citizens and firms and the generation, use and disclosure of program evaluations. 10. The reform program also impacts the Attorney General’s Department (AGD) and the National Audit Office of Sri Lanka (NAOSL). The National Audit Act of July 2018 established a National Audit Office of Sri Lanka (NAOSL) and an Audit Service Commission to independently manage its service and cadre. The transformation of the Auditor General’s Department into a modern Supreme Audit Institution (SAI) capable of meeting its constitutional mandate and delivering audits in line with international standards will require sustained investment in institutional strengthening. A detailed five year ‘Development Action Plan-DAP’ has been prepared based on an assessment of the performance of NAOSL using the SAI Performance Measurement Framework (SAI-PMF). The AGD is responsible for legislative drafting and providing legal advice to the executive. Its workload has increased sharply in recent years in line with the reform agenda. AGD has identified its capacity building priorities to meet the enhanced mandate and anticipated demand for legal advice to government. 4 Procurement data to be included here 5 https://www.rti.gov.lk/images/publications/Online-Proactive-Disclosure-under-the-RTI-Act-in-Sri-Lanka_Final-Report.pdf May 29, 2019 Page 6 of 17 The World Bank Sri Lanka Public Sector Efficiency Strengthening Project (P162949) Relevance to Higher Level Objectives 11. The project is fully aligned with and supports the Government of Sri Lanka (GOSL)’s program of governance reforms. The project supports the accountability policies and institutions created through the 19th amendment to the Constitution, including the Right to Information and the independent information, procurement and audit commissions. The project supports the Government’s Vision 2025 which seeks to strengthen public finances, mobilize and allocate resources in line with socio-economic development objectives. The project also supports the implementation of reforms announced in the 2019 budget notably the excise and e-procurement reforms. 12. The project is aligned with the Country Partnership Framework (CPF) for Sri Lanka for FY17– FY20. The project will contribute to the achievement of the first CPF pillar on improving macro-fiscal stability and competitiveness. Specifically, it will support the achievement of Objective 1.1: Improving public finance management as well as Objective 1.2: Improving the enabling environment for private investment and trade. The project will further support the CPF’s cross-cutting themes on Governance and on Voice, notably by supporting the implementation of the right to information and citizen engagement reforms. The project builds on the achievements and supports the implementation of key policy reforms initiated under the 2016 DPF. C. Proposed Development Objective(s) Development Objective(s) (From PAD) To improve transparency and the efficiency of core government and public financial management functions. Key Results 1. Increased tax revenues through the Excise reform to enhance the fiscal space. 2. Improved allocative and operational efficiency of public investments. 3. Reduction in time taken for procurement of standard goods and services. 4. Improved transparency through proactive disclosure of information by ministries. D. Project Description Concept 13. The US$31 million Investment Project Financing, with Disbursement-Linked Indicators, also supported by the European Union (EU), consists of two financing modalities: 1) US$24 million in results- based financing to provide incentives for achieving results along three components; and 2) US$7 million in input-based financing for technical assistance and capacity building to support the GoSL in the implementation of reforms. The input- based financing, is partly supported by an EU recipient-executed trust fund of US$6 million. There is also a separate EU- World Bank executed Trust Fund of US$4 million to mobilize high level short-term expertise, technical assistance and analytical work from the World Bank May 29, 2019 Page 7 of 17 The World Bank Sri Lanka Public Sector Efficiency Strengthening Project (P162949) Group to support the reform implementation across components, including the independent constitutional commissions. This will ensure continued engagement of Bank technical specialists who are familiar with the reforms and counterparts and thereby help leverage other Bank operations and analysis. The total EU financing is estimated at US$ 10 million and will be managed through a Trust Fund administered by the World Bank and composed of a recipient executed trust fund of US$6 million and a Bank executed trust fund of US$4 million6. 14. The results-based financing will disburse against an Eligible Expenditure Program (EEPs) and incurrence of eligible expenditures, upon achievement of Disbursement-Linked Indicators (DLIs). The Technical Assistance (TA) will disburse against eligible expenditures upon submission of Interim Unaudited Financial Reports (IUFRs). The TA and capacity building activities under the different thematic components will be consolidated and budgeted under component 3.3, with the exception of the Auditor General, supported by its specific component 3.2. The project has three thematic components and one project management component. Table 1: Project components and indicative financing (in US$ million) Project cost Components and sub-components Total DLI WB TA EU TA 1. Strengthening Allocative Efficiency of Public Investments, 13 12 0.5 0.5 Programs and Excise Management 1.1: Strengthening Public Investment Management and Evaluation 6.5 6 0.25 0.25 1.2: Increasing the Efficiency of and Compliance with Excise Taxes 6.5 6 0.25 0.25 2. Improving the Operational Efficiency of Public Expenditures 7.5 7 0.25 0.25 through Procurement 3. Strengthening the Governance, Transparency and Efficiency 9.5 5 0.25 4.25 of Public Services 3.1: Strengthening Fiscal Transparency and the Right to Information 5.5 5 0.25 0.25 3.2: Strengthening Accountability and the Implementation of the Audit Law 2 - - 2 3.3: Strengthening Capacity and Skills of Core Central Departments and Institutions 2 - - 2 4. Project management 1 - 1 Total Project Financing 31 24 1 6 Component 1: Strengthening Allocative Efficiency of Public Investments, Programs and Excise Management (US$13 million) Sub-component 1.1: Strengthening Public Investment Management and Evaluation 6The EU signed a financing agreement with the Government committing its support to the technical assistance and capacity building part of this project on 16/05/2018. May 29, 2019 Page 8 of 17 The World Bank Sri Lanka Public Sector Efficiency Strengthening Project (P162949) 15. The project is providing technical assistance and capacity building to strengthen public investment management and evaluation, through supporting, inter alia: (i) the design of an integrated public investment management information system; (ii) the formulation of a legal and regulatory framework for public investment management; (iii) the implementation of a policy for the review of the business case of state-owned enterprise investments, in line with the principles for Maximizing Finance for Development; (iv) the public investment committee in institutionalizing the horizontal coordination across the central departments involved in public investment management; (v) implementation of the national evaluation policy and framework, including the performance monitoring and evaluation of SOEs and citizen feedback; and (vi) the development and implementation of a climate screening tool as part of the appraisal of large projects above LKR 1bn7 to strengthen their resilience and adaptation to climate change. 16. The subcomponent is also incentivizing the implementation of the public investment management framework through the following disbursement linked indicators and results. This includes the development of a national information system and database for project submission, processing and monitoring and evaluation, including geotagging of selected projects covering both national and provincial governments. This reform aims to strengthen the vetting and prioritization of high impact projects, enhance transparency and citizen engagement, including in project monitoring. DLI #1- Public Investment Management US$ mn Strengthened Public investment management committee - and guidelines including 0.8 public investment climate screening approved by Cabinet and publicly disclosed (Year 1) management, National investment management system operational and includes 3.2 efficiency and geotagging of projects for citizen feedback (Year 3) transparency 80% of Large Investments have an independent pre-feasibility review 2 published along the project proposal on the GoSL website Total 6 Sub-component 1.2: Increasing the Efficiency of and Compliance with Excise Taxes 17. This sub-component is providing technical assistance and capacity building to increase the efficiency of and compliance with excise taxes, through supporting, inter alia: (i) the modernization of excise policies and regulations; (ii) building analytical and research capacity of the Department of Excise; (iii) the simplification of the procedures and processes of the Department of Excise; (iv) the design of an excise management information system; (v) the development and implementation of a training and communication program; and (vi) the formulation of climate-informed excise policies and taxes. Furthermore, the project is incentivizing the modernization of excise policies, administration and risk- based controls through the following disbursement linked indicator and results. The modernization of excise policies including a rules and risk based excise management and an excise tariff indexation formula for alcohol and tobacco products, based on inflation or GDP growth to enhance revenue and reduce affordability and thereby reduce consumption. It will further support the development and the implementation of a web-based Excise information management system. This will enable a phased 7 As per Circular No MNPEA 2/2019 on public investment guidelines May 29, 2019 Page 9 of 17 The World Bank Sri Lanka Public Sector Efficiency Strengthening Project (P162949) transition from an ex-ante transaction-based controls to a more rules and risk-based control system aimed to improve both revenue collection and the ease of doing business. DLI #2 – Excises US$ mn Increased Minister of Finance decision introducing an excise tax indexation formula for 2 efficiency of alcohol and tobacco adopted and published (Year 1) excises New excise management system is operational (Year 3) 2 New risk-based excise control system rolled out to two largest operators in 2 the Borrower’s territory (Year 5) Total 6 Component 2: Improving the Operational Efficiency of Public Expenditures through Procurement (US$7.5 million) 18. The project will support the improvement of procurement outcomes through a combination of results based financing and technical assistance to the Ministry of Finance (MoF) and the National Procurement Commission (NPC). 19. This component is providing technical assistance and capacity building to improve operational efficiency of public expenditures through procurement, by supporting, inter alia: (i) the strengthening of the National Procurement Commission’s regulatory and oversight functions; (ii) professionalization of procurement staff through the establishment of standards and skills requirements and a system of accreditation; (iii) the establishment of an independent complaints handling mechanism; (iv) the design of an e-government procurement system; (v) the review and update of the procurement regulations; (vi) an outreach and support program to small and medium-size enterprises and women entrepreneurs to enhance their access to public tenders; (vii) the development and pilot testing of a policy and framework for green procurement and more climate resilient infrastructure; and (viii) developing open contracting standards to enhance transparency and accountability; 20. It is further incentivizing the development of an e-procurement system and its phased roll out through the following disbursement linked indicator and results: DLI #3 – Procurement US$ mn E-procurement Core design of the e-procurement system finalized and one module 2 system launched (Year 1) operationalized Procurement plans, tenders and contracts awards above specified 2 threshold published on MoF website (Year 2) E-procurement system fully operational and all procuring entities (Year 4) 3 Total 7 Component 3: Strengthening the governance, Transparency and Efficiency of Public Services (US$9.5 million) May 29, 2019 Page 10 of 17 The World Bank Sri Lanka Public Sector Efficiency Strengthening Project (P162949) Sub-component 3.1: Strengthening Fiscal Transparency and the Right to Information (RTI) 21. The project will support the implementation of the right to information reform guided by the strategic implementation plans (2017-2020) developed by the Department of Government Information (DoI), the nodal agency and by the Information Commission. 22. More specifically this sub-component is providing technical assistance and capacity building to strengthen fiscal transparency and the right to information, by supporting, inter alia: (i) the implementation of selected ministries’ right to information mandate; (ii) the proactive disclosure of information on ministries’ websites; (iii) the promotion of public awareness and demand for information, especially from women; and (iv) the strengthening of the Right to Information Commission. 23. The results-based financing will incentivize proactive and reactive implementation modalities of the Right to Information Act through the following disbursement linked indicator and results. DLI #4 – Right to Information US$ mn Strengthened fiscal Instructions and guidelines on proactive disclosure issued by 1 transparency and Department of Government Information to line ministries (Year 1) Right to Information Right to information request tracking platform operational (Year 3) 2 Act implemented 50% of all ministries score moderately satisfactory or above for 2 their statutory online proactive disclosure (Year 5) Total 5 Sub-component 3.2: Strengthening Accountability and the Implementation of the Audit Law 24. This sub-component is providing technical assistance and capacity building support to NAOSL, to: (a) support NAOSL in the implementation of the development action plan; (ii) build institutional and human resource capacities; (iii) enhance capacity for auditing state-owned business enterprises, including by leveraging private auditors; and (iv) develop and pilot test a framework for participatory auditing, support pilot programs that involve the private sector, citizens and civil society in the audit process. Sub-component 3.3: Strengthening Capacity and Skills of Core Central Departments and Institutions 25. This sub-component will provide technical assistance, capacity building and training to the Treasury and Planning Departments, the Valuation Department, the Attorney General’s Department and independent constitutional commissions – including the National Procurement Commission, the Right to Information Commission and the Commission to Investigate Bribery or Corruption. 26. This subcomponent aims to support these central government departments to upgrade skills, adapt to reforms and strengthen management to support: greater integration and synergies across departments and reforms; a more open, collaborative and inclusive work culture; increased decentralization and devolution of functions; a stronger focus on public policy objectives and performance beyond compliance; and the generation, use and disclosure of program evaluations; and the automation and integration of information systems. This cross-cutting subcomponent will support capacity building and training activities based on the skills gap and functional training and capacity needs assessment carried May 29, 2019 Page 11 of 17 The World Bank Sri Lanka Public Sector Efficiency Strengthening Project (P162949) out by each agency and a capacity building and training plan validated by the Project Steering Committee. This sub-component will be managed by the Project Management Unit. Component 4: Project management (US$ 1 million) 27. This component will finance the Project Management Unit (PMU), Project Monitoring and Evaluation as well as the communications and change management strategy to maximize effectiveness. It will notably finance the operating costs of the PMU as well as consultants dedicated to project procurement and fiduciary management. The PMU will further carry out annual beneficiary surveys and support the relevant components to respond to the feedback received. This beneficiary feedback will in turn inform the communication and change management strategy. E. Implementation Institutional and Implementation Arrangements 28. A Project Steering Committee (PSC) will be established to oversee project implementation. The PSC, chaired by the Secretary to the Treasury or his representative and comprising the Secretaries or Deputy Secretaries of the Ministries involved, the Project Director and the heads of the independent institutions involved in the project, will: provide strategic guidance on project activities and oversight for project implementation and its’ progress; ensure effective coordination and communication among the project stakeholders; provide directions and mandate remedial action as appropriate. 29. An Operational Committee (OC), will support the PSC, meet every quarter or more, and provide technical guidance and ensure inter-agency coordination for project implementation at the operational level. The OC will be set up in the MoF and chaired by the project director. The OC will include the focal points for each component and the Director-Generals of the Departments participating in the project. The Project Management Unit will serve as the permanent secretariat of the OC. 30. A Project Management Unit (PMU) will be set up under the Ministry of Finance. The PMU will serve as the permanent secretariat of the OC. The PMU will be led by a Project Director and will be responsible for the coordination, planning, reporting as well as for the fiduciary, procurement and monitoring and evaluation functions. The PMU will oversee the implementation of the project activities; manage and coordinate project activities, chairing the operational committee and acting as secretariat for the PSC; undertake centralized procurement and provide procurement support to the project teams (see below); undertake financial management, accounting and reporting functions, ensuring budget and fund availability; monitor and evaluate project performance and report on progress; and manage the project- level grievance and complaints procedures pursuant to the Project Implementation Plan (PIP). 31. Agencies and Independent Commissions benefiting from the project will designate officials to a core project team for the implementation of their respective activities. These commissions include the RTI commission of Sri Lanka, the National Procurement Commission of Sri Lanka, both established under the 19th constitutional amendment. The agencies participating in the project include notably the Excise department, the Valuation department, the Attorney general’s Department and the National Audit Office of Sri Lanka. The core project team will be responsible for: managing and implementing their respective project sub-components and activities; carrying out procurement with procurement support from the May 29, 2019 Page 12 of 17 The World Bank Sri Lanka Public Sector Efficiency Strengthening Project (P162949) PMU. These institutions will also benefit from technical assistance and advisory support financed by the EU-financed Bank-executed Trust Fund supporting this project. . F. Project location and Salient physical characteristics relevant to the safeguard analysis (if known) Not applicable because there are no physical activities supported by the Project. G. Environmental and Social Safeguards Specialists on the Team Darshani De Silva, Environmental Specialist Ferdous Jahan, Social Specialist Bandita Sijapati, Social Specialist SAFEGUARD POLICIES THAT MIGHT APPLY Safeguard Policies Triggered? Explanation (Optional) The policy is not applicable because no environmental impacts are attributed to planned project interventions, which constitute mainly on system strengthening and technical assistance. The Environmental Assessment OP/BP 4.01 No project does not involve either direct or indirect financing of any physical interventions that will lead to negative environmental and social impacts including the procurement of electronic equipment which could lead to the generation of e-waste. Performance Standards for Private Sector This policy is not applicable because there are no No Activities OP/BP 4.03 private sector activities supported by the project. This policy is not applicable because the project Natural Habitats OP/BP 4.04 No interventions are not expected to have any significant impacts on the natural habitats. This policy is not applicable because no impacts on Forests OP/BP 4.36 No forests due to the proposed project are envisioned. The policy is not applicable because no project Pest Management OP 4.09 No interventions are undertaken where significant use of pesticides and other such substances are utilized. This policy is not applicable because the project Physical Cultural Resources OP/BP 4.11 No interventions do not involve any physical May 29, 2019 Page 13 of 17 The World Bank Sri Lanka Public Sector Efficiency Strengthening Project (P162949) interventions that would impact any physical cultural resources. There is no conclusive evidence suggesting the presence of indigenous people in the area. Further, Indigenous Peoples OP/BP 4.10 No there are no physical interventions under the project that would have any impacts on indigenous people. Project activities do not involve any physical interventions or civil works that require any land Involuntary Resettlement OP/BP 4.12 No taking. Thus, land acquisition and involuntary resettlement is not envisaged under the project. No dams will be affected due to project Safety of Dams OP/BP 4.37 No interventions. Projects on International Waterways The proposed project activities do not have any No OP/BP 7.50 impacts to international waterways. There are no disputed areas where project Projects in Disputed Areas OP/BP 7.60 No interventions are undertaken and therefore this policy is not applicable. KEY SAFEGUARD POLICY ISSUES AND THEIR MANAGEMENT A. Summary of Key Safeguard Issues 1. Describe any safeguard issues and impacts associated with the proposed project. Identify and describe any potential large scale, significant and/or irreversible impacts: There will be no safeguard issues or impacts associated with project interventions that will be of large scale and/or significant. The project will not finance any physical interventions nor partake in any activities that will lead to irreversible environmental impacts. The project will be undertaking environmentally and socially positive actions including: (i) development and implementation of a climate screening tool as part of the appraisal of large projects above LKR 1bn to strengthen their resilience and adaptation to climate change; (ii) technical assistance for the formulation of climate-informed excise policies and taxes aimed at mitigating negative environmental externalities and contributing to climate adaptation; (iii) an outreach and support program to SMEs and women entrepreneurs to enhance their access to public tenders; (iv) develop and pilot test a policy and framework for green procurement and more climate resilient infrastructure, comprised of assessment tools, review processes and models to estimate climate risks and resilience; and (v) technical assistance and capacity building to implement the RTI mandates with the expected results of proactive disclosure of information on ministries’ website including fiscal information, public investments and environmental information; promotion of public awareness and demand for information, especially from women. 2. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: No potential indirect and/or long-term negative impacts are anticipated due to future activities within the project area other than the positive impacts described above. 3. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts. May 29, 2019 Page 14 of 17 The World Bank Sri Lanka Public Sector Efficiency Strengthening Project (P162949) As the project will not induce adverse safeguards impacts, no potential alternatives have been taken into consideration. 4. Describe measures taken by the borrower to address safeguard policy issues. Provide an assessment of borrower capacity to plan and implement the measures described. A comprehensive policy and regulatory framework for environmental management is in existence in Sri Lanka. The Central Environmental Authority (CEA) is the key regulatory body that is mandated by the National Environmental Act (NEA) to implement all regulatory provisions outlined in its statutes for environmental management. The integration of positive environmental and social actions described earlier will further strengthen the policy and regulatory framework of Sri Lanka for environmental management and social inclusion. 5. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. Not Applicable B. Disclosure Requirements C. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) OPS_ PDI_ COMP_TA BLE The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank for disclosure? NA Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs? NA May 29, 2019 Page 15 of 17 The World Bank Sri Lanka Public Sector Efficiency Strengthening Project (P162949) All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of measures related to safeguard policies? NA Have costs related to safeguard policy measures been included in the project cost? NA Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures related to safeguard policies? NA Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents? NA CONTACT POINT World Bank Fabian Seiderer Lead Public Sector Specialist Mohan Gopalakrishnan Sr Financial Management Specialist Borrower/Client/Recipient Democratic Socialist Republic of Sri Lanka Dr. R H S Samaratunga Secretary to the Treasury sf@mo.treasury.gov.lk Ms. Hemantha Pubudusiri Director - World Bank & IMF Division hemantha@erd.gov.lk Implementing Agencies Ministry of Finance Ms. Hemantha Pubudusiri Director - World Bank & IMF Division hemantha@erd.gov.lk National Audit Office of Sri Lanka May 29, 2019 Page 16 of 17 The World Bank Sri Lanka Public Sector Efficiency Strengthening Project (P162949) Mr. W.P.C. Wickramaratne Auditor General ag@auditorgeneral.gov.lk FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects APPROVAL Fabian Seiderer Task Team Leader(s): Mohan Gopalakrishnan Approved By Safeguards Advisor: Practice Manager/Manager: Adrian Fozzard 03-Jun-2019 Country Director: Valerie Marie Helene Layrol 03-Jun-2019 May 29, 2019 Page 17 of 17