Document of The World Bank FOR OFFICIAL USE ONLY Report No 60620-CO INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND INTERNATIONAL FINANCE CORPORATION COUNTRY PARTNERSHIP STRATEGY FOR THE REPUBLIC OF COLOMBIA FOR THE PERIOD FY2012-2016 June 12, 2011 Colombia and Mexico Country Management Unit Latin America and the Caribbean Region The International Finance Corporation Latin America and the Caribbean Region 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 authorization. CURRENCY EQUIVALENTS (Exchange rate effective as of June 12, 2011) Currency Unit Colombian Pesos US$1.00 COP 1,773 FISCAL YEAR January 1 to December 31 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS APEC Asia-Pacific Economic Cooperation IMF International Monetary Fund APL Adaptable program loan JSDF Japan Social Development Fund CAF Corporación Andina de Fomento LAC Latin American and the Caribbean Region (World CAT DDO Catastrophe deferred drawdown option Bank) CCT Conditional cash transfer NGO Nongovernmental organization CPPR Country Portfolio Performance Review NTF Norwegian Trust Fund CPS Country Partnership Strategy NUTP National Urban Transport Program CTF Clean Technology Transfer OECD Organization for Economic Co-operation and DAC Development Assistance Committee (OECD) Development DDO Deferred drawdown option M&E Monitoring and evaluation DDR Disarmament, demobilization, and reintegration MESEP Misión para el Empalme de las Series de Empleo, DNP Department of National Planning Pobreza y Desigualdad DPL Development policy loan MHCP Ministry of Finance and Public Credit ECD Early childhood development NDP National Development Plan GDP Gross Domestic Product PFM Public financial management GEF Global Environment Facility PPP Public–private partnership GFDRR Global Facility of Disaster Reduction and PSIA Poverty and Social Impact Analysis Recovery SFLAC Spanish Fund for Latin America and the GOC Government of Colombia Caribbean IBRD International Bank for Reconstruction and SME Small and medium-size enterprise Development SSC South-South Cooperation IDB Inter-American Development Bank SSKE South-South knowledge exchange IDA International Development Association STI Science, technology, and innovation IDF Institutional Development Fund TA Technical assistance IFC International Finance Corporation WBG World Bank Group IDP Internally displaced population WBI World Bank Institute IBRD IFC Regional Vice President: Pamela Cox Vice President for LAC: Thierry Tanoh Country Director: Gloria M. Grandolini Director: Paolo M. Martelli Task Team Leader: Sabine Hader Task Manager: John Barham Country Manager: Geoffrey Bergen Country Manager: Enrique Cañas ii REPUBLIC OF COLOMBIA COUNTRY PARTNERSHIP STRATEGY (FY12-16) Contents EXECUTIVE SUMMARY .................................................................................................................. I. INTRODUCTION .................................................................................................................. 1 II. COUNTRY CONTEXT ............................................................................................................ 1 A. POLITICAL CONTEXT ............................................................................................................................1 B. RECENT ECONOMIC DEVELOPMENTS AND PROSPECTS ...............................................................................2 C. MACROECONOMIC OUTLOOK ...............................................................................................................4 D. POVERTY LEVEL AND TRENDS ................................................................................................................5 III. GOVERNMENT’S VISION AND DEVELOPMENT CHALLENGES ..................................................... 6 IV. WORLD BANK GROUP PARTNERSHIP .....................................................................................10 A. LESSONS LEARNED FROM PREVIOUS CPS AND STAKEHOLDER FEEDBACK ....................................................10 B. PROPOSED WBG PARTNERSHIP STRATEGY ............................................................................................12 C. THE WBG’S INDICATIVE PROGRAM......................................................................................................29 D. DEVELOPMENT PARTNER COLLABORATION AND SOUTH-SOUTH KNOWLEDGE EXCHANGE .............................30 V. RISKS .....................................................................................................................................31 ANNEX A: CPS RESULTS FRAMEWORK.........................................................................................34 ANNEX B: CPS COMPLETION REPORT (CPSCR) .............................................................................45 ANNEX C: THE IMPACT OF HIGHER FOOD AND COMMODITY PRICES IN COLOMBIA......................77 ANNEX D: RECENT TRENDS ON POVERTY AND INEQUALITY IN COLOMBIA ..................................79 ANNEX E: FISCAL RISK MANAGEMENT IN THE COLOMBIAN PUBLIC SECTOR .................................83 ANNEX F: COLOMBIA AND SOUTH-SOUTH KNOWLEDGE EXCHANGE (SSKE) .................................87 ANNEX G: COLOMBIA CLIENT SURVEY 2011 ................................................................................89 ANNEX H: COLOMBIA AT A GLANCE ............................................................................................91 ANNEX I: SELECTED INDICATORS OF BANK PORTFOLIO PERFORMANCE AND MANAGEMENT .......94 ANNEX J: COLOMBIA SOCIAL INDICATORS ..................................................................................95 ANNEX K: KEY ECONOMIC INDICATORS ......................................................................................96 ANNEX L: KEY EXPOSURE INDICATORS ........................................................................................98 ANNEX M: OPERATIONS PORTFOLIO (IBRD/IDA AND GRANTS) ....................................................99 ANNEX N: TRUST FUNDS OVERVIEW ......................................................................................... 100 ANNEX O: IFC COMMITTED AND DISBURSED OUTSTANDING INVESTMENT PORTFOLIO.............. 101 ANNEX P: MAP......................................................................................................................... 102 ACKNOWLEDGMENTS The World Bank Group greatly appreciates the collaboration and contributions of the Government of Colombia in the preparation of this Country Partnership Strategy (CPS). This CPS was prepared by a team led by Sabine Hader (World Bank) in collaboration with John Barham (IFC) under the overall guidance of Gloria M. Grandolini and Enrique Cañas. Core CPS team members included: Paloma Anós-Casero, Diego Arias Carballo, Amparo Ballivian, Catalina Barjun, Harold Bedoya, Juan Carlos Belausteguigoitía, Daniel Alberto Benítez, Raja Bentaouet Kattan, Geoffrey Bergen, Díomedes Berroa, Greg Browder, Alejandro Caballero, Diana Cárdenas, Irene Chagasteles, Marie-Hélène Collion, Elena Correa, Mauricio Cuellar, Elizabeth Currie, Richard Damania, Antonio Davila-Bonazzi, Luís de la Plaza, Niels B. Holm-Nielsen, Leonardo Escandón, Talib Esmail, Angela María Fonseca, Beatriz Franco, Natalia Gómez, Eva Gutiérrez, Thomas Haven, Arturo Herrera, Federica Iorio, Theresa Jones, Irina Klytchnikova, Christoph Kurowski, Martha Laverde, Dolores López-Larroy, Esperanza Lasagabaster, Rogelio Marchetti, Andre Medici, Lars Moller, Fernando Montenegro, Edgardo Mosqueira, Xiomara Morel, Alicia Pérez, Hnin Hnin Pyne, Rekha Reddy, Camila Rodríguez, Mariangeles Sabella, Taimur Samad, David Sislen, Eduardo Somensatto, Claudia Tabuenca, María Clara Ucros, Joao Pedro Wagner De Azevedo, Eduardo Wallentin, and Fernanda Zavaleta. Invaluable inputs and suggestions were received from the broader Colombia Country Team and the peer reviewers: Sascha Djumena and Peter Siegenthaler, as well as from other participants of the concept review and regional operations committee meetings. EXECUTIVE SUMMARY Colombia is an upper-middle income country with the fourth largest economy in Latin America. President Juan Manuel Santos assumed office in August 2010 with a strong political mandate that gave his ―national unity‖ coalition an 80 percent majority in Congress. The elections demonstrated the maturity of Colombia‘s democratic process and reflected a strengthening of political institutions. The new President is committed to continue implementing the core policy framework established by the previous government, while also promoting new reforms to boost growth and tackle poverty and inequality. Colombia has a solid and stable economy with a large domestic market and a rich natural resources endowment. A strong macroeconomic framework helped cushion the impact of the economic crisis. By 2010, the Colombian economy had fully recovered from the 2008-09 slowdown; GDP growth reached 4.3 percent in 2010, compared to 1.5 percent in 2009. Private domestic demand, supported by higher consumer and investor confidence and access to cheap credit, has led the recovery process. On the supply side, the recovery was spearheaded by the mining and financial sectors. In December 2010, the Government launched its ambitious National Development Plan, called Prosperity for All. The overarching goals of this Plan are to increase employment, reduce poverty, and improve security. The Plan has three strategic areas: (1) Sustainable Growth and Competitiveness, (2) Equality of Opportunities for Social Prosperity, and (3) Consolidation of Peace. Moreover, it highlights four cross-cutting themes: (a) Relevance of International Relations, (b) Environmental and Disaster Risk Management, (c) Good Governance, and (d) Regional Development and Integration. This Country Partnership Strategy (CPS) builds on the successful experience of the prior World Bank Group (WBG) strategy in Colombia. It aims to support the new National Development Plan. The WBG will step up efforts to enhance development impact through selectivity and to provide added value to the country. The IFC hopes to increase both its investment and advisory operations in Colombia, as market conditions permit. The WBG will carry out activities either through financial, knowledge, or convening services for which the Government or the private sector has expressed explicit need. These activities are combined as a results-focused package of support grouped under three strategic themes: (a) Expanding Opportunities for Social Prosperity; (b) Sustainable Growth with Enhanced Climate Change Resilience; and (c) Inclusive Growth with Enhanced Productivity. Despite the slow decline of poverty and inequality over the last decade, Colombia has continued to strengthen its social policies to expand opportunities to the majority of the population. Colombia‘s efforts to achieve lasting peace are also commendable. Still, the country‘s recent history has been marred by violence and armed conflicts that have precluded it from reaching its full development potential. Violence has displaced a large portion of the population, and the new Government has adopted policies to further promote peace. While in recent years progress has been achieved in fostering infrastructure investments, Colombia lags behind other Latin American countries. Management of infrastructure assets, including maintenance, and improved information systems remains a critical challenge within the context of Colombia‘s three-tier system of decentralized public administration. While urbanization rates have remained high, the quality of urban services has not kept up with the growth of cities. Environmental management and climate change are increasingly important areas of policy action in Colombia. Despite Colombia‘s major improvements in environmental management, environmental degradation affects public health and welfare in significant ways and compromises the country‘s potential for sustainable economic growth. Colombia also needs to focus on achieving faster and more inclusive economic growth. The country requires policy efforts geared toward converting the country‘s natural and human resources into a development pattern that accelerates growth and shares its benefits with broad segments of the population. In particular, it requires skillful management of risks and fiscal policy challenges associated with natural resources wealth and careful monitoring and evaluation of policies and programs conducive to inclusive growth. Transparent and effective public sector institutions (at national and subnational levels) and a friendly business environment will also facilitate this growth. And in support of innovation and entrepreneurship for higher productivity, the development in the financial sector must deliver efficient and stable services with access for all people. The programs under these strategic themes reflect current dialogue with the authorities and include the ongoing portfolio as well as new activities running until FY13. Within the framework of the National Development Plan, new activities beyond FY13 will be identified in agreement with the Government to acknowledge the needed flexibility and responsiveness to emerging requests. The CPS Progress Report, which is envisaged after the next Presidential elections in 2014, will provide an update on the WBG engagement. The IFC will seek investments in areas where it can add the greatest value. The IFC‘s main objectives are to foster greater entrepreneurship in advanced fields or in developing innovative business models. Investments will be focused initially on education, infrastructure development, investment climate, royalty management, and corporate governance. Also, IFC may engage with selected agribusiness clients to enhance yields and productivity. REPUBLIC OF COLOMBIA COUNTRY PARTNERSHIP STRATEGY (FY12-16) I. INTRODUCTION 1. Colombia is an upper middle-income country with substantial potential yet with relatively high rates of poverty and inequality. It has a solid and stable economy with a large domestic market and a rich natural resources endowment. At the same time Colombia is particularly vulnerable to natural hazards and faces an important challenge in consolidating peace following decades of internal strife and violence. 2. This Country Partnership Strategy (CPS) covers the fiscal years 2012-16. It proposes a World Bank Group (WBG) integrated program of financial, knowledge, and convening services and has been designed to selectively support the Government of Colombia‘s (GOC) new National Development Plan (NDP) 2010-2014. The proposed CPS is also grounded in the LAC Regional Strategy and the WBG strategic themes. Its five-year span takes into account the GOC election cycle in order to provide a mid-term opportunity to address potential government and policy changes that will be reflected in the CPS Progress Report. The CPS core principles are flexibility, responsiveness, and innovation. Past experience has shown that WBG support to GOC is most effective by being adaptive and receptive to emerging needs rather than just a blueprint of the terms and scope of the partnership with GOC. The focus on innovation corresponds with the needs of a sophisticated middle-income country and the WBG‘s efforts to add value to the GOC program. The CPS lays out the guiding principles for shaping this partnership. 3. This CPS provides a summary of (a) the country context, (b) the Government‘s vision and development challenges, (c) lessons learned from the implementation of the previous CPS as well as stakeholder feedback, (d) a proposed new strategy for the WBG, and (e) a description of risks in Colombia. II. COUNTRY CONTEXT A. Political Context 4. President Juan Manuel Santos assumed office in August 2010 with a strong political mandate that gave his “national unity” coalition an 80 percent majority in Congress. He won the second round of the Presidential poll by more than 70 percent of the vote against a former mayor of Bogotá. Santos campaigned on a continuation of former President Alvaro Uribe‘s democratic security and economic policies. The elections demonstrated the maturity of Colombia‘s democratic process and reflected a strengthening of political institutions. The country has undergone a transformation since 2002, striving to move away from internal violence, drug trafficking, and weak institutions that has plagued the country for many years. Today, Colombia has a resurgent economy with promising prospects. It is a safer, more stable country that is more popular with foreign investors, and it aspires to join the OECD group of countries. 1 5. The Santos Administration registered several significant achievements early in its first term. This includes the restoration of diplomatic and trade relationships with Venezuela, which had been broken off shortly before the second round of the presidential elections in July 2010. Relationships were also fully normalized with Ecuador. Moreover, an agreement reached with the United States increases the likelihood that the bilateral Free Trade Agreement, which was signed in 2006, will eventually be implemented. Overall, these positive developments have helped boost the popularity ratings of the President and strengthened the national unity coalition. 6. The Santos Administration has launched a very ambitious reform program. To consolidate the fiscal stance and manage windfalls from commodities production, Congress has approved a new fiscal rule, a reform of the royalties system, and a proposal to make fiscal sustainability a Constitutional criterion. Tax exemptions have been reduced, loopholes closed, and import tariffs lowered in an effort to enhance revenues and promote competitiveness. Legislation has been passed to reduce informality and encourage youth employment. A new legal framework is being introduced to improve the performance of the health system, including the enactment of an ordinary Health Law in 2011. And, a Victims Law (Ley de Victimas) will compensate victims who have been harmed by actions as a result of conflict. 7. Municipal and regional elections are scheduled for October 2011, and the next legislative and presidential elections are set for March and May 2014, respectively. The outcome of the municipal and regional elections will help to gauge the support for the various coalition members as well as the opposition during 2011–2015. B. Recent Economic Developments and Prospects 8. Colombia is an upper-middle income country whose economic performance is typical of the major economies in Latin America. The economy is well endowed with natural resources, including oil, coal, gas, iron, and gold. The domestic market is sizeable, making it important for aggregate demand growth. Agribusiness (particularly coffee) and manufacturing (e.g., the car industry) are also relatively well developed. Improved security combined with business-friendly investment rules has led to a surge in foreign direct investment, particularly in the oil and mining sector. 9. Following a longer period of broad-based economic growth, the economy was not affected too severely by the global economic crisis. Between 2002 and 2007, GDP growth averaged 5.0 percent per year on account of an improving security situation and a favorable external environment. The economy slowed down in 2008 to a growth rate of 3.5 percent, as economic policies were tightened to address overheating. The country‘s strong macroeconomic framework and the resilience of the financial sector helped cushion the impact of the global economic crisis. Monetary policy responded swiftly as the policy rate was lowered from 10 to 3 percent. Fiscal policy also contributed to support aggregate demand. Countercyclical policies were combined with a flexible exchange rate regime, which acted as a shock absorber to counter the deceleration in external demand. By 2010, the economy had largely recovered from the slowdown, although a collapse in exports to Venezuela has held back some economic expansion. The GDP growth increased by 4.3 percent in 2010 compared with 1.5 percent in 2009. 2 Table 1. Key Economic and Fiscal Indicators (percent of GDP) 2007 2008 2009 2010 2011 2012 2013 2014 Real GDP growth (%) 6.9 3.5 1.5 4.3 4.6 4.5 4.5 4.5 Inflation (avg. %) 5.5 7.0 4.2 2.3 3.3 2.9 3.0 2.9 Oil price, Colombian mix (US$/bl) 66.2 90.2 56.6 73.3 99.3 100.1 97.8 96.9 Gross national savings 20.2 20.5 20.5 20.1 21.9 22.5 22.9 21.9 Gross dom. Investment 23.0 23.4 22.7 23.2 23.9 24.6 24.8 24.1 + Export growth (FOB, %) 22.8 26.3 -12.2 21.4 25.6 5.8 8.3 3.9 - Oil exports growth (%) 15.6 66.8 -16.0 54.4 48.6 10.3 11.3 3.6 Import growth (FOB, %) 25.5 20.7 -16.0 23.0 12.6 6.2 7.0 6.5 Current account balance -2.9 -2.8 -2.2 -3.1 -2.1 -2.1 -1.9 -2.2 Foreign direct investment (net) 3.9 3.4 1.7 0.1 2.1 2.2 2.0 2.1 ++ Gross reserves (months of G&S) 5.3 5.1 6.2 5.7 6.6 6.6 6.6 6.6 +++ Total external debt 21.5 19.0 22.7 22.6 20.2 19.9 19.5 19.2 Total public sector revenues 27.2 26.3 26.5 24.5 25.2 25.9 25.9 25.7 Total public sector expenditures 28.2 26.3 29.1 27.3 28.8 28.5 27.7 27.3 Combined Public Sector balance -0.7 -0.1 -2.7 -3.0 -3.5 -2.5 -1.5 -1.3 Public debt 32.7 30.8 36.3 36.7 35.8 35.6 34.9 34.3 - o/w foreign-currency 13.7 12.5 15.9 13.7 13.4 13.3 13.1 13.0 GDP (US$ billions) 207.4 244.6 235.8 288.2 313.3 332.1 350.6 369.9 + ++ +++ Note: FOB = Free-on-board; G&S = Goods and services; Public and private external debt. Source: World Bank Staff projections based on DANE (the statistics agency), Central Bank, Ministry of Finance and Public Credit, and the IMF. 10. As the recovery phase consolidates, Colombia is facing economic policy dilemmas similar to those experienced by other Latin American countries. 1 On the one hand, the authorities face the challenge of keeping inflation expectations anchored in the face of higher economic activity and rising inflation. On the other hand, international capital flows are exerting appreciation pressures on the Colombian Peso and could also prompt credit booms and asset price bubbles, which would in turn destabilize the financial sector. On a positive note, the Colombian foreign currency bond credit rating was upgraded to investment grade for the first time since 1999 by Standard and Poor‘s (in March 2011) and by Moody‘s (in May 2011). This upgrade gives Colombia access to a new class of investors and may increase capital inflows further. In a move to return monetary policy to a neutral stance, the Central Bank increased the policy rate by 125 basis points during 2011, and this coincided with a slight decline in observed and expected inflation (despite higher global prices and a weather-related emergency.) The Government has taken a range of measures to smooth the exchange rate adjustment toward its long-term equilibrium value, including a program of reserve accumulation (with some sterilization), macro prudential measures, tariff and tax adjustments, as well as non-monetization of dollar proceeds. 11. Colombia is experiencing some of the heaviest rainfall in recent history leading to widespread flooding and landslides. The heavy and prolonged rainfall that peaked in November and December 2010 (and which re-emerged in April 2011) is largely attributed to the meteorological phenomenon known as La Niña. Almost 3 million people, especially the poor, have been directly affected through loss of homes or being seriously deprived of access 1 See ―LAC Success Put to the Test‖ (World Bank, 2011) for a detailed discussion. 3 to most essential public services. Economic losses are expected to have exceeded 1 percent of GDP, but the weather shock has not derailed the economic recovery. The impact on food prices also proved temporary (see Annex C for details). The fiscal cost of the disaster increased the Central Government deficit by 0.2 and 0.4 percent of GDP in 2010 and 2011, respectively. C. Macroeconomic Outlook 12. Colombia’s economy proved to be more resilient than other emerging market economies, and it is recovering steadily from the effects of the global crisis. This resilience is linked to a robust macroeconomic framework that rests on three mutually re- enforcing pillars: (a) a responsible fiscal policy based on a credible medium-term fiscal framework and the introduction of a fiscal rule; (b) a monetary policy based on an inflation targeting regime (Consumer Price Index target of 3.0 percent with a tolerance of +/-1 percent) complemented by a floating exchange rate with moderate interventions; and (c) sound macro and micro prudential policies combined with a solid financial system. In the short term, growth and domestic demand is likely to be boosted by consumer and investor confidence and the reconstruction program, as well as rising export volumes and solid commodity prices. 13. The CPS baseline macro projections focus on the short- and medium-term outlook. The projections incorporate the effects of the 2010 La Niña episode and the government reconstruction program; the ongoing economic recovery; the latest assumptions of prospects for the global economy, including higher commodity prices; and recent Central Bank monetary and exchange rate policy announcements. The CPS baselines macro projections are summarized as follows:  Growth and inflation. Given the ongoing economic recovery, real GDP is expected to expand by 4.6 percent in 2011 and to converge to 4.5 percent in the medium term. Private consumption and private and public investment will sustain domestic demand growth in the short run. Inflation will stay on target (3 percent) over the projection period.  Fiscal accounts. The Ministry of Finance has presented a credible economic and fiscal strategy, which proposes a declining path for the fiscal deficit in 2011-13 in preparation for meeting the 2014 target stipulated by the new fiscal rule (a structural deficit of the Central Government of 2.3 percent of GDP). In line with the envisaged fiscal adjustment for the Central Government, the combined public sector deficit is also projected to decline from 3.0 percent of GDP in 2010 to 1.7 percent in 2014. As a result, public debt is declining moderately over the medium term.  External accounts. The current external account deficit widened during the 2010-11 recovery as imports accelerated and factor income outflows increased. In the medium term, this deficit will narrow again as imports moderate and commodity exports continue to benefit from solid international prices and higher volumes. The deficit is largely financed by net foreign direct investment. 4 D. Poverty Level and Trends 14. Economic growth in recent years has been accompanied by poverty reduction. Between 2002 and 2009, poverty fell from 53.7 to 45.5 percent while the proportion of the population that could not satisfy basic nutritional needs (the extreme poor) declined from 19.7 to 16.4 percent. While this is a positive development, Colombia‘s progress in reducing poverty, given its economic performance since 2002, falls below the performance of regional peers. Moreover, poverty levels remain relatively high given the country‘s income per capita. In part, this is explained by an unequal distribution of income, as reflected by the Gini coefficient, which is among the 10 highest in the world (see Annex D for details.) Food prices are also relatively higher in Colombia, which among other reasons is associated with the high cost of transport related to limited competition in the transport sector and unequal road access. Table 2. Poverty and Inequality in Colombia, 2002–05 and 2008–09 2002 2003 2004 2005 2008 2009 Poverty (%) 53.7 51.2 51.0 50.3 46.0 45.5 Extreme poverty (%) 19.7 17.0 17.0 15.7 17.8 16.4 Gini coefficient 0.594 0.573 0.579 0.580 0.589 0.578 Note: 2006 and 2007 data not available. Source: Misión para el Empalme de las Series de Empleo, Pobreza y Desigualdad (MESEP). 15. Labor market rigidities and skill mismatches are also contributing to high- income inequality. Colombian labor markets are still characterized by persistent, high-level unemployment (close to 12 percent in 2009), as well as pervasive labor informality, comprising 50-60 percent of the labor force depending on the definition used. Income generation opportunities for the extreme poor are very limited, with the unemployment rate close to 35 percent among this population. In addition, gender inequality in the labor markets contributes directly to inequality but also to further labor market rigidities.2 High minimum wages and labor costs, misperceptions of social security benefits, skill mismatches between labor supply and demand, and weak labor intermediation systems explain the poor performance in these labor market outcomes. 16. Despite advances, pronounced inequalities remain in terms of access to quality social services. Capturing coverage of key services necessary for children, Colombia‘s Human Opportunity Index, while adjusting for fairness in its distribution among the population, is above the regional average. Encouragingly, between 1997 and 2008, there were significant improvements in opportunities for children to receive health care; attend preschool; complete high school; and, along with their families, gain access to electricity and telephones. Nevertheless, significant challenges remain for provision of social services in general, particularly in terms of unequal access to safe water, nutrition, food security, comprehensive early childhood development (ECD), and quality education and health services (see also Annex C, The Impact of Higher Food and Commodity Prices in Colombia). 2 The ratio between female and male labor force participation was 0.54 in 2006, lower than the average for lower middle- income countries (World Bank Gender Stats indicators, http://www.worldbank.org/gender ; Data and Statistics). Women earned about 83 percent less than men after controlling for differences in education, age, and other characteristics; see H. Nopo, A. Moro, and A. Chong, eds., Discrimination in Latin America: An Economic Perspective (Inter-American Development Bank, 2009). 5 III. GOVERNMENT’S VISION AND DEVELOPMENT CHALLENGES 17. In December 2010, the GOC launched its ambitious National Development Plan, called Prosperity for All 2010–2014 (Prosperidad para Todos 2010–14). The overarching goals of the NDP are to increase employment, reduce poverty, and improve security. The NDP has three main objectives: (1) Sustainable Growth and Competitiveness, (2) Equality of Opportunities for Social Prosperity, and (3) Consolidation of Peace. Moreover, it highlights four cross-cutting themes: (a) Relevance of International Relations, (b) Environmental and Disaster Risk Management, (c) Good Governance, and (d) Regional Development and Integration. 18. Colombia also wants to strengthen its international image. Diversifying foreign relations and improving Colombia‘s image abroad are among the main goals of the Santos Administration. A key priority will be enhancing economic links with Pacific Rim countries and with countries in South and Central America. The GOC is also actively pursuing membership of APEC and OECD. For the latter, membership requirements are challenging, necessitating Colombia to continue addressing democratic as well as sound economic reforms. 19. With the new National Development Plan the GOC will retain central elements of the previous administration’s economic policy, namely attracting foreign investment, fostering macroeconomic stability, addressing high unemployment and widespread informality, reducing poverty and inequality, restoring peace and security, and improving the business environment. Key development challenges include the following areas which are linked to the WBG program of support: to reduce poverty and inequality; to further raise human capital development, and to improve the impact of social services. 20. To reduce poverty and inequality, the social protection system requires further integration and strengthening of institutional capacities. Although some social insurance schemes have significantly increased coverage levels, the social protection system as a whole, including health insurance, requires further integration to improve its reach and effectiveness. Likewise, the conditional cash transfer program Familias en Accion and the Juntos program, which focuses on reducing extreme poverty and involves tutors accompanying poor households to ensure their preferential access to social services, have significantly improved human capital development and opportunities among poor families; but enhancing coordination between the two programs remains a critical challenge. In addition, Familias en Accion and Juntos need to increase both coordination with social services in a broader way and effective coverage of internally displaced people. Finally, further creation of formal employment faces significant barriers — high labor costs, the relevance of skills, and a complex regulatory framework to establish businesses. 21. To further raise human capital development, Colombia must continue to develop the education system at all levels. Despite substantial progress over the past decade, access to quality education remains unequal. Pronounced disparities persist with poorer regions exhibiting lower average enrollment rates and student achievement levels than wealthier regions, particularly at the secondary and upper-secondary levels. These disparities impact the performance of the education system as a whole; given its GDP per capita levels, Colombia performs subpar on international student assessments such as the Program for 6 International Student Assessment (OECD) and Trends in International Mathematics and Science Study (International Association for the Evaluation of Education Achievement). 22. To improve the impact of social services, programs and systems require greater coordination, enhanced regulation, and accountability. At the core of this challenge are fragmented and insufficient information systems. The Ministry of Education‘s information system, for example, does not cover all institutions that manage government resources and provide education services. As the private (for-profit and not-for-profit) sector continues to play an increasingly important role in education (about 70 percent in preschool, 20 percent in primary and secondary education, and 43 percent in higher education), its full inclusion is a key consideration in further strengthening the education information system as a whole. Furthermore, institutional mandates of oversight, financing, and service provision within and across different levels of government remain blurred with often-weak coordination and accountability mechanisms. For example, some agencies are responsible for both provision of services and the monitoring and evaluation of said services, which can create perverse incentives. Combined, these deficiencies can negatively impact performance in Colombia‘s human development sectors, particularly those that are highly fragmented or involve multiple actors, such as health and early childhood development. 23. Colombia has taken significant steps toward the consolidation of peace. Between 2003 and 2009 the number of kidnappings was reduced by nearly 90 percent, acts of terrorism by more than 80 percent, and subversive activities by 64 percent. In addition, disarmament, demobilization, and reintegration (DDR) programs have also led to disarmament of 45,000 ex-combatants via collective negotiations with paramilitary groups and individual demobilizations from left-wing guerrillas. Despite these advances, the consolidation of peace is still a very complex work in progress. Violence has migrated to the urban centers and into the border regions; criminals have designed new ways to organize and operate. More than 150,000 internally displaced families are expecting that their lands, confiscated by illegal actors, be finally restituted; and around 3 million individuals of the internally displaced population (IDP) continue struggling in urban areas to find social and economic opportunities. Efforts to consolidate peace are not confined to police departments and criminal courts. They are part of a broader initiative involving the whole of Colombian society, promoting a citizenship culture based on the right and respect for peaceful coexistence and humanitarian and human rights more broadly, and strengthening and holding accountable democratic institutions and the justice system. It is essential to tackle the difficulties in terms of access, efficiency, and effectiveness of Colombia‘s judicial system to consolidate the peace process in the country that have been stymied by delays, costs, and complicated processes to access the justice system. 24. While in recent years progress has been achieved in fostering infrastructure investments, Colombia lags behind other Latin American countries. Chile, a country with a smaller population than Colombia, has more than 2,400 kilometers of four-lane highways compared to only about 800 kilometers in Colombia. The challenges to improving the quality of public services, including transport and water, sanitation, and solid waste management, are likely to require regulatory reform, institutional improvements, and continued public investment and efforts to promote and attract private sector financing for infrastructure. Management of infrastructure assets, including maintenance, and improved 7 information systems remains a critical challenge within the context of Colombia‘s three-tier system of decentralized public administration. 25. Cities have been the engines of Colombia’s economic growth. More than 50 percent of Colombia‘s GDP growth in the last 4 decades can be attributed to economic development in urban areas. Today, 75 percent of Colombians live among five large cities, Bogotá, Cali, Medellin, Barranquilla, and Cartagena, which make these urban areas very densely populated, although economic density remains low. While urbanization rates have remained high, the quality of urban services has not kept up with the growth of cities. Land management and housing development for low-income segments of the population is a critical challenge, which the Santos Administration has identified as a policy priority. 26. The Santos Administration’s renewed focus on urban services, urban land development, and expansion of housing for lower-income segments of the urban population aims to address inequity issues and also stimulate job growth. The Government‘s National Development Plan clearly highlights the need to manage urban growth through improvements in public transportation systems, developing financially sustainable approaches to expanding access to affordable housing, and consolidating many of the improvements in basic services coverage through improved management and service quality. Urban environmental issues — particularly in terms of air quality and management of wastewater — remain equally important challenges. 27. Colombia is prone to natural disasters. While the extraordinary rainfall that plagued the country during 2010 and 2011 may not be directly linked to anthropogenic climate change, it highlights the country‘s continued vulnerability to an array of disaster risks and the likelihood that adaptation to climatic events will be a priority for this and future administrations. While Colombia, seen as a leader in managing disaster risk, has a sophisticated institutional arrangement in place to manage disaster risk, significant work remains in improving knowledge and risk assessments of territorial management; investing in critical infrastructure, like drainage systems; and ensuring that institutional reforms and investment are accompanied by robust enforcement of zoning requirements and building codes. Colombia‘s critical ecosystems also remain vulnerable to climatic events and the environmental services provided by many key ecosystems are crucial for the country‘s continued growth and development. 28. Environmental management and climate change are increasingly important areas of policy action in Colombia. Despite Colombia‘s major improvements in environmental management, environmental degradation affects public health and welfare in a significant way and compromises the country‘s potential for sustainable economic growth. Colombia has a long history of environmental and natural resource management policies and programs aimed to address issues of degradation and resource protection. The Santos Administration has made clear the centrality of environmental issues in its program, creating a dedicated Ministry of Environment. The proposed World Bank engagement under the CPS is wholly aligned with the Government‘s renewed focus on sustainable development, including positioning Colombia as a leader in the area of climate change. 29. Colombia faces fiscal challenges related to managing the commodity boom, social security liabilities, and the risks associated with natural hazards. The economy is becoming increasingly intensive in commodity production. Oil production rose by 25 percent 8 in 2002–10, from 600,000 to 800,000 barrels per day, while coal production more than doubled from 40 million to 70 million tons. Macroeconomic challenges arise from the potential Dutch Disease effect of an appreciating real exchange rate as well as commodity price volatility, which increases economy-wide uncertainty. Given the fact that both national and subnational budgets rely on commodity revenue, this can give rise to reduced budget predictability and stability. Additional fiscal challenges relate to the Government‘s obligations to provide health care and pension. A strong expansion in subsidized coverage, rapid growth of demand outside the mandatory benefits package and a policy to harmonize health benefit packages for all individuals have contributed to rising health care costs. Meanwhile, pressures on the pension system arise from demographic change, migration of members from the defined contribution to the defined benefit system, and low coverage owing to high labor informality. Colombia is experiencing increasing economic losses as a result of natural hazards. Natural disaster events also represent a substantial fiscal contingent liability given potential losses to publically owned assets and the private assets of low- income groups (which the Government would be compelled to partially compensate). 30. Good governance and increased transparency in Colombia’s economy remains challenging and is one of the crosscutting priorities of the new Government. Although considerable progress has been made in improving the effectiveness and credibility of government institutions, increased transparency, accountability, and effectiveness remain challenging and require clear definition by the Government. The Government of Colombia realizes the necessity to increase transparency, improve management capacity, and strengthen the accountability of public institutions. Furthermore, citizen participation in politics and public debate, which is essential to generate social capital needs further encouragement. The subnational governments collectively execute expenditures worth roughly 10 percent of GDP (about a one-third of total public expenditures); they also raise roughly 3 percent of GDP in tax revenue. It is critical to improve subnational management capacity as new functions devolve to subnational governments. In addition to the challenge of good governance, the performance of public financial management (PFM) systems including public procurement is a critical factor for fiscal discipline, strategic allocation, operational efficiency, and transparency in use of public funds. A 2009 World Bank national- level PFM and procurement report3 concluded that the PFM system in Colombia possesses a number of strengths that contribute to fiscal discipline and better control, such as legal powers to contain budgeted expenditures, timely monitoring of budget execution data and cash flows, centralization of revenues, and adequate debt management. In terms of operational efficiency, public procurement could be optimized. Some positive steps in modernizing the procurement system have been taken. With respect to the legal framework, for example, in 2007 and 2008, Colombia enacted a new law and associated regulatory decrees thereby making substantial progress toward bringing the Colombian system close to internationally agreed standards. Critical work remains in terms of ensuring sustainability of the procurement reform, including improving country institutional capacity; creating of a public procurement bureau; enhancing transparency; promoting participation of the private sector; and creating a more efficient, compliant mechanism. 3 Colombia- National Level Public Financial Management and Procurement Report, World Bank, June 30, 2009, Report No.: 55113-CO 9 31. Aiming to grow at 6 percent per year, Colombia must progress in productivity and competitiveness to achieve this goal. Colombia's level of productivity is relatively low in a regional comparison. Low productivity, in turn, is linked to the labor market where a large proportion of workers and enterprises operate in the informal sector. Informal enterprises have limited access to credit, do not compete internationally, and have limited incentives to grow out of the shadow economy. To reduce the informality rate, the Government must generate an enabling economic environment that encourages formal job creation, invests in human capital, and manages individual incentives that favor informality. 32. Colombia is lagging behind countries with similar characteristics in the development of science, technology, and innovation (STI). Colombia‘s STI sector growth (amounting to 11.9 percent annual growth in real terms from 2006 to 2009) has outpaced the economy‘s growth rate. As a result, investments in the sector have helped to expand basic infrastructure services to support STI development. In spite of these efforts, total investment in research and development in Colombia remains relatively low. It is 0.2 percent of GDP, compared to Argentina, which invests 0.5 percent; Chile, 0.7 percent; Brazil, 0.8 percent; and South Korea, 3.2 percent. The National Development Plan and the ―Plan Vive Digital Colombia‖ emphasize the Government‘s commitment to scale up investments into research and development and to address pending regulatory bottlenecks to reap its full potential. In particular, the Government aims to address (a) organizational weaknesses; (b) the insufficient use of mechanisms to protect intellectual property rights; (c) limited access to financial instruments for innovative enterprises; (d) insufficient qualified human capital in relevant areas with an emphasis on innovation; and (e) insufficient incentives to retain the Colombians living abroad who have the potential to contribute to STI development. IV. WORLD BANK GROUP PARTNERSHIP A. Lessons Learned from Previous CPS and Stakeholder Feedback 33. CPS Completion Report. World Bank Group assistance to Colombia, an upper middle-income country with the third largest portfolio in Latin America and the seventh Bank-wide, offers lessons that are relevant to future Bank engagements with the country and with other middle-income countries. Overall, the FY2008–2011 CPS program performance is rated ―satisfactory‖ having achieved good progress toward all major expected outcomes. In this context, the Bank, in close coordination with the borrower, has incorporated a broad set of measures into both project implementation and supervision to strengthen the overall fiduciary control framework and to safeguard individual operations. 34. The previous CPS was designed to be flexible and innovative in responding to Colombia’s financial and development needs. This flexibility has allowed the World Bank to explore new avenues of resources, mainly through trust funds, that financed unanticipated Government requests for knowledge and advisory services. Just-in-time technical assistance tailored for particular requests, policy dialogue, global knowledge transfer, and a fully integrated trust fund portfolio resulted in an important and innovative aspect of the program. While trust fund resources were not predictable at the outset of the CPS, the Bank ensured selectivity during implementation so that these resources were aligned with Government priorities. Colombia was also one of the first Bank clients to take advantage of the flexible 10 development policy loan (DPL) with Catastrophe Deferred Drawdown Option (CAT DDO) as part of its integrated approach to disaster risk management. Combined with the other ongoing activities by the Bank — spanning the range of financial and knowledge services — Colombia has one of the most integrated programs in risk management of any Bank client. Its multi-year, knowledge and advisory programmatic approach, where IBRD had an on- going engagement with the Government in key areas, defined the annual work program (for knowledge and convening services) according to the existing needs at the time. The IFC advisory program also expanded in Colombia, and its services were also based on strategic aims. This flexibility and just-in-time, multi-sectoral programmatic advisory approach proved to be effective and should be maintained. 35. While all countries face risks, sound economic management, efficient and transparent institutions, good governance, and proactive social investments help mitigate the potential impact of internal and external risks. A strong institutional framework and an overall government commitment to a coherent development effort facilitate the design and implementation of a flexible, client-driven, assistance program. Looking forward it is important to agree with the authorities on an integrated package of financial, knowledge, and convening services with a focus on providing customized results- focused development solutions in areas where the World Bank Group can add value. 36. Engagement with Colombia is also effective on knowledge transfer utilizing the Colombian experience to the benefit of other, less-developed countries. Continued WBG engagement with Colombia offers a win-win situation as already shown with the mass transit system in Bogotá as well as the nationwide conditional cash transfer program Familias en Accion, which are similar to programs being developed in other countries around the world. 37. Stakeholder feedback. In August 2010, after presidential elections, the WBG team engaged promptly with the new authorities. The WBG team prepared a set of thematic policy notes followed by an all-day meeting with President Santos and Government officials to discuss the new Government‘s potential priority areas, provide early input into the new National Development Plan, and seek feedback for the Bank‘s new CPS. 38. Following these discussions the Government began formulating its National Development Plan, which was then subject to an extensive national consultation process. The exercise drew on the input of 16 administrative departments and an ample range of stakeholders from academia, NGOs, private sector, unions, the media, and — for the first time — indigenous peoples groups. As part of the CPS process, the Bank participated selectively in relevant Government consultation events. Given the extensive Government consultations on the National Development Plan and the relatively limited scope of the WBG in support of the National Development Plan, the WBG will continue to hold systematic stakeholder consultations in the process of developing new operational engagements and at mid- term CPS implementation. 39. In addition, to complement the Government’s consultation efforts, the Bank carried out a national client survey. The survey process took place between February and March 2011, and offered some important inputs for the preparation of this CPS. Overall, stakeholders identified as the top development priorities in Colombia: (a) the reduction of poverty; (b) enhanced economic growth and employment generation; (c) improved education access and quality; and (d) peace. The survey suggests that the Bank is perceived to be 11 involved in some top development areas such as poverty and growth but less so in education where a plurality would like to see the Bank more involved. Respondents were mainly from government agencies (60 percent), followed by civil society organizations (18 percent), private sector (10 percent), academia (10 percent), and media (2 percent). For details, see Annex G. B. Proposed WBG Partnership Strategy 40. The CPS aims to support selectively the new National Development Plan. The WBG will step up efforts to enhance development impact through selectivity, as a means to provide added value to the country. The WBG will carry out activities for which the Government or the private sector have expressed explicit need either through financial, knowledge, or convening services. These activities are combined as a results-focused package of support grouped under three strategic themes: (a) Expanding Opportunities for Social Prosperity; (b) Sustainable Growth with Enhanced Climate Change Resilience; and (c) Inclusive Growth with Enhanced Productivity. Each of these strategic themes has three areas of results with specified outcomes. The WBG aims to contribute toward these outcomes (as detailed in Table 3, 4, and 5 throughout the discussion of each theme below). In some cases, outcomes in this CPS cannot solely be attributed to the WBG since activities are often jointly accomplished with the Government or other partners. 41. The programs under these strategic themes reflect the current dialogue with the authorities and include the ongoing portfolio as well as new activities running until FY13. Within the framework of the National Development Plan, new activities beyond FY13 will be identified in agreement with the Government to acknowledge the needed flexibility, and responsiveness to emerging requests. The CPS Progress Report, which is envisaged after the next presidential election in 2014, will provide an update on the WBG engagement. 42. The IFC expects to continue expanding its activities in Colombia supporting the National Development Plan. The IFC investments and advisory engagements will largely focus on enhancing the competitiveness of Colombia‘s private sector, and on increasing its capacity to generate new jobs. The IFC aims to support the private sector-oriented adult education sector, especially technical and vocational training for low- and middle-income students. Education is a critical factor in reducing inequality as well as raising productivity. Experience in other countries, such as Brazil, shows that working adults can double or triple their incomes on graduation. IFC has already built up considerable experience in Colombia through its support for Uniminuto, a network of not-for-profit colleges, which enrolled 26,500 students in 2009. 43. The IFC aims to enhance Colombia’s infrastructure and logistics by expanding its work on structuring public–private partnership (PPP) projects in cooperation with government agencies. The IFC also intends to further improve Colombia‘s investment climate and trade logistics through its advisory services arm. The IFC expects to build on an active range of projects in Colombia currently focused on trade logistics and simplification of business registration processes. The IFC advisory services expect to expand with royalty management projects in the growing extractives sector. The IFC intends to increase financing of Colombian financial institutions, especially those focused on small and medium-size enterprises, low-income communities, and women. While small businesses typically employ 12 more workers than larger companies, insufficient financing affects their ability to survive and grow. 44. The IFC also intends to maintain its commitment to corporate governance, an important issue given its substantial equity investments in Colombia and its ability to promote best practices in the field. Equity investments account for one-third of IFC‘s outstanding investments in Colombia. Housing may also become a growth area, with IFC supporting mortgage loans that benefit low- and middle-income groups. And IFC expects to ramp up its offering of technical as well as financial support for green-building codes and construction methods. 45. Finally, the World Bank is offering its help to the Government in leveraging different sources of financing through its convening power, financial expertise, and relations. The Bank will work with Colombia to deliver financial structure to effectively leverage additional sources of financing and to tap into capital markets (e.g., Green Bond, Carbon Emission Rights sales contracts, joint financings, etc). In summary, Colombia has been a regional leader in the use of WBG risk management products and new financial structure and is expected to continue taking full advantage of WBG financial products. Expanding Opportunities for Social Prosperity 46. Despite the slow decline of poverty and inequality over the last decade, Colombia has continued to strengthen its social policies to expand opportunities to the majority of the population. These efforts are concentrated in (a) enhancing social promotion and citizen security through increased coverage of safety nets and social protection programs for the poor and violence afflicted; (b) expanding educational opportunities for all; and (c) improving the performance of basic social services, such as those related to health, early childhood development, and education. The Bank has been an important partner in this effort, through investment loans and DPLs, grants, knowledge and convening services, and in-time technical assistance at Government‘s request. Table 3: Expanding Opportunities for Social Prosperity - Results Areas and Outcomes Enhanced Social Promotion and Improved Opportunities In Improved Performance of Social Improved Citizens Security Education Services Outcome 1: Better coverage of Outcome 1: Increase in enrollment Outcome 1: Strengthened Unidos program (merger of two key rates (primary and lower secondary; information systems to monitor poverty reduction programs). and secondary education) of service delivery and strengthen students from poor and rural accountability in health, education Outcome 2: Increase in the coverage households (31 poorest territorial and ECD. of municipalities that offer active entities, including 17 departments labor market policies to enhance and 13 municipalities). labor productivity and reduce barriers to the employability of the Outcome 2: Increase in tertiary poor. education enrollment of students from poor households. Outcome 3: Increase in number of land rights protected of internally displaced people who abandoned their land due to forced displacement. 13 Enhanced Social Promotion and Improved Citizens Security 47. Enhanced social promotion is critical in the fight against poverty and more broadly against inequality. The Bank has been supporting the development of Colombia‘s social promotion system since the inception of the conditional cash transfer program Familias en Accion almost a decade ago. Since then, it has provided advice in the design, implementation, and evaluation of the Juntos and most recently Unidos anti-poverty strategy. Furthermore, its multi-year programs of knowledge and convening services have gone beyond supporting the social promotion system to promoting inclusive, equitable, and efficient social protection for all Colombians. In the future, these services will focus on the development and implementation of the National Plan for Social Prosperity — that will include analyses to support the Unidos strategy, which aims to improve the coordination and strengthening of the Familias en Accion and Juntos programs, helping ensure the alignment with other social services and income-generation and active labor market programs — and review of existing capacity and international experiences to develop a platform to promote social innovation. The Bank has also been supporting development of Colombia‘s social protection system through operations and advisory services, focused on achieving (a) greater integration, efficiency, and equity of social insurance through expansion of information systems for social security contributions and the centralized registry of beneficiaries of all social programs; (b) improvement of the targeting, efficiency, and articulation of social assistance programs (SISBEN); and (c) promotion of higher-quality training and employment services, as well as a strategy to promote income generation among the extreme poor, including social innovation and approaches that involve the private sector. Potential areas of knowledge services include support for the creation of a system that promotes labor market competencies and tackles barriers to employability, and design of temporary employment programs and a national labor intermediation system. 48. The Bank is supporting Colombia’s efforts to achieve lasting peace and greater gender equity. The country‘s recent history has been marred by violence and armed conflicts that have precluded it from reaching its full development potential. Violence has displaced a large portion of the population. The Bank is actively supporting the joint efforts by the Government and the international community with knowledge and convening services as well as trust fund financing. The ongoing Peace and Development Project aims to assist vulnerable, low-income, and displaced populations in rural and urban communities in the conflict-affected regions; this assistance comes by reducing risk of further exposure to violence and mitigating the negative impact of possible derived effects. The Bank is also implementing a grant to protect the land and patrimony of internally displaced populations. The Bank plans to continue work in peace and development through technical assistance and several grants that will focus on youth at risk, Afro descendants, ex-combatants, displaced populations, gender issues, and strengthening policies and institutions to protect human rights. Given the high number of people affected by conflict in the country (about 15 percent of the total population), the Bank will continue to support Colombia in improving strategies to assist internally displaced populations in a comprehensive and sustainable way. 49. Critical gender issues in Colombia include labor markets segmentation, domestic violence, and early childbearing. Gender issues are fully integrated in the WBG program and in addition the Bank offers several grants with a concrete focus on gender issues, specifically among IDPs. These are designed to (a) increase the economic 14 empowerment of women in IDP communities; (b) assist these women to join the formal labor force; (c) build the assets of internally displaced women (including greater food security); (d) help understanding of the causes of political and/or domestic violence against women and develop tools to mitigate it; and (e) increase participation of women in the Peace and Development Project. A recent review of this work by the Bank‘s Internal Evaluation Group highlights the need to support gender equality in the area of employment and opportunities; as a direct consequence, the Bank is closely engaged in supporting the Secretary for Women‘s Issues in the Presidency with an initiative to certify those businesses and enterprises that adopt gender-neutral employment policies. Improved Opportunities in Education 50. In order to support continued economic growth and reductions in poverty and inequality, it is imperative that Colombia raise human capital development by improving opportunities in education at all levels. This includes improving quality in pre- school, basic, and secondary levels; promoting relevance in upper secondary, including vocational and technical education; and increasing enrollment while decreasing dropouts at the tertiary level. The World Bank will continue to support Colombia in these efforts through several projects. The ongoing second phase of an adaptable program loan (APL) for the Rural Education Project further expands opportunities for non-urban students by supporting increased delivery of educational resources and implementation of flexible education models in rural areas. The Antioquia Upper Secondary Education Project supports the Department of Antioquia‘s efforts to improve access, retention, and outcomes among upper-secondary schools to improve the employability of young people and increase labor force competitiveness. The Education Quality Project aims to improve the design, application, evaluation, and use of assessments to inform policies and initiatives to enhance the quality of education. The first phase and upcoming second phase of an APL for the Student Loan Support Project has been instrumental in increasing enrollment and graduation rates among tertiary students from economically disadvantaged backgrounds. Complementary to the financial services, the Bank is involved in a multi-year Program of Knowledge Services, Skills for Shared Growth, as well as convening services to support GOC efforts to increase education quality and skill formation, identify determinants of student learning in order to better inform policy and improve technical and institutional capacity to conduct research, and to monitor and evaluate education policies and programs. In FY13, the program will include a joint World Bank/OECD review of the tertiary education system. 51. The IFC plan to increase its operations in adult education, with a focus on technical and vocational training, fits well with this approach. The IFC aims to reach low-income students either through direct financing for technical and vocational colleges, or possibly through a loan program designed to meet students‘ needs. Complementary to these projects, the World Bank will continue to provide a multi-year program of knowledge and convening services to support efforts to increase education quality and skill formation. These services will include, among other activities, an assessment of teacher performance, policy notes on technical education, and the establishment of a comprehensive database of learning outcomes that allows tracking progress across various student assessments and the effect of time changes on overall student performance. 15 Improved Performance of Social Services 52. Improving the performance of social services hinges on strengthening information systems and planning, coordination and accountability at and across all levels of government. In support of these goals, the World Bank will continue to provide a multi-year program of knowledge and convening services. In the short term, this program will assess the information systems in health, early childhood development, and education, and will issue recommendations to strengthen the systems using innovative information technologies and platforms. In health and early child development, the program will also assess accountability arrangements between central and local governments. In early childhood development, Bank efforts will support development of the national multi-sector strategy, De Cero a Siempre, which aims to consolidate currently fragmented efforts to provide young children of all families, particularly the poorest, with access to high-quality, comprehensive ECD services. 53. The multi-year program of knowledge and convening services will be complemented through a DPL and three trust fund-financed projects. The enhancing governance and accountability arrangements of health insurance schemes in Mexico, Colombia and Peru seeks to analyze the current situation and explore options to enhance current organizational arrangements and information systems for improving governability of health insurance in Colombia. Implementing the Right to Health through Universal Health Insurance Project aims to strengthen participation of academic centers and civil society in developing instruments and foster dialogue on how to fairly and efficiently ensure rights in health. Furthermore, a Fiscal Sustainability and Growth Resilience DPL series will support the adoption of critical legal and regulatory reforms to better manage fiscal pressures stemming from the harmonization of benefit packages among population groups and to improve reimbursement practices and enhance the financial sustainability of the health system as a whole. In FY12, the Bank is also supporting the GOC with the Strengthening Governance of Early Childhood Development Programs (SFLAC grant), which includes provision of continued knowledge services to help improve coordination and governance arrangements under the ECD service delivery system, rationalize the existing complex set of overlapping programs, and design and provide technical assistance to implement a comprehensive information system for monitoring and evaluation. In addition, the Colombia Enhancing Governance, Transparency, and Accountability in Education Project (IDF grant) aims to strengthen education efficiency through improved monitoring, accountability, and oversight of the sector, including the establishment of a superintendence of education. Sustainable Growth with Enhanced Climate Change Resilience 54. The areas of sustainable urban development, environmental management, resilience to climate change, and disaster risk mitigation are high priorities for the World Bank‘s engagement under this CPS. These activities have gained prominence given the challenges of meeting Colombia‘s ambitious plans for growth and economic development with the explicit policy objectives of the new administration to make development environmentally and socially sustainable. The Bank-supported program aims to continue addressing the needs of Colombia‘s highly urbanized population – through better land management, improved 16 services, and governance – while maintaining Colombia‘s position as an international leader in environmental management. Table 4: Sustainable Growth with Enhanced Climate Change Resilience - Results Areas and Outcomes Improved Environmental Improved Sustainable Urban Enhanced Disaster Risk Management and Climate Change Development Management Resilience Outcome 1: Increased population Outcome 1: Strengthened technical Outcome 1: Government has benefitting from improved capacity for disaster risk developed a national policy for transportation services in large management at national and regional climate change and a national low- cities. levels. carbon growth strategy. Outcome 2: Increased population Outcome 2: National Policy for Outcome 2: Government has benefitting from improved Disaster Risk Management mainstreamed improved transportation services in medium- formulated. environmental practices in the sized cities. agricultural sector through a scaling- up of silvopastoril livestock Outcome 3: Improved institutional systems. capacity of the Central Government to plan and deliver transportation services. Improved Sustainable Urban Development 55. Seventy-five percent of Colombians live in cities. Colombia‘s largest city, Bogotá is home to 8 million; with 18,000 people per square kilometer, it is the densest populated city in the Western hemisphere. At the other end of the spectrum lie 927 municipalities with fewer than 20,000 people, fairly dispersed across the national landscape. Population density is the signature of Colombian cities, but economic densities are low. Bogotá, Medellín, and Bucaramanga rank among the 50 most densely populated cities in the world. Urbanization has stimulated the concentration of people and jobs, generating economies of scale and agglomeration. The urban economy has contributed much to Colombia‘s economic progress. Building on industry and services, the urban sector has contributed more than 50 percent to GDP growth over the past 40 years. A key goal of the Government‘s new National Development Plan is to improve the urban living environment, which includes improving access to and quality of basic services, improving the urban environment, and expanding access to affordable housing solutions for the poor. 56. Over the last 30 years the World Bank has supported Colombia‘s urban development agenda on the national as well as subnational levels in urban housing, transport, solid waste management, and water and sanitation; and the Bank‘s current portfolio reflects the centrality of urban services and environment. The Bogotá Urban Services Project assists the District of Bogotá to implement a strategic portion of its 3-year Development Plan through urban transport solutions to improve mobility and strengthening of the cadastre system. The Bank is also supporting the development of sustainable urban transport in large and medium-sized cities through the Government‘s pioneering and widely recognized National Urban Transport Program (NUTP), which supports the financing of sustainable public transport systems. The IFC may expand a successful subnational financing program for urban improvement to other cities. In 2010, IFC committed a US$45 million senior loan to the metropolitan municipality of Bogotá to finance its 2007-2008 capital expenditure program and rehabilitation of streets, sidewalks, and bike paths. In the near term, Colombia is likely to access the Clean Technology Fund (CTF) resources to further develop low-carbon solutions 17 for expanded public transport (a CTF Investment Plan totaling US$100 million was approved in 2010). 57. In the area of water and sanitation, the GOC has been a leader in adopting sound water sector policies. Among the forerunners of decentralization, the GOC established a legal framework that clearly separates service provision from policy-making, thus allowing private sector participation. The key to success in the Colombian water sector reform has been the development of homegrown solutions and at times the skillful adaptation of models (successfully used elsewhere) suited to particular circumstances and culture of Colombia. As a result, Colombia has made substantial progress in the expansion of water supply and sanitation services. As of 2010, urban water supply access was over 95 percent (rural water supply coverage was 71 percent) although service quality remains uneven. Sanitation access has also improved significantly in recent years with urban coverage of over 90 percent. Over the years, the World Bank has supported Colombia through advisory work, capacity building, and lending services. Since 1988, the World Bank has provided a series of loans with a total value of over US$700 million to the Colombian water supply and sanitation sector. The IFC is helping to finance Barranquilla‘s water and sewer system with a US$10.9 million guarantee, and hopes similar risk management structures or direct financing programs can be used to support local infrastructure projects. Remaining challenges in the sector include the need to improve multi-city service quality, improve access in rural areas, and dramatically improve wastewater management. 58. Ongoing operations within the sector include the La Guajira Water and Sanitation Infrastructure and Service Management Project, which aims to support the development of financial sustainable utilities in one of Colombia‘s lagging departments and to improve the quality of basic service delivery in La Guajira‘s 15 municipalities. The Rio Bogotá Environmental Recuperation and Flood Control Project is an example to urban water quality management, which aims to transform the Río Bogotá — a terribly polluted open sewer — into an environmental asset for the District of Bogotá by improving water quality, reducing flood risks, and creating multi-functional areas along the river. 59. Among the challenges of solid waste management in Colombia, a significant proportion of solid waste is disposed of inadequately. Colombia‘s 1,102 municipalities produce approximately 28,800 tons of solid waste per day. Approximately 35 percent, or 10,000 tons per day, of this waste is generated in Bogotá, Cali, Medellin, and Barranquilla, while medium-size cities and smaller municipalities generate the remaining 65 percent, or 18,800 tons per day. It is estimated that a large proportion of this waste is inadequately disposed in open-air dumps, bodies of water, and other environmentally sensitive sites. Inadequate disposal results in environmental and health problems that include surface and groundwater contamination, air pollution, and increased vector-transmitted (flies and rodents) illnesses. The Bank has a solid waste management project under implementation that helps to address some of these key issues through public–private partnerships for the development and management of multi-municipal regional sanitary landfills. 60. In the area of housing and urban land management, the Bank supports a broad thematic engagement related to a range of issues, from development of financial instruments for financing of urban investment to creation of public–private solutions for mixed-use and low-income housing. The Bank has been working closely with a range of actors within the GOC and civil society in what the Santos Administration considers one of five ―engines of 18 growth‖ under the National Development Plan. The Bank‘s work includes financial support (through the Macroproyectos project); a range of knowledge services and delivery of just- in-time technical guidance; and the use of the Bank‘s convening power, which included a visit by a high-level Colombian delegation to Washington, D.C., to help develop options for establishing tools, such as tax increment financing for developing urban infrastructure and urban renovation. This engagement is likely to continue in the coming years, especially given the National Development Plan‘s focus on regional differentiation and development of a multi-polar growth dynamic led by urban revitalization. Enhanced Disaster Risk Management 61. Natural disasters are a challenge to sustainable development in Colombia. Colombia’s high rate of urbanization, compounded by the location of major cities in high-risk areas, and considerable environmental degradation have brought with them growing vulnerability to adverse natural events. Population growth and the increasing concentration of settlements, assets, and infrastructure mean that vulnerability to natural hazard events is on the rise. This, combined with global climate change and the expected increased climatic variability, is likely to exacerbate the country‘s exposure to floods, erosion, landslide, and drought. Annually, Colombia suffers from more than 600 natural disasters. In the past 30 years, Colombia has experienced 6 major earthquakes, 4 volcanic eruptions, major landslides, and extensive flooding. Recognizing that disasters are most effectively dealt with before they happen, Colombia has over the past 2 decades institutionalized a system for comprehensive disaster risk management that among other things seeks to reduce vulnerability by investing in risk mitigation, environmental management, and strengthening the integration of disaster risk management in urban and territorial planning. Improving Colombia‘s disaster risk management has been a central theme of the Government‘s overall policy program since 2002. Since 2004, the Government requested preparation of an APL series to support the implementation of its disaster risk management policies. Two loans are under implementation. 62. The APL I, which finances investment by the Central Government, addresses the sector issues through components based on the 5 lines of action — (a) risk identification, (b) risk reduction, (c) institutional development, (d) risk awareness, and (e) risk financing — including activities aimed at increasing the effectiveness of investments in disaster risk mitigation and at addressing the need for contingency plans to cover fiscal shortfalls in case of a major catastrophe. The APL II, a direct loan to the District of Bogotá, aims at reducing the vulnerability of the Capital District of Bogotá to adverse natural events, by strengthening its capacity to manage disaster risks, and by reducing vulnerability in key sectors. The project will contribute to the District‘s long-term program to save lives and reduce social, economic, and financial losses resulting from earthquakes, floods, landslides, and other adverse natural events. 63. In December 2010 during the country‘s worst rainy season in decades, the World Bank disbursed a DPL with a deferred drawdown option linked to catastrophic events (CAT DDO of US$150 million) to support Colombia in the face of the humanitarian emergency. The use of the CAT DDO reflects the Government‘s interest in expanding the use of innovative financing instruments to develop a comprehensive risk financing strategy. As in 19 other areas, the Bank‘s engagement in disaster risk management spans the broad range of lending, technical assistance, and knowledge services that support a variety of actors within Central Government, at the local level and in civil society. Given the focus on disaster risk issues as a result of the rains and flooding of 2010/2011 and the Bank‘s experience in helping the GOC effectively, it is likely that additional work in this area will take place that could include new lending operations for further financing of the APL series, a new CAT DDO, and subnational operations, including in Barranquilla (a flood protection project), as well as a continued engagement in technical assistance and other knowledge work. The Bank will also explore synergies between assisting internally displaced people and people affected by natural disasters, given the large numbers and geographical coincidences of these two groups. Improved Environmental Management and Climate Change Resilience 64. As one of the most biodiverse countries on Earth, Colombia faces serious challenges related to environmental degradation, which affects public health and welfare and compromises the country’s potential for sustainable economic growth. An analysis of the costs of environmental degradation in Colombia indicates that the most significant costs are associated with urban environmental challenges — inadequate water, sanitation, and hygiene and ambient and indoor air pollution, mainly from increased child morbidity and mortality. Colombia also faces great challenges and opportunities on the ―green‖ environment side related to protecting critical ecosystems, developing strategies and instruments for the sustainable use and protection of its rich forest resources, and taking advantage of the new climate financing instruments under development. The country‘s remarkable efforts to protect large amounts of its national territory put it in an excellent position to emerge as a leader in forest protection and environmental management. The CPS envisages a broad engagement in integrating environmental principles in sectoral policies (in particular those of the growth engines, such as infrastructure and mining), urban environmental management, ecosystem protection, and forestry and water resources management; this will most likely extend to potentially scaled-up engagement in climate change mitigation and adaptation, which seems to have taken on a new emphasis under the Santos Administration. In this context, the Bank is also helping to facilitate nascent work in developing a strategy for conservation and sustainable development in the Colombian Amazon, which might focus on supporting the needs of the Amazon‘s indigenous peoples who are disproportionately affected by poverty and violence. 65. In recent years, the Bank has been actively assisting the Government of Colombia with a policy-based program of reforms that have been highly successful and have been accompanied by a program of technical assistance under the Sustainable Development Investment Project. This programmatic engagement aims to strengthen the Government‘s program for reducing environmental degradation in Colombia and is likely to continue and expand under the new CPS. This policy and knowledge engagement has gone hand in hand with a number of grant-financed and carbon finance activities. These activities include but are not limited to the Global Environment Facility (GEF) Integrated National Adaptation Project, a national program to define and implement specific pilot climate change adaptation; the GEF-funded Colombian National Protected Areas Conservation Trust Fund Project (soon to enter a stage of additional finance) that supports the 20 development of the National Protected Areas System by consolidating a Biodiversity and Protected Areas Trust Fund; and the GEF Sustainable Cattle Ranching Project, which supports the development of silvopastoril cattle ranching systems that greatly improve environmental management, provide financial and economic benefits to participating cattle farms, and incorporate an environmental services payment element for development of critical biodiversity corridors. 66. The IFC sees strong potential demand in Colombia for its suite of climate-related products. These include credit lines for banks to support energy efficiency projects for corporate clients as well as direct financing to manufacturers to raise energy efficiency levels to boost operating margins as well as cutting greenhouse gas emissions. The IFC also intends to support energy efficient building codes through its investment operations and advisory service projects. 67. In the new CPS period, the Bank is likely to be deeply involved in environmental management issues in Colombia, spanning urban environmental issues, forestry, climate change, biodiversity protection, and water management. And from an institutional point of view, the integration of environmental principles in sectoral policies could have a significantly high environmental footprint, unless environmental factors are considered in their expansion plans. At this moment, activities are ongoing to develop a national low- carbon growth strategy to address a range of urban environmental issues (including through operations mentioned above) and to help Colombia take advantage of its vast human capacity and strong legal and institutional framework in ensuring that the institutional and governance aspects of environmental management are strengthened. Inclusive Growth with Enhanced Productivity 68. Colombia also faces the challenge to achieve faster and more inclusive economic growth. The National Development Plan sets out to increase the country‘s growth rate from 4 to 6 percent, cut the unemployment from 12 to 9 percent, and reduce the Gini coefficient of income inequality from 0.58 to 0.54. Achieving these challenging targets require policy efforts geared toward developing the country‘s natural and human resources into such a pattern that accelerates growth and shares its benefits with broad segments of the population. In particular, it requires skillful management of risks and fiscal policy challenges associated with natural resources wealth and careful monitoring and evaluation of policies and programs conducive to inclusive growth. Transparent and effective public sector institutions (at federal and subnational levels) and a friendly business environment will also facilitate this growth. And in support of innovation and entrepreneurship for higher productivity, the development in the financial sector must deliver efficient and stable services with access for all people. The Bank is supporting the Colombian Government in this endeavor through an array of financial and knowledge services discussed below. 21 Table 5: Inclusive Growth with Enhanced Productivity – Results Areas and Outcomes Improved Fiscal, Financial and Improved Public Sector Improved Productivity and Social Risk Management Management and Equity and Innovation Efficiency of Economic Policies Outcome 1: Enhanced public sector Outcome 1: Strengthened capacity Outcome 1: The Central efficiency and transparency by of COLCIENCIAS to promote Government meets the structural strengthening and expanding the human capital for knowledge fiscal deficit target for 2014 (2.3% individual management information economy, research and development of GDP or less). systems that are the building blocks and innovation. of an integrated, performance- Outcome 2: Financial instruments informed management model. Outcome 2: Raised awareness of to mitigate natural disaster risks science, technology, and innovation have been implemented by 2013. Outcome 2: Management capacities in the Colombian society. at subnational level of governments are improved and have a positive Outcome 3: Improved regulations impact in the quality of expenditures for business and property and the provision of services. registration, and reform the legislation for secured transactions Outcome 3: Improved quality and and the collateral registry. accessibility of the evidence base for decision making and particularly for Outcome 4: Higher financial policies and programs related to inclusion measured by increased poverty reduction. percentage of the population with a deposit account. Outcome 4: Improvement in the movement of cargo in and out of Colombia by enhancing automation through the VUCE system and improved handling of cargo at ports through risk-based policy and procedures. Improved Fiscal, Financial, and Social Risk Management 69. Colombia has made good progress on the fiscal front over the past decade as illustrated by substantial reduction in public debt by about ten percentage points since 2002. Yet, as previously discussed, the country faces fiscal challenges related to increased fiscal reliance on commodity revenues, substantial social security liabilities, and fiscal risks associated with natural hazards. 70. The Santos Administration is pursuing fiscal reforms aimed at addressing some of these challenges. A new fiscal rule sets a deficit target for 2014 and commits the Government to undertake a medium-term fiscal adjustment of about 1.5 percentage points of GDP. The rule targets a Central Government structural balance by 2022. The fiscal rule legislation also introduces a savings and stabilization fund to reduce budget volatility associated with an increased fiscal reliance on commodities revenues (primarily oil, coal, and metals). A reform of the royalties system, which directs revenues from natural resources exploration toward subnational entities, complements these efforts by introducing a stabilization fund at the decentralized level. Congress has also approved an amendment to the Constitution that introduces fiscal sustainability as a criterion. The Government has also taken measures to reduce social security spending through legislative and administrative measures in the health sector, and it is preparing a financing strategy to mitigate fiscal risks from natural hazards. The Government‘s fiscal management program represents a substantial effort in tackling 22 these challenges. Further progress, for instance in reforming the pension system, would nonetheless be warranted even following successful implementation of the reform program. 71. Colombia has focused for many years in managing the risk reduction of its debt portfolio through a substantial increase in the share of local currency and fixed interest rate, the extension of maturities, and the smoothing out of the debt redemption profile. To meet the goals of its debt management strategy, Colombia has taken full advantage of IBRD financial products, both at the federal and subnational levels. As Colombia proceeds with active liability management of its debt portfolio in the future, it is expected that the country will continue using the embedded conversion options of IBRD loans to fix the interest rate or convert the loan currency into Colombian Pesos. In addition, Colombia has signed a Master Derivatives Agreement with IBRD that gives it access to a wider menu of financial products to manage risks related to commodity, weather, and natural disasters. The Master Derivatives Agreement would also help hedge the currency exposure generated by bond issuance in international markets in different currencies (e.g., in Japan). Subnationals, which have revenues in local currency (e.g., Bogotá, ICETEX), are also expected to continue with the practice of converting their loan disbursements into Colombian Pesos. 72. Colombia is in the process of developing a broader approach to sovereign risk management. The country lacks a comprehensive fiscal risk analysis of the balance sheet as well as a specific framework for the design and implementation of a holistic risk management strategy capable of deliberating between (a) risk absorption capacity, (b) risk retention and transfer, (c) policy advice and institutional capacity for managing risk, and (d) potential financial products available for strategy implementation. Colombian authorities and the World Bank have enjoyed a long-lasting and fruitful partnership on issues relating to sovereign debt management in general and the reduction of financial vulnerabilities in particular, with Colombia being a regional leader in the use of the Bank‘s risk management products and services. As part of this ongoing partnership, the World Bank is assisting the Government of Colombia as it endeavors to develop and implement a more comprehensive sovereign risk management agenda (see Annex E for details). 73. The World Bank also supports the Government‘s fiscal management program through a multi-sectoral, programmatic package of financial, knowledge, and convening services. Financial services include a DPL series (FY12-13) that support greater budget predictability and stability, improved management of public sector contingent liabilities, and improved disaster risk financing management. Knowledge services range from economic modeling support to commodity risks management. In the area of convening services, the Bank organizes various seminars with high-level government officials on royalties‘ reform, disaster risk management, and management of public sector liabilities. 74. The Bank is also supporting efforts to strengthen the Colombian financial sector, which is considered underdeveloped. Data shows that different measures of financial system development are below the expected medium value given GDP per capita, size and demographics and is also below the regional media for LAC countries. Sound financial sector development is necessary to fund productive investment, to increase productivity, and to sustain growth. To this end, there is work underway to strengthen financial sector oversight, develop the financial sector, and improve access to finance. In the area of financial sector strengthening, the Bank plans to provide knowledge and advisory services in forms of (a) a Report on the Observance of Standards and Codes (ROSC), with its recommendations, 23 including financial architecture, regulation, and supervision; (b) a review of the pension system; (c) continued ongoing work on capital markets development through the Efficient Securities Markets Institutional Development (ESMID) program. Furthermore, work to strengthen financial literacy and consumer protection is underway namely through analytical work to understand the financial management practices of the Colombian population and technical assistance to the financial sector on fee structures. In social risk management, the Bank will provide advisory services to improve the Government‘s ability to monitor social welfare impacts of crises (and related responses) at the national and local level. The Bank will also step in to strengthen the capacity of the Government and communities to prepare for crises. This work will include development of a management information system for social risk management and approval of a SFLAC recipient-executed grant to strengthen social risk management capacity at the Department of National Planning (DNP). Improved Public Sector Management and Equity and Efficiency of Economic Policies 75. Colombian authorities have been focused on enhancing the equity, efficiency, and effectiveness of economic policies and public administration for more than two decades. Progress has been notable under the last two administrations, and the political commitment was renewed by the new Administration that put enhancing public sector management as a top priority in the National Development Plan. The Bank supports the GOC Good Governance and Decentralization Programs with specific focus in the national government‘s management institutions, the decentralization framework, and the governance and public management capacities at subnational level of government. 76. The Bank‘s support in this area include the Consolidation of National Public Management Information Systems Project that aims to improve transparency and inter- operability of the Government‘s main management information systems. The Subnational Institutional Strengthening Investment Loan, planned for FY12, will support the implementation of the decentralization reforms and the Government‘s strategy to improve governance and institutional capacities in subnational governments. The IFC hopes to expand its royalty management program in Colombia. There are three active projects in the country that are assisting local governments to improve transparency and accountability in their use of payments from extractive industry operations. 77. Knowledge and advisory services will seek to strengthen territorial development through improved management capacities in departments and municipal governments. Bank assistance will focus on strengthening human resource management, financial management, and coordination with local organizations (public, private, and civil society). Specific activities include the design and piloting of the Rapid Assessments and Action Plans Methodology, which aims to improve management capacities in departments and municipal governments. In addition, a diagnostic and strategic planning tool based on the Capacity Development and Results Framework is being applied to assess and address institutional capacities of demand and supply-side institutions at the subnational level. The Bank also provides advisory services on the implementation of the Citizen’s Visible Audits Methodology, which promotes civil society participation and control in the execution of public investments. The regional study ―Fiscal Federalism/Decentralization in LAC” also contributes to generate and share knowledge on good practice related to intergovernmental 24 arrangements. Convening services include organization of workshops on mechanisms to improve national government tools to assess public management capacities at subnational level and to regulate and supervise the delivery of services by subnational governments; and the exchange of international experiences on policies to improve coordination among central and subnational governments as well as on budget management to improve expenditure efficiency. 78. In the past few years, Colombia has also demonstrated a good track record in implementing public financial management. The Colombian PFM systems at central level perform close to international good practice, albeit with a few areas needing further improvement. The Bank has supported strengthening of the financial management and oversight systems in the country by using different financing instruments and advisory services to the Ministry of Finance and Public Credit, Department of National Planning, Supreme Audit Institutions, and National Accounting Office. In accordance with the Bank and regional governance and anti-corruption strategies, the Bank‘s financial management support to increase good governance and transparency during the CPS period will focus on (a) increasing reliance in PFM country systems (strengthening the capacity and independence of the Supreme Audit Institution); (b) increasing transparency at national and subnational levels by continuing with provision of advisory service on financial and fiscal reporting of public accounts; and (c) assessing fiduciary risks for project preparation and implementation support recommending appropriate strengthening mitigating measures. 79. The Bank is also planning to continue to support the Government in establishing an enhanced and effective public procurement system and building better capacity of its institutions. Both at the national and subnational levels, the Bank will provide just-in- time policy advice and financial support to assist the Government in designing and implementing key reforms in public procurement. These may include (a) the support to implementation of a procurement strategy; (b) issuance and implementation of an improved procurement law and regulations; (c) creation and support of a regulatory body in the context of an inter-institutional coordination effort; (d) transformation and roll-out of the new e- procurement system (SECOP) that promotes transparency and competition in public procurement; and (e) implementation of cost reduction strategies (price benchmarking, consolidation for economies of scale). Furthermore, the Bank plans to provide technical assistance to the Government to evaluate specific sectors and government programs to uncover and deter public procurement deficiencies that may limit public services. The Bank could also help to strengthen inter-institutional coordination and information-sharing systems that will contribute to strengthening internal checks and balances. 80. To address the challenges of low accountability and weak basis for managerial decisions, the Strengthening Public Information, Monitoring and Evaluation for Results Management Project has been helping the Government of Colombia to increase the use of information for policy design and accountability in a cost-effective way. The project supports the GOC SINERGIA program, which includes: (a) a system of monitoring indicators throughout the public sector and linked to the national budget (SISMEG); (b) a system of evaluation of public policies (SISDEVAL); and (c) a network of evaluation agencies throughout Colombia (RED de Evaluación), which includes support to subnational governments and therefore would be particularly attuned to the new Government‘s priority for decentralization. The Bank will continue to provide technical support to the National 25 Planning Department in consolidating results-based public management and rigorous evaluation of public programs and policies. 81. The Bank also plans to provide analytical and advisory services to improve the equity and efficiency of economic policies, by improving the quality and accessibility of the evidence-base for decision-making. The main emphasis of this work is impact evaluation and assessment of economic policies and programs that contribute to poverty reduction, stronger labor markets, upward mobility, and gender. The Bank will continue supporting GOC efforts to improve inputs and methodology for poverty measurement through technical assistance for the MESEP and the new poverty committee and to improve household income measurement. It will also provide support to analyze the impact of high food prices on poverty through (a) a joint technical note with Department of National Planning on the impact of food prices on poverty; and (b) an approved SFLAC recipient- executed grant that will support the ability of Department of National Planning to monitor the impact of food prices on poverty and evaluate its main determinants. The Bank will also support GOC efforts to measure and track inequality and upward mobility, and to better understand means to improve access to critical goods and services that can improve equity, mobility, and the strengthening of the middle class. In particular, the Bank plans to undertake the following activities: (a) Colombia Equity Assessment; (b) analytical work on Colombia as part of the Regional Mobility Flagship; and (c) approval of a recipient-executed trust fund for statistical capacity for the design on longitudinal surveys in Colombia (DNP/DANE). Improved Productivity and Innovation 82. The Government of Colombia seeks to strengthen productivity, innovation, and entrepreneurship through increased coverage and better quality of financial and education services, and stronger national systems for innovation and technology transfer, with a special focus on improving productivity and innovation in small and medium-size enterprises and the agricultural sector. The Government has also emphasized its commitment to scale up investments in science, technology and innovation, as reflected in the National Development Plan and the ―Plan Vive Digital‖. 83. To support innovation, competitiveness, and entrepreneurship, the Bank will provide a package of financial, knowledge, advisory, and convening services. The planned Innovation, Competitiveness and Entrepreneurship Investment Loan (FY13) will focus on the following priorities: (a) strengthen the national system for innovation and technology transfer; (b) strengthen financial mechanisms to support innovation (Bancoldex and Fondo Emprender); (c) strengthen the intellectual property rights protection system; (d) strengthen regional competitiveness; and (e) support technology transfer diffusion and other mechanisms seeking to facilitate productivity improvements in small and medium-size enterprises (SMEs). This loan builds on the Science, Technology, and Innovation (STI) Program that is currently under implementation and enhances the competitiveness and productivity of Colombian firms to foster sustainable growth and reduce economic disparities. The Program links specific STI investments to promote knowledge generation and absorption in Colombia to the national strategy for competitiveness and productivity and to the development of priority industrial sectors in relation with the Productive Transformation Strategy. Potential Bank knowledge and advisory services will broaden 26 support to include (a) reviewing the innovation system with focus on designing alternative models for channeling resources toward regional innovation projects; (b) providing international experiences on piloting projects to increase SME productivity and promote technological transfer; and (c) conducting cluster/value chain analysis. The proposed Bank support in this area will also focus on improving productivity of the service sector with technical assistance on the design of a service sector survey focused on the informal sector and analytical work on measurement of productivity in the service sector. 84. The support for competitiveness and productivity growth are key features of the IFC strategy for Colombia as well as for the entire Latin American and Caribbean region. In addition to financing innovative companies and supporting efficiency gains, IFC also expects to increase its financing for Colombian companies investing overseas, as well as backing inward investment by companies based in developing countries. Outward investment by Colombian businesses enables them to achieve economies of scale needed to compete in a globalized marketplace, manage risk by reducing reliance on a single market, and increase their exposure to international best practices. 85. The Bank plans to improve firm productivity growth through knowledge and advisory services to improve access to financial services. In particular this work will be structured around (a) expanding the use of electronic money and mobile banking, (b) supporting financial literacy, and (c) strengthening consumer protection. The IFC will continue ramping up its SME financing by providing dedicated credit lines to client banks for onlending to client companies. Although Colombia has made progress in strengthening its business regulatory environment, investment climate obstacles remain. Colombia‘s business entry and exit procedures are less efficient than those in industrialized countries and systems for secured transactions and collateral registration can be improved. The WBG plans to continue its technical assistance for improving the business regulatory environment, including advising on the drafting of a new law for secured transactions and the creation of a unified collateral registry. In addition, work will continue to simplify the areas of business and property registration, and construction permits. The WBG has three investment climate operations in Colombia at present. 86. The Government has also requested the WBG to implement in 2012 the third Doing Business subnational study in collaboration of the Department of National Planning. The project goal is to promote competition for a better business environment in Colombia by benchmarking business regulations across Colombian cities and comparing them with 183 economies. 87. The IFC has also developed a vibrant microfinance industry in Colombia both through investments and advisory engagements. Microfinance is an important part of IFC‘s financial markets strategy in Colombia for its impact on low-income communities, women, and minorities. The IFC hopes to support the expansion of mobile banking services in Colombia. It also hopes to help provide insurance coverage for low-income groups through investments in second-tier insurance companies. The IFC microfinance portfolio consists of seven projects totaling US$40.9 million, which accounts for 10 percent of its financial markets portfolio in Colombia. The IFC advisory services also hopes to increase its engagement with the microfinance sector, assisting lenders to transition from NGO status to becoming regulated financial institutions. The IFC objectives for the microfinance sector in Colombia include: (a) increasing access to finance through programs aimed at micro, small 27 and medium-size enterprise; low- and middle-income segments; rural populations; women; and the underserved; (b) lowering intermediation costs through improved risk management and greater operating efficiencies; (c) deepening, broadening and diversifying financial sector participation to achieve greater financial sector stability; and (d) targeting programs in insurance and low-income housing. 88. The Bank is also likely to play an important role in the area of infrastructure for growth and competitiveness during the CPS period. An initial activity, which emerged from the policy notes undertaken during the political transition period, has been launched to provide technical assistance in the redesign of the National Institute of Concessions, and the development of a new concessions entity. It is likely that this work will be complemented in the near future with further knowledge and convening activities, in conjunction with the IFC, related to the institutional and legal issues related to public–private partnerships in the infrastructure sectors. The IFC has worked successfully with the Government on structuring a PPP concession for the 1,071-kilometer highway, Ruta del Sol, and expects that close engagement with the authorities will lead to more PPP-related activities at national and departmental levels. 89. Like infrastructure, another of the GOC “engines of growths” is mining and extractive industries. The Bank is now working with the Ministry of Mines and Energy through technical assistance activities related to improving the management of mining concessions information, including the social land environmental aspects of extractive industries. Given the expected continued importance of extractive industry growth in Colombia, it is likely that this will remain an important area in which the WBG maintains an engagement. As mentioned above, IFC advisory services expect to expand its royalty management program in Colombia to assist communities to better manage revenue from local mining operations. 90. The World Bank is also focusing on improving competitiveness and productivity of the agriculture sector. With Bank support in 2002, the Government started a small pilot program called Rural Productive Partnership, which increases rural competitiveness and builds up rural entrepreneurship in a sustainable manner. The program supports demand- driven partnerships between organized small producers and the commercial private sector with the objective to improve small producers‘ incomes through their participation in high- value chains. To date, the program has supported 213 partnerships. The Government intends to scale up the program by adding 640 new partnerships by the end of 2014. The Bank is planning to help the Government to scale up this program under the title Small-holder Agriculture Competitiveness. The scaling up is likely to include linkages to other key policy programs in the areas of land restitution, agricultural innovations, as well as agricultural risk mitigation and risk management, as needed to improve the competitiveness of small-holder agriculture. The Agricultural Transition Project, currently under implementation, aims to strengthen the national agricultural science and technology and sanitary and phytosanitary systems by supporting joint participation of the public and private sectors through production chain mechanisms, thereby contributing to the competitiveness of Colombian agriculture and improving the accessibility of export-potential products to international markets. Land management and administration might also be an area in which the Bank could work under this CPS. The IFC may also engage with selected agribusiness 28 clients to raise yields and productivity through investment projects, advisory engagements, or a combination of both. 91. The Agricultural Transition Project is appropriately complemented by the Science, Technology, and Innovation Project. The Bank builds on the well-established cooperation with the Government of Colombia in the STI and tertiary education sectors. The project‘s main objective is to increase access, quality, and coherence in the tertiary education subsector. Colciencias (Departamento Administrativo de Ciencia, Tecnología e Innovación) was a co-implementing agency for this loan, which financed national doctoral scholarships, the acquisition of robust research equipment, and researchers‘ mobility programs. The project enhances the competitiveness and productivity of Colombian firms to foster sustainable growth and reduce economic disparities. The project links specific STI investments to promote knowledge generation and absorption to the national strategy for competitiveness and productivity and to development of priority industrial sectors under the Productive Transformation Strategy. C. The WBG’s Indicative Program 92. In terms of financial services, the Government has indicated financing expectations of about US$1.1 billion in FY12. The FY11 financing program was lower than in recent years as a result of the Presidential transition period. For FY13-16 the lending program is expected to be US$800–1,080 million per annum. These are only indicative lending amounts. Actual delivery of the lending program will depend on Colombia‘s performance, IBRD lending capacity, demand from other borrowers, global economic developments, and disbursement profiles that keep exposure within the country limits. 93. Trust funds will continue to be an integral part of the Bank‘s engagement with Colombia. As trust fund resources are not predictable for the purpose of the CPS, the WBG will ensure that activities financed by trust funds follow the thrust of this strategy in agreement with the Government counterparts. 94. The CPS thematic areas will be managed under an enhanced thematic business model approach. This approach aims to improve the impact of the Bank‘s engagement in Colombia. Financial, knowledge, and convening services are managed as a comprehensive package of support under each theme to deliver timely and flexible development solutions. 95. The WBG intends to monitor CPS results via (a) regular project/program supervision; (b) annual reviews of programmatic knowledge and convening services; (c) annual Country Portfolio Performance Reviews; (d) client demand and feedback, in particular with respect to knowledge and convening services; (e) Bank internal independent evaluations; and (f) the mid-term CPS Progress Report. 29 Table 6: Indicative World Bank Financial Services (FY12-13) FY-12 Lending Program Commitment US$ million Urban Transport (SIL) 350 CAT DDO II 150 Sustainable Development (TA-AF) 10 Fiscal Sustainability and Growth Resilience (DPL I) 300 Sub-National Institutional Strengthening (SIL) 150 Small-holder Agriculture Competitiveness (SIL) 150 Total: 1110 FY13 Lending Program Pipeline Education Quality (P4R) 150 Social Safety Net III (SIL) 150 Disaster Vulnerability Reduction Phase 2 APL1 100 Barranquilla Flood Protection (SIL) 100 Sustainable Development (DPL) 100 Fiscal Sustainability and Growth Resilience (DPL II) 200 Innovation, Competitiveness, and Entrepreneurship (SIL) 100 Total: 900 Table 7: Indicative WB Knowledge and Convening Services (FY12) FY12 Enhanced Social Promotion (P123158) (Programmatic) Improved Opportunities in Education (P123144) (Programmatic) Improved Performance of Social Services (P123301) (Programmatic) Urbanization Review (P121640) (Programmatic) Support to Infrastructure Concession Entity Restructuring (P125932) Low-carbon Development (P124909) Strengthening Environmental and Natural Res. Institution (P123864) (Programmatic) Financial Sector Work (Programmatic) Poverty, Labor Markets, Inequality and Monitoring and Evaluation (Programmatic) Strengthening Public Sector (Programmatic) Institutional & Mineral Rights (P125514) Productivity, Competitiveness and Entrepreneurship (P126865) Financial Capability Assessment (P122698) D. Development Partner Collaboration and South-South Knowledge Exchange 96. Joint work with other development partners, both the Inter-American Development Bank (IDB) and Corporación Andina de Fomento (CAF), has entailed inter-disciplinary activities from conditional cash transfer (CCT) experiences to the harmonization of procedures for the STI project; energy-generation deals with IFC; and collaboration for completion of the NUTP system. Other bilateral donors have worked closely with the Bank providing grant funds for programs that are ranging from youth promotion, gender equality, and institutional strengthening to flood management and public transport. 30 97. South-South Cooperation (SSC) is an important national priority for Colombia. Colombia‘s National Development Plan identifies international relevance through South- South Cooperation as a key cross-cutting theme, and the Government has striven to strengthen the planning, funding, and implementation of South-South Knowledge Exchange (SSKE) while promoting Colombia as a potential SSKE partner regionally and globally. Colombia and Indonesia co-chair the Task Team on South-South Cooperation, a working party of the OECD/DAC and an international coalition of countries, multilaterals, donors, academic institutions, and other stakeholders that aim to develop good practice and policy guidance for SSC activities. The World Bank Country Team is looking to include an SSKE component in its capacity development initiatives in Colombia and is promoting Colombia‘s participation in a WBI Pilot Brokering Mechanism supporting SSKE. The pilot aims to help countries document their knowledge-sharing needs and facilitate matches for exchanges between developing country partners. (Annex F provides further details regarding Colombia‘s role in SSKE and the Pilot Brokering Mechanism.) 98. In addition, the Accra Agenda for Action created a mandate to review the SSKE and Triangular Cooperation. Colombia is the leader of this new initiative as a long-standing SSC practitioner. The public mass transit system in Bogotá (Transmilenio), which has been replicated in many countries, is a good example of technical cooperation and mutual learning and its contribution to development. V. RISKS 99. Colombia is vulnerable to commodity price shocks and a deterioration of external financing conditions. Commodity exports accounted for 63 percent of export revenue in 2010 while 73 percent of foreign direct investment inflows are in commodity- related projects (mainly oil). As a result, an adverse shock to oil and other primary exports (e.g., coffee) could result in a significant increase in Colombia‘s financing needs. A sudden deterioration of external financing conditions would also affect Colombia. Tighter global financial conditions would lower the inflows of private capital envisaged in the macroeconomic projections; and public external financing conditions also could be affected, even if the Government was to maintain access to international markets at favorable rates, possibly creating debt roll-over difficulties. The two-year US$6.2 billion (SDR3.87 billion) arrangement under the IMF Flexible Credit Line, approved in May 2011, will mitigate these risks continuing to provide space for policy flexibility while bolstering Colombia‘s access to international markets if tail risks were to materialize. 100. Another external economic risk derives from a slower-than-expected global recovery. Earlier fears of a double-dip recession have not materialized, but there are important downside risks. Future developments in the United States, in particular, are of importance to Colombia. Substantially higher oil prices or a further decline in domestic housing prices could dampen confidence and consumer spending in the United States. This would reduce demand for Colombian exports. Higher global prices for Colombia‘s commodity exports will mitigate this impact, but the recovery of non-traditional exports (e.g., flowers) may be slower than expected. The Bank and the IMF are maintaining an on- 31 going policy dialogue with the Government on macroeconomic policy issues, which may help detect early potential threats to Colombia‘s growth. 101. Rising food prices. Since end-2010, global food prices have risen substantially and are now at levels comparable to the 2008 crisis with a risk that they may rise even further owing to global market conditions. High food prices raise macroeconomic as well as social concerns. Higher global prices are, to some extent, transmitted to domestic food prices, which in turn generate inflation. If the Central Bank evaluates that the price effect is permanent or that it affects expectations for inflation, then it may decide to tighten monetary policy, which would dampen the economic recovery. Higher food prices directly affect poverty given that a relatively higher share of household consumption is devoted to food expenses among the poor. The Government of Colombia can mitigate this impact through social programs, including an increase in the amount of conditional cash transfer. 102. Policy slippages in implementing fiscal reforms. Given the high level of ambition for the fiscal reform agenda, there is a risk of slower progress in politically contentious areas. This unfortunately has been frequently the case in Colombia when dealing with structural fiscal reforms in the past (e.g., pensions, health care). This would call for frontloaded action in key policy reform areas that signal commitment to strengthening fiscal institutions and reducing fiscal risks. Moving forward with the most contentious issues first would signal strong commitment to reform and mitigate some of these risks. The Government has, to some extent, followed this strategy, for instance, by bringing forward the royalties reform and frontloading the fiscal adjustment. The Bank will stay engaged through its programmatic and comprehensive engagement in the fiscal reform program. 103. Sustainability of reform efforts in disaster risk management. In the aftermath of the La Niña event, natural disaster risk management moved to the top on the political agenda. The Government designed an effective post-disaster financing mechanism; included the theme in the new National Development Plan; and between December 7, 2010 and January 6, 2011, the issued several decrees to improve the country‘s future crises preparedness. While there are important indications that Colombia is heading toward an improved institutional framework, there is a risk that reform attention will be diverted as the memory of the recent disaster fades and other priorities rise up the political agenda. The Government has asked the Bank to be its strategic partner in moving the reforms forward, and the Bank can try to mitigate the risk by reminding the Government of importance of the agenda. 104. Working at subnational level. As the Bank intensifies its engagement at the subnational level, fiduciary and safeguard risks will increase — as will the costs of attendant mitigation mechanisms. The Bank may also face potential reputational risks as it expands its support into regions where local governments might be subject to the influence of illegal groups and other non-state actors. The Central Government‘s commitment to work with the subnational authorities and the Bank to embed strong fiduciary measures will help offset these potential risks. 105. Promoting peace, deposing violence. Peace has not been secured throughout the entire country. Poverty, corruption, and the drug trade remain significant challenges. A rise in urban crime and violence from illegal groups tied to the drug trade — some of which have been formed by former paramilitary combatants — represents an increasing security challenge and will require more attention from the Government during 2011–16. 32 Strengthened drug cartels in Mexico and Central America working closely with Colombian suppliers also impose a challenge for the authorities in the years to come. Beginning in early 2000, the Bank has been closely involved with the Government in a range of activities related to community-driven conflict resolution and management as part of the peace pillar in the previous CPS. These activities are likely to continue in coming years as the new administration has broadly adopted policies to further promote peace. 33 Annex A: CPS Results Framework Country Development Goals WBG Program (and Issues and Obstacles CPS Outcomes Milestones (from NDP) Partners) Expanding Opportunities for Social Prosperity Enhanced Social Promotion and Improved Citizens Security Financial Services: Social Protection: Families 1. Weak coordination among 1. Better coverage of Unidos 1. Merger of CCT (Familias en Lending – Ongoing: graduated from the Unidos programs for poverty reduction program (merger of two key Accion) and social promotion Support for the Second Phase of the Program that meet conditions to poverty reduction programs) strategy (Juntos) into a single Expansion of the Program of not be in Extreme Poverty 2. Barriers to create formal program (Unidos) Conditional Transfers-Familias en employment, including high labor Baseline: 0 Acción Project – Social Safety Net Baseline: 0 (2011) costs, relevance of skills, complex Target: 1.5 million II(P101211) Target: 350.000 (2014) regulatory framework to establish Baseline: Programs operate separately Peace and Development (AF) businesses 2. Increase in the coverage of (P051306) Reduction in overall and youth municipalities that offer active Target: Programs merged unemployment rates: labor market policies to enhance Lending – Pipeline: 3. Deficiencies in enforcement of labor productivity and reduce 2. Design and implementation of Social Safety Net III (SIL) (FY13) Baseline (2010): 12.0% (overall) basic rights of IDP‘s barriers to the employability of the the program Trabajemos Unidos, (P104507) and 21.6% (youth) poor to provide active labor market Target (2014): 8.9% (overall) policies for the poor. Knowledge Services: and 16.1% (youth) Baseline: 0 Enhanced Social Promotion Target: 300 new municipalities Baseline: 0 (P123158) (Programmatic) 3. Increase in number of land Target: Program created and Financed by grants - Ongoing: rights protected of internally implemented at pilot or national Empowering young women affected displaced people who abandoned scale by violence (JSDF, their land due to forced TF093829/TF093830) displacement Soccer together (JSDF, No-code yet) Baseline: 83.450 households Peaceful Dispute Resolution (2.525.566 hectares) protected Services for the Poor (JSDF, (2008) TF091176, Recipient) Target: 219.450 households X Gender and IDPs (GENTF, hectares (2014) TF095198) Protection of Land and Patrimony of IDPs Phase 3 (SPBF, TF094596) Access to Opportunities for Youth (JSDF, TF093141) Labor Reforming Cajas de Compensación Familiar (CCF) (PSIA, TF097240) Institutional Community Strengthening for Local Governance (JSDF TF091174) Youth Reintegration Project (Colegio del Cuerpo) (IF-P095598- CAH-BB) 34 Country Development Goals WBG Program (and Issues and Obstacles CPS Outcomes Milestones (from NDP) Partners) Study on conflict and education resilience in Antioquia as part of the global study ―Towards a Tool to Assess Violent Conflict and Educational Fragility/Resilience in Conflict-affected and Post-Conflict Countries‖(Fragile States Program – HDNED) Financed by grants - Pipeline: Strengthening Human Rights to Basic Social Services in Peace and Development Zones (NTF, TF096627) Convening Services: Financed by grants: Community Practice CCTs South-south transfer - labor Social network on health financing Natl. Tech. Comm. - IDP‘s Assets Protection Program Human Rights-Peace & Dev. Dialogue Support for South-South Dissemination on DDR (WBI initiative IFC Possible direct lending to and/or equity investment in microfinance institutions. Advisory services support for transitioning microfinance lenders to regulated institutions Low-income housing finance. Improved Opportunities In Education Human Capital Formation: 1. Subpar learning outcomes 1. Increase in enrollment rates 1. Enhanced policy framework for Financial Services: Education Coverage (Higher) compared to other countries in the (primary and lower secondary; quality of education Lending – Ongoing: region. and secondary education) of Rural education project (APL II) Baseline: 35.3% (2011) students from poor and rural Baseline: Current framework (P082908). Target: 50% (2014) households (31 poorest territorial Target: Revised framework Antioquia upper secondary 2. Pronounced disparities in entities, including 17 departments education project (P052608) access and quality of secondary and 13 municipalities). 2. Improve national system for Second student loan project (APL student assessments II)-(P105164). and tertiary education. Baseline: Lending – Pipeline: NER primary and lower Baseline: Current system Education Quality project. (FY13)- secondary: 90.21% Target: Transformed system (P106693) 35 Country Development Goals WBG Program (and Issues and Obstacles CPS Outcomes Milestones (from NDP) Partners) NER upper secondary: 30.84% Risk Management: Target: Local currency financing for NER primary and lower ICETEX, Antioquia secondary: 94% NER upper secondary: 35% Knowledge Services: Improved Opportunities in 2. Increase in tertiary education Education (P123144) enrollment of students from poor (Programmatic) households Benchmarking of basic education Baseline: 75,000 system Target: 150,000 Joint OECD/WB Review of the national tertiary education system Joint OECD/WB Review of the tertiary education system at the regional level (Antioquia)Review student loan and scholarship programs Diversify ICETEX financing portfolio Technical and Vocational Education Policy Note Financed by grants – Pipeline: Education Quality Report (ICFES)- (P106710) Convening Services: SSKE CO- Morocco on Measuring Learning outcomes in Higher Education IFC ongoing and potential new projects in technical and vocational adult education Piloting financial literacy programs. Improved Performance of Social Services Early Childhood Attention to 1. Fragmented service delivery 1. Strengthened information 1. Develop information system for Knowledge Services: Vulnerable Children systems systems to monitor service ECD Improved Performance of Social Baseline: 566,429 (2011) delivery and strengthen Services (P123301) Target: 1,200,000 (2014) 2. Blurred institutional mandates, accountability in health, education Baseline: Information system to (Programmatic) fragmented financing and and ECD be developed information systems and weak Target: Plan for ECD information Financed by grants - Ongoing: Access to Health: Coverage of accountability arrangements Baseline: Multiple information system developed Avian Influenza (TF 098473) Subsidized Regime systems do not effectively capture Financial Capabilities and Education Baseline: 90.2% (2011) productivity and quality of 2. Strengthen management and Measurement Project (FLIT Target: 100% (2014) services in health, education and information system of the health TF097524) ECD insurance system for the poor Financed by grants - Pipeline: Implementing the right to health Target: Unified information Baseline: Reform strategy lacking (NTF, TF096788) Strengthening Governance of Early 36 Country Development Goals WBG Program (and Issues and Obstacles CPS Outcomes Milestones (from NDP) Partners) systems capture productivity and Target: Reform strategy Childhood Development Programs quality of services in health, developed (SFLAC TF099190) education and ECD Colombia enhancing governance, 3. Strengthen information system transparency and accountability in of education sector education (IDF grant) Baseline: Reform strategy lacking Convening Services: Target: Reform strategy Financed by grants: developed South-south transfer health sector regulation Community of Practice ECD North-South transfer ECD South-South transfer ECD ALAS – Colombia University and WB partnership on ECD Sustainable Growth with Enhanced Climate Change Resilience Improved Sustainable Urban Development 1. Number of low income Financial Services: Cities with urban mobility 1. Infrastructure investments and 1.Increased population benefitting beneficiaries with access to Lending - Ongoing: solutions in place quality of urban services has not from improved transportation housing units under La Guajira Water and Sanitation kept up with the growth of cities services in large cities; Macroproyectos subprojects, The Proj (P096965). Baseline: 10 (2011) target would be 40,000 Bogota Urban Services AF Target: 30 (2014) Baseline: 460,000 (2011) (P074726) 2. Land management and housing Target: 1,800,000 (2014) development for low-income Baseline: 0 (2011) Solid Waste Mgmt Project Construction Dynamic-# of Target: 40,000 (2014) (P101279). houses/apartments initiated in the segments of the population Macroproyectos Project (FY11)- 2010-2014 period) remains a critical challenge 2. Increased population benefitting (P110671) from improved transportation Integrated Mass Transit Systems Base: 560.300 services in medium-sized cities; (P082466 / P114325) Target: 1.000.000 Rio Bogota Project (FY11)- Baseline: 0 (2011) (P111479) Target: 150,000 (2014) Lending - Pipeline: 3. Improved institutional capacity National Urban Transport (FY12) of the central Government to plan (P117947) and deliver transportation services Knowledge Services: Baseline: n/a (2011) Financed by grants - Ongoing: Target: Improved (2014) Strategic Basin Planning for the Rio Bogota (WPP, TF095149) Regulatory Aspects of Transport (SFLAC, TF096162, Recipient) Nordic Fund for Universal Access to BRTs (NF, P114302, Recipient) Pilot Impact Evaluation Pereira BRTs-(NTF, TF096953, Recipient) 37 Country Development Goals WBG Program (and Issues and Obstacles CPS Outcomes Milestones (from NDP) Partners) Metro Study, Integration Public Transit Syst., SNTA (3 cities), and Comm. Campaign BRT Impl.(PPIAFs ,TF074726, Recipient) - Integration of Public Transit Systems (SFLAC, TF071296) - Cartagena Bus Rapid Transit System ( P11517, CF) Analyze the Experience of Specialized Water Operator in Colombia (SFLAC TF098814) Colombia Low Carbon Study (SFLAC TF098916) Cities Alliance-Macroproyectos de Interes Social Nacional (CITIES TF098963) Institutional Strengthening and Capacity Building to Support the Rio Bogota Environmental (SFLAC TF097840) Financed by grants - Pipeline: Public Transport Regulatory Framework (SFLAC, TF096162, Recipient) Water Resource Model (TF096847) AAA: Cities Alliance support for Macroproyectos: Developing a Policy and Program Framework Urbanization Review II ) Urban Renovation TA (2 cities) PPIAF - Urban Renewal Financing Instruments Social Compact Work IFC Transportation, telecom, and multi- sector projects Low income housing projects PPP structuring vehicle for all types of infrastructure 38 Country Development Goals WBG Program (and Issues and Obstacles CPS Outcomes Milestones (from NDP) Partners) Enhanced Disaster Risk Management Financial services: Technical capacity of territorial 1. Need to improve territorial 1. Strengthened technical 1.At least 50 percent of Lending – Ongoing: entities and CAR in risk management; capacity for disaster risk Colombian Municipalities with APL1 Disaster Vulnerability management (# of formulated management at national and Municipal DRM plans Proj.(P082429) plans per municipality) 2. Lack of investment in disaster- regional levels APL2 Disaster Vulnerability resistant infrastructure Baseline: TBD (2011) Proj.(P085727) Base: 226 (2011) Baseline: n/a (2011) Target: 50% (2014)\ CAT DDO (P113084) Target: 790 (2014) Target: Improved (2016) Lending – Pipeline: 2. At least 250 functioning CAT DDO II (FY12)-(P120899) Municipalities assisted and 2. National Policy for Disaster geological or hydrometeorological Barranquilla Flood (FY13) recovered from rain season Risk Management formulated. stations connected with early (P120159) warning systems Disaster Vulnerability Reduction 2nd Base: 0 (2011) Baseline: No (2011) phase APL I (FY13) Target: 755 (2014) Target: Yes (2016) Baseline: TBD (2011) Risk Management: Target: 250 (2014) Blending model for structuring IBRD financial package 3. Successful definition and Loan customization for CAR (use implementation of vulnerability of local currency) reduction investments in at least 2 large cities Knowledge Services: Finance by grants – Ongoing: Baseline: 1 (2011) Risk Modeling Bogota (GFDRR , Target: 2 (2014) TF091242, Recipient) Flood Protection in Barranquilla (Supervision funds) (SFLAC, TF096784) Barranquilla-Preparation for integrated urban flood prevention (GFDRR, TF096323) CAPRA (GFDRR, TF096324) Strenght. Crisis preparedness framework (FIRST, TF095378) Disaster Risk Management Analysis (CCDRMA) (GFDRR TF098966) Convening Services: Financed by grants: CAPRA (P082429) ACODAL Workshop ―Grandes Sismos‖ Workshop Improved Environmental Management and Climate Change Resilience Financial Services: Houses incorporated into the 1. Major urban centers and rivers 1. Government has developed a 1. Establishing a national Lending – Ongoing: National Protected Areas system polluted; national policy for climate change emissions testing center as part of Sustainable Dev. Proj. (P082520) with ecological representativeness and a national low-carbon growth the air quality monitoring network Lending – Pipeline: criteria 2. No environmental controls for strategy. Sustainable Dev. AF (FY12) hazardous waste; Baseline: 0 (2011) 39 Country Development Goals WBG Program (and Issues and Obstacles CPS Outcomes Milestones (from NDP) Partners) Base: 12.6 million hectares Baseline: No (2011) Target: 1 (2014) (P115639) (2011) 3. Farming, ranching contribute to Target: Yes (2016) Sustainable Dev. DPL (FY13) Target: 15.6 million hectares rapid deforestation and soil 2. Water quality monitoring Risk Management: (2014) degradation 2. Government has mainstreamed network and information system Use of full menu of IBRD CAT risk improved environmental practices strengthened. financing instruments weather in the agricultural sector through a derivative and/or Catbond) scaling up of silvopastoril Baseline: Not fully operational livestock systems (2011) Knowledge Services: Strengthening Environmental and Baseline: 0 ha (2011) Target: Operational with 13 new Natural Res. Institution (P123864) Targets: 50,500 ha (2016) water quality monitoring stations (Programmatic) FY12 (2014) Finance by grants – Ongoing: Low Carbon Growth (P123695) National Adaptation Plan (TF056350) Rio Amoya CF (TF053534), Jepirachi CF (TF051156), San Nicolas Carbon Sink CF (TF056577) INAP GEF, Mainstreaming Cattle Ranching GEF (TF096465), Protected Areas GEF(TF094084), Netherlands Conservation Incentives Grant FCPF Readiness (TF097224) GEF Protected Areas AF (TF056351) Water Resources and Air Quality Management (SFLAC, TF097348) + Training (WPP, TF096847) Finance by grants – Pipeline: Course on hydrological modeling for decision makers (WPP financed) International Glacier network Low Carbon Development Study (P124909) IFC Green building codes, energy efficiency, cleaner production 40 Country Development Goals WBG Program (and Issues and Obstacles CPS Outcomes Milestones (from NDP) Partners) Inclusive Growth with Enhanced Productivity Improved Fiscal, Financial and Social Risk Management Financial Services: Economic growth (average for 1. Price fluctuations and 1. The Central Government meets 1. The Central Government Lending – Pipeline: 4yr-period) exchange rate appreciation related the structural fiscal deficit target overall deficit: Fiscal Sustainability and Growth to increased commodity for 2014 (2.3% of GDP or less). Baseline: 3.9% (2010). Target Resilience DPL series (FY12-13) Baseline: 4,1% (2011) production have important fiscal 3.5% of GDP or less by 2012 and Target: 6,2% (2014) and economic impacts that need to 2. Financial instruments to 3.2% of GDP or less by 2013. Knowledge Services: be well managed at national and mitigate natural disaster risks have Financed by grants – Ongoing: subnational levels. been implemented by 2013. National Level Public Finance 2. Public sector contingent Study (P106916) liabilities related to pensions, Knowledge and advisory services health care, litigation, and natural to improve the monitoring of disasters are sizeable and require social impact of the crisis sound management. Financed by grants – Pipeline: 3. There is scope for further Institutional Mineral Rights improvement in the monitoring of Cadastre Reform (SFLAC) social impacts of crises. Banking ROSC and FSAP Update 4. The global crisis has exposed Analyzing the contribution to shared the need to enhance regulatory and supervisory standards for the IFC financial system. Revenue management advisory services in mining (municipalities) Convening Services: Fiscal Risk Management (SFLAC). This activity supports activities related to the improved management of health and pension liabilities. 41 Country Development Goals WBG Program (and Issues and Obstacles CPS Outcomes Milestones (from NDP) Partners) Improved Public Sector Management and Equity and Efficiency of Economic Policies Reduced income inequality as 1 There is a need to increase 1. Enhanced public sector 1. 100% of consolidated budget Financial Services: measured by the Gini coefficient transparency, improve efficiency and transparency by information (at the level of Lending - Ongoing: management capacity, and strengthening and expanding the individual entities) is published Consolidation of National Public Baseline: 0.58 (2009) strengthen the accountability of individual management online on a monthly basis within Management Information Systems Target: 0.54 (2014) public institutions. information systems that are the the first week of the following Project (P106628) building blocks of an integrated, month Strengthening Justice Services 2. Effectiveness and efficiency of performance-informed Baseline: Currently not published (P083904) public expenditures are poor due management model, including: Target :80% by 2014 Strengthening Public Information, to lack of adequate and timely Sistema Integrado de Informacion Monitoring, Evaluation for Results information on budget execution Financiera SIIF-Nación, Sistema 2. SIIF and SUIFP information on Management SIL(P099139) at national and sub-national level. Unificado de Inversiones y the allocation and execution of Lending – Pipeline: Finanzas Públicas budget items is fully consistent. Sub-National Institutional 3. Regulations and systems related SUIFP and Baseline Not consistent today Strengthening (Royalties Reform)- with key public management Modelo Único de Ingresos, Target ?Consistency achieved by SIL (FY12) systems including financial, Servicios y Control Automatizado 2013. investment, procurement and tax MUISCA. Knowledge Services: management are not linked, Baseline: 2011 - Public 3. A cloud computing scheme to Financed by grants – Ongoing: preventing the provision of Management Information Systems provide financial management and Legal claims mgmt system (IDF, reliable information on public do not provide on time reliable monitoring services to local TF058311, Recipient) expenditures and revenues, as well information on expenditures and governments is implemented. Expanded subnational rapid preventing to the M&E systems. investments. Baseline: Currently not existing assessments of PSM Decentralization Study (P101308) Target : 2015 - Public Target: First version operating by Strengthening Procurement System 4. Public management capacities Management Information Systems 2013 (TF092702, Recipient) at sub-national level of provide on time, reliable and IDF Procurement Law Reform government are weak, preventing consistent information on budget 4. A program to increase Implementation the adequate management of and investment execution. managerial capacity at sub Advisory work on accounting and public resources and investments, national level is implemented financial reporting standards as well the adequate provision of 2. Management capacities at sub- Baseline: Not existing Peaceful Dispute Resolution for the services. national level of governments are Target: The program is launched Poor (TF091176) improved and have a positive in 2012 and by 2013 20% of low Support for the creation of a central 5. There is scope for improvement impact in the quality of performing municipalities are Procurement office in the poverty measurement expenditures and the provision of included in the program. Citizen‘s visible audits to improve methodology in Colombia. services. public investment transparency and Baseline:2011 - Lack of efficient 5. The FUT (Single Territorial accountability (Global Partnership 6. There is scope to improve the mechanisms in the National Format) is implemented as the Facility, TF096676) existing M&E system for results Government to provide effective sole source of sub national budget Assessment for e-GP and Road Map and efficient support to sub and final reporting) Strategy 7. There is scope to improve national governments for the Baseline Limited coverage Preparation of National Standard access to information in the strengthening of management Target Sole source by 2012 Bidding Documents country, in particular timely and capacities. TA on the review of the current well documented access to Target: 2015 - A set of 6. New poverty methodology is subnational control systems surveys and administrative mechanisms have been put in finalized and announced and well TA in strengthening CGR inst records. place and are available to sub received by the public. national governments to improve Baseline: May 2011 official AAA 8. There is scope to improve their management capacities. poverty methodology (based in Poverty, Labor Markets, Inequality economic policies to promote 1996 expenditure survey) and Monitoring and Evaluation upward mobility and expand the Target: May 2012 revised poverty (Programmatic) 42 Country Development Goals WBG Program (and Issues and Obstacles CPS Outcomes Milestones (from NDP) Partners) middle class. methodology (based on the 2006 Strengthening Public Sector 3. Improved quality and expenditure survey) (Programmatic) 9. There is scope to improve accessibility of the evidence base economic policies to strengthen for decision making and IFC the productivity of the informal particularly for policies and Infrastructure advisory, PPP sector, and in particular, service programs related to poverty structuring for highways, ports sector. reduction. Simplifying municipal construction Baseline: 2011 - No micro data permits 10. Large percentage of the produced by DANE is made population has limited access to available to the public. Streamlining trade logistics policies basic financial services. Target: 2015 - Public guidelines to and procedures; enhance 11. Colombia‘s free trade grant access to the micro data automation; improve risk negotiations with the US and other produced by DANE. management policy for trade countries necessitate efficient and logistics and border clearance 4. Improvement in the movement transparent trade transactions that of cargo in and out of Colombia will serve to enhance Colombia‘s Convening Services: by enhancing automation through Financed by grants: image in world markets as a the VUCE system and improved trading partner, to generate Seminar to discuss strategies to handling of cargo at ports through improve assessment methodology of savings for the private sector and risk based policy and procedures. improve transparency. This will subnationals serve to increase Colombian Baseline: 24 days for imports and Active participation in expert 23 days for imports. committee on poverty measurement exports. Target for 2014: 10 days to import Support to the Colombian M&E Network and 9 days to export. Worshop on Social Mobility Workshop on Food crisis and Poverty Workshop on the accelerated data program (ADP) with counterparts in DANE Financial capabilities (P122698) Improved Productivity and Innovation 1. Strengthened capacity of 1. At least 3 financing instrumentsFinancial Services: Investment in STI (% of GDP) 1. 1 Insufficient investment in COLCIENCIAS to promote designed and redesigned and Lending – Ongoing: science, technology, and human capital for knowledge approved by Colciencias Board of Agricultural Transition Project Baseline: 0.39 (2011) innovation and weak economy, research and Directors by 2013. (P082167) Target: 0.70 (2014) coordination within the development, and innovation. Rural Productive Partnerships II national innovation system; 2. Monitoring and evaluation Project (P104567) 2. Inadequate stock of Number of journal articles by framework for social dissemination Science, Technology, and advanced human capital and Colombian researchers in SCI of STI defined by 2013. Innovation low economic relevance and expanded per million population (P117590) limited international Baseline (2009): 48.0 3.Number of additional families Lending – Pipeline: linkages of existing public Target (2014): 58.5 benefitting from high value Small-holder Agriculture research, including linkages agricultural value chains Competitiveness (FY12) with the Colombian 2. Raised awareness of science, Baseline: 0 (2010) Innovation,Competitiveness, diaspora; Target: 32,000 (2014) Entrepreneurship SIL (FY13) 43 Country Development Goals WBG Program (and Issues and Obstacles CPS Outcomes Milestones (from NDP) Partners) 3. Limited productivity growth technology and innovation in the of SMEs; Colombian society 4.Design of pilots for enhancing Knowledge services: 4. Regulatory obstacles for technology transfer and diffusion. Cooperation agreement on SMEs to start, operate and Total grant applications for Investment Climate close businesses and research and development and 5.Disseminate good practices and Regional Doing Business Reform underdeveloped systems for innovation subprojects received regulatory reforms implemented Advisory project secured transactions and yearly by COLCIENCIAS by local Governments in the areas collateral registration Baseline (2009): 2009 measured by the 2012 sub- Financed by grants – Ongoing: Target (2013): 2674 national Doing Business report in Innovation, Productivity and Colombia Entrepreneurship (TF096995) 3. Improved regulations for Financial capabilities and Education business and property registration, 6. Scaling up of financial Measurement Project (P122698) and reform the legislation for education strategy secured transactions and the Financed by grants – Pipeline: collateral registry. Agriculture Risk Management - modeling, advising and training to Efficiency of starting a business public and private sector on Baseline: 9 procedures, 14 days, identifying, quantifying and Target (2014): 4 procedures, 6 addressing and financing systemic days risks in the agriculture sector. SME factoring (primarily with 4. Higher financial inclusion grants) measured by increased percentage Analyzing the contribution to shared of the population with a deposit growth of existing instruments to account. promote public support for Baseline: 1,295 accounts per commercial innovation (Diagnostic 1,000 adults (2010) Facility for Shared Growth, TF096995) Target: 1,400 accounts per 1,000 adults (2014). AAA: Productivity, competitiveness and entrepreneurship (Assessment of drivers of TFP growth, technology transfer diffusion mechanisms) PPIAF Support for the Reorganization of INCO IFC Gender and microfinance sector support Tier 2 insurance companies and mobile banking Transformation projects (agriculture, beverages, poultry, etc) Support PPP projects through investment. 44 Annex B: CPS Completion Report (CPSCR) COLOMBIA - CPS COMPLETION REPORT (CPSCR) FY 2008-2011 CPS March 4, 2008 Report No. 42847-CO CPSPR March 1, 2010 Report No 52878-CO Contents I. INTRODUCTION A. COLOMBIA‘S ECONOMIC AND SOCIAL BACKGROUND B. WORLD BANK PROGRAM OF SUPPORT II. CPS PROGRAM PERFORMANCE A. OVERVIEW AND PRINCIPLES OF ENGAGEMENT B. PROGRESS BY STRATEGIC ENGAGEMENT THEMES (TOWARDS CPS OUTCOMES B.1. Sustained Equitable Growth B.2. Poverty Alleviation and Equity of Opportunity B.3. Environment and Natural Resources Management B.4. Peace and Development B.5. A State at the Service of its Citizens: Efficient and Effective Government III. WORLD BANK GROUP PERFORMANCE A. CPS DESIGN B. IMPLEMENTING THE STRATEGY C. MANAGEMENT OF RISKS IV. LESSONS LEARNED AND RECOMMENDATIONS CPSCR ANNEX 1. COLOMBIA CPSCR RESULTS MATRIX FY08-11 (as of Feb. 3, 2011) CPSCR ANNEX 2. CHANGES IN THE INDICATIVE LENDING PROGRAM FOR FY08-11 CPSCR ANNEX 3. INDICATIVE AND ACTUAL KNOWLEDGE (AAA) PROGRAM FOR FY08-11 45 I. INTRODUCTION 1. This Country Partnership Strategy Completion Report (CPSCR) assesses the joint IBRD/IFC CPS for Colombia (FY2008-11). It describes the support provided through an integrated package of financial, knowledge, and coordination services; evaluates (i) the achievements of CPS program outcomes; (ii) assesses World Bank Group (WBG) performance; and (iii) draws lessons for the preparation of the forthcoming CPS (FY2012-16). The March 1, 2010 CPS Progress Report (CPSPR) adjusted the original CPS program and strengthened its CPS Results Matrix. This CPSCR uses the updated CPSPR Results Matrix as the reference for assessing CPS program performance. A. Colombia’s Economic and Social Background 1. During preparation of the CPS (2008-11), Colombia was enjoying a period of high economic growth (an average of five percent per annum for CY07 and CY08), growing consumption, accelerating investment, and rising confidence. This was due to a propitious external environment, improving internal security, access to new geographical areas and markets, expanding credit, and a natural resources boom. The improved economic conditions resulted in rising incomes, a reduction in poverty, and greater social sector coverage. But the international economic crisis 2008 brought a halt to the high growth period, and the near-future prospects were clouded by uncertainties concerning policy continuity and the need to tackle structural obstacles to increase long-term growth. 2. The Government faced daunting and simultaneous challenges to achieve sustained peace, security, and economic stability. As a result of successful demobilization negotiations, the Government had to reintegrate thousands of former combatants into civilian life and provide them with sufficient incentives not to re-arm or re-engage in illegal activities. The guerrilla and paramilitary activities and the narco-trafficking have continued to pose obstacles to achieving sustainable development in Colombia. 3. The country‘s comprehensive social protection system limited the impact of the crisis on poorest families. During the crisis, the Government effectively shielded social protection expenditures from broader cuts, and expanded programs targeted to the poor, such as Familias en Acción, the core conditional cash transfer program, and Juntos, the Government‘s strategy to provide social work assistance to the poorest families. While challenges remain in terms of coverage and efficiency of the social protection system, the existing programs preserved a minimum level of benefits, contained the negative impact of the crisis on poorer households and shielded them from the downward adjustments that often result in losses of human, physical, and financial assets. B. World Bank Program of Support 4. The current CPS, discussed by the Executive Board in April 2008, was prepared after a new political administration in Colombia came into office. The structure of the CPS was aligned with the priorities identified in the new National Development Plan for 2006-2010 with a proposed IBRD engagement of a base lending of around US$4 billion (for the FY08-11) with an increasingly active IFC program. This was complemented by knowledge and coordination/convening services as well as specialized grants. The CPS was designed to be flexible and innovative in response to Colombia‘s financial and development needs. In keeping with past practice, the CPS allowed for innovative instruments in response to program needs. It also called for increased coordination within the Bank Group and with other development partners. 46 5. The implementation of the strategy has proceeded for the most part along the lines established in the original CPS. Most of the proposed activities outlined in the CPS were carried out, but adjustments were made to respond to unexpected developments (see Annex B). The ensuing international economic crisis in particular affected the financing needs of the Government, as well as their requirements for knowledge and coordination services. II. CPS PROGRAM PERFORMANCE 6. Overall the CPS program performance is rated satisfactory as the program achieved good progress toward all major expected outcomes. 7. The IBRD lending program proceeded faster than anticipated to the economic crisis in Colombia. During the CPS period, the Executive Board has approved 20 loans to Colombia amounting to US$3,703 million. In addition, during this same period, the Bank delivered an average of six analytical and advisory activities (SAP count) per fiscal year, ranging in topics from climate change, education quality, decentralization, financial sector access, poverty measurement (Human Opportunity Index), social protection, health system modernization and extractive industries. Disbursements for the CPS period have been around US$3.9 billion (average of US$975 million per FY), while overall exposure to Colombia rose to approximately US$7.5 billion. The Bank‘s response to the crisis has led to an acceleration of disbursements in the last couple years, not only because of fast-disbursing, policy-based loans but also because a few investment operations had a front-loaded disbursements profile. As a result, IBRD lending to Colombia increased from US$940 million in FY08 to US$1,275 in FY09, dropping to US$1,173 million in FY10 and projected at US$315 million in FY11. During the CPS period, the Bank had also around 27 grants from different trust funds totaling over US$60 million under implementation. A. Overview and Principles of Engagement 8. The Bank followed three basic principles of engagement in developing its relationship with Colombia: flexibility, responsiveness and innovation. The flexibility granted by the CPS proved to be extremely perceptive. In the initial stages of the CPS, when the currency was strengthening and foreign capital flows were strong, Colombian authorities were focused on the innovative instruments available from the Bank and were particularly interested in domestic currency financing, as well as a mix of investment and development policy lending. More recently, the authorities have asked for support in dealing with the adverse consequences of the global crisis. This includes additional financing and technical assistance to help sustain and improve crucial government programs to attenuate the effects of the crisis. 9. To support the emerging needs of the private sector, the IFC also adapted its Colombia strategy and diversified its portfolio with new projects in infrastructure logistics, microfinance, higher education, vocational training, agribusiness, natural resources (oil, gas, and mining), and energy efficiency. The IFC response also led to an increase in commitments and disbursements. The IFC committed portfolio almost doubled from US$504 million in FY06 to US$881 million in FY10, as a result of financing 27 projects during this period (in agribusiness, the financial sector, manufacturing, infrastructure, extractive industries, and private equity fund) for a total commitment of US$846 million, including syndications. These results were in great part due t the IFC decentralization process. Today, the Bogotá regional hub office has 30 staff, a three-fold increase from 2006. 10. In keeping with the principles of engagement, the World Bank Group has also provided an array of knowledge and convening services to Colombia, ranging from technical support embedded in the preparation of projects to analytical work specific for Colombia, along with both regional and 47 global studies, just-in-time technical assistance specifically tailored for particular requests, policy dialogue, and transfer of global knowledge. One important and innovative aspect of this work was its multi-year programmatic approach, where IBRD had an on-going engagement in key areas, and defined its annual work program according to the existing needs at the time. The IFC advisory program expanded in Colombia, and its services were also based on a programmatic approach that supported strategic investments, with an emphasis on sustainable business advisory projects, investment climate work, and access to finance engagements. In August 2010, after elections, the Bank Group team prepared a set of thematic policy notes and met with the President Santos and Government officials to discuss potential priority areas and provide early input into the new National Development Plan. 11. Financial innovation was a hallmark characteristic of the Bank Group‘s program. Colombia has always made effective use of the new Bank instruments, and in some instances has promoted and led the innovation. During the CPS period, Colombia was one of the first countries to make use of the new contingent financing for natural catastrophes under the revised Deferred Drawdown Option (DDO) guidelines. Over the past few years, the Bank‘s Treasury Department has advised Colombia on several issues related to risk and debt management, including contingent liabilities. 12. The Bank has advised Colombian authorities on strengthening of the Investor Relations Office, leveraging the Bank‘s expertise in accessing international markets and developing outreach materials. Complimentarily, the Bank continued providing local currency financing to sub- national entities such as Cartagena, Antioquia, and Bogotá by converting outstanding loan amounts to pesos. B. Progress by Strategic Engagement Themes (Towards CPS Outcomes) 13. The CPS Outcomes, Status and Evaluation Summary, and IBRD/IFC interventions that contributed to the CPS outcomes are summarized in the CPS Completion Report Matrix in Annex A. B 1. Sustained Equitable Growth 14. Commendable macroeconomic management, improvements on institutions, and strengthening of the financial markets brought about economic growth and increase in competitiveness. Human capital growth was improved through enhanced quality of secondary and tertiary education programs. 15. The work under this theme became crucial for the Bank‘s engagement following the onset of the economic crisis. The WBG contributed to preserving economic growth and minimizing the impact of the crisis in Colombia through policy-based and IFC loans, as well as targeted interventions and provision of knowledge and coordination/convening services. 16. The focus of the work was on the economy‘s competitiveness, the financial system, capital markets, infrastructure development and human capital. Among several loans, the most important were some development policy loans that supported important policy reforms in the areas of business efficiency and competitiveness, along with the reforms in the financial sector. The Bank supported implementation measures that helped keep the banking system adequacy ratio above 10 percent. These policy-based loans also served to cover the fiscal needs during the crisis and to preserve macroeconomic stability. This was accompanied by project lending in infrastructure. 17. In the area of competitiveness, lending was buttressed by substantial technical assistance. Development policy lending on business productivity was the umbrella for the program and was part of a programmatic series that supported reforms in the areas of innovation and technology, quality standards, and private sector participation in infrastructure and logistics. The Bank also 48 supported labor market reforms through a multi-year knowledge service program that was the main input in the design of new policies to reduce informality and make the labor markets more efficient and flexible. A significant contribution was the assistance provided to the National Planning Department through studies and seminars in their formulation of policies for employment and income generation. 18. In the area of financial sector development, the Bank provided development policy lending on finance and private sector development, which supported the recent legal reforms designed to strengthen financial sector resiliency and deepen capital markets. This was accompanied by knowledge services to improve the framework for consolidated supervision and to regulate over- the-counter markets (i.e., advisory work on accounting and financial reporting standards and strengthening social accountability). The Bank also helped Colombian authorities to undertake a financial crisis simulation exercise. Through the FIRST program, Colombia received Bank support to correct any identified shortcomings. 19. The IFC also made investments in key financial lending institutions in order to develop new services. Since access to finance is low in Colombia, particularly in the rural areas, the joint Bank/IFC work in financial sector reforms greatly facilitated the IFC investment program to reach the underserved. With significant involvement in Colombia‘s microfinance sector, IFC investments in 6 lenders enabled them to make almost 1 million loans for a total US$1.13 billion in CY2009, equivalent to about one-quarter of all loans by the IFC‘s Latin American microfinance lenders that year. Bancamia is a key IFC microfinance partner in Colombia and the country‘s third microfinance lender. The IFC invested US$10 million for a minority equity stake in the Bancamia in May 2010. In CY2009, Bancamia made over 300,000 loans for a total US$238.6 million, or an average of about US$800 per loan. Two-thirds of its clients are low- income women living across 300 municipalities around Colombia. 20. The IFC has also played a role in strengthening Colombia‘s conventional banking system through countercyclical investments. In May 2010, for instance, IFC committed US$23.5 million in equity and subordinated debt to finance acquisition of non-performing loans first originated by Bancolombia, the country‘s biggest bank. This transaction, signed in the aftermath of the global financial crisis, allowed a systemically important bank to dispose of its non-performing assets through a market-based mechanism. In addition to financing, IFC also provided a package of corporate governance advice and workout guidelines that set an example of distressed asset resolution. The IFC has been active in the global non-performing loan (NPL) market for over a decade and was able to use its expertise to benefit Bancolombia and assist in the development of an active NPL market in Colombia. 21. The IFC and IBRD also closely coordinated their support to concentrate much of the project financing to improve the infrastructure in the country, particularly in areas of transport and basic services. This was complemented by investments to improve water and sanitation services, solid waste management, urban housing development, as well as renewable energy and energy efficiency. The Bank also supported the development of the urban mass transit program in six major cities, recognized as one of the most innovative and pioneering projects in LCR. This has been accompanied by assistance to improve urban services in Bogotá, including preliminary studies on the viability of a metro system. Through a programmatic approach, IFC invested in transportation/logistic projects (roads, airlines, and ports) and leveraged its investments with Advisory Services on trade logistics and competitiveness. This approach is exemplified by IFC‘s role in one of Latin America‘s most significant road projects. Ruta del Sol, a 1,000-kilometer highway linking Bogotá to the Caribbean coast. The IFC‘s Infrastructure Advisory Team acted as transaction adviser to Colombia‘s Transportation Ministry, assisting it in structuring and implementing a public/private partnership project for the concession of the highway. Colombia has achieved considerable success in attracting local contractors to other public–private projects, 49 but the Government felt IFC would be crucial in convincing large international groups to bid for such a large and complex project. The IFC completed the three-year concession process in August 2010. Contracts worth US$2.7 billion were awarded to companies from Argentina, Brazil, and Italy, as well as Colombia. In addition to reducing travel time between Colombia‘s biggest cities and the coast, Ruta del Sol will also improve access for once-isolated rural communities. 22. One of IFC‘s largest exposures in Colombia is to Avianca, the national flagship airline. The IFC committed US$50 million in loans to the airline in September 2008 as part of a turnaround program being implemented by the troubled carrier‘s new owners. Avianca is an integral part of Colombia‘s transport system given the country‘s mountainous terrain and long distances between cities. The company was later able to merge with El Salvador‘s TACA, improving connections between Central America and the Andean region. B.2. Poverty Alleviation and Equity of Opportunity 23. The Bank contributed to expanded coverage and quality of public services and social protection targeted to poor. Increased equality in the Colombian society and opportunities for the less fortunate especially during the period of the financial crisis mark a significant development in the fight against poverty including an expanded coverage and quality of public services. Support ranged from reforms in the health sector to improving the quality of education; promoting science, technology and innovation; and strengthening the social protection system. 24. Significantly triggered by the onset of the crisis, the core of the support was through a loan to preserve the financing of the country‘s main social welfare program, Familias en Acción, a conditional cash transfer program. Among the Government initiatives in terms of providing social assistance and poverty alleviation is the creation of Red Juntos, which aims to reduce extreme poverty by providing extremely poor families with accompaniment and preferential access to core social services. The Bank‘s support to these programs includes continued knowledge services to help improve the protection under the social security system, rationalize the existing complex set of overlapping programs, and modernize the system of information and evaluation. 25. The work in this area was based on the principle of increasing the equality of opportunities by expanding the provision of basic services. As such, during the current CPS several loans were extended to expand services in key areas such as water and sanitation, and agricultural and rural development. In the area of agriculture and rural development, the program included the support to small farmer organizations to increase market access for their products, and foster a sense of entrepreneurship. The program also included support for agricultural research and development as well as the strengthening of sanitary and phytosanitary systems along with the first public, high- level bio-safety laboratory in the country. The IFC‘s US$30 million financing for Abocol helped improve agribusiness competitiveness by supporting the fertilizer sector. 26. The Bank Group‘s support in this area also included substantial analytical and advisory service (i.e. publications on agricultural sectoral issues.) 27. The program also included several projects in education, mostly in the rural areas, and focused on secondary school quality and enrollment. A core element was support to the student loan program geared toward giving access to secondary school education to indigenous people. As for the IBRD Antioquia Secondary Education project, completion rate in the poorest areas has dramatically increased. The IFC complemented the education initiatives by investing in Uniminuto, a higher-education institution that serves mostly students from lower quintiles of the population. Uniminuto aims to reach a total enrollment of 44,000 students by 2015, half of which will be women. In CY2009, the school had 26,000 students of whom 60 percent were women. 50 Uniminuto is focused on serving the lower two quintiles of Colombian society. Many of its students are from secondary cities, peri-urban, or rural areas. 28. A key area of involvement was the support to improve the efficiency and sustainability of the Colombian health system. The complexity of the financing and delivery systems, with cross subsidies and different forms of reimbursements, and coupled with a Constitutional Court ruling that guarantees the fundamental right to health, firmly established the need for regulatory reform to guarantee equal access to all citizens and a fundamental review and reform of the health sector. 29. The Bank played a key coordination and supportive role in the updating of poverty measures. This work entailed naming a high-level Presidential Commission to assist the Government in updating its poverty measurements. The lack of consistent information and the publication of recent poverty data created significant doubts about the accuracy of the preliminary figures. The work of the Bank and the Commission helped give credibility to the poverty figures. 30. Several grants focused on gender issues and on strengthening institutions dealing with discrimination. The Bank, with financing from the Japanese Social Development Fund, helped improve the skills of mostly young single mothers, who have been displaced by the violence in the country, to assist them to integrate in the formal economy. Another grant supported the Presidential Secretary for Gender to institute a system of certification of businesses that promote gender equality and are apply gender-free policies. B 3. Environment and Natural Resource Management 31. The considerable increase in design and implementation of knowledge and lending services in sustainable development dramatically increased awareness on environmental issues. The World Bank Group was able to provide input to national policy and help the Government to strengthen institutional capacity for managing environmental services and mainstreaming principles of environmental sustainability. 32. The environmental sustainability activities ranged from loans to support policy reforms and implementation, to grants designed for piloting key protection and adaptation programs. This was complemented by many investment projects in flood protection, water treatment, and disaster risk management. A significant part of the program dealt with climate change adaptation programs. 33. One of the first actions under the CPS was to provide financing and technical support for the implementation of important policy reforms. The work in this area involved updating the environmental health policies of the country, where new emission standards were applied. It also included updating the institutional structure to deal with the formulation and implementation of environmental policies. 34. Under the CPS, there were several investment projects that contributed to environmental sustainability, including lending activities in water and sanitation and solid waste management. These activities are being complemented by two projects under supervision for disaster risk management, which are designed to improve the data gathering and analysis framework, along with reinforcing school and hospital buildings. The Government also entered into a catastrophic risk deferred drawdown option (CAT DDO), the new financial instrument that provides contingency financing in case of a major natural disaster. 35. The GEF supported a variety of activities, including conservation of national protected areas, and multi-country integrated Silvopastoral approaches to ecosystem management, an example of recent achievements under the National Protected Areas GEF with sustainable natural resource practices in place. Several other grants supported pilot programs of renewable energy, efficiency, and greenhouse gas reductions in the transport sector. Colombia has also made effective use of carbon finance grants. 51 36. The IFC invested selectively in small hydro-generation in remote areas of Colombia and in thermal efficiency, consistent with its focus on reducing impact on climate change through renewal energy and cleaner, more efficient electricity generation. The IFC was instrumental in upgrading and expanding the Termoflores natural gas-fired electricity-generating plant in Barranquilla through a US$62.5 million loan package that included US$10 million in syndications. The project used energy efficiency gains and heat recovery to increase output without a significant increase in gas consumption. B 4. Peace and Development 37. The Bank played an important role in supporting the country’s efforts to achieve lasting peace and inclusive development. The Bank’s interventions contributed to improved effectiveness of Government’s peace initiatives by increasing awareness of global experience and piloting innovative models of participatory community development in conflict-affected zones. Colombia‘s recent history has been marred by violence and armed conflicts that have precluded the country from achieving its full development potential. Violence has also displaced a large portion of the population. The Bank actively supported the joint efforts by the Government and the international community with both financing and coordination services. 38. As an innovative approach to the gender, minority populations, and youth issues, the Bank integrated grant activities to the Peace and Development pillar. The Internally Displaced Women‘s Project was designed to increase the economic empowerment of women in communities of internally displaced populations by assisting them in joining the formal labor force, building their assets (including greater food security), and helping them to understand the causes of political and/or domestic violence against women and develop tools to mitigate them. The Bank closely engaged in supporting the Secretary for Women‘s Issues in the Presidency with an initiative to certify those businesses and enterprises that adopted gender-neutral employment policies. The Human Rights Project‘s was designed to identify effective links between the nature and work of the Regional Peace and Development Programs, Government, other partners and the Bank, regarding human rights and to promote the introduction of human rights best practices in peace and development interventions. The new operations, Afropaz, designed to strengthen Afro- Colombian organizations, build social networks and empower communities to promote local development, and Access to Opportunities for Youth, designed to enhance the access of young men and women to opportunities for education, work and political participation, were recently declared effective. 39. As part of the activities under this pillar, the Bank was a key player in the coordination of activities of the international community. The Bank led organizing and preparing the International Disarmament, Demobilization and Reparation Congress in Cartagena in May of 2009. This Congress and the Education for Peace Partnership are examples of the catalytic role the Bank plays in promoting dialogue and disseminating experiences. 40. Joint efforts with the International Organization for Migration, the Bank contributed to diminishing the risk of impoverishment of the displaced population and to the peace-building process, by promoting the application of measures for protection of patrimonial assets, providing land titles for those internally displaced populations whose rights have not been protected, and proposing public policy initiatives for restitution of properties of internally displaced populations. Under the two initial phases, more than 3 million hectares have been protected, equivalent to 100,000 farms and 127,000 land rights, benefiting overall more than 95,000 individuals. A third phase was declared effective in August 2010, and project outcomes have been acknowledged and recognized by the new Government to the extent that the project will constitute the foundation of the land restitution and regularization flagship program of the Ministry of Agriculture and Rural Development that will benefit 480,000 displaced and violence-affected families. 52 41. The Bank raised the awareness of the human challenges confronted by Colombians affected by violence through a unique publication, ―Voices.‖ The book, published in June 2009, contains stories of the experiences of individuals directly touched by the violence. A special exhibit, which included a collection of photographs and testimonials, was mounted in several Colombian cities and in Washington D.C. B 5. A State at the Service of its Citizens: Efficient and Effective Government 42. Excellent public financial management paired with an increase in the number of social programs contributes to Central Government efforts to improve public sector management and citizen services. The Bank’s supported programs improved public sector management and citizen services in support of Central Government efforts. 43. The World Bank Group‘s expanded its support for institutional reforms and improvement in governance. Initiatives ranged from strengthening the public management information systems to integrating the tax and customs administration processes, implementing a system of monitoring and evaluation of government programs, expanding the assistance to sub-national governments, and assisting with the modernization of the judicial sector. One of the major achievements was the introduction of a new system for budget management throughout the Central Government. It is a web-based system, with open architecture, which will greatly improve the efficiency of public financial management, expand access to information, and establish greater transparency. The new system is being complemented with new norms and procedures for budgetary management, as well as the introduction of a single account for cash management. 44. The support for improving the managerial systems was designed for the full application of country systems. The Bank accepted the use of Colombia‘s financial management system for its projects and programs. This was achieved with considerable support by several project loans that helped modernize the systems, and the progress achieved in streamlining implementation arrangements and the reliance on the Colombian Supreme Audit Institution (SAI) and sub- national SAIs for external audits for Bank-financed projects. The Bank provided extensive training and technical assistance to the SAI toward strengthening its staff capacity; and from 2008, all projects with the exception of grants implemented by NGOs are audited by the SAI. 45. A Public Financial Management (PFM) and Procurement Performance Assessment Report, which was authorized by the Government, concluded that PFM systems, institutions, and processes at the central level show advanced levels of performance, which are close to or follow good international practice. There remain a few gaps where challenges and opportunities to further enhance PFM in the country could be pursued in the near future toward strengthening fiscal discipline and increasing operational efficiency and transparency. 46. The program under this theme included targeted financing and a broad program of knowledge services. During the last two years, several smaller loans were approved to improve the services of the state. They included a loan to support building the Management and Planning System for the Government (SIGOB), a fairly advanced system of monitoring and evaluation of government programs, which is considered a leading program in Latin America. This technical assistance loan is assisting with all of the evaluations of government programs being carried out by the National Planning Department. The Board has approved a follow-up loan for the Modernization of the Public Sector Management Systems. This operation is part of a series of loans that, over the years, helped modernize the budget and financial systems, along with the tax and customs agencies. The other important operation will be assisting with the process of judicial sector reforms, which remain a major development challenge for the country. 47. Among the most promising work was the development of new relationships and support for sub- national governments. The public sector group has developed a new product called the Rapid Assessment and Action Plan (RAAP) for sub-national governments. Public sector experts on 53 fiscal, budget, tax, financial management and information systems worked with local authorities to develop an action plan for key public sector reforms. The first two studies were presented in cities where there has been tremendous improvement in the financial, fiscal, and managerial capacities. The IFC complemented this work with cities and regions on issues of regional competitiveness, local business climate, and management of royalties from mining development. The IFC‘s Advisory Services expects to expand its royalty management activities in Colombia, assisting companies and local communities in managing revenues from mining and oil producing projects. The IFC currently advises Ecopetrol, the state-owned oil company and is in advanced talks with other clients on future engagements. III. WORLD BANK GROUP PERFORMANCE 48. The World Bank Group performance is rated satisfactory. The CPS was relevant, aligned with the Government’s National Development Plan and its design and implementation of the program contributed to the achievement of CPS outcomes with a focus on results, and a timely adaptation to changing circumstances and priorities. It delivered a package of services beyond those initially anticipated in the CPS, in response to both the emerging needs of the country and the impact of the international financial crisis. 49. The success of the strategy and program was due in part to the continued Bank presence over the years, the close engagement with the client, WBG‘s responsiveness and an active supervision and follow-up to the projects and scheduled activities. A. CPS Design 50. The foresight to preserve the flexibility and to ensure full compatibility with the Government‘s program proved critical. In addition, the design of the strategy was constructed on the basis of extensive experience and understanding of the conditions and the development challenges of Colombia. The initial CPS results framework entailed a mixture of outcomes and outputs and was therefore strengthened and updated in the CPSPR. 51. The success of the Bank‘s program in Colombia owes much to the fact that the CPS was well aligned with the priorities of the Government, and thus equipped with strong local ownership. The strategic engagement areas of the CPS were fully consistent with the main building blocks of the National Development Plan. 52. The Bank‘s ability to respond successfully to the changing circumstances in Colombia was rooted in the flexibility of the CPS design. The Bank was able to adjust its program or reallocate staff and budgetary resources in response to the country‘s emerging financial and development needs, especially at a time when international markets were severely constrained. Colombia continues to promote innovation by taking full advantage of the new instruments and policies offered by the World Bank. B. Implementing the Strategy 53. The overall implementation of the strategy was satisfactory. The Bank followed essentially the overall thrust of the CPS, while having to make adjustments in response to the international financial crisis. The initial program had to be altered slightly to include accelerated disbursements through policy-based loans and projects supporting budget programs. Most of the potential investment projects initially identified in the CPS were carried out, and some new priorities were introduced as a result of continued dialogue with the authorities. 54. As shown in the Results Matrix (Annex A), most of the activities of the WBG involved transfer of knowledge and provision of advisory and convening services. Making effective use of the wealth of knowledge available in the Bank, Colombia also relied on the Bank‘s support to 54 evaluate different policy alternatives and proposals. While often associated with lending activities, much of the knowledge work was specifically designed to address direct requests or particular issues. An important characteristic of the Colombia program was the inclusion of programmatic multisectoral knowledge services, designed to be an open multi-year engagement in a particular area. The annual activities were determined after a review of previous accomplishments and the evolving needs of the country. Finally, during the political transition to a new administration in mid 2010, the Bank prepared policy notes in areas of special interest to the incoming authorities. These were discussed with the newly elected President Santos and Government members, and offered an excellent entry point for engagement with the new authorities. 55. The implementation of the program entailed close supervision and periodic reviews of the portfolio. The Bank‘s supervision occurred though continuous monitoring and evaluation of the activities, both at the project and country level. The high-quality of Bank lending during the CPS period was evidenced by a generally satisfactory progress in portfolio implementation and by the achievement of the project‘s development objectives (see Table 3.1). Policy-based lending played an important role in producing results. 56. The current Administration has underlined the need to strengthen the institutional capacity of key government entities to optimize the implementation of investment projects, in particular civil works financed with public funds at the national level. The government, led by the Ministry of Transport, is exploring an appropriate strategy, including a review of the legal framework, enhancing procurement processes and external controls, in addition to strengthen the technical capacity of the executing agencies. 57. To that end the Bank has maintained close scrutiny of the portfolio in Colombia and timely addressed procurement issues that have been uncovered during Bank supervisions. In addition, in close coordination with the borrower, the Bank has incorporated a broad set of measures into both project implementation and supervision to strengthen the overall fiduciary control framework and to safeguard individual operations. 58. The 2008 Country Performance Portfolio Review (CPPR) focused on assessing the quality of the portfolio with respect to necessary adjustments in relation to the CPS. As a consequence of the CPPR, three projects were restructured that showed problems on implementation and slow disbursements. The 2010 CPPR focused on establishing a new coordination mechanism between the Ministry of Finance, the National Planning Department, the Social Action Department, and the Bank for the implementation and discussion of the grants pipeline. Table 3.1 Portfolio overview (data as of May 16, 2011) Variable FY2007 FY2008 FY2009 FY2010 FY2011 Number of projects 17 20 15 18 22 Net commitment (US$ million) 1,900 2,866 1,857 2,489 2,044 Number of problem projects 0 2 1 2 2 % at risk 0.0 10.0 13.3 11.1 9.1 % proactivity -- -- 50 -- -- % Realism Index -- 47.5 31.1 40.7 44.4 Overage projects by FY 0 2 1 0 0 Total undisbursed balance (US$ 1,117 1,488 1,451 885 734 million) Disbursement ratio by FY 39 48 25 60 42.5 55 59. Much of work of the Bank Group was carried out in partnership with other development partners. The Bank continued to build excellent relations with groups involved in the development agenda of Colombia. The work with agencies extending bilateral support included joint activities in the area of environment, climate change, and the peace and development agenda. While the Government coordinated much of this work, the financing from bilateral partners was critical for the success of some Bank-supported programs. The Bank has worked closely with the European Union and the UN System on peace and community development in areas affected by violence. 60. The Nordic countries were also closely engaged, especially in the areas of environmental protection. In several programs, the Bank co-financed and worked in close coordination with the IDB, such as in conditional cash transfers, water and sanitation, and science and technology. The Bank and IDB also closely coordinated in furthering the development of country systems and prepared a program to pursue shared documentation. The alliances also involved NGOs, particularly those involved with efforts to consolidate the peace process and create the conditions for more inclusive communities. A well-publicized alliance took place with Shakira, a famous Colombian artist, who is leading an international effort to promote greater attention to early childhood development programs. C. Management of Risks 61. The risks originally identified in the CPS were well managed. The CPS anticipated potential difficulties emanating from external shocks. The subprime financial crisis and reductions in trade with neighboring countries actually materialized and led to the need for additional financing. Naturally, the overall magnitude of the crisis was beyond any initial estimate, and the rapid exposure to Colombia was not fully anticipated. The domestic risks to the strategy, which included both overheating of the economy and political factors, did play a significant role. In fact, the political transition was much smoother than foreseen with a continuity of programs and an excellent relationship with the new authorities. IV. LESSONS LEARNED AND RECOMMENDATIONS 62. The CPS was designed to be flexible and innovative in responding to Colombia’s financial and development needs. The IFC also adapted its Colombia strategy and diversified its portfolio with new projects. This flexibility allowed the Bank to explore new avenues of resources, mainly through trust funds, that financed unanticipated Government requests for knowledge and advisory services. Just-in-time technical assistance tailored for particular requests, policy dialogue, global knowledge transfer and a fully integrated trust fund portfolio resulted in an important and innovative aspect of the program. Colombia was one of the first Bank clients to take advantage of the flexible DPL with Catastrophe Drawdown Option (CAT-DDO) as part of its integrated approach to disaster risk management. Combined with the other ongoing activities by the Bank -- which span the range of financial and knowledge services -- Colombia has one of the most integrated programs in risk management of any Bank client. Its multi-year, knowledge and advisory programmatic approach, where IBRD had an on-going engagement with the Government in key areas, defined the annual work program (for knowledge and convening services) according to the existing needs at the time. The IFC advisory program also expanded in Colombia, and its services were also based on strategic aims. This flexibility and just-in-time, multi-sectoral programmatic advisory approach proved to be effective and should be maintained. 63. Good Governance and increased transparency in Colombia’s economy remains challenging and the performance of public financial management (PFM) systems including public procurement is a critical factor for fiscal discipline, strategic allocation, operational efficiency and transparency in use of public funds. The Bank will therefore continue to pay special attention to PFM issues to support the Government in enhancing its operational efficiency, 56 ensuring sustainability of the procurement reform, including improving country intuitional capacity, creating of a public procurement bureau, enhancing transparency, promoting participation of the private sector, and the creation of a more efficient compliant mechanism. 64. With the Government of Colombia wanting to borrow more than currently possible under Bank exposure limits — it is advisable to agree with the Government on an integrated package of financial, knowledge, and convening services with a focus on providing customized results- focused development solutions in areas where the Bank Group can add value. In this context, it will be important for the WBG to increase its efforts to leverage resources from other development partners and to maximize it development impact by created better synergies among different sectors in support of the Government‘s program. 57 CPSCR Annex 1 – Colombia CPSCR Results Matrix FY08-11 CPS Outcomes Status and Evaluation Summary IBRD/IFC Interventions Approval/Completion-date/ICR/ISR(DO/IP) Rating SUSTAINABLE EQUITABLE GROWTH ACHIEVED Contribute to Government efforts to sustain growth IFC Doing Business 2011 Report Financial Services: i.e., through improving the business climate,  Business Productivity III (FY08/FY11/ICR:S) measured by:  Reduced starting business from 19 to 9  Financial Sector Development DPL (FY10/FY12/(S/S)) procedures; led to reduction of bureaucratic and  Productive Partnerships Project II(FY08/FY14/(MS/MS))  Reduce total number of administrative procedures legal hurdles to incorporate and register a new  Agricultural Transition (FY05/FY12/(MS/MS) for starting businesses by 50% with respect to firm baseline in 2004 Knowledge Services:  Improved close advisory on 9 categories of Doing  SME Finance ESW (FY08)  Increase annual value of non-traditional exports to Business in the last 3 years of the report, and have  Strengthening arrangements to deal with financial crisis US$10 billion per year had a positive impact on attracting foreign (TA) investment to the country  Supervision of financial conglomerates (TF)  Increase financial sector depth, reflected in total  Trade Logistics Advisory Program (TF-IFC) credit to the private sector (CTPS), growing to  Non-traditional exports averaged US$15.6 billion  Streamlining trade procedures(IFC) 27% of GDP annually in 2007-2010 compared to 9.2 billion in  Deepening of capital markets 2002-06 - an increase of 70 percent.'  Competitiveness, innovation (ESW improving logistics and trade facilitation)  Incentivized resource management projects in  Financial sector policy note (FY11) communities to take stronger control of royalty  Extractive Industries Royalty Mgmt. (TF-IFC) investment by getting local governments to  FIRST Strengthening Crisis Preparedness Framework account for their inputs in the design, process, (TF) and delivery of public works Coordination/Convening Services : Financial Sector DPLs:  Fiscal Risk Knowledge Management Services (FY11-12)  Colombia Lessons in the Agricultural Sector (En Breve  Growth in CTPS to 32.7% of GDP Bank- Publication) supported implementation measures to keep the  Presentation at Cenicafe‘s 60th Anniversary banking system adequacy ratio above 10% (June  Presentation at SAC Congress 2010)  Publications (video – press) on agriculture sector, BRTS,  Increased macro stability through support for  WDR 2008 ―Agriculture for Development‖ – 600 financial sector reforms: capital increase, participants, PPP advisory work strengthening of liquidity regulation, enhancing 58 CPS Outcomes Status and Evaluation Summary IBRD/IFC Interventions Approval/Completion-date/ICR/ISR(DO/IP) Rating SUSTAINABLE EQUITABLE GROWTH powers to close illegal intermediaries  Adopted measures (improving professionalism of intermediaries securities market, protecting investor rights, increasing transparency, and regulating derivative products) adopted on financial front and derived from Finance DPL  Enhanced liquidity of the credit system Productive Partnerships Project II:  Created 48 partnerships to increase rural competitiveness and build up rural entrepreneurship in poor rural communities Agriculture Transition:  Increased the competitiveness of Colombian agriculture and improved the accessibility of export-potential products to international markets by strengthening National Agricultural Science and Technology and Sanitary and Phytosanitary Systems through the joint participation of both the public and private sectors. ACHIEVED Infrastructure Investments: Financial Services: Infrastructure Development  Bogota Urban Services AF (FY09/FY12/(S/HS))  Expanded country‘s logistic infrastructure  Science, Technology and Innovation (FY11/FY14/(S/S)) Structuring, financing, and continuing support of through IFC investments in national ports in  Cartagena Bus Rapid Transit (CF) (FY11/FY14) Ruta del Sol infrastructure project (a 950-km Muelles El Bosque (Cartagena), SMITCO (Santa  Investment with Municipality of Bogota (IFC) highway connecting Bogotá to the Caribbean coast) Marta) and TC Buen (Buenaventura)  CTF Bogota Transport SITP reducing travel time by 8 hours  Integrated Mass Transit Systems (AFII)  Offered advisory services for structuring and (FY04/FY12/(HS/S) Expand coverage and quality of public services implementation of Ruta del Sol bidding process  Water and Sanitation Sector Support and social protection targeted to poor. Main (IFC). The project was successfully awarded to 3 (FY05/FY11/(MS/MS) outcomes include: concessionaires through a competitive tender  La Guajira Water and Sanitation (FY07/FY12/(MU/MU) 59 CPS Outcomes Status and Evaluation Summary IBRD/IFC Interventions Approval/Completion-date/ICR/ISR(DO/IP) Rating SUSTAINABLE EQUITABLE GROWTH Public Services process with domestic and international bidders  Water Sector Reform Assistance (FY02/FY11/(S/S)  Inhabitants of 7 cities gain access to rapid mass  Cartagena Water Supply, Sewerage and Env. transit though extension of Transmilenio model Management(FY00/FY09/ ICR: S) Bogotá Urban Services:  Colombia Natural Gas (Fy06/Fy08)  10-15 departments carry out modernization  Improved quality of life of low income families plans resulting in improvement in the quality by increasing access, coverage, quality, Knowledge Services: of water and sanitation service, including reliability, and inter-agency coordination in the  PPIAF - Urban Renewal Financing Instruments coverage, continuity, pressure, and water provision of water, sanitation, transport and  BRTS Video/Documentary quality related basic services.  Participation in 3rd Road Safety Seminar  Improved city's mobility by providing better  Participation in IDB Metro Conference Water and Sanitation Sector Support Project access to the public transport system, and  Mass Transport Systems series preparation (TFs) Improve access to safe water and sanitation improving road safety, traffic management and  Regulatory Aspects of Transport transport planning.  Nordic Fund for Universal Access to BRTs  Strengthened the institutional and administrative  Pilot Impact Evaluation Pereira BRTs framework for an efficient and sustainable  Metro Study, Integration Public Transit System, SNTA (3 delivery of urban services throughout the city. cities)  Safeguard Workshops Mass Transport Systems Project:  Procurement Seminars with local BRTS teams  Systems operating in 4 cities (2 more in 2011) Coordination/Convening Services:  Approx. 1.7 million people per day use  Tax Increment Financing Study Visit Transmilenio in Bogota (140,000 in Pereira)  Launching of Transport on a Human Scale  South-South collaboration and knowledge transfer originating from the Colombian experience. Over 20 Water & Sanitation Support project: countries, including China and Vietnam visited to learn about the NUTP.  1.4 million consumers receiving improved access to reliable and safe water supply (target: 1.2 million).  271,072 consumers receiving improved sewerage services Water Sector Reform Assistance: The Project was successful in widening and 60 CPS Outcomes Status and Evaluation Summary IBRD/IFC Interventions Approval/Completion-date/ICR/ISR(DO/IP) Rating SUSTAINABLE EQUITABLE GROWTH strengthening the pool of competent operators in the water sector in the Caribbean region of Colombia. Under the overall program, 36 municipalities in the Caribbean region now have specialized operators; twenty five of these municipalities received World Bank financing. Improvements in service were demonstrated through: approximately 1.3 million people in the lower economic stratum (1, 2, and 3) receiving improved water supply service; an increase in the water supply infrastructure coverage for medium- sized cities from 61% to 85%; an increase in continuous supply from 2% to 53% for the total Project population and; improved operational and commercial performance of the operators as measured by collection rate (85%-96%), micro- metering (> 80%), and falling operating costs. All participating cities have responsible and dedicated operators; users are aware of efforts, implemented works, and improvements, and are satisfied with the results. Cartagena Water:  There is now universal water service coverage throughout the city, including the poorest neighborhoods. Cartagena‘s water coverage increased from 80 percent to 99.9 percent from 2000 to 2009, corresponding to 78,300 new water connections. · Cartagena‘s sewerage coverage increased from 69 percent to 86 percent from 2000 to 2009, adding 66,900 new sewer connections. · There are improved sanitary conditions for the low-income communities located in the Cienaga drainage basin and for the city in general as a 61 CPS Outcomes Status and Evaluation Summary IBRD/IFC Interventions Approval/Completion-date/ICR/ISR(DO/IP) Rating SUSTAINABLE EQUITABLE GROWTH result of the improved wastewater collection and conveyance system.  There is an on-going dispute between the Project implementing entity and the outfall contractor. Final outfall construction is underway with Government counterpart funds. The Bank is still involved in supervision and the ICR will be updated once project completed. Natural Gas Distribution for Low Income Families in the Caribbean Coast Project:  Connected up to 35,000 household to the natural gas distribution network Provided 35,000 households with three months of service after connection. CPS Outcomes Status and Evaluation Summary IBRD/IFC Interventions Approval/Completion-date/ICR/ISR(DO/IP) Rating POVERTY ALLEVIATION AND EQUITY ACHIEVED Social Protection Social Safety Net Series: Financial Services:  Social Safety Net II (FY09/FY12/(S/S))  2.7 million poor, displaced and indigenous  Social DPL (FY10/FY11/(S/S))  Ensure access to quality education, with joint federal/local programs reaching students in the families enrolled in Familias en Acción  Rural Education APL II (FY08/FY14/(MS/MS) poorest rural areas of the country (around 20%  Supported the improvement of the country‘s  Antioquia Secondary Education (FY08/FY13/(S/S)) of jurisdictions) social protection systems through financing and  Higher Education Improving Access (FY03/FY09/ICR:S) technical assistance for social safety net  Second Student Loan APL (FY08/FY12/S/S) Human Capital Formation  Uniminuto Education Access (IFC) Uniminuto:  Local currency financing for ICETEX, Identification of Strengthening education at secondary and tertiary client‘s risk management needs levels with more focus on quality than coverage  Uniminuto transaction will reach a total  Loan customization by: enrollment of 44,000 students by 2015, half of  Promote early childhood development through which will be women. Knowledge Services: innovative conditional cash transfers and better  Education Quality I ESW (FY08) LaRSDPL: targeted social and infrastructure services to the  Multi-year programmatic AAA – Health, Education, 62 CPS Outcomes Status and Evaluation Summary IBRD/IFC Interventions Approval/Completion-date/ICR/ISR(DO/IP) Rating POVERTY ALLEVIATION AND EQUITY poor  Strengthened Colombia's social protection Social Protection system and improved the delivery of social  Engagement in the health sector reform through NLTA services, (b) raised human capital formation, (c)  Innovative arts-based education to displaced and violence  Expanding enrollment and reducing dropout improved employability, and (d) enhanced affected communities (TF) rate, targeted to students from lower-income families (ICETEX-ACCES loans for tertiary monitoring and evaluation systems for better  Policy Notes on ECD and quality of education, and social transparency, social oversight, and results protection education reach 210,000 new students during CPS period) management in the social sectors.  Workshops on improving social protection for the  Poverty and Jobs – (i) Promoted initiative (DNP- unemployed, including through reforms in unemployment led) of having a comprehensive monitoring insurance.  Initiating Antioquia Education project pilots state-level mechanisms for improving secondary system to measure impact of social crisis, (ii)  Target SMEs and student lending (IFC) education enrollment and quality, benefiting strengthened institutional capacity of Government  Leverage guarantees with knowledge institutions (IFC) to refine system to measure poverty and a  Informality Programmatic ESW (FY08) 22,000 local students multidimensional approach with the Human  Poverty and Jobs TA (FY08) Opportunity Index  Poverty and Jobs II TA (FY09)  Poverty Monitoring TA (FY10)  Pensions – Provided inputs for discussion on the  Access to Opportunities for Young People (TF) importance of expanding coverage with an  Empowering Young Women Affected by Violence (TF) integral approach  Inequality of Human Opportunities Index  Cajas de Compensación – Added new elements  Policy Note on labor markets to discussion on cost-benefit of services financed  Labor Market Policies for the Poor with the Parafiscales  Transition from school to work & labor markets  Analyze health financing system Engagement in Health Sector Reform:  Pension (multifunds) support  Labor markets: reforming Cajas de Compensación  Improved quality of health care and guaranteed Familiar (CCF) financial and institutional sustainability of a  Piloting financial literacy programs (IFC) universal and unified health insurance system by developing proposals to reform the sector and Coordination/Convening Services: pilot cases  Active participation in expert committee on poverty measurement Empowering Young Women Affected by  International conference on poverty measurement Violence:  Support to M&E Network  Colombia a leading member of the CCT community of  Improved skills of mostly young single mothers, learning facilitated by the Bank. who have been displaced by violence in country,  Participation in international conference organized by enabling them to integrate in formal economy Colombia on urban CCTs. 63 CPS Outcomes Status and Evaluation Summary IBRD/IFC Interventions Approval/Completion-date/ICR/ISR(DO/IP) Rating POVERTY ALLEVIATION AND EQUITY (through the Japanese Social Development Fund). Coordination/Convening Services:  Roadshow launching of the WDR Rural Education APL II:  Development Marketplace 2010 in Bogota  Insurance for the Extreme Poor - Bancoldex (recipient-  Ministry of Education has signed official executed activity) agreements with 16 participating territorial  South-South high-level conference entities and 9 of them have already made financial  ALAS – Colombia University and World Bank contributions to the project. All 16 entities have partnership on ECD viable and approved rural education plans and  Support dialogue on ECD at Ibero-American Summit execution of subprojects is well underway. In 2011, approximately 12,000 teachers will be trained in the use of information and communication technologies. Education ACCES Project:  Benefited 175,427 new students with ACCES I students loans  Benefited 89,287 new students with ACCES II student loans; 75,052 of these students came from the 2 lowest socioeconomic strata (between June 2008 and December 2010) Antioquia Education Project:  Increased upper secondary completion rate in the poorest areas from 81.2% to 90% (Progress: 89.64% - 6/30/10)  Increased educational attendance to 10% in gross enrollment (Progress: 46% in 2007 to 56% in 2009)  Granted 5,944 CCT to secondary school students, including 119 indigenous (Progress: 21.8%; 27,222 planned for 2013) Second Student Loan Support Project: 64 CPS Outcomes Status and Evaluation Summary IBRD/IFC Interventions Approval/Completion-date/ICR/ISR(DO/IP) Rating POVERTY ALLEVIATION AND EQUITY  Increased coverage and equity of tertiary education system since program began in 2008. Reached 69.2% of students graduating from secondary education and continuing to enroll in tertiary education (from 65% in 2008) 65 CPS Outcomes IBRD/IFC Interventions Status and Evaluation Summary Approval/Completion-date/ICR/ISR(DO/IP) Rating ENVIRONMENT AND NATURAL RESOURCE MANAGEMENT ACHIEVED Provide input to national policy and help  Led to the government initiative of reducing Financial Services: Government strengthen the institutional capacity sulfur content in diesel from 1,200 ppm to 50 ppm for managing environmental services and in Bogota (Sustainable Development DPL series)  Sustainable Development II and III DPL mainstreaming principles of environmental  Fostered design and implementation of policy (FY07/FY10/(HS/S) sustainability. Milestones include: reforms through substantial lending in sustainable  Sustainable Development Investment (FY06/FY12/S/S) development (Sustainable Development III DPL)  Solid Waste Mgmt. (FY10/FY14/(S/S))  Approval and implementation of a national policy  Increased awareness on coastal wetland  Rio Bogota Environmental (FY11/FY16) on environmental health, covering water quality, protection, conservation of national protected  Biodiversity in Sustainable Cattle Ranching (GEF) urban and indoor air quality, and results Strategic areas, and Ecosystem Management (GEF (FY10/FY16/(S/S) Environmental Assessments (SEAs). initiatives)  Integrated Silvopastoril Eco Mgmt. (GEF)  Andean Conservation and Use of Biodiversity  MAVDT Climate Change Unit strengthened and Disaster Vulnerability series: (GEF)(FY01/FY08/ICR:S) able to meet the environment goals of the 2006-  Enabled Ingeominas to increase disaster  Conservation of Protected Areas 2010 NDP prevention monitoring through assisting in the (GEF)(FY06/FY12/(S/S) procurement process for the necessary equipment  Mangrove Restoration and Carbon Sink (CF)  Implementation of system to monitor and evaluate  Mainstreamed disaster risk management national and regional environmental management  Rio Frio Waste Mgmt. /Jepirachi (CF) throughout health, education, social sectors and in  Corporate Citizenship Facility (IFC) based on 6 sustainable development objectives the country linked to MDGs  Thermal Efficiency Investments (IFC)  Increased interest and investment in disaster risk  Enhancing Local Benefits Business Line (IFC) management and reduction, and vulnerabilities  MAVDT Water Resources Unit adapted in line  APL1 Disaster Vulnerability (FY05/FY12/(S/S))  Resettled 1,052 out of 1,075 households living in with new water resource management reform  APL2 Disaster Vulnerability(FY06/FY11/(HS/MS)) high-risk areas in permanent housing as of June  CAT DDO (FY09/FY12/(S/S) 30, 2010.  Use of full menu of IBRD CAT risk financing  Retrofitted/reconstructed many schools and Assist Government to reach MDG 7 (Ensure instruments weather kindergardens to seismic resistant standards. environmental sustainability), focusing on  Reduced population at risk in public buildings following subgoals: Knowledge Services: from 575,000 to 252,000 (achieving beyond the Energy-Mining: end of project target of 450,000) as of June 30,  Promote integrated water management knowledge  Alternative Energy ESW (FY09) 2010, measured by increase in percent of municipalities  Renewable Energy Sector Policy II (TF)  Slower progress of retrofitting and repositioning that have implemented Watershed Administration of health infrastructure  Alternative Energy and Bio-energy (TF) and Management Plans  Low Carbon Growth  Financed reconstruction /rehabilitation of 36 schools (14 out of 22 elementary schools  Rio Amoya CF, Jepirachi CF, San Nicolas Carbon Sink  Strengthen environmental governance measured CF by increased transparency, accountability, and completed (target of 40)  Extractive Industries Transparency Initiative EITI TA public participation in environmental license 66 CPS Outcomes IBRD/IFC Interventions Status and Evaluation Summary Approval/Completion-date/ICR/ISR(DO/IP) Rating ENVIRONMENT AND NATURAL RESOURCE MANAGEMENT process; improved identification of environmental IFC: (FY09) priorities as a result of increased use of SEAs  Policy Options for Renewable Energy TA (FY10) mainstream environmental considerations into  Developed investment opportunities in policy cooperation with financial institutions and Water Resources: companies interested in energy efficiency and  Water Resource Model  Prevention/control of environmental degradation renewable energy  Water Resources and Air Quality Management by improving quality of urban water bodies,  Maximized WBG impact in environmental Institutional Assessment and Mineral Rights Cadastre decreasing the number of open waste dumps, and sustainability by complementing Bank‘s use of  Flood Protection in Barranquilla (Supervision implementing air pollution control strategy; and grant instruments and leveraging private sector funds) under National Protected Areas GEF, improved investments  Preparation Funds for urban flood prevention (GFDRR) management systems by project year 5 of at least  Application of the Earth Simulator for River Stream 2 million hectares of core conservation areas National Protected Areas GEF: Flows (Knowledge Transfer) (national parks) and 20% of conservation mosaics Environment:  Met target of 2.2 million hectares of core  Administration of Dutch Resources for National  Dialogue on climate change and renewable energy conservation areas (9 NPAs) with management Protected Areas (TF) leads to increased sources of renewable energy plans in place and 1.4 million hectares with  Conservation Incentives for Land Mgmt. (TF) and leadership role for Colombia in promoting sustainable natural resource practices in place  National Adaptation Plan (TF) South/South exchanges on climate change  Met target of 3 surrounding territories  INAP GEF, Mainstreaming Cattle Ranching GEF, implementing activities that promote ecological Protected Areas GEF, Netherlands Conservation connectivity through biological corridors and Incentives Grant restoration practices  GEF Protected Areas AF  Exceeded target with 9 NPAs implementing  Risk Modeling Bogota (GFDRR) specific conservation management subprojects  CAPRA (GFDRR) (target: 7)  Met target of 30% of families adopting Coordination/ Convening Services: sustainable production systems (68% over  Identification mission for Potential Flood Mitigation baseline) Project  Technical Discussions for disaster impact analysis and Amoya Environmental Services TF: evaluation (CAPRA)  Started environmental education and awareness  Presentation at SNPAD (National System for Prevention on role and services of Paramo and Attention to Disasters) 20 years, MHCP Risk  Awarded education grants Financing Workshop, Bogota Sharing Experiences Event,  Upgraded April, 2010: Schooling program and ACODAL (Colombian Association for Sanitary and facilities of 23 rural schools (April 2010) Environmental Engineering) Annual Meeting  Awarded full scholarships to 30 local children to  Workshops CEA Update study pursue studies at Universities throughout the  Course on hydrological modeling for decision makers country (WPP financed) 67 CPS Outcomes Status and Evaluation Summary IBRD/IFC Interventions Approval/Completion-date/ICR/ISR(DO/IP) Rating ENVIRONMENT AND NATURAL RESOURCE MANAGEMENT  International Glacier network  ―Grandes Sismos‖ Workshop  Assessment of Changes in bio-climatic Conditions in Paramo Ecosystems (KT)  Closing Workshop Biosafety Mgmt. to comply with Cartagena Protocol  Workshop Multi-country project to strengthen biosafety systems  Technical Assistance for Sustainable Development reforms  Regional study on climate change – forum with high level participation from GOC and experts 68 CPS Outcomes Status and Evaluation Summary IBRD/IFC Interventions Approval/Completion-date/ICR/ISR(DO/IP) Rating PEACE AND DEVELOPMENT ACHIEVED Contribute to effectiveness of  Protected patrimonial assets of population at risk Financial Services: Government’s peace initiatives by of displacement or already displaced increasing awareness of global  Peace and Development (AF) (FY04/FY13/(S/MS) experience and piloting innovative models  Derived framework from lessons learned to of participatory community development in formulate a policy for land restitution under new Knowledge Services: conflict-affected zones by: Government  Increased awareness of peace process and called  Peace Programmatic III (FY09)  Providing technical advice on models of upon civil society by the launching of ―Voices‖  Youth reintegration project (Colegio del Cuerpo) intervention for demobilized and  Peaceful Dispute Resolution Services for the Poor displaced  Enhanced synergies among the National  Capacity Building in the Pacific Coast (Afro-Colombians) Commission for Reparation and Reconciliation  Gender and IDPs  Contributing to design of national and the High Counselor for Reintegration, and gave advice and financing  Strengthening Human Rights to Basic Social Services in Peace and reparation program Development Zones  Support for South-South Dissemination on DDR  Extending models of participatory Peace and Development Series:  Protection of Land and Patrimony of IDP (TF) community development in conflict- affected zones (level of implementation  At least 80% of targets are met in food security,  Publication of ―Voices‖ (June 2009) of Annual Operation Plan in each of the basic sanitation, and productive subprojects for 5 project regions) returned or relocated families  Benefited 6,478 families (81%) with food security  Going forward on IDP and with special focus on vulnerable groups in urban  Benefited 7,900 families (46%) with income/job areas opportunities  Benefited 4,572 families (76%) with housing improvements  Benefited 75,000 families (poor, vulnerable and displaced) from productive subprojects  Disseminated total subsidiary agreements and other contracts totaling US$29.4 million by October 2007 (98% of loan).  Implemented 100% of Annual Operation Plans in 69 CPS Outcomes Status and Evaluation Summary IBRD/IFC Interventions Approval/Completion-date/ICR/ISR(DO/IP) Rating PEACE AND DEVELOPMENT each of the 5 regions (April, 2010)  Received satisfactory financial and procurement audits from partner organizations  Recorded a 38% reduction of overall displaced population between 2004-2009 Human Rights Project:  Assisted in identification of effective links, with regard to human rights, between nature and work of the Regional Peace and Development Programs, Government, other partners, and the Bank  Promoted introduction of human rights good practice in peace and development interventions Afropaz:  Strengthened Afro-Colombian organizations by assisting in construction of social networks, empowering communities to promote local development, and improving Access to Opportunities for Youth 70 CPS Outcomes Status and Evaluation Summary IBRD/IFC Interventions Approval/Completion-date/ICR/ISR(DO/IP) Rating A STATE AT THE SERVICE OF CITIZENS ACHIEVED Improved public sector management and TAL - Strengthening Public Information, Financial Services: citizen services in support of Central Monitoring, Evaluation for Results Government efforts: Management  Strengthening Public Mgmt. M & E (FY09/FY14/(S/S))  Consolidation of Public Mgmt. Systems  Implement a M&E system within DNP to (FY10/FY13/(S/S) improve existing SIGOB information system  SIGOB system was replaced by more modern  Justice Services Strengthening (FY10/FY14/(S/S)) for citizen control, including pilots in 2-3 SISMEG. Also, an Evaluation System was  Education quality project (ICFES - IFC) subnational entities to enhance data introduced, as well as a National Network of  TAL to Support the Second Programmatic Labor Reform collection and processing M&E institutions. Technical guidelines on and Social Structural Adjustment Loan M&E practices at the territorial level (FY05/FY09/(S/S))  Strengthen capacity of central and developed and budgets of Medellin and Pasto subnational entities to manage resources and used them to present Performance Based Knowledge Services: deliver social services in an efficient and Budgets to their Municipal Councils. transparent manner, promoting good practice  National Level Public Financial management and models in procurement, anticorruption, and  Developed Rapid Assessment and Action Plan Procurement Report (FY09) transparency (RAAP) - completed and tested for 2  Decentralization Programmatic TA (FY10) municipalities and improved public  Institutional and Community Strengthening for Local  Improve government-citizen service linkage management capacity by providing Barranquilla Governance (TF) through better communication, identification and Cartagena with a solid roadmap  Installing Basic Mgmt. Capacity in Chocó (TF) of citizen needs, and one-stop service centers to ease registration and access to government  Strengthening of the Procurement System (TF)  Improved and expanded municipal capacity by  Preparation of National Standard Bidding Documents services Central Government  Strengthening Social Accountability to Improve the  Strengthen services to tax payers to Impact of Royalties (IFC-TF) TAL to support the 2nd PSAL:  Peaceful Dispute Resolution Services for the Poor (TF) contribute to DIAN efforts to improve revenue collection procedures and expand  Legal claims mgmt system (IDF, TF) the tax base  Increased number (3 to 13) of social/labor  Assessment for e-GP and Road Map Strategy programs under DNP, MSP, and MEN being  Advisory work on accounting and financial reporting  Improve implementation of country systems systematically and rigorously monitored, standards evaluated, and discussed with the public  TA on the review of the current subnational control (06/30/09) systems  Revenue management advisory services in gold mining (IFC) 71 CPS Outcomes Status and Evaluation Summary IBRD/IFC Interventions Approval/Completion-date/ICR/ISR(DO/IP) Rating A STATE AT THE SERVICE OF CITIZENS Public Financial Management: Coordination/Convening Services:  Supported achievement of 95% of national budget managed through SIIF (90% achieved,  Conference on results informed budgeting (FY08) 12/31/2009)  Fifth Annual Conference of the LCR Monitoring and  Contributed to having 1.5 million taxpayers Evaluation Network (Nov/09) updated and reviewed (4.6 million updated,  Seminar to discuss strategies to improve assessment 12/09) methodology of subnationals  Expanded DIAN Integrated Tax and Customs  South-south transfer health sector regulation. Administration Model – (Restructuring decree on the model issued, 12/09)  Reached proportion above 75% of tax revenue paid voluntarily and on time for both VAT and for income tax (above 96% for both indicators)  Improved efficiency of public financial management, expanded access to information, and established greater transparency Co Consolidation of National Public Management Information Systems:  Supported creation of the Management and Planning System for the Government (SIGOB), a fairly advanced system of monitoring and evaluation of government programs 72 CPSCR Annex 2: Indicative versus Actual Lending Program for the FY08-11 Colombia CPS (US$M) CPS CPSPR CPSCR FY08 FY09 FY10 FY08 FY09 FY10 FY11 FY10 FY11 (Pipeline) (Unconst.) INVESTMENT OPERATIONS Antioquia Education 20 20 Productive Partnerships 30 30 Access to Higher Education 300 300 Promoting Rural Education 40 40 Departmental Water and Sanitation 75 Dropped Building National M & E Systems 9 8.5 Social Safety Net/Familias en Acción 636.5 Improving Municipal Services Dropped Bogota Urban Services (AF) 30 Macro-Urban Projects/Low Income Land and Housing 40 Solid Waste Management 20 Justice Services Strengthening 20 Peace and Development (AF) 7.8 Integrated Mass Transport Systems (AFII) 300 300 Science, Technology and Innovation 25 Slipped 25 Rio Bogota Environmental 250 Slipped 250 Consolidation of National Public Information Systems 25 25 21 Education System Modernization 20 Slipped to FY 12 MAFP IV 100 Dropped 350 National Urban Transport Project 250 Slipped to FY12 Ruta del Sol/Road Infrastructure 500 Dropped Investment Operations Total 474 390 675 600 870 373 315 73 FY08 FY09 FY10 FY08 FY09 FY10 FY11 FY10 FY11 (Pipeline) (Unconst.) DEVELOPMENT POLICY LENDING/DDO 550 Business Efficiency III DDO Up to 650 (DPL) Sustainable Development III DPL 450 Disaster Risk Management DDO 150 Financial Sector DPL 300 300 Social DPL 500 500 Development Policy Total 650 550 600 800 800 1,124 1,000 1,000 940 1,275 1,400 870 1,173 315 TOTAL Annual Lending 74 CPSCR Annex 3: Indicative and Actual Knowledge (AAA) Program for the FY08-11 Colombia CPS Planned at Actually Delivered at CPS Beginning Completion (CPSCR) CPS FY Knowledge Services FY09 FY08 FY09 FY10 FY11 08 Education Quality     Informality Programmatic    Poverty and Jobs for the Poor    SME Finance   Money Market Development      High Level Seminar on Climate Change      Alternative Energy     National Level Public Finance   Extractive Industries Transportation Initiative   Financial Sector Access   Poverty and Jobs for the Poor II   Peace Programmatic III   Supervision of Financial Conglomerates     CS Crisis Simulation Exercise     Extractive Industries Transportation Initiative     Education Quality II    Sub-National Capacity Building  Dropped   Private Pensions Cost and Regulation  Dropped   Support to Transfer Reform  Dropped   Health System Modernization     Policy Option for Renewable Energy    Decentralization Programmatic    Financial Conglomerates Supervision   Strengthening Social Protection  Poverty Monitor  Strengthening the Crisis Preparedness Framework  Poverty Measurement HOI & Labor Markets  75 Corporate Governance ROSC Assessment  Country Assessment GCMCG  Policy Notes  76 Annex C: The Impact of Higher Food and Commodity Prices in Colombia As a net exporter of food, Colombia can reap benefits from higher agricultural prices. In 2010, the country exported around US$5.7 billion (14 percent of total goods exports) of agricultural products and processed food and showed a food trade surplus of US$1.9 billion (0.7 percent of GDP). The main export product is coffee (US$2.2 billion), followed by vegetables and fruits (US$860 million) and sugar (US$674 million). In spite of the commodity boom, Colombian agricultural exports have lost global market share, declining from an average 0.68 in the period 1995-1999 to 0.55 in 2000-2009. Nonetheless, Colombia has a great potential to expand agricultural production and exports and the Government is taking measures to increase productivity. In contrast with global trends, food price inflation in Colombia is declining. Food price inflation fell from 4.8 percent to 2.8 percent between January and April 2011. As of April 2011, food inflation contributed by 0.8 percentage points to the overall rate of 2.8 percent (the weight of food items in the Consumer Price Inflation index is 28.2 percent). This trend is consistent with IMF (2011) estimates of the pass-through from world to domestic food prices. Colombia has the lowest estimated pass- through among major Latin American economies (about 0.1), which is not even statistically significant. Local food prices could, however, increase in the future since the impact of the last global food price shock in 2008 appeared with a time lag (see Figure C1a). Given that poor people devote a higher share of their household budgets to food, they experience a higher rate of inflation than the rest of the population when food prices rise. In April 2011, the inflation rate of low-income groups was 33 percent higher than high-income groups and 2 percent higher than the middle-income group. Figure C1a. Food price inflation (yoy, %) Figure C1b. Oil and transport inflation (yoy, %) 80 Colombia 16 100 Colombia 10 60 food price 80 transport 8 inflation 60 inflation 6 11 40 (right axis) 40 (right axis) 4 20 6 20 2 0 0 0 Global food 1 -20 -2 -20 inflation -40 WTI price -4 (left axis) inflation -40 -4 -60 -6 (left axis) Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Source: World Bank (GEM) and DANE. Colombia is a net exporter of oil, coal, gas, and metals, and experiences benefits as well as challenges of higher prices. In 2010, export of these commodities reached US$25.6 billion and contributed by 63 percent to total goods exports and by 73 percent of foreign direct investment (US$4.9 billion). Commodities also contribute by about 12 percent to total fiscal revenues. Higher commodity prices increase export and fiscal revenues thereby improving both the external current account and fiscal balances. On the other hand, higher foreign exchange inflows add to appreciation pressures, which potentially undermine the competitiveness of non-commodity exports. Colombia can also not escape the negative impact of higher oil prices on the global economic recovery, and is particularly sensitive to developments in the US – its largest trading partner. Recent measures taken by the government to manage commodity revenues, such as the introduction of stabilization funds at the national and subnational levels, are supported by this operation. 77 The inflationary impact of higher global oil prices is modest owing to government intervention, but local fuel prices are likely to increase in the future to ensure fiscal balance. In 2008, the Government abolished direct fuel price subsidies and introduced a Fuel Price Stabilization Fund, which works on the following basis. During periods of low global prices, local pump prices are kept relatively higher and this gives rise to savings. In spells of high oil prices, local prices are raised, but not fully, with the difference paid for by drawing down the savings of the Fund. Given this mechanism, local transport prices have only followed the rise in global crude oil prices to some extent in recent months (see Figure C1b). Econometric estimates of the pass-through suggest that it is the lowest in the region (after Mexico) at about 0.175 and statistically significant, according to the IMF (2011). While the mechanism may work well in theory, the timing of its implementation gave rise to only a limited period of relatively low world prices and savings accumulation followed by a period of high prices. As a result, the Fund recently exhausted its savings in end-2010 and registered a deficit of COP950 billion or US$530 million in end-April 2011. To avoid fiscal imbalances, further local price increases would thus be necessary. 78 Annex D: Recent Trends on Poverty and Inequality in Colombia Colombia is not a poor country, but it is a country with a lot of poor people. The poverty rate and gap observed for Colombia is far greater than one would expect based on the level of Gross National Income per capita observed in the country (Figures D1 and D2). Figure D1. Poverty and per capita GNI relationship Figure D2. Poverty Gap and per capita GNI relationship Part of this is due to the high and persistent income inequality in Colombia. Between 1995 and 2009, a period when most LAC countries observed an unprecedented reduction on inequality, Colombia experienced a relatively stable Gini Index (Figure D3a). Poverty reduction during the 2000-2009 could have been stronger if Colombia had experienced more 79 equitable economic growth (leading to lower inequality). Figure D3b simulates what would have happened to poverty in 2009 if Colombia‘s distribution of income was similar to that in other LAC countries. For instance, had Colombia‘s Gini been similar to that of Mexico, moderate poverty would have been 38 percent; while if it had been at the level of Uruguay (the lowest in the LAC region), poverty would have been 26 percent. Figure D3a. Evoluation of Gini for Colombia and LAC 0.58 0.57 0.57 0.58 0.57 0.56 0.57 0.56 0.55 0.55 0.55 Gini 0.54 0.53 0.53 0.52 0.51 0.5 1995 2000 2005 2009 Colombia LAC Note: 70% of the LAC population; LCSPP s calculation based on SEDLAC data. Figure D3b. Poverty in Colombia if the country had the Gini of selected LAC countries (Colombia average income from 2009 constant) 50 Colombia 45 Brasil (2009) 40 Pobreza (%) Mexico (2008) Ecuador (2009) DR (2007) 35 Peru (2009) 30 Uruguay (2009) 25 20 0.600 0.550 0.500 0.450 0.400 0.350 Gini Source: LCSPP calculation based on SEDLAC data. Poverty (extreme and moderate) reduction in Colombia between 2000 and 2009 was entirely driven by growth, as inequality remained largely constant. During this period, Colombia experienced an average growth rate above the regional average. The Datt-Ravallion decomposition (Table D1) suggests that, on average, 46 percent of the poverty reduction between 2000 and 2009 among LAC countries can be attributed to growth and 54 percent to redistribution. In the case of Colombia, the share due to growth was 97 percent, while falling inequality contributed only 3 percent. The growth incidence curves for Colombia for 2006- 2009 suggest that the middle class benefited the most from the income growth experienced (Figure D4). 80 Table D1 Datt-Ravallion Decomposition for Selected LAC countries Growth Resdistribution Countries 2000-2005 2005-2009 Average 2000-2005 2005-2009 Average Brazil 0.25 0.51 0.38 0.75 0.49 0.62 Chile 0.43 0.57 0.50 0.57 0.43 0.50 Colombia 0.98 0.97 0.97 0.02 0.03 0.03 Mexico 0.43 0.54 0.49 0.57 0.46 0.51 Panama 0.61 0.80 0.71 0.39 0.20 0.29 Peru 1.40 0.99 1.20 -0.40 0.01 -0.20 LAC 0.32 0.60 0.46 0.68 0.40 0.54 Source: LCSPP calculation based on SEDLAC data. The relatively high poverty levels in Colombia are partially explained by the relatively high levels of food prices. Table D2 shows the results of the International Comparison Program (ICP) 2005 prices indexes for food items for LAC countries. This analysis shows that food categories in Colombia were higher than regional average in 23 out of 29 categories (by an average of 16 percent). The high cost of logistics (ranking of 82 in the WDI Logistic Cost Index)4 the worst of the LAC region is expected to be a major factor behind the high food prices.5 Evidence suggests that logistic costs represent between 20 to 50 percent of food prices.6 Table D2 Food price levels of LAC countries (ICP 2005) Country Food Price Level Index (World = 100) Venezuela 98 Chile 90 Colombia 84 Brazil 77 Peru 77 Uruguay 77 LAC 77 Ecuador 74 Argentina 65 Bolivia 50 Paraguya 47 Source: World Bank, 2005 International Comparison Program: Tables of Final Results. (Washington, DC, 2008) 4 World Bank. 2010. World Development Indicators. http://data.worldbank.org/ . 5 Schwartz, J. Mejorando la competitividad de Colombia. Portafolio, 15 de Deciembre de 2009 6 World Bank. Logistics, Transport and Food Prices in LAC: Policy Guidance for Improving Efficiency and Reducing Costs. Preparatory workshop for the Second Meeting of the Finance Ministers of the Americas and the Caribbean (2009). 81 Figure D4. Growth incidence curves from 2005 to 2009 82 Annex E: Fiscal Risk Management in the Colombian Public Sector I. INTRODUCTION Fiscal risks can be broadly defined as deviations of fiscal outcomes from what was expected as the time of the budget or other forecast7 and can arise from both revenues and expenditures, principally as a consequence of exogenous shocks such as volatility of currency and interest rates, closure of international financial markets, natural disasters, volatility of commodity prices, etc., combined with the Government‘s exposure to these shocks. The time horizon should be defined for quantification and management of fiscal risk; in Colombia‘s case, it could include reference8 to the Government‘s Medium-Term Fiscal Framework (MTFF) in the next five to ten years, as well as next year‘s budget and possibly other fiscal forecasts. The Colombian authorities are well along the curve of identifying, quantifying, and managing various types of fiscal risks. The authorities acknowledge the obligation to address many of the potential risks — direct and indirect, explicit and implicit — by including them in the MTFF and in setting fiscal targets. However, it would be prudent for the authorities to decide on an explicit strategy for dealing with remaining sources of medium-term budgetary risk arising from factors such as natural disasters. II. SOURCES OF FISCAL RISK Initially the analysis has been limited to the central government balance sheet,9 although the MTFF also applies to the consolidated public sector. The analysis includes the accounting balance sheet, an expanded ―fiscal‖ balance sheet, and contingent assets and liabilities, both explicit and implicit. Figure E1 Figure E2 The government asset and liabilities with potential fiscal risk can correspond both to an accounting and a fiscal simplified balance sheet (Figure E1). The Colombian Government has an accounting balance sheet so the main items could be analyzed in terms of fiscal risk, namely, identifying and ideally quantifying how much the value of the asset or liability change, given a movement in the 7 Cebotari and others, Fiscal Risks: Sources, Disclosure and Management, (IMF, FAD, 2009). 8 Country Insurance: Reducing Systemic Vulnerabilities in LAC (World Bank, Nov.2007), which concludes that countries should cover themselves against insurable external shocks, providing insurance is offered at reasonable costs, and having considered main fiscal risks arising from exogenous shocks. 9 Ideally it would be extended to the public sector as a whole, due to the decentralized nature of the Colombian Government. 83 source of risk (e.g., interest rates, currencies). The bottom items refer to a ―fiscal balance sheet‖, which is necessary to understand the risks to the Government‘s budget. The most important source of risk is usually the rate of economic growth, but it is possible to identify other vulnerabilities of the revenue and expenditure streams to factors that can decrease revenues and/or increase expenditures, in comparison to the original budget and other forecasts. It is also necessary to analyze sources of fiscal risk that are contingent on events/variables, namely, contingent liabilities and assets (Figure E2). In turn these can be classified as explicit or implicit: the former refers to Government‘s legal obligations to make a payment (liability) or receive revenues (asset) only if a particular event occurs. The latter refers to liabilities that arise but on which the Government is not legally obliged to act, and which are typically excluded from the Government balance sheet. A. Criteria for identifying sources of fiscal risk The criteria for identifying sources of fiscal risk are as follows: (a) Government assets and liabilities that -- (i) have a potential exposure to shocks (e.g., currency, interest rate, volatility in the price of commodities, credit defaults), which could impact the MTFF or other medium-term fiscal forecasts; and 10 (ii) lack a reasonable or successful risk management strategy and/or have difficulties with its implementation, such that shocks may have a significant impact on fiscal forecasts such as the MTFF. For example, these could include a government loan portfolio whose value could be diminished by credit risk factors (e.g., default by the borrowers), or investments in state- owned enterprises that go bankrupt. (b) Contingent liabilities with potential exposure to shocks (e.g., natural disaster that can have an effect on higher expenditure related to government insurance for agricultural produce, disaster mitigation expenditure for affected population, etc) with estimated expenditures not included in the medium-term fiscal forecasts, including MTFF. The contingent liabilities already included in the fiscal forecasts would not be considered fiscal risks as they are already taken into account (e.g., government guarantees for infrastructure) unless, as in the case of legal demands against the Government, there are flaws in the system for managing its risk (i.e., lack of an adequate information system on legal demands). The accounting balance sheet allows an identification of the government direct assets and liabilities, as well as explicit contingent liabilities; an economic balance sheet includes the Government‘s tax revenues and expenditures, as well as implicit contingent liabilities of various types.11 10 The success of the strategy has to be analyzed in terms of whether it is indeed limiting/preventing a fiscal impact arising from the risks being dealt with and whether it is ―reasonable‖ from a technical point of view — for example, a debt management strategy that is highly speculative (i.e., based on market views) and that does take into account reducing medium-term cost within prudent risk limits would not be considered ―reasonable ‖. 11 In addition, the Colombian authorities have already estimated expected cost and maximum cost with 95% probability of a number of contingent liabilities. 84 B. Current sources of fiscal risk for government finances  Legal claims against the state (risk quantification identifies as 18 to 82 percent of GDP in 2010, according to MTFF);  Oil price shocks (revenues are 13 percent of fiscal revenues annually and rising; requires updated risk quantification);  Natural disasters (total value exposed is equivalent to US$173 billion, including publicly owned assets and the private assets of low-income groups). The fiscal risk is calculated by adjusting the value exposed with the probability of a disaster event. Estimated fiscal risk equivalent to US$316 million a year; PV is 18 percent of GDP in 2011-50 period.12  Agricultural subsidies (currently being estimated).  There are other implicit contingent liabilities such as financial sector risk, which can be analyzed and quantified. III. WORLD BANK ADVISORY SERVICES/PRODUCTS FOR FISCAL RISK MANAGEMENT The World Bank is assisting the Colombian Government13 in its design of medium-term fiscal risk management strategies for the specific sources of fiscal risk mentioned above and for a comprehensive strategy for the central government, taking into account total fiscal exposure. Working closely with the Colombian authorities, it will do so by providing the following services and financial products: (a) Definition of fiscal risk management objectives; (b) Identification, together with the Colombian authorities, of potential fiscal risks and mapping of those same risks, taking into account the accounting and fiscal balance sheet, as well as Colombia‘s explicit and implicit contingent liabilities; (c) Identification of methodologies/models for quantifying risk; (d) Quantification of fiscal risk; (e) Analysis of the Government‘s capacity to absorb some or all of the risk, that is whether it has a high degree of fiscal flexibility (e.g., provided by fiscal surpluses, fiscal buffers and stabilization funds, a low-debt level, a low-risk debt structure, diversified funding sources, lack of budgetary rigidities, etc.); (f) Assistance to the Government in its design of risk management strategies, including: (i) Definition of objectives and time horizon for dealing with potential shocks, followed by evaluation of different risk-management alternatives, taking into account the following aspects:  risk avoidance/reduction using policy dimensions;  risk retention/self-insurance, related to the Government‘s macroeconomic capacity to absorb fiscal risk (e.g., natural hedges, fiscal buffers, contingent credits, instruments to leverage funding from international financial institutions, leveraging concessional financing for climate change, etc.);  risk transfer, whereby fiscal risk is transferred to third parties market — using interest rate swaps, currency swaps into desired currencies, including local 12 Study by ENS, quoted in Fiscal Risk DPL Concept Note. 13 Fiscal risk can be analyzed and managed at the level of the public sector, the central government, sub-national government and/or different state-owned entities. 85 currency, natural disaster insurance, weather hedges as, for example, rainfall indexes, financing of low-carbon investments in the market, swaps, options and/or forwards for oil price risk, loans tied to oil price indexes, etc.  cost-risk trade-off of alternative strategies and instruments;  coordination of proposed alternatives with macroeconomic policy;  constraints of the financial markets, which may limit the strategy choices;  institutional capacity for risk management strategy design and implementation, including coordination among different government units (e.g., governance, strategy approval, delegation, accountability, reporting, technical capacity, etc.). (ii) Advisory services in the use of financial products for strategy implementation (e.g., CAT-Bonds, oil-linked debt) and analyze the different sources which provide these products; (iii) Training and institutional capacity building in all these areas, so as to make risk analysis and management sustainable in the future, be it at a central, state, and sub- national government level. The different Bank departments will work together to provide an integrated, comprehensive fiscal risk-management service to Colombia. A simplified risk management exercise is described in Figure E3. Figure E3. . 86 Annex F: Colombia and South-South Knowledge Exchange (SSKE) World Bank Institute Brokering Pilot South-South Cooperation (SSC) is an important national priority for Colombia. Colombia‘s National Development Plan identifies International Relevance through South- South Cooperation as a key cross-cutting theme, and the Government has striven to strengthen the planning, funding, and implementation of South-South Knowledge Exchange (SSKE), while promoting Colombia as a potential partner for SSKE regionally and globally. The Government has formulated approaches for South-South learning for the Caribbean and Mesoamerica, and established funding sources for SSKE, such as its Cooperation and International Assistance Fund. They are also planning a cooperation strategy with Africa and the Asia-Pacific region. Colombia‘s Accion Social has begun the important task of documenting the country‘s rich history of exchanges, which has included sharing knowledge in social promotion, disaster management, and other diverse sectors. Accion Social has developed a ―Good Practice‖ guide to catalyze the development of SSKEs and showcase Colombia as a potential knowledge supplier. Colombia is also active with international organizations and partners to improve the design and monitoring of SSKEs, with a view to strengthening the effectiveness of knowledge exchange within the global aid framework. Colombia’s strong commitment to SSKE, which parallels a growing international focus on South-South Cooperation, underlies its participation in a Pilot Brokering Mechanism supporting SSKE coordinated by the World Bank Institute (WBI), which aims to help countries document their knowledge sharing needs and facilitate matches for exchanges. In late 2010 WBI launched the Brokering Mechanism in response to increasing requests from client countries for assistance in systematically documenting knowledge offers and requests, identifying partners, and implementing follow-up learning activities. The Pilot is now working with 13 countries, and is expected to focus in 2011 on identifying a small initial set of supply and demand areas, assisting Country Teams in engaging governments to document these areas, and brokering matches, mainly through a community of practice and integration of requests and offers into an online portal. WBI can also provide assistance on implementing follow-up exchanges, particularly through its planned launch of an online SSKE Knowledge Hub, which will feature a design toolkit for exchanges and links to funding sources. Given Colombia‘s strong commitment and evidence of government interest in working with the World Bank on SSKE, the Country Team has chosen to participate in this Pilot. Over the course of 2011, the Country Team will work with Colombian authorities to identify initial supply and demand areas, document these areas using WBI templates, and provide assistance to identify matches within the evolving community of practice, which will engage network and country staff throughout the Bank. Initial dialogue with the Country Team and the Government on the Pilot has identified several possible areas for engagement. On the supply side, Colombia may be interested in sharing its expertise in public sector governance, health sector reform, urban mass transport (Transmilenio), and Conditional Cash Transfer (CCT) programs. The World Bank is currently engaged in these areas, notably urban transport and social promotion. Colombia may be interested in being a knowledge recipient in early childhood development, royalty management and management of economic transitions, such as accession to the Organization 87 for Economic Co-operation and Development (OECD). Colombia has already received funding for four active exchanges in these and other areas funded by the Knowledge and Learning Council through a WBI-sponsored South-South Knowledge Exchange Competition. These exchanges are detailed below:  Achieving Universal Health Care: Colombia together with Chile and Turkey are sharing knowledge with the Philippines on options and strategies for expanding health insurance coverage and ensuring high quality healthcare.  Developing the Capacity of the Ecuadorian Ministry of Finance: Ecuador‘s Ministry is receiving assistance from counterparts in Colombia, Chile, and Peru to develop capacity in results based budgeting and management of fiscal contingencies.  Measuring Learning Outcomes in Tertiary Education: Colombia is helping the Moroccan government to build capacity to assess the quality of education in Moroccan universities and devise strategies for allocating resources.  Enhancing Knowledge on Employment Policies: Colombia along with twelve other nations mainly in Latin America and Asia are sharing knowledge on ways to design and implement employment programs in post-crisis settings. Colombia is a co-chair the Task Team on South-South Cooperation, an international coalition of countries, multilaterals, donors, academic institutions, and other stakeholders that aims to develop good practices and policy guidance for South-South learning activities. Launched in 2009, the SSC Task Team has engaged in a global dialogue on South-South Cooperation in the context of the broader aid effectiveness agenda, including through analytical work, case study development, and a community of practice. Colombia‘s Director for International Cooperation in the Ministry of Foreign Affairs co-chairs the SSC Task Team, while technical leadership of the SSC Task Team resides in the Presidential Program for Social Action and Accion Social. Both the SSC Task Team and Colombia are expected to play important roles in the Fourth High-Level Forum on Aid Effectiveness in Busan, Korea in late November 2011. 88 Annex G: Colombia Client Survey 2011 Between February and March, 2011, 402 stakeholders of the World Bank Group in Colombia were invited to provide their opinions on the Bank‘s assistance to Colombia by participating in a country survey. Participants in the survey were drawn from among the offices of the President, Vice President, Ministers, or Parliamentarians; employees of a ministry, ministerial departments, or implementation agencies; local government officials or staff; bilateral or multilateral agencies; private sector organizations; NGOs (including CBOs); the media; independent government institutions; trade unions; faith-based groups; academia or research institutes; and the judiciary. A total of 147 stakeholders participated in the country survey (37%). Respondents were asked about the role and performance of the Bank as well as about general issues facing the country. Familiarity with the Bank received a mean rating of 7.1 on a 10-point scale (1 being not familiar and 10 being familiar). This was statistically similar to the FY ‘07 survey, in which familiarity with the Bank received a mean rating of 6.7 across all respondents. The Country Survey suggests that overall optimism about Colombia‘s future has increased since FY 07 from 6.4 to 7.3. Colombia’s development priorities. While the same constellation of development priorities seems to be of most concern to stakeholders over the years, the research suggests that education is now of greater concern to respondents, whereas in FY 07, poverty reduction was considered by a strong plurality of respondents as the top development priority in Colombia. Aligned with this finding, fifty percent of respondents said that education was the key factor to reducing poverty (followed closely by employment opportunities). Throughout the survey, peace and development was identified as an important factor in a number of challenges by a relatively noticeable percentage of respondents. The Bank Group’s top priorities. Respondents across all stakeholder groups and both geographic locations indicated that they thought the Bank‘s top priorities in Colombia were poverty reduction, economic growth, and infrastructure development. Respondents indicated that it would be most productive for the Bank to focus most of its resources on access and quality of education, infrastructure development, increasing employment, and reducing poverty. The World Bank’s value. They FY 11 Country Survey in Colombia suggests that while a significant majority would like to see the Bank more involved in the country, and overall effectiveness ratings have gone up significantly since FY 07 (6.3 – 7.0) greater emphasis on its knowledge might be worth greater consideration. For example, ratings of the Bank‘s technical competence, producing and sharing knowledge and research that are useful, sharing knowledge about international best practices, and adapting knowledge to the country‘s needs have all gone down significantly since FY 07. In addition, when asked how the Bank could be of greater value in Colombia, nearly all the top choices are related to knowledge sharing, knowledge coordination and knowledge services (in FY 07 there was more emphasis on financing) . This is a critical aspect of the Bank‘s work in middle income countries. 89 Strengths and weaknesses. While effectiveness ratings in terms of poverty reduction are still relatively low in Colombia, the Bank‘s ratings increased significantly in this area. Its ratings also increased in work related to strengthening the environment and natural resource management (an emerging priority in the country), as well as broader issues such as ‗lending in a way that promotes effective development‘ and supporting ‗programs and strategies that are realistic for Colombia.‘ In terms of overall relationships, the Bank is considered highly respectful, and respondents note that they like to work with the Bank. This is similar to findings in all other Country Surveys in the region. 90 Annex H: Colombia at a Glance Colombia at a glance 3/1 5/1 1 Latin Upper Ke y D e v e lo pm e nt Indic a t o rs A merica middle Co lo mbia & Carib. inco me Age distribution, 2009 (2009) Male Female P o pulatio n, mid-year (millio ns) 46.3 572 1,002 75-79 Surface area (tho usand sq. km) ,1 1 42 20,422 48,659 60-64 P o pulatio n gro wth (%) 1.4 1.1 0.9 Urban po pulatio n (% o f to tal po pulatio n) 75 79 75 45-49 30-34 GNI (A tlas metho d, US$ billio ns) 229.4 4,003 7,508 15-19 GNI per capita (A tlas metho d, US$ ) 5,050 6,993 7,495 GNI per capita (P P P , internatio nal $ ) 8,600 10,315 12,466 0-4 6 4 2 0 2 4 6 GDP gro wth (%) 4.3 -1.8 -2.5 percent of total population GDP per capita gro wth (%) 2.9 -2.9 -3.3 ( m o s t re c e nt e s t im a t e , 2 0 0 3 – 2 0 0 9 ) P o verty headco unt ratio at $ 1 .25 a day (P P P , %) 16 8 .. Under-5 mortality rate (per 1,000) P o verty headco unt ratio at $ 2.00 a day (P P P , %) 28 17 .. Life expectancy at birth (years) 73 73 71 60 Infant mo rtality (per 1,000 live births) 16 19 19 Child malnutritio n (% o f children under 5) 5 4 .. 50 40 5 A dult literacy, male (% o f ages 1 and o lder) 93 92 95 30 5 A dult literacy, female (% o f ages 1 and o lder) 93 90 92 Gro ss primary enro llment, male (% o f age gro up) 120 1 18 1 11 20 Gro ss primary enro llment, female (% o f age gro up) 120 1 14 1 10 10 0 A ccess to an impro ved water so urce (% o f po pulatio n) 92 93 95 A ccess to impro ved sanitatio n facilities (% o f po pulatio n) 74 79 84 1990 1995 2000 2008 Colombia Latin America & the Caribbean a N e t A id F lo ws 19 8 0 19 9 0 2000 2009 (US$ millio ns) Net ODA and o fficial aid 90 89 186 972 Growth of GDP and GDP per capita (%) To p 3 do no rs (in 2008): United States -14 -19 105 636 8 Spain 0 7 13 85 6 Euro pean Co mmissio n 0 5 15 57 4 2 0 A id (% o f GNI) 0.3 0.2 0.2 0.4 -2 A id per capita (US$ ) 3 3 5 22 -4 -6 Lo ng- T e rm E c o no m ic T re nds 19 8 0 19 9 0 2000 2 0 10 -8 95 05 Co nsumer prices (annual % change) 26.5 29.1 9.2 2.3 GDP implicit deflato r (annual % change) 27.6 26.1 34.3 2.8 GDP GDP per capita Exchange rate (annual average, lo cal per US$ ) 47.3 502.3 2,087.4 1,898.0 Terms o f trade index (2000 = 100) .. .. 100 120 19 8 0 – 9 0 19 9 0 – 2 0 0 0 2 0 0 0 – 10 (average annual gro wth %) P o pulatio n, mid-year (millio ns) 26.9 33.2 39.8 46.3 2.1 1.8 1.5 GDP (US$ millio ns) 33,401 40,274 100,364 287,400 3.7 2.8 4.5 (% o f GDP ) A griculture 19.9 16.7 8.9 7.2 2.9 -2.6 2.3 Industry 32.5 37.9 29.5 33.6 5.0 1.5 4.2 M anufacturing 23.9 20.6 15.5 14.2 3.5 -2.5 3.6 Services 47.6 45.4 61.6 58.9 3.1 4.5 4.6 Ho useho ld final co nsumptio n expenditure 70.2 66.4 68.6 66.7 3.0 1.7 4.1 General go v't final co nsumptio n expenditure 10.1 9.4 16.7 1 .2 1 4.2 10.5 3.8 Gro ss capital fo rmatio n 19.1 18.5 15.0 22.6 1.4 2.0 10.1 Expo rts o f go o ds and services 16.2 20.6 16.4 16.5 7.5 5.3 5.7 Impo rts o f go o ds and services 15.6 14.8 16.7 17.2 0.4 9.0 9.2 Gro ss savings 19.6 21.6 14.0 19.5 No te: Figures in italics are fo r years o ther than tho se specified. 2009 data are preliminary. .. indicates data are no t available. a. A id data are fo r 2008. Develo pment Eco no mics, Develo pment Data Gro up (DECDG). 91 Colombia B a la nc e o f P a ym e nt s a nd T ra de 2000 2 0 10 Governance indicators, 2000 and 2009 (US$ millio ns) To tal merchandise expo rts (fo b) 3,1 1 58 39,741 To tal merchandise impo rts (cif) 1 ,786 1 38,511 Voice and accountability Net trade in go o ds and services ,41 1 1 1,230 Political stability Current acco unt balance 770 8,866 Regulatory quality as a % o f GDP 0.8 -3.1 Rule of law Wo rkers' remittances and co mpensatio n o f emplo yees (receipts) 1,578 4,023 Control of corruption Reserves, including go ld 9,006 28,463 0 25 50 75 100 2009 Country's percentile rank (0-100) P ublic S e c t o r F ina nc e higher values imply better ratings 2000 (% o f GDP ) Source: Kaufmann-Kraay-Mastruzzi, World Bank To tal revenue (including grants) 23.8 24.5 Tax revenue 14.4 17.6 Current expenditure 20.6 21.4 T e c hno lo gy a nd Inf ra s t ruc t ure 2000 2008 Overall surplus/deficit -3.2 -3.1 P aved ro ads (% o f to tal) 14.4 .. Highest marginal tax rate (%) Fixed line and mo bile pho ne Individual .. 33 00 subscribers (per 1 peo ple) 24 1 10 Co rpo rate 35 33 High techno lo gy expo rts (% o f manufactured expo rts) 7.7 3.8 E xt e rna l D e bt a nd R e s o urc e F lo ws 2 0 10 E nv iro nm e nt (US$ millio ns) To tal debt o utstanding and disbursed 36,219 59,644 A gricultural land (% o f land area) 40 38 To tal debt service 8,218 9,455 Fo rest area (% o f land area) 54.9 54.6 Debt relief (HIP C, M DRI) – – Terrestrial pro tected areas (% o f surface area) .. 26.2 To tal debt (% o f GDP ) 36.3 20.9 Freshwater reso urces per capita (cu. meters) 51,403 46,921 To tal debt service (% o f expo rts) 45.0 18.7 Freshwater withdrawal (billio n cubic meters) 10.7 .. Fo reign direct investment (net inflo ws) 1 2,1 1 2,535 CO2 emissio ns per capita (mt) 1.5 1.4 P o rtfo lio equity (net inflo ws) 1,332 913 GDP per unit o f energy use (2005 P P P $ per kg o f o il equivalent) 9.6 12.1 Composition of total external debt, 2009 IBRD, 6,570 Energy use per capita (kg o f o il equivalent) 673 665 Short-term, IDA, 1 4,110 IMF, 0 Wo rld B a nk G ro up po rt f o lio 2000 2 0 10 Other multi- (US$ millio ns) lateral, 8,161 IB RD To tal debt o utstanding and disbursed 1,920 7,504 Private, 32,867 Disbursements 266 1,279 Bilateral, 514 P rincipal repayments 242 338 Interest payments 126 266 2000 2009 US$ millions IDA To tal debt o utstanding and disbursed 7 0 Disbursements 0 0 P riv a t e S e c t o r D e v e lo pm e nt 2000 2009 To tal debt service 1 1 Time required to start a business (days) – 20 IFC (fiscal year) Co st to start a business (% o f GNI per capita) – 13.1 To tal disbursed and o utstanding po rtfo lio 107 838 Time required to register pro perty (days) – 20 o f which IFC o wn acco unt 84 686 Disbursements fo r IFC o wn acco unt 26 152 Ranked as a majo r co nstraint to business 2000 2009 P o rtfo lio sales, prepayments and (% o f managers surveyed who agreed) repayments fo r IFC o wn acco unt 20 74 A ntico mpetitive o r info rmal practices .. 34.5 Crime .. 13.0 M IGA Gro ss expo sure 97 0 Sto ck market capitalizatio n (% o f GDP ) 9.5 57.0 New guarantees 0 0 B ank capital to asset ratio (%) 1 1 .2 12.2 No te: Figures in italics are fo r years o ther than tho se specified. 2009 data are preliminary. 5/1 1 3/1 92 .. indicates data are no t available. – indicates o bservatio n is no t applicable. Develo pment Eco no mics, Develo pment Data Gro up (DECDG). Millennium Development Goals Colombia With selected targets to achieve b etween 1990 and 2015 (estimate clo sest to date sho wn, +/- 2 years) C o lo m bia G o a l 1: ha lv e t he ra t e s f o r e xt re m e po v e rt y a nd m a lnut rit io n 19 9 0 19 9 5 2000 2008 .25 P o verty headco unt ratio at $ 1 a day (P P P , % o f po pulatio n) 8.3 13.5 16.8 16.0 P o verty headco unt ratio at natio nal po verty line (% o f po pulatio n) .. 60.0 64.0 45.1 Share o f inco me o r co nsumptio n to the po o rest qunitile (%) 3.4 3.1 2.6 2.3 P revalence o f malnutritio n (% o f children under 5) .. 6.3 4.9 5.1 G o a l 2 : e ns ure t ha t c hildre n a re a ble t o c o m ple t e prim a ry s c ho o ling P rimary scho o l enro llment (net, %) 71 83 94 90 P rimary co mpletio n rate (% o f relevant age gro up) 74 87 95 1 10 Seco ndary scho o l enro llment (gro ss, %) 53 64 72 91 Yo uth literacy rate (% o f peo ple ages 1 5-24) 95 96 97 97 G o a l 3 : e lim ina t e ge nde r dis pa rit y in e duc a t io n a nd e m po we r wo m e n Ratio o f girls to bo ys in primary and seco ndary educatio n (%) 108 105 104 104 Wo men emplo yed in the no nagricultural secto r (% o f no nagricultural emplo yment) 42 45 49 49 P ro po rtio n o f seats held by wo men in natio nal parliament (%) 5 12 12 8 G o a l 4 : re duc e unde r- 5 m o rt a lit y by t wo - t hirds Under-5 mo rtality rate (per 1 ,000) 35 31 26 19 Infant mo rtality rate (per 1,000 live births) 28 26 22 16 M easles immunizatio n (pro po rtio n o f o ne-year o lds immunized, %) 82 82 80 95 G o a l 5 : re duc e m a t e rna l m o rt a lit y by t hre e - f o urt hs M aternal mo rtality ratio (mo deled estimate, per 1 00,000 live births) 140 120 1 10 85 B irths attended by skilled health staff (% o f to tal) 82 86 86 96 Co ntraceptive prevalence (% o f wo men ages 1 5-49) 66 72 77 78 G o a l 6 : ha lt a nd be gin t o re v e rs e t he s pre a d o f H IV / A ID S a nd o t he r m a jo r dis e a s e s P revalence o f HIV (% o f po pulatio n ages 1 5-49) 0.1 0.3 0.5 0.6 Incidence o f tuberculo sis (per 100,000 peo ple) 54 48 43 36 Tuberculo sis case detectio n rate (%, all fo rms) 70 57 68 70 G o a l 7 : ha lv e t he pro po rt io n o f pe o ple wit ho ut s us t a ina ble a c c e s s t o ba s ic ne e ds A ccess to an impro ved water so urce (% o f po pulatio n) 88 90 91 92 A ccess to impro ved sanitatio n facilities (% o f po pulatio n) 68 70 72 74 Fo rest area (% o f to tal land area) 55.4 55.2 54.9 54.6 Terrestrial pro tected areas (% o f surface area) .. .. .. 26.2 CO2 emissio ns (metric to ns per capita) 1.7 1.6 1.5 1.4 GDP per unit o f energy use (co nstant 2005 P P P $ per kg o f o il equivalent) 8.2 8.6 9.6 12.1 G o a l 8 : de v e lo p a glo ba l pa rt ne rs hip f o r de v e lo pm e nt 00 Telepho ne mainlines (per 1 peo ple) 7.3 10.6 18.1 17.9 00 M o bile pho ne subscribers (per 1 peo ple) 0.0 0.8 5.7 91 .9 00 Internet users (per 1 peo ple) 0.0 0.2 2.2 38.5 00 P erso nal co mputers (per 1 peo ple) 0.9 1.7 3.8 1 1 .2 Education indicators (%) Measles immunization (% of 1-year ICT indicators (per 100 people) olds) 125 100 120 100 100 75 75 80 50 50 60 25 40 25 0 20 2000 2002 2004 2006 2008 0 0 1990 1995 2000 2008 2000 2002 2004 2006 2008 Primary net enrollment ratio Fixed + mobile subscribers Ratio of girls to boys in primary & secondary Colombia Latin America & the Caribbean education Internet users 93 No te: Figures in italics are fo r years o ther than tho se specified. .. indicates data are no t available. 3/1 5/1 1 Develo pment Eco no mics, Develo pment Data Gro up (DECDG). Annex I: Selected Indicators of Bank Portfolio Performance and Management As As of 5/12/2011 Indicators * 2008 2009 2010 2011 Portfolio Assessment Number of Projects Under Implementation a 22 17 21 22 Average Implementation Period (years) b 3.6 3.2 3.2 3.7 Percent of Problem Projects by Number a, c 9.1 5.9 9.5 9.1 Percent of Problem Projects by Amount a, c 5.9 4.8 4.8 5.4 Percent of Projects at Risk by Number a, d 9.1 11.8 9.5 9.1 Percent of Projects at Risk by Amount a, d 5.9 6.9 4.8 5.4 Disbursement Ratio (%) e 47.6 25.2 59.9 42.5 Portfolio Management CPPR during the year (yes/no) y y y n Memorandum Item Since FY 80 Last 5 FYs Proj Eval by IEG by Number 133 13 Proj Eval by IEG by Amt (US$ millions) 10,513 1,087.5 % of IEG Projects Rated U or HU by Number 23.7 16.7 % of IEG Projects Rated U or HU by Amt 18.2 0.2 * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. 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 objective (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. 94 Annex J: Colombia Social Indicators Latest single year Same region/income group Latin Low er- Am erica m iddle- 1980-85 1990-95 2002-08 & Carib. incom e POPULATION Total population, mid-year (millions) 30.1 36.5 44.5 560.6 3,434.5 Grow th rate (% annual average for period) 2.0 1.9 1.3 1.3 1.1 Urban population (% of population) 65.6 70.5 74.2 78.3 41.6 Total fertility rate (births per woman) 3.4 2.8 2.5 2.4 2.3 POVERTY (% of population) National headcount index .. 60.0 46.0 .. .. Urban headcount index .. 48.0 30.7 .. .. Rural headcount index .. 79.0 65.2 .. .. INCOME GNI per capita (US$) 1,210 2,100 4,670 5,801 1,905 Consumer price index (2000=100) 6 50 158 158 142 Food price index (2000=100) .. .. .. .. .. INCOME/CONSUMPTION DISTRIBUTION Gini index .. 57.2 58.9 .. .. Low est quintile (% of income or consumption) 2.4 3.2 2.9 .. .. Highest quintile (% of income or consumption) .. 61.2 61.6 .. .. SOCIAL INDICATORS Public expenditure Health (% of GDP) .. .. 6.2 3.4 2.0 Education (% of GNI) .. .. .. 3.5 3.2 Net prim ary school enrollm ent rate (% of age group) Total .. 68 87 94 90 Male .. 64 87 94 91 Female .. 73 88 94 90 Access to an im proved w ater source (% of population) Total .. 90 93 91 88 Urban .. 98 99 97 96 Rural .. 71 77 73 83 Im m unization rate (% of children ages 12-23 months) Measles 51 95 95 93 82 DPT 61 86 86 92 79 Child malnutrition (% under 5 years) .. 6 5 4 25 Life expectancy at birth (years) Total 68 70 73 73 69 Male 64 66 69 70 67 Female 71 74 76 76 71 Mortality Infant (per 1,000 live births) 32 25 17 22 38 Under 5 (per 1,000) 43 31 20 26 50 Adult (15-59) Male (per 1,000 population) 237 222 202 196 197 Female (per 1,000 population) 162 127 97 107 125 Maternal (per 100,000 live births) .. .. 130 130 300 Births attended by skilled health staff (%) .. 86 96 89 69 CAS Annex B5. This table w as produced from the CMU LDB system. 4/1 04/1 1 Note: 0 or 0.0 means zero or less than half the unit show n. Net enrollment rate: break in series betw een 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months w ho received vaccinations before one year of age or at any time before the survey. 95 Annex K: Key Economic Indicators Estimate Projected Indicator 2006 2007 2008 2009 2010 2011 2012 2013 2014 National accounts (as % of GDP) Gross domestic product a 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Agriculture 8.1 7.8 7.6 7.4 7.2 7.0 6.9 6.7 6.4 Industry 33.8 33.7 34.6 34.0 33.7 32.8 32.5 32.2 34.4 Services 58.1 58.5 57.8 58.6 59.1 60.2 60.6 61.0 59.2 Total Consumption 80.5 80.2 78.9 79.4 79.9 77.1 76.2 75.7 74.6 Gross domestic fixed investment 22.4 23.0 23.4 22.7 23.2 23.9 24.6 24.8 24.1 Exports (GNFS)b 17.6 16.5 17.9 16.0 15.1 17.5 17.6 18.1 17.9 Imports (GNFS) 20.5 19.8 20.2 18.2 18.2 18.5 18.4 18.6 16.6 Gross domestic savings 19.5 19.8 21.1 20.6 20.1 22.9 23.8 24.3 25.4 c Gross national savings 20.6 20.2 20.5 20.5 20.1 21.9 22.5 22.9 21.9 Memorandum items Gross domestic product (US$ billion) 162.8 207.4 244.6 235.8 288.2 313.3 332.1 350.6 369.9 (US$ million at current prices) GNI per capita (US$, Atlas method) 3440 4060 4640 5050 5510 6060 6710 7040 7290 Real annual growth rates (%, calculated from 00 prices) Gross domestic product at market prices 6.7 6.9 3.5 1.5 4.3 4.6 4.5 4.5 4.5 Gross Domestic Income 7.8 7.6 5.8 0.2 5.3 8.3 4.7 6.2 7.6 Real annual per capita growth rates (%, calculated from 00 prices) Gross domestic product at market prices 5.3 5.6 2.3 0.2 3.1 3.4 3.3 3.2 3.3 Total consumption 4.9 5.7 2.2 0.2 3.2 2.8 3.0 3.8 2.9 Private consumption 5.1 5.9 2.2 -0.3 3.1 2.9 4.7 3.8 3.3 Balance of Payments (US$ millions) Exports (GNFS)b 28558 34213 42671 38237 45240 54924 58065 63145 66720 Merchandise FOB 23930 29381 37095 32563 39546 49909 52814 57223 59456 Imports (GNFS)b 30353 37444 44773 38500 46569 51469 54632 58518 61792 Merchandise FOB 23975 30088 36320 30510 37521 43359 46064 49304 52500 Resource balance -1795 -3231 -2101 -262 -1329 3455 3432 4627 4928 Net current transfers 4743 5216 5512 4614 4391 3987 4273 4594 4940 Current account balance -2988 -6018 -6923 -5141 -8944 -6440 -7064 -6636 -8237 Net private foreign direct investment 5558 8136 8342 4049 256 6540 7431 7116 7841 Long-term loans (net) 1248 2736 1336 1781 5509 1830 -1518 -1220 -1220 Official 869 1723 1238 1617 1053 791 616 416 -73 Private 379 1013 97 164 4455 1039 -2134 -1636 -1147 Other capital (net, incl. errors & ommissions) -3841 -9552 -5378 -2036 43 -3915 -767 -1225 -394 Change in reserves d 23 4698 2623 1347 3136 1985 1918 1965 2010 Memorandum items Resource balance (% of GDP) -1.1 -1.6 -0.9 -0.1 -0.5 1.1 1.0 1.3 1.3 Current account balance (% of GDP) -1.8 -2.9 -2.8 -2.2 -3.1 -2.1 -2.1 -1.9 -2.2 Real annual growth rates ( YR00 prices) Merchandise exports (FOB) 8.6% 6.9% 4.5% -2.2% 2.2% 3.1% 8.1% 9.9% 7.1% Merchandise imports (CIF) 20.0% 14.0% 10.5% -7.3% 14.7% 7.3% 6.6% 13.7% 7.0% (Continued) 96 Annex K: Key Economic Indicators (continued) Estimate Projected Indicator 2006 2007 2008 2009 2010 2011 2012 2013 2014 Public finance (as % of GDP at market prices)e Total revenues 27.3 27.2 26.3 26.5 24.5 25.2 25.9 25.9 25.7 Total expenditures 28.1 28.2 26.3 29.1 27.3 28.8 28.5 27.7 27.3 Statistical discrepancies -0.2 0.2 -0.3 -0.2 -0.3 0.0 0.0 0.0 0.0 Current account surplus (+) or deficit (-) -1.0 -0.8 -0.3 -2.8 -3.1 -3.5 -2.5 -1.7 -1.5 Capital expenditure 5.5 6.4 5.0 6.2 5.9 6.5 6.9 6.9 6.7 Monetary indicators M2/GDP 22.7 22.6 22.0 22.0 21.7 20.9 21.0 21.0 22.2 Growth of M2 (%) 20.2 11.9 8.5 5.9 4.3 6.8 8.1 7.5 6.9 Price indices( YR00 =100) Merchandise export price index 108.8 107.1 123.8 120.0 117.5 146.1 145.9 146.8 148.4 Merchandise import price index 102.8 97.6 100.8 103.3 95.7 100.3 100.4 96.1 87.6 Merchandise terms of trade index 105.8 109.8 122.8 116.2 122.7 145.6 145.2 152.7 169.4 Consumer price index (% change) 4.3 5.5 7.0 4.2 2.3 3.3 2.9 3.0 2.9 GDP deflator (% change) 5.8 5.0 7.8 4.2 2.4 6.9 2.9 2.7 2.3 a. GDP at factor cost b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMF resources. e. Consolidated central government. f. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation. 97 Annex L: Key Exposure Indicators Estimated Projected Indicator 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total debt outstanding and 40702 44593 46483 53535 64670 63180 66355 68931 71576 disbursed (TDO) (US$m)a Net disbursements (US$m)a 1174 3220 2342 7260.7 5357.4 4582.4 2273.1 3994.4 3258.17 Total debt service (TDS) 10520 8451 8210 8754 9455 8479 11175 9562 12413 a (US$m) Debt and debt service indicators (%) TDO/XGSb 119.8 109.9 94.4 122.6 127.7 102.8 101.6 98.3 96.5 TDO/GDP 25.0 21.5 19.0 22.7 22.6 20.2 19.9 19.5 19.2 TDS/XGS 31.0 20.8 16.7 20.0 18.7 13.8 17.1 13.6 16.7 Concessional/TDO 2.5 2.1 2.1 4.0 3.9 4.0 3.8 3.7 3.6 IBRD exposure indicators (%) IBRD DS/public DS 8.5 14.1 9.3 12.0 14.7 11.8 10.6 12.8 13.2 Preferred creditor DS/public 28.0 38.9 32.2 36.6 29.6 34.5 29.9 30.2 27.1 DS (%)c IBRD DS/XGS 1.4 1.7 0.8 1.0 1.2 0.8 0.8 0.9 1.2 IBRD TDO (US$m)d 4563 4756 5438 6570 7503 7842 8118 8242 8190 Of which present value of guarantees (US$m) Share of IBRD portfolio (%) 4 4 5 6 7 8 8 8 7 IDA TDO (US$m)d 3 2 2 1 0 0 0 0 0 a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net short- term capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. 98 Annex M: Operations Portfolio (IBRD/IDA and Grants) IBRD/IDA Total Disbursed (Active) 1,294.00 of w hich has been repaid 34.12 Total Disbursed (Closed) 6,175.92 of w hich has been repaid 2,260.08 Total Disbursed (Active + Closed) 7,469.92 of w hich has been repaid 2,294.20 Total Undisbursed (Active) 741.38 Active Projects Difference Between Last PSR Expected and Actual Supervision Rating Original Amount in US$ Millions Disbursements Development Implementation Project ID Project Name Fiscal Year IBRD IDA GRANT Cancel. Undisb. Orig. Frm Rev'd Objectives Progress P074726 Bogota Urban Services Project S HS 2003 130 26.6 -3.42 26.5 P051306 Peace and Development I S MS 2004 37.8 0.12 3.6 -3.03 -3 P082466 Integrated Mass Transit Systems HS S 2004 757 0.24 2.4 -504.35 P082167 Agricultural Transition Project MS MS 2005 30 0.3 0.27 P082429 Disaster Vulnerability Reduction S S 2005 260 150 22.5 158.97 21.36 P083075 GEF Integrated National Adaptation S S 2006 5.4 0.1 0.1265 P091932 GEF National Protected Areas S S 2006 15 4.3 3.86 P082520 Sustainable Development Inv S S 2006 7 0.3 0.29 P085727 Disaster Vulnerability Reduct. II HS MS 2006 80 2.44 39.6 42 42.05 P096965 La Guajira Water and Sanit. MU MU 2007 90 80.0 80 P082908 Rural Education APL II MS MS 2008 40 31.0 20.78 P052608 Antioquia Secondary Education S S 2008 20 13.9 11.1 P105164 Second Student Loan Support S S 2008 300 126.9 126.9 51.98 P104567 Second Rural Productive Partnerships MS MS 2008 30 12.2 -1.99 P099139 Strength. Public Info, M&E for Res. Mgmt. S S 2009 8.5 5.0 2.11 P083904 Justice Services Strenghtening MS MS 2010 20 19.0 3.45 P106628 Consolidation of Nat. Publ Mgmt Inf. MS MS 2010 25 14.5 -0.8255 P104687 GEF Mainstreaming Sust. Cattle Ranching S MS 2010 7 6.3 P101279 Solid Waste Management Program MU MU 2010 20 18.0 5.66 P117590 Science Technology & Innovation S S 2011 25 25.0 P111479 Rio Bogota Environ Infrastructure S S 2011 250 250.0 P110671 National Macroproyectos Social Interest S S 2011 40 40.0 Overall Result 2170.3 27.4 153 741.4 -88.7 86.28 99 Annex N: Trust Funds Overview Grant Grant Program Fund Trust Fund Name Amount Closing US (000) date IDF TF058311 Strenghening of the Legal Claims System 479 9/27/2010 PSIA TF097240 Colombian Labor Markets: Reforming the Cajas de Compensación Familiar (CCFs) 25 12/31/2010 PHRD TF056577 San Nicolas Carbon Sink 498 4/5/2011 DFSG TF096995 Contribution to shared growth of existing instruments to promote public support for commercial innovation 60 4/30/2011 SFLAC TF096162 Advisory Services for the Formulation of Integrated Public Transport Regulatory Frameworks 390 5/31/2011 GFDRR TF096323 Barranquilla- Preparation for integrated urban flood prevention investment project 150 6/22/2011 AHI TF098473 Avian Flu Prevention and Early Response Project 890 6/30/2011 GENTF TF095198 Gender and IDPs: Integrating Gender into Peace and Development 100 6/30/2011 GFDRR TF096324 CAPRA 500 6/30/2011 WPP TF096847 Training Program for Water Resources Management Modeling in Colombia 53 6/30/2011 JSDF TF057249 Innovative Arts-Based Education for Displaced People in Cartagena 1085 6/30/2011 PPAIF TF074726 Metro Study, Integration Public Transit Syst., SNTA (3 cities), and Comm. Campaign BRT 75 6/30/2011 GFDRR TF091242 Risk Modeling for Hazard and Risk Management - Experience of Bogota: Apllication Reference Book 100 6/30/2011 IFC TF093390 Trade Logistics Advisory Program 210 6/30/2011 FS-CO TF094084 Conservation Incentives for Land Management 6425 10/18/2011 GEFIA TF056351 National Protected Areas 15000 10/18/2011 SFLAC TF096015 Preparation for Barranquilla Flood Management Project 725 11/1/2011 SFLAC TF096784 Supervision Funds for the Preparation of the Barranquilla Management Flood Project 36 11/1/2011 GEFIA TF056350 National Adaptation to Climate Change 5400 12/31/2011 SFLAC TF098916 Colombia Low-Carbon Study 400 12/31/2011 PSIA TF098305 National Job Formation System 25 12/31/2011 IDF TF092702 Strengthening of the Procurement System 365 1/15/2012 PPIAF TF099124 PPIAF-Support to Concession Agency (INCO) 249 2/28/2012 FLIT TF097524 Financial Capabilities and Education Measurement Project 200 2/28/2012 PHRD TF093087 Jepirachi Wind Farm Offset 675 3/30/2012 GPF TF096676 W2-Citizen´s Visible Audits to Improve Public Investment Transparency and Accountability 700 3/30/2012 NTF TF096627 Strengthening Human Rights and Rights to Basic Social Services in Peace and Development Zones 400 3/31/2012 JSDF TF091174 Institutional and Community Strengthening for Local Governance 1588 6/24/2012 CITIES TF098963 Cities Alliance - Macroproyectos de Interes Social Nacional 215 6/29/2012 GFDRR TF098966 Disaster Risk Management Analysis (CCDRMA) 100 6/29/2012 FCPFR TF097224 FCPF Readiness Grant 200 6/30/2012 NTF TF096788 Implementing the Right to Health through Universal Health Insurance in Colombia 400 6/30/2012 IFC TF093766 Strengthening Social Accountability to Improve Impact of Royalties in Colombia 250 6/30/2012 GFDRR TF096953 Pilot Impact Evaluation Pereira BRTs 20 6/30/2012 JSDF TF091176 Peaceful Dispute Resolution Services for the Poor 1900 9/4/2012 SPBF TF094596 Protection of Land and Patrimony of Internally Displaced Persons - Phase III 5000 10/29/2012 SFLAC TF097840 Institutional Strengthening and Capacity Building to Support the Rio Bogota Environmental 200 12/28/2012 CF TF053534 Rio Amoya Enviromental Services 9400 12/30/2012 IFC TF095026 Extractive Industries Royalty Management 230 12/31/2012 JSDF TF093829 Empowering Young Women Affected by Violence in Colombia 1483 6/11/2013 SFLAC TF097348 Environmental System and Enhancing Sustainability in Water Resources and Air Quality Management 750 7/15/2013 JSDF TF099171 Soccer Together: Rethinking how to Improve Gender Equity and Inclusion in the Education System 1900 3/31/2014 JSDF TF093141 Access to Opportunities for Young People in Colombia 1734 7/28/2014 GEFIA TF096465 Mainstreaming Sustainable Cattle Ranching Project 7000 9/23/2015 CF TF054033 Rio Frio Waste Management 100 12/31/2016 CF TF090526 San Nicolas Carbon Sink and Arboreal Species Recovery 486 12/31/2018 68,171 100 Annex O: IFC Committed and Disbursed Outstanding Investment Portfolio 101 IBRD 33388R 75°W 70°W Puerto Bolívar C a r i bb e an S e a J IR A Ríohacha UA G To Santa Marta LA Maracaibo Barranquilla Pico Cristóbal Colón AT L Á N T I C O (5,775 m) COLOMBIA A Cartegena Valledupar N LE DA 10°N Maganqué CESAR Lago de AG Maracaibo M Sincelejo PA NA El Baneo SU SU Monteria M C CR AR Acandí NORTE DE E E Ocaña A SANTANDER LÍV Turbo A D OB To R.B. DE BO ÓR Mérida Cúcuta C VENEZUELA uca To Ca Cord C d Guasdualito Bucaramanga Yarumal le na Arauca iller da Socorro ANTIOQUIA Ma g ARAUCA CÁ Atra r ER a O AND Casanare PAC IF IC SANT to YA Occi Medellin Puerto BO Carreño OC E AN d i dental Quibdo Chiquinquirá Puerto S CASANARE CHOCÓ LDA Tunja Nueva CA Manizales CUNDINA- Yopal 5°N RISARALDÁ Santa Rita 5°N Cartago Pereira MARCA BOGOTÁ VICHADA Atacavi ta Armenia Me QUINDIO tal San Pedro Gaviotas Ibaque Giradot en Villavincencio Chaviva Vich a da ri al M A a O DISTRITO Buenaventura Buga ntr VALLE DEL LI Puerto TO Palmira Inirída Ce er CAPITAL ill CAUCA Cali M E TA rd a San Juan er Co de Arama ill Neiva Guaviare GUAINÍA rd CAUCA HULA Mapiripana Tabaquén Co San José Guapí Popayan del Guaviare Brujas San Vicente Garzon del Caguán Calamar Patía Tumaco Neg Florencia G U AV I A R E NARIÑO ro San Rafael Miraflores Mitu Pasto Cagu Mocoa Vau pés án Yavarate To Ipiales PUTUM CAQUETÁ VA U P É S Puerto AY Ibarra Asis O Macujer Puerto Huitoto 0°N Puerto 0°N Leguízamo Puerto Lérida E C U A DOR Pizarro Caq u etá Puerto Santander Locas de Ptu Cahuinari ma y CO LOMB I A o La Pedrera AMAZONAS El Encanto SELECTED CITIES AND TOWNS BRAZI L DEPARTMENT CAPITALS NATIONAL CAPITAL PERU RIVERS This map was produced by the Map Design Unit of The World Bank. The boundaries, MAIN ROADS 0 80 160 240 320 Kilometers colors, denominations and any other information shown RAILROADS on this map do not imply, on Leticia the part of The World Bank 0 40 80 120 160 200 Miles Group, any judgment on the DEPARTMENT BOUNDARIES legal status of any territory, or any endorsement or INTERNATIONAL BOUNDARIES acceptance of such 75°W 70°W boundaries. FEBRUARY 2009