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Document of
The World Bank
Report No: ICR00002888
IMPLEMENTATION COMPLETION AND RESULTS REPORT
(TF-91192)
ON
A MULTI-DONOR TRUST FUND GRANT
IN THE AMOUNT OF US$8.00 MILLION
TO THE
LAO PEOPLE’S DEMOCRATIC REPUBLIC
FOR A
PUBLIC FINANCIAL MANAGEMENT STRENGTHENING PROGRAM
February 28, 2014
Poverty Reduction and Economic Management Department
Southeast Asia Country Department
East Asia and Pacific Region
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CURRENCY EQUIVALENTS
(Exchange Rate Effective as of February 2014)
Currency Unit = Lao Kip
1.00 Kip = US$ 0.0001245
US$ 1.00 = 8030.55 Kip
FISCAL YEAR
October 1 – September 30
ABBREVIATIONS AND ACRONYMS
ADB Asian Development Bank NGPES National Growth and Poverty Eradication
Strategy
ASEAN Association of Southeast Asian Nations NSEDP National Socio-Economic Development Plan
BOL Bank of Lao People’s Democratic Republic NT2 Nam Theun 2 Hydroelectric Project
CAS Country Assistance Strategy OM Operations Manual (Project)
DMFAS Debt Management and Financial Analysis
System
PER Public Expenditure Review
EFRD External Finance Relations Department PFMSP Public Financial Management Strengthening
Program
EU European Union PFMSU Public Financial Management Strengthening Unit
FA Financing Agreement PFMSP-
MU
Public Financial Management Strengthening
Program - Management Unit
FM Financial Management PCU Project Coordination Unit
FMCBP Financial Management Capacity Building
Project
PRGF Poverty Reduction and Growth Facility
FMR Financial Management Report PrMO Procurement Monitoring Office
FSS Financial Sector Strategy PRSC Poverty Reduction Support Operation
GFIS Government Financial Information System SAO State Audit Organization
IDA International Development Association SDC Swiss Development Corporation
IMF International Monetary Fund SIDA Swedish International Development Agency
KPI Key Performance Indicator TM Task Manager
MDGs Millennium Development Goals UNDP United Nations Development Programme
MIS Management Information System VAT Value-added Tax
MOF Ministry of Finance
Vice President: Axel van Trotsenburg
Country Director: Ulrich Zachau
Sector Director: Sudhir Shetty
Country Manager: Keiko Miwa
Sector Manager: Mathew Verghis
Project Team Leader: Saysanith Vongviengkham
LAO PEOPLE’S DEMOCRATIC REPUBLIC
Public Financial Management Strengthening Program
Multi-Donor Trust Fund
CONTENTS
Data Sheet
A. Basic Information
B. Key Dates
C. Ratings Summary
D. Sector and Theme Codes
E. Bank Staff
F. Results Framework Analysis
G. Ratings of Project Performance in ISRs
H. Restructuring
I. Disbursement Graph
Implementation Completion and Results Report
1. Project Context, Development Objectives and Design ............................................... 1
2. Key Factors Affecting Implementation and Outcomes .............................................. 7
3. Assessment of Outcomes ...................................................................... 17
4. Assessment of Risk to Development Outcome ......................................................... 22
5. Assessment of Bank and Borrower Performance ..................................................... 22
6. Lessons Learned ....................................................................................................... 24
7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 26
Annex 1. Project Costs and Financing .......................................................................... 27
Annex 2. Outputs by Component ................................................................................. 28
Annex 3. Economic and Financial Analysis ................................................................. 35
Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 36
Annex 5. Beneficiary Survey Results ........................................................................... 37
Annex 6. Stakeholder Workshop Report and Results ................................................... 38
Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 39
Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 41
Annex 9. List of Supporting Documents ...................................................................... 45
MAP
i
A. Basic Information
Country: Lao People's Democratic
Republic Project Name:
Public Finance
Management
Strengthening Program
MDTF
Project ID: P108787 L/C/TF Number(s): TF-91192
ICR Date: 01/23/2014 ICR Type: Core ICR
Lending Instrument: TAL Grantee:
LAO PEOPLES
DEMOCRATIC
REPUBLIC
Original Total
Commitment: USD 3.86M Disbursed Amount: USD 5.19M
Revised Amount: USD 5.19M
Environmental Category: C
Implementing Agencies:
Ministry of Finance
Cofinanciers and Other External Partners: Swedish International Development Agency (SIDA) Australian Agency for International Development European Union Delegation
Swiss Development Corporation
B. Key Dates
Process Date Process Original Date Revised / Actual
Date(s)
Concept Review: 12/14/2007 Effectiveness: 01/09/2009 01/09/2009
Appraisal: 06/18/2008 Restructuring(s):
02/29/2012
03/31/2012
03/31/2013
08/31/2013
Approval: 11/15/2007 Mid-term Review: 11/15/2010 11/15/2010
Closing: 10/31/2011 08/31/2013
C. Ratings Summary
C.1 Performance Rating by ICR
Outcomes: Moderately Unsatisfactory
Risk to Development Outcome: High
Bank Performance: Moderately Satisfactory
Grantee Performance: Moderately Unsatisfactory
ii
C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)
Bank Ratings Borrower Ratings
Quality at Entry: Moderately
Satisfactory Government: Moderately Satisfactory
Quality of Supervision: Moderately
Satisfactory
Implementing
Agency/Agencies: Moderately Unsatisfactory
Overall Bank
Performance:
Moderately
Satisfactory
Overall Borrower
Performance: Moderately Unsatisfactory
C.3 Quality at Entry and Implementation Performance Indicators
Implementation
Performance Indicators
QAG Assessments (if
any) Rating
Potential Problem Project
at any time (Yes/No): No
Quality at Entry
(QEA): None
Problem Project at any time
(Yes/No): Yes
Quality of Supervision
(QSA): None
DO rating before
Closing/Inactive status:
Moderately
Satisfactory
D. Sector and Theme Codes
Original Actual
Sector Code (as % of total Bank financing)
Central government administration 30 30
General public administration sector 40 40
Sub-national government administration 30 30
Theme Code (as % of total Bank financing)
Public expenditure, financial management and procurement 100 100
E. Bank Staff
Positions At ICR At Approval
Vice President: Axel van Trotsenburg James W. Adams
Country Director: Ulrich Zachau Annette Dixon
Sector Manager: Mathew A. Verghis Mathew A. Verghis
Project Team Leader: Saysanith Vongviengkham Saiyed Shabih Ali Mohib
ICR Team Leader: Saysanith Vongviengkham
ICR Primary Author:
iii
F. Results Framework Analysis
Project Development Objectives (from Project Appraisal Document) The overall objective of the proposed Trust Fund is to support the Government of the Lao PDR to
enhance public sector effectiveness to improve the socio-economic development of its population. The
purpose of the proposed activities is to improve the effectiveness of public finance management in Lao
PDR through support to the Government's Public Financial Management Strengthening Program.
Revised Project Development Objectives (as approved by original approving authority) There was no revision of the PDO
(a) PDO Indicator(s)
Indicator Baseline Value
Original Target
Values (from
approval
documents)
Formally
Revised
Target Values
Actual Value
Achieved at
Completion1 or
Target Years
Indicator 1 : Improved Macro-Fiscal Discipline
Value
quantitative or
qualitative)
PEFA Score: 2.75 3.0
2.75 (Not Achieved)
PI-1: B (FY09/10 = 7.9%,
FY10/11 = 6.6% and
FY11/12 = 8.1%)
PI-11: C+
Date achieved 06/30/2009 10/31/2013 08/31/2013
Comments
(incl. %
achievement)
There has been limited progress on the budget deviation and the budget calendar
defined in the budget law has not been strictly observed.
Indicator 2 : Improved Financial Management and Control
Value
quantitative or
qualitative)
PEFA Score: 1.6 2.5
2.16 (Partially Achieved)
PI-17: 2.5 (C+)
PI-24: 2.5 (C+)
PI-25: 1.5 (D+)
Date achieved 06/30/2009 10/31/2013 08/31/2013
Comments
(incl. %
achievement)
There has been good progress in the areas of cash and debt management, the
publication of the in-year budget report and the financial statements and audit, but the
achievements are lower than the target.
Indicator 3 : Improved revenue management and control
Value
quantitative or
Qualitative)
PEFA Score: C B C+ (Not achieved)
PI-14: (i: C, ii: B and iii:
C)
Date achieved 06/30/2009 10/31/2013 08/31/2013
Comments
(incl. %
achievement)
While there has been a good progress in centralizing the tax registration, the tax
assessment has made a limited improvement.
1 The Team applied the PEFA methodology to do the assessment based on team’s knowledge and information
available because the formal 2nd
PEFA assessment has been planned for the end of 2014.
iv
Indicator 4 : Improved sectoral and local allocations and management
Value
quantitative or
Qualitative)
PEFA Score: D C C (Achieved)
PI-8: C (i: C, ii: D and iii:
B:
Date achieved 06/30/2009 08/31/2013
Comments
(incl. %
achievement)
At the end of 2013, there were 9,452 tax payers registered, of which 6,700 tax payers were VAT payers.
Note: For averaging purpose, a numerical value is assigned to a PEFA score: a score A is
equivalent to 4; B+ is 3.5; B is 3; C+ is 2.5; C is 2; D+ is 1.5 and D is 1.
(b) Intermediate Outcome Indicator(s)
Indicator Baseline Value
Original Target
Values (from
approval
documents)
Formally
Revised Target
Values
Actual Value
Achieved at
Completion or
Target Years
Indicator 1 :
Stability and credibility of the budget (PEFA-PI-1)
Reliable Aggregate Expenditure Control: Deviation of Outturn to budget (budget
outturn is close to budget plan)
Value
(quantitative
or Qualitative)
13.8 percent 5-10 percent (by
2013) None
Achieved:
8.1% (FY11/12, the latest
outturn available; and
FY09/10 = 7.9%,
FY10/11 = 6.6%)
Date achieved 06/30/2009 10/31/2013 08/31/2013
Comments
(incl. %
achievement)
Annex II recorded 8.1 percent for FY2011/12
Indicator 2 :
Orderliness and participation in the annual budget process
Budget Process Becomes More Orderly – providing adequate time for key stakeholders
to participate:
Annual Budget Calendar is adhered to and Budget Ceilings are issued to ensure an
orderly budget process
Value
(quantitative
or Qualitative)
Budget Calendar exists but
not followed rigorously, so
no budget circular was
issued
Stable Budget
Calendar and
Budget Ceilings are
issued
Partially Achieved: Budget Circular
issued in March 2012
for FY2012-13
Date achieved 06/30/2009 10/31/2013 08/31/2013
Comments
(incl. %
achievement)
Budget Circular for FY2012-13 was issued one month earlier than previous fiscal year.
Budget Circular for FY2012-13 instructed ministries and provinces to include technical
revenue in the budget and revenue-collecting agencies to break down non-resource and
resource revenue (i.e. mining and hydropower separately. No ceilings were issued yet.
Indicator 3 :
Recording and Management of Cash Balances, Debt and Guarantee.
Cash is actively managed to ensure it is available to support expenditures and to reduce
borrowing costs:
Technical revenue bank accounts are consolidated into Treasury and Treasury Single
Account (TSA) Framework is fully implemented to allow for more active cash
management.
v
Value
(quantitative
or Qualitative)
Debt data lack accuracy;
spending unit accounts not
consolidated into Treasury;
lending by BOL and
provincial debt guaranteed
outside budget framework
Completion of the
consolidation of
technical revenue
accounts into
Treasury and TSA is
rolled out to
commercial banks
Partially Achieved (Please refer to
comments below)
Date achieved 06/30/2009 10/31/2013 08/31/2013
Comments
(incl. %
achievement)
Technical revenue bank account consolidation is progressing well at the time of the ICR
preparation. TSA has been implemented at BOL and its branches, and all state-owned
commercial banks (LDB, APB and BCEL) was completed in 2013.
Indicator 4 :
Improved Budget Execution Reporting:
Quality and timeliness of in-year budget execution reports.
Improved quality of in-year budget execution report through expanded coverage (to
include all technical revenue) and utilization of upgraded GFIS
Value
(quantitative
or Qualitative)
Budget execution report
coverage was not completed
and no report on
expenditure financed by
technical revenue.
Upgraded GFIS is yet to be
put into operation.
Budget execution
report coverage will
include all technical
revenue and full
utilization of GFIS
Partially Achieved (Please refer to
comments below)
Date achieved 06/30/2009 09/30/2013 08/31/2013
Comments
(incl. %
achievement)
By end of September2013 the balance of technical revenue accounts outside the
National Treasury (NT) had yet to be reduced from 75 billion Kip to 35 billion Kip, and
for FY2012/2013, the amount of technical revenue brought onto the budget has
increased slightly. At the central level, the number of bank accounts at the commercial
banks reduced from 251 in FY2011/12 to 216 in FY2012/2013; whereas the number of
accounts opened at the NT increased from 324 in FY2011/12 to 411 in FY2012/2013.
At the local level, the review shows that there were still 352 accounts of the budget
units at the commercials banks, of which 289 are still active; while the number of
accounts opened at the NT increased from 359 in FY2011/12 to 1,397 in FY2012/2013,
and the amount of deposits increased from 68 billion kip in FY2011/12 to 185 billion
kip in FY2012/2013. The GFIS was now used by all central agencies and provinces; the
system was rolled out to a number of tier-2 agencies of MOE and MOH, and is planned
to be rolled out to MOAF and MPWT in 2014.
Indicator 5 :
Improved Budget Execution Reporting:
Quality and Timeliness of Annual Financial Statements:
Improved quality of annual financial statements through enhanced completeness and
accounting standard disclosure.
Value
(quantitative
or Qualitative)
Incomplete coverage and
non-compliant with IPSAS
Financial statement
will include revenue
and expenditure
from charges for
services and the
IPSAS is adopted
for phased
implementation
Not Achieved (Please see
comments below)
Date achieved 06/30/2009 09/30/2013 08/31/2013
vi
Comments
(incl. %
achievement)
With an IMF TA, work had begun on designing the future IP-SAS-compliant financial
reporting framework for the public sector at the national and sub-national levels, but
there was some uncertainty with continuing funding sources.
Indicator 6 : Improved transparency of inter-governmental fiscal relations:
Budget Allocation Norms are developed to guide the budget preparation process.
Value
(quantitative
or Qualitative)
Budget allocation to
provinces and districts is
not based on transparent
rules
Non-wage recurrent
budgeted norms for
at least education
and health sectors
and capital budget
norms are in
operation. Work
underway to
develop non-wage
recurrent budget
norm for other
sectors
Partially Achieved (Please see
comments below)
Date achieved 06/30/2009 09/30/2013 08/31/2013
Comments
(incl. %
achievement)
There had been no formal issuance of budget allocation norms. However, the MOF
reported that some allocation norms for the education sector, based on the ESDF, were
used in allocating the education budget. In addition, from 2011‒12, the government has
implemented a school block grant scheme to channel the resources directly to the
primary schools’ one-per-student formula.
Indicator 7 :
Effective Tax Registration and Tax Assessment
Enhanced tax payer registration: Taxpayers are properly identified and registered with
the tax authorities through the number of tax payers registered with the Tax IT system
(Lao TIS)
Value
(quantitative
or Qualitative)
No unique TIN exists. Lao
TIS under development for
VAT taxpayer registration
4,000 VAT
taxpayers are
registered
Achieved 9,452 (Aug 2013)
Date achieved 30/06/2009 10/31/2013 08/31/2013
Comments
(incl. %
achievement)
At the end of August 2013, there were 9,452 tax payers registered, of which 6,700 tax
payers were VAT payers.
G. Ratings of Project Performance in ISRs
No. Date ISR
Archived DO IP
Actual Disbursements
(USD millions)
1 07/08/2009 Satisfactory Moderately Satisfactory 0.15
2 06/27/2010 Moderately Satisfactory Moderately Unsatisfactory 0.53
3 10/05/2011 Satisfactory Moderately Satisfactory 1.93
4 03/11/2012 Satisfactory Moderately Satisfactory 2.50
5 10/10/2012 Satisfactory Moderately Satisfactory 3.69
6 05/17/2013 Moderately Satisfactory Moderately Satisfactory 4.47
vii
H. Restructuring (if any)
Restructuring
Date(s)
Board
Approved PDO
Change
ISR Ratings at
Restructuring
Amount
Disbursed at
Restructuring
in USD millions
Reason for Restructuring & Key
Changes Made DO IP
02/29/2012 S MS 2.50
03/31/2012 S MS 2.63
03/31/2013 S MS 4.42
08/31/2013 MS MS 4.96
I. Disbursement Profile
1
1. Project Context, Development Objectives and Design
1.1 Context at Appraisal
1. In the late 1990s, the Lao People’s Democratic Republic (Lao PDR) suffered
from the adverse economic effects of the Asian financial crisis—slowing GDP growth;
falling value of the national currency (the Kip); and triple-digit inflation—along with a
weakening effort in domestic reforms and macroeconomic management. Following a
series of partial and ad hoc, but largely unsuccessful responses to halt the country’s
economic deterioration, in 2000, the government renewed its effort to restore economic
stability and reduce poverty through a 5-Year Plan and an Interim Poverty Reduction
Strategy Paper (I-PRSP). 2 With these, the Lao government launched a program of
structural reforms that aimed to: strengthen macroeconomic stability; reduce the drain on
public resources by the state-owned banking and enterprise sectors; attract private
investment; and increase budgetary and financial transparency.
One of the main foci of the reform program was to increase the efficiency of the public
sector to lead the reform program. Public sector effectiveness was to be enhanced
through policies and actions aimed at reforms towards transparent and efficient public
financial management in both expenditures and revenues. The implementation of these
policies and actions, in turn, required significant human and institutional capacity
development and building of a successful and sustainable reform program. With
inadequate human resources and constraints in the public sector, the strategy of the Lao
authorities was to assign priority to sustained human resource development and capacity
building activities to assure effective management of its reform program.
2. The Public Financial Management Strengthening Program (PFMSP), officially
adopted in November 2005 as a medium-to-long-term program, was one of the important
elements of the Lao government’s long-term framework for public finance reform. The
PFMSP was intended as the main vehicle to implement government policies and
strategies laid out in a 2003 policy paper on governance, the 2004 National Growth and
Poverty Eradication Strategy (NGPES), and the sixth National Socio-Economic
Development Program 2006–2010 (NSEDP).3 As such, the PFMSP sought to improve
consistency, efficiency, transparency, and accountability in public expenditure policy and
management, as well as revenue collection. Under the PFMSP umbrella, all elements of
the revised Budget Law, promulgated in February 2007, and the Nam Theun 2 Revenue
Management Arrangements were to be operationalized. The PFMSP focused on
strengthening the management system of the Ministry of Finance (MOF) and the capacity
of its staff, and through pilot interventions at the provincial and sector levels, improve the
management systems and staff in provincial finance departments.
2 These documents were discussed by the World Bank’s Board on April 24, 2001 (IDA/SecM/0216).
3 Lao PDR. “Priority Areas for Governance Reform: Public Service Reform, People’s Participation, Rule
of Law and Sound Financial Management ‒ A Policy Paper of the Government of Lao PDR on Governance
Issues,” Round Table Process, Vientiane, Lao PDR, March 2003; Lao PDR, National Growth and Poverty
Eradication Strategy (NGPES), Vientiane, 2004; Lao PDR, Sixth National Socio-Economic Development
Plan 2006–2010, Vientiane, 2010.
2
3. In accord with the PFMSP, in 2007, the World Bank’s Country Assistance
Strategy (CAS) called for reforms to achieve better management of public resources.4
Since the reforms envisaged under the PFMSP were consistent with the strategies and
outcomes of the World Bank, as well as those of a number of other development partners,
and better aligning donor support was also a priority in the Lao PDR, the Bank led the
establishment of a 4-year Multi-Donor Trust Fund (MDTF) to support the PFMSP. The
PFMSP-MDTF, which was governed by the principles of government ownership, policy
engagement, institutional development, accountability, transparency, donor coordination,
and participation, was intended to support critical interventions at all stages of the
PFMSP by providing quick and flexible access to technical assistance (TA).
1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)
4. The overall objective of the Trust Fund, as stated in both the Project Appraisal
Document (PAD) and the Grant Agreement, was to support the Government of Lao
PDR’s efforts to enhance public sector effectiveness to improve socio-economic
development for the country’s population. The indicators set for measuring the success of
the PFMSP-MDTF were as follows: (i) improved macro-fiscal discipline and
management; (ii) improved financial management and control; (iii) improved revenue
management and control, and (iv) improved sectoral and local allocation and
management. Through support for these four objectives, the PFMSP-MDTF aimed to be
an effective instrument for supporting the government in formulating reform policies and
measures that improved policy consistency, efficiency, transparency, and accountability,
both in public expenditures and revenue management. The MDTF aimed to strengthen
institutional systems and staff capacity, while making progress towards appropriate
international financial management standards and effective utilization of donor assistance.
5. Concerning the key indicators listed above, the PAD noted that “The PFMSP will
have its own monitoring results framework that will incorporate some of the key and
relevant indicators of the Public Expenditure Financial Accountability (PEFA)
framework. It is expected that the detailed monitoring and evaluation arrangements
(including indicators, benchmarks and target values) for [the] PFMSP will be delivered as
the first key output under the MDTF.” However, due to a considerable time lag in
implementation of the PFMSP-MDTF, no clear results framework was constructed,
despite the need to move ahead on this activity. Given the absence of the formal results
framework, and the need to proceed with monitoring and evaluation activities, Bank staff
developed a list of relevant indicators based on the PEFA which were as follows:
Stability and credibility of the budget;
Transparency of inter-governmental fiscal relations;
Orderliness and participation in the annual budget process;
4 World Bank, Country Assistance Strategy Progress Report, Report No. 39688-LA, May 2007.
3
Recording and management of cash balances, debt and guarantees;
Quality and timeliness of in-year budget execution reports;
Tax registration and tax assessment to be effective;
Quality and timeliness of annual financial statements
6. The Restructuring Paper of March 21, 2012 listed the following agreed outcomes:
Improved consistency between government development priorities and activities;
Improved efficiency in public financial management;
Improved transparency and accountability in public finance management;
Strengthened institutional financial management standards applied; and
Prioritized and sequenced government’s initiative in strengthening public
financial management.
The intermediate results indicators established by World Bank staff were derived from
the above key outcomes as follows:
Budget allocation norms developed to guide the budget preparation process;
Taxpayers are properly identified and registered with the tax authorities [as
measured] through the number of tax payers registered with the Tax IT
[information technology] system or the Lao TIS [tax information system];
Deviation of outturn to the budget;
Annual budget calendar is adhered to and budget ceilings are issued to ensure an
orderly budget process;
Technical revenue bank accounts are consolidated into [the] Treasury and [the]
Treasury Single Account Framework is fully implemented to allow for more
active cash management;
Improved quality of [the] in-year budget execution report through expanded
coverage (to include all technical revenue) and utilization of [the] upgraded
government financial information system (GFIS);
Improved quality of annual financial statements through enhanced completeness
and accounting standard disclosure.
1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and
reasons/justification
7. The PDO was not revised during the life of the project. 5 However there were four
restructurings of the project which also involved four extensions of the project’s closing
5 While the Restructuring Paper (RP) of March 21, 2012 stated that the PDO has not changed and cited the
PDO from the PAD, the wording in the RP is slightly different as shown in its Annex 2: “To improve the
effectiveness of public finance management in Lao PDR through support to the Government’s Public
Financial Management Strengthening Program. The ultimate goal[s] of the PFMSP are: improved policy
consistency, efficiency, transparency and accountability in public expenditure and revenue management by
strengthening institutional systems and capacity and making progress towards appropriate international
financial management standards and effective use of foreign financing. [The] MDTF will contribute to
progress in four outcome areas of the PFMSP (improved macro-fiscal discipline and management;
4
date, additional funding from donors, and transfers of funds between components and
sub-components (Section 1.7).
8. The final PDO Indicators, based on the PEFA paper, were agreed as follows:
Stability and credibility of the budget (PEFA-PI-1);
Transparency of inter-governmental fiscal relations (PEFA-PI-8);
Orderliness and participation on the annual review budget process (PEFA-PI-11);
Tax registration and tax assessment is effective (PEFA-PI-14);
Recording and management of cash balance, debt, and guarantee (PEFA-PI-17);
Quality and timeliness of in-year budget execution reports (PEFA-PI-24;
Quality and timeliness of annual financial statements (PEFA-PI-25).
9. The intermediate results indicators were based on the key indicators for the PDO
but were not subsequently changed (Para No. 7).
1.4 Main Beneficiaries,
10. The targeted institutions for the PFMSP included the Ministry of Finance (MOF)
and its selected departments (listed below), the State Audit Organization (SAO, formerly
the National Audit Office), the Ministry of Education, and the National Assembly.
Within the MOF, specific beneficiary departments included: the Fiscal Policy
Department, Budget Department, National Treasury, Tax Department, Personnel
Department, Accounting Department, State Asset Management Department, External
Finance Department, Customs Department, SOE Financial Management Department,
Cabinet, Financial Information Technology Center (FITC), Procurement Monitoring
Office (PrMO) and provincial and district finance departments. Under the restructured
project, the beneficiaries were the same group. The interventions were expected to help
strengthen relations between these ministries and agencies and their respective
departments, as well as assist with more efficient policy implementation in public finance
management.
1.5 Original Components (as approved)
11. The program to support the PFMSP consisted of six original components. Taken
together, they would contribute to bolstering the effectiveness of the public sector in its
responsibility for better management of public resources, both in its revenue and
spending authorities: 6
A. Revenue sharing, fiscal planning and budget preparation;
B. Treasury centralization, budget execution, accounting, and financial reporting;
improved financial management and control; improved revenue management and control and improved
sectoral and local allocation and management) which are critical to achieving the goal of the PFM reform.”
6 World Bank, Program Appraisal Document for the PFMSP, April 8, 2008, p. 4.
5
C. Revenue policy and administration;
D. Local government financial management;
E. Financial legislation and regulatory framework; and
F. Human resource and capacity development.
1.6 Revised Components
12. One new component was added at the third restructuring of the project following
the Mid-Term Review of the PFMSP-MDTF in November 2010: External Budget and
Financial Oversight and Audit. Participants at the Mid-Term Review agreed that this
component constituted an important element of the PFM system. As a recipient-executed
project, the restructuring was approved at the Regional Vice President-level in the Bank.
13. The revised list of components is as follows: 7
A. Revenue sharing, fiscal planning and budget preparation;
B. Treasury centralization, budget execution, accounting, and financial reporting;
C. Revenue policy and administration;
D. Local government financial management;
E. Financial legislation and regulatory framework;
F. Human resource and capacity development, and
G. External budget and financial oversight and audit.
1.7 Other significant changes
14. As noted earlier, the project was extended four times during its life. The project’s
closing date, which was originally on October 30, 2011, was extended to August 31, 2013.
15. The first restructuring (October 31, 2011 to February 29, 2012) was to (i) allow
the government to continue with the activities in order to complete them as called for in
the work plan, and (ii) accommodate the donors in extending the bilateral agreement with
the government and disburse their contributions to the parent trust fund account.8 The
second restructuring (February 29 to March 31, 2012) was necessary to allow for
continued support to the program, while providing additional time to complete the
Amendments to the Administrative Arrangements with all the donors to the PFMSP-
MDTF. 9 The third restructuring of the PFMSP Grant Agreement was subsequently
needed to extend the closing date for the PFMSP Grant Agreement from March 31, 2012
to March 31, 2013, upon agreement from two donors supporting the program.10 This
restructuring allowed the government to:
7 World Bank, Mid-Term Review, November 2010.
8 World Bank, Restructuring Paper for the PFMSP-MDTF, October 6, 2011.
9 World Bank, Restructuring Paper for the PFMSP-MDTF, February 24, 2012.
10 World Bank, Restructuring Paper for the PFMSP-MDTF, March 21, 2012.
6
Align the amount of the grant agreement with the resources available in the
MDTF, following full disbursement of donors’ commitments;
Allow donors to disburse their respective remaining commitments to the MDTF;
Complete critical activities under the program;
Provide continued support to the PFMSP 2011‒2015, with an additional
component—external budget and financial oversight and audit; and
Update allocation to the disbursement categories and the detailed financing plan
by subcomponent, to reflect the extended timeline and the revised amount for the
Grant Agreement, and to include the updated results matrix and program
indicators.
In addition, the results framework, which was endorsed by the MTR in 2010, was
formally and finally adopted for the project in the Restructuring Paper.
16. The fourth and last restructuring of the PFMSP Grant Agreement, from March 31,
2013 to August 31, 2013,11
was necessary for:
Alignment of the amount in the grant agreement with the resources available in
the MDTF, following full disbursement of donors’ commitments;
Reallocation of funding from the Bank-executed trust fund (associated with the
PFMSP-MDTF) and additional allocation from the un-materialized exchange rate
fluctuation provision and investment income to the PFMSP-MDTF;
Completion of remaining critical activities under the program, and those yet to be
undertaken, using the above reallocated funding;
Provision of continued support to the PFMSP 2011‒2015; and
Updating allocation to the disbursement categories and the detailed financing plan
by subcomponent in order to reflect the extended timeline and the revised amount
of the Grant Agreement.
17. In addition, a series of design modifications affected the organizational structure
over the life of the project. While at the design and preparation stage, the project was
meticulous about the organizational structure of the PFMSP, some unanticipated
organizational changes (discussed in Section 2.2) took place in the MOF that eventually
affected the success of project implementation, as well as the success of its outcomes.
11 World Bank, Restructuring Paper for the PFMSP-MDTF, March 5, 2013.
7
2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry
18. Background and lessons from previous operations. Inadequate institutional
capacity in the Lao PDR was one of the major lessons learned from three Bank-financed
structural adjustment credits in the 1990s.12 Through its PFMSP, the government was
highly committed to strengthening its institutional capacity to carry out effective reform,
and assigned high priority to addressing the inadequate staffing in the implementing units
and the day-to-day managing unit.
19. Project design assessment. In light of the above considerations, and the
country’s context, Bank staff considered that a highly-flexible, capacity-building TA
framework to support the PFMSP would be an appropriate vehicle to ensure good-quality
capacity building activities, funding availability and timeliness, as well as consistency
and comprehensiveness in meeting the government’s PFM needs. This reasoning was
based on the Bank’s previous TA experience, and appeared to be suited to the Lao
context in carrying out PFM reform at a time of transition to a market economy. A donor-
funded, recipient-executed project was expected serve as an effective vehicle to support
the MOF in building its institutional capacity through developing its human resources.
The project was also expected to serve as a logical channel for development partners to
discuss PFM reform with government, and facilitate the MOF’s efforts to strengthen its
institutional capacity through a flexible approach that responded to the country’s fast-
changing environment.
20. To build up the required institutional capacity, the project established detailed
plans for the institutional and implementation arrangements, staffing and managing a
project implementation unit, and administrative details for the project.13 The institutional
structure and management design drew on the success of the Bank’s previous TA project,
the Financial Management Capacity Building Project (FMCBP), which initially was
concurrent with the PFMSP. The PFMSP was led by an Implementation Committee (IC)
and assisted by a Secretariat. The MOF assigned the PFMSU, which handled day-to-day
requirements for the FMCBP, to serve the PFMSP as well. Four task forces were
established for each of the project’s PFM components and flexible funding allocations
were built into the project. However, due to subsequent changes in the administrative and
institutional arrangements, the careful administrative and management design for the
project was undermined during implementation.
21. Risk assessment and mitigation measures. The PFMSP identified an extensive
list of risks and mitigating measures. These were based on lessons learned over the
Bank’s earlier policy lending experiences and have, to some extent, addressed the risks as
12 World Bank, Implementation Completion Report for the Third Structural Adjustment Credit, Report No.
19434-LA, June 29, 1999, p. iv. 13
The PAD provided a detailed implementation structure to address the requirements of the project both to
carry out agreed activities and to ensure sustained ownership within each implementing units.
8
did the Bank’s appointment of a long-term advisor to help the MOF implement the
project’s activities. The ICR mission concurs with the list of risks outlined in the PAD,
however, in hindsight, the overall moderate rating given in the PFMSP-MDTF PAD may
not adequately capture the challenges faced in implementing the project, and especially
the unanticipated developments that subsequently impacted project results and
achievements.
22. Adequacy of government commitment and participatory process. The Lao
government demonstrated strong commitment to PFM reform and to strengthening public
sector capacity to undertake PFM reform. The government’s approach was set out in a
policy paper on governance in 2003, the NGPES, and the sixth NSEDP 2006‒2010. The
then operating, Bank-funded FMCBP and its series of the Poverty Reduction Support
Operations (PRSOs), further demonstrated government commitment to PFM reform, as
did the appointment of the then-Vice Minister, who was proactive in heading the MDTF
Steering Committee.
23. During PFMSP-MDTF project preparation, the Bank and supporting development
partners conducted meetings and workshops with relevant ministries and agencies on key
capacity-building issues. Through these dialogues, the donor community endorsed efforts
by the Bank and the project’s participating donors’ efforts to consolidate all PFM
capacity building under one coordinated framework, with regular monitoring, evaluation
and planning. The IMF and Bank teams also collaborated in analyzing needs and making
recommendations on relevant capacity building. Thus, despite the enormous challenges
of the changing development landscape, these efforts contributed to project relevance.
24. Based on the analysis above, the project’s overall quality at entry was rated
moderately satisfactory. An array of organizational structures and other features were
created at the project preparation stage to ensure sustainable implementation. Also, the
project PDO was aligned with the government’s strategy and policies, as well as with the
CAS, and lessons learned from previous Bank operations were incorporated into the
project design. However, as noted, some risks and capacity issues were not fully
identified, and institutional coordination challenges were not accurately anticipated.
2.2 Implementation
25. The PFMSP-MDTF was implemented over a period of six years, from 2008 to
2013, at a final cost of approximately $8.4 million.14 A parallel, Bank-executed Trust
Fund project, the FMCBP, served as the project’s technical companion. Following
approval by the Bank’s Regional Vice President, and the signing of all the Administration
Agreements with donors, the PFMSP-MDTF launched in January 2009. The MOF was
the implementing agency, with a set of detailed institutional arrangements designed to
help the ministry manage the project.15 These included a long-term advisor appointed to
14 Total project estimate was the equivalent of $ 7.2 million at appraisal and the total final project cost was
the equivalent of $8.4 million at project closing. 15 The PFMSP organizational structure consisted of the:
9
work with the MOF, and administrative support from the experienced staff in FMCBP. It
is important to emphasize here that the ICR only covers the review, and only assessed the
performance of activities funded by the PFMSP-MDTF. The ICR is not a position to
comment on the government’s overall PFMSP, although features of the PFMSP are
discussed in relation to the PFMSP-MDTF Project.
26. The PFMSP began with some auspicious developments in the MOF’s senior
management and additional development partners pledged their support too through
bilateral arrangements. On the government’s side, with the promotion of the Chair of the
PFMSP-IC (the Deputy Director-General of the Fiscal Policy Department-FPD) to
Director-General, the Minister of Finance set up the PFMSP Management Unit under the
Fiscal Policy Department to ensure that adequate assistance and services were available
for the PFMSP-SC, as well as the PFMSP-IC. On the Bank and project donors’ side, the
PFMSP enjoyed continuing close collaboration with the experienced staff of the FMCBP,
and the Bank located the Task Team Leader (TTL) in Vientiane so that the TTL could be
readily available during PFMSP implementation.
27. However, due to the overlapping responsibilities of those administering the
project, the road to effectively implementing the PFMSP-MDTF was long and arduous,
resulting in a mix of achievements and shortcomings in carrying out the project’s
components. Four restructurings and extensions of the closing date were necessary,
which, as indicated above, extended the original close by 22 months from October 31,
2011 to August 31, 2013 (see Section 1.7). In the sixth and last ISR, the project closed
with a moderately satisfactory rating, however, results were uneven as some activities
remained partially or entirely unfinished as a result of numerous delays, and there were
doubts about whether project results would be sustainable.
28. The project progressed at a slower pace than envisaged by the government due to
the time required to establish modalities for the project, and MOF restructuring
(completed in 2007). The Bank’s review mission in October 2009 rated progress as only
marginally satisfactory, with a financial management rating of marginally unsatisfactory,
due to the unclear definition of roles and responsibilities for the PMFSP-MU and the
Public Financial Management Strengthening Unit (PFMSU), with regard to budget
preparation, payment authorities and fund flows, plus weak internal control. The mission
recommended clarification of, and revision of the governance structure matrix and
actions to improve the effectiveness and efficiency of the project so that activities
supported by the project could proceed, and maintain momentum.
• PFMSP Steering Committee (PFMSP-SC), headed by the MOF Vice Minister, who would lead the
project;
• PFMSP Implementation Committee (PFMSP-IC that managed the overall project administration
under the direction of the Deputy Director-General of the Fiscal Policy Department;
• the PFMSP Strengthening Unit (PFMSP-SU) that was in charge of the day-to-day management of
the project.
PFMSP Managing Unit (PFMSP-MU), which was established in March 2009, under the directorate
of the Fiscal Policy Department, to carry out technical and coordination support to the
Implementation Committee and Implementing Agencies, under the direction of a full time director.
10
29. According to the PAD, at the initial design stage, it was decided that the PFMSP
would make use of existing structures and capacities in order to integrate the MDTF into
normal operations of the MOF. These structures included the overall PFMSP Steering
Committee (PFMSP-SC), which oversaw the PFMSP Implementation Committee
(PFMSP-IC), the PFMSP-Secretariat (PFMSP-S), and the four task forces.16 In addition,
the decision was made to maintain and strengthen the already-established Public
Financial Management Strengthening Unit (PFMSU) under the External Financial
Department (EFD), which had handled procurement and financial management for the
Financial Management Capacity Building Project (FMCBP), 17 and would take on the
additional procurement and financial management work for the PFMSP-MDTF. These
arrangements were to make use of the FMCBP’s existing capacity in financial
management and procurement at the MOF, and were consistent with government law as
well as the World Bank’s procedures and guidelines for grants. The intention was to:
ensure that no additional structures were created; contribute to smooth PFM
communication between the government and donors; and provide coordination of public
financial management reforms. The PFMSU was expected to be the project
implementation unit, including maintaining the dedicated account, and providing
procurement and financial management services to the PFMSP-IC. The project’s PAD
clearly stated that the PFMSU would serve as the secretariat for the PFMSP-SC, the
review meetings of the PFMSP-IC (PAD, p.11), and would be responsible for the reports
of these meetings.
30. However, nine months into the implementation stage, the MOF instituted an
important change that altered the management of the PFMSP. After some personnel
changes, the Minister of Finance established the PFMSP Management Unit (PFMSP-
MU) under the Fiscal Policy Department (FDP)18
to: (i) assist the PFMSP-SC and
PFMSP-IC; (ii) coordinate the various MOF-managed activities and responsibilities
managed by the MOF’s Implementing Agencies (IAs) for PFMSP; (iii) coordinate with
donors on matters concerning the PFMSP; and iv) work closely with the PFMSP-MDTF
itself. In many instances, the responsibilities of the PFMSP-MU overlapped those of the
PFMSU (especially regarding the PFMSP-MDTF), and generated conflict that would
affect the implementation of the PFMSP program and cause confusion among the
implementing agencies under the PFMSP. There were also some difficulties in
coordinating a large number of ministerial departments and implementing agencies to
identify, prioritize and plan for their own TA activities. The Bank and donors involved in
the PFMSP-MDTF repeatedly asked for clarification and definition of the areas of
responsibility for both the PFMSU and the PFMSP-MU so that administrative
16 The four task forces were: (i) Tax and Customs Centralization, (ii) Revenue Sharing, (iii) National
Treasury Centralization, and (iv) Human Resource and Program Management. 17 The PFMSU was originally established to manage the FMCBP. This unit had proven to be a positive
institutional unit for the FMCBP and was maintained to manage the procurement and financial activities for
the PFMSP. 18
The Deputy Director General of the FPD (who headed the PFMCP-IC) assumed the FPD’s Director-
General position.
11
requirements and processes could be better facilitated and potential conflicts between the
two units could be minimized.
31. Following the closure of the FMCBP, however, the MOF decided in June 2011 to
establish the Project Coordination Unit (PCU) under the Cabinet to oversee and provide
project management services to Bank-funded projects, including the PFMSP-MDTF.
These included the financial management and procurement services that were previously
performed by the PFMSU. The introduction of this institutional change required a period
of transition so that the PCU to be staffed and become fully functional, but it did provide
a solution to the previous institutional governance issues of the PFMSP-MDTF.
32. Important personnel changes also took place at the senior level that would affect
implementation of the project. The PFMSP was spearheaded by a Steering Committee,
headed by the MOF’s Vice Minister who was proactive in the activities supported by the
PFMSP. The Vice Minister was subsequently appointed as President of the State Audit
Organization (SAO) in July 2012. From then, until closure of the PFMSP-MDTF, there
was no Chair for the project’s Steering Committee. In addition, a decision by the MOF’s
senior management in April 2013 to appoint a national private firm to design and
implement an integrated Treasury system for the ministry, halted most of the related
activities which were supported by the PFMSP-MDTF.
33. Until closure of the PFMSP-MDTF project in August 2013, these significant
changes contributed to substantial delays and uncertainties in implementing the project,
and interfered with the whole PFMSP Program.
34. The Mid-Term Review (MTR) of both the PFMSP, and the PFMSP-MDTF, was
held in November 2010 with representatives from donors and the government. Overall,
the MTR found that the project had made some good progress with its seven components,
although at an uneven speed and with many challenges arising as a result of the changing
environment in which the project was implemented. The MTR noted some progress was
achieved in the three pillars under the PFM, namely (i) Fiscal Planning and Budget
Preparation, (ii) Budget Execution, Accounting and Financial Reporting; and (iii)
Revenue Policy and Administration. However, as a result of the challenges discussed
above, the number of activities agreed under the results framework, but yet to be
completed, were numerous.
35. Throughout the project’s life, and until its closure, despite the efforts of
government, donors and the World Bank, issues with the project’s institutional
governance, management and responsibilities continued to cause delays and uncertainties
between the implementing agencies and the PFMSU-MU, the PFMSU, and later with the
PCU. Project management was further adversely affected towards the end of the project
when the senior official who oversaw the PFMSP program was re-assigned, and the
government also decided to commission a private company to implement an overall IT
system for the Treasury that brought an end to project IT initiatives. The last ISR in April
2013 noted that while there were key achievements under the project, many project
12
initiatives were still incomplete, and uncertainty prevailed as a result of the Treasury-
related work being undertaken by the government’s IT contractor.
36. At the time of the project’s closure and preparation of the ICR, the draft ICR
listed the following assessment of the project’s components. This was based on the
results framework established by the PEFA.
Component A. Revenue sharing, fiscal planning and budget preparation. An improved legal framework for budget management has been established that
will enable further refinements, albeit following some long discussions among the
stakeholders. The 2006 Budget Law and its Implementing Decree, issued in
February 2008, have provided the legal framework and timetable for the budget
planning and execution process. However, the MOF is still working on the
activities which are called for under this component (i.e., the budget calendar and
challenges in observing the budget calendar). This component also included
consultation to build consensus and acceptance among ministries and agencies on
this important instrument for budget planning. However, budget transparency and
publication of the annual budget and budget expenditures are still facing delays
and challenges as these measures are implemented.
The project also supported finalization of the revenue-sharing formula and the
exchange of experiences on developing the fiscal strategy for the next 5-year plan,
and medium- to long-term fiscal and budget planning. However, these measures
need to be better implemented and are currently of limited use as they are still
waiting for government endorsement. For fiscal planning, the Fiscal Policy
Department has moved ahead with drafting the long-term fiscal strategy. However,
the challenge of fulfilling the objective of effective budgeting and related
activities for this component remains.
Component B. Treasury centralization, budget execution, accounting, and
financial reporting. The project provided critical support to implement the
Treasury Single Account (TSA) framework and piloting of the Zero-Balance
Treasury accounts (ZBA) at Bank of the Lao People’s Democratic Republic
(BOL) and its branches. The ZBA was then rolled out to three state-owned
commercial banks. The MTR noted that the National Treasury reported that
ministries with large expenditures successfully transferred their accounts to the
National Treasury. Since then, the expansion of budget coverage was completed
with the consolidation of technical revenue accounts into the National Treasury,
and the Treasury Single Account was rolled out to commercial banks. Major off-
budget funds were also consolidated in the budget. These funds are now disbursed
through the National Treasury and its provincial offices. While it was expected
that the budget execution report would include all technical revenue, with full
utilization of the GFIS, this had not yet been confirmed at the ICR mission stage.
The GFIS program and system acquired good basic hardware to improve their
operations, and the whole country has now been connected through the leased
lines. One of the planned concrete outputs for this activity is expected to be
13
completion of government’s financial statements for the first time. For the
Treasury Information Management System (the TIMS or GFIS-2), functional
requirements and technical specifications for the bidding document for
conducting a two-stage selection process for a commercial off-the-shelf (COTS)
integrated financial management information system and business process
mapping, as well as proposed changes to the COTS system implementation, were
prepared by the project design consultant (WYG International, Ltd). However, the
government decided to make some functional enhancements to the existing GFIS,
and delayed implementing the full-function Treasury system for some time.
Eventually, the move to the new integrated financial management information
system, the TIMS, was cancelled after the government decided in April 2013 to
use government resources and another private contractor to implement a
comprehensive information system. Given this development, the ICR could not
ascertain whether, as expected, the budget execution report would include all
technical revenue.
The Accounting Department completed the Prime Minister’s draft Decree on
Accounting for Enterprises, its implementation and government financial
statements, in accord with the International Public Sector Accounting Standards
(IPSAS) on a cash basis, and the International Financial Reporting Standards
(IFRS) for small and medium enterprises (SMEs). These actions served as
preliminary steps towards better monitoring and assessments of SMEs and need to
be finalized so that their implementation— the next crucial stage—could begin.
The External Financial Department (EFD) continued to record data on debt from
international financial institutions (IFIs) and bilateral donors, and successfully
completed the draft decree on External Debt Management and the draft manual
for Overseas Development Assistance (ODA) Financial Management. These
activities have set the stage for better government debt management in future, and
the MOF needs to maintain this momentum going forward.
At the time of ICR preparation, effort towards more transparency in government
procurement was nudged forward, with preparations to start piloting the
institutional procurement capacity-building program. Again, momentum must
continue in order to achieve greater progress in this important area.
Component C. Revenue policy and administration. The project supported
major tax reform in the Lao PDR, specifically through introduction of the Value-
Added Tax (VAT) and a comprehensive technical support package for the Tax
Department, including an international consultant, training courses, and the
development of an IT instrument to support VAT implementation. The VAT was
successfully introduced through putting in place a firm foundation for the
strengthening of taxpayer services. The project enabled the proper identification
and registration of tax payers through the Tax IT system, the Lao Tax Information
System. At the end of August 2013, 9,452 tax payers were registered, 6,700 of
whom were VAT payers. The government has also moved to revamp the State
14
Asset Management Law, the drafting of a Presidential Decree on Revenue
Collection from Natural Resources, and a Prime Minister’s Decree on State Fund
Management. The State-owned Enterprise (SOE) Financial Management
Department has been working on improving the regulations on SOE management
and conversion of SOEs to public companies as part of the government’s road
map towards establishing the Lao Security Exchange. These activities have set the
stage, although very preliminary, for reform in this area. However, much further
work needs to be undertaken, and this project served only as the first step towards
the completed activities discussed above.
Component D. Local government financial management. Some specific
activities have reached the local and district financial officers, who benefitted
from all the project activities conducted by MOF departments. The MOF
continued to prepare a special program of support to target districts whose
capacities are well below the national average. Following the State-Party
Guidelines on Sam Sang [Delegation of Responsibilities from the Central to the
Local Level], the MOF prepared to implement the Guidelines on Sam Sang and
conducted related training activities at the local level. However, information on
improvements achieved in capacity building need to be collected and analyzed.
Component E. Financial legislation and regulatory framework. This
component provided support for consultations and exchange programs to develop
and revise legislation. These include developing inputs for laws on budget, tax,
customs, VAT, audit and state assets, and their implementing decrees.
Component F. Human resources and capacity development. Since most of
the capacity-building work is incorporated into the work in other departments,
PFMSP support for this component is limited and only included efforts to enhance
and improve MOF officials’ English.
Component G. External budget and financial oversight and audit. At the
MTR, the Bank agreed to support the SAO in continuing to implement its Action
Plan for Capacity Development and an ICT strategy, as well as the SAO’s
development of a strategy on professional capacity building. The SAO completed
the audit report for the final State Budget Execution for FY2009‒10 and FY2010‒
11, some extracts of which were made public. Activities to support the SAO were
still on-going when the ICR was being prepared at the end of 2013.
Program Management. The PFMSP’s joint government-donor MTR meeting in
November 2010 provided an opportunity for government and donors to discuss
program progress and reach consensus on immediate and medium-term program
priorities. This was to ensure continuing effective PFMSP support for
implementation of the 2011‒2015 NSEDP, and to align planned development
partner support for PFMSP implementation. The update of the PFMSP was based
on consensus reached during the MTR meeting about the future for PFM reforms,
and the Medium-term Plan Implementation for 2011‒15, with the Program
15
Performance Assessment Framework. The list of activities included the Annual
Work Plan Implementation, Update Progress Report, Donors Implementation
Support, and Bank/donor Mission Reviews of Technical and Financial
Management. These activities were assisted by a PFMSP technical advisor and
national consultants. At the time of ICR preparation, a draft Results Framework,
with linkages to the PEFA assessment was completed and under review by the
implementing agencies. Also, as the ICR was being finalized, an MTR-
recommended performance assessment framework for PFMP implementation was
being prepared to facilitate the annual monitoring of reform progress, and was to
be submitted to the Steering Committee.
37. As this is a donor trust-funded project, the table below summarizes the
contribution of each donor at the project’s closing. There were originally four donors for
this project. However two donors ended their involvement in March 2012.
PFMSP-MDTF - Donor Contribution –
as of August 31, 2013
Breakdown table for Recipient Executed and Bank-executed
Amount
Recipient-executed 5,187,364.25
Bank-executed 2,379,184.99
Administration Fee 167,667.03
Balance 885,195.87
Data from myTF
Donors Contribution
Total funds valued at
Project Closing
Amount Currency US$ Equivalent
Australia
2,000,000
(plus 1,000,000 to support
school block grant
implementation)
AUD 2,989,140
EU 3,000,000 EUR 4,109,610
SIDA 7,400,000 SEK 1,084,628
SDC 200,000 USD 200,000
TOTAL 8,383,378.30
16
2.3. Monitoring and Evaluation (M&E) Design, Implementation and Utilization
(a) M&E Design
38. The original M&E framework was designed to address the government’s
inadequate institutional capacity with the PFMPSU, which to meet the project day-to-day
requirements was under the MOF’s External Finance Department. The project was also
overseen by the PFMSP-Implementing Committee and its Secretariat, which provided
policy direction and evaluated outcomes. The PFMSP was developed and implemented in
such a way as to be able to accommodate the government’s demand-driven capacity
building needs. However, key indicators for the project were not selected and agreed at
the project’s preparation, but instead were expected to be set at the beginning of
implementation as a key output of the project. As it turned out, there was continuing
delay in the work to select these key indicators, which posed some challenges for the
project’s data collection efforts. Progress of the project was difficult to monitor at the
outset without this agreed list. There was also a gap in the collection of relevant
information and data on activities performed on key institution-strengthening measures,
organization of training programs, and technology support for the departments and
agencies concerned. Some of the activities above put pressure on the MOF and strained
its effectiveness, especially with the timeliness and quality of required reports for the
project, as discussed below. “The timing of establishing a PEFA-based results framework
will be discussed at the first government-donor consultations with the PFMSP-SC after
the MDTF is established” (PAD, Para. No. 30). Subsequently, following the consultation
meeting in May 25, 2011, the World Bank, donors and the government agreed to the set
of key indicators for the Project Development Objectives.
(b) M&E Implementation
39. The Bank’s project team and its government’s counterparts in all implementing
agencies made great efforts to make relevant information available and ensure quality and
reliability once the key indicators were agreed. Collecting and tabulating data to ensure
reliability had been, and continued to be, a challenge. Although the PFMSP benefitted
from an earlier investment TA project managed by the MOF, the responsible staff lacked
experience in conducting these activities. Nevertheless, some incremental, but slow
progress was made throughout the project’s life cycle with regard to the type and
accuracy of the information collected as staff gained experience through undertaking
their work.
(c) M&E Utilization.
40. The project team collected some appropriate data for evaluation and use from the
implementing agencies and sought to apply the data as a basis for decision-making and
resource allocation. The data being generated for the project’s components were expected
to serve as continuing outputs for the implementing agencies in conducting their reform
programs. For example, the GFIS now operates with better connectivity and stability.
Government officials with GFIS training are also currently working with the system,
which was deployed with real-time connectivity in the finance departments/offices of 43
17
central ministries and 17 provinces. However, with the MOF’s recent decision to hire a
national private firm to design and implement an integrated Treasury system, the
project’s GFIS work, while still operational, is now on hold, pending the development of
the new system.
2.4 Safeguard and Fiduciary Compliance
41. There were no social safeguard issues arising from implementation of the project
because the project had been granted a C rating. Fiduciary compliance of the PFMSP-MU,
PFMSU, and subsequently the PCU, was monitored closely throughout the project by the
Bank’s task team. There were delays in submission of the IFRs and audit reports from
these units throughout the project’s life, and especially as a result of their overlapping
roles and responsibilities in managing and coordinating the activities of the PFMSP-
MDTF.
2.5 Post-completion Operation/Next Phase
42. At the time of the ICR’s preparation for the PFMSP-MDTF, the Bank’s assistance
to the government in the PFM area was being reviewed and assessed for future lending
activities.
3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation
43. Capacity building remains consistent with the Bank’s CAS Progress Report,19
and
based on lessons learned from previous Bank operations in the country, capacity building
continues to be an integral part of the Bank’s priority assistance strategy for the Lao PDR.
The capacity building objective of the PFMSP-MDTF, which accurately reflected the
government’s development priorities at project appraisal, has been critical in meeting the
country’s needs, as well as its goals and strategies, as identified in the NGPES in 2005,
the NSEDP 2006‒2010, and the NSEDP 2011‒2015. Considered a priority pillar of the
NSEDP, the government sought to strengthen national capacity and institutions in order
to implement its reform program to effectively and efficiently manage public financial
resources and delivery of public services. Institutional and staff capacity building and
strengthening were seen as indispensable for implementing the comprehensive reform
strategy and program of the NGPES, and this was supported by donors and the Bank’s
current PRSO series. Last, but not least, besides aligning with the government’s PFM
reform strategy, the PFMSP-MDTF’s focus on capacity building also drew on lessons
learned through Bank’s previous lending operations. Once again, it is important to note
that the following discussion on relevance is restricted to the PFMSP-MDTF project only,
and does not apply to the overall PFMSP. Given the objectives and strategy of the
government, in the Bank’s public sector report, the PFMSP project was rated as relevant
to the government’s overall reform program.
19 World Bank, Country Assistance Strategy Progress Report, op.cit.
18
44. Despite initial careful design of the organizational structures in the implementing
MOF departments and units in order to mitigate potential risks, modifications in the
ministry’s administrative arrangements, and the government’s apparent shift in
development priorities (towards another pillar of reform—trade and preparation for Lao
membership in the World Trade Organization) resulted delays in implementing key
MDTF activities (i.e., the results framework and the list of key output indicators).
45. The built-in flexibility of the project, while well thought out at the appraisal stage
in order to accommodate the changing dynamics of PFM reform, became a challenge
when implementing units in the MOF were reorganized. As discussed earlier, the
mechanisms for replenishing donor funding and advancing funds, as well as for
producing the required documentation, contributed to misunderstanding between the
implementing units and the two managing units. These, and other challenges facing the
MOF, resulted in confusion and delays in implementing the project and necessitated four
extensions and restructuring in order to allow the completion of some project activities.
In addition, the PFMSP-MDTF suffered from change at the top of the PFMSP-IC when
the Vice Minister, who chaired the Steering Committee, was promoted to President of the
SAO. This important position remained vacant, creating uncertainty about, and inertia
towards implementing the project. This was further aggravated when the MOF’s senior
management decided to appointment a national private firm to design and implement an
integrated Treasury system which, in turn, affected the project’s capacity to carry out
agreed components and activities.
46. To address these challenges, the Bank and donors intensified their supervision
efforts and made strong recommendations, but these had little impact, as the emphasis for
the PFMSP shifted in a direction that differed substantially from what was initially
anticipated.
3.2 Achievement of Project Development Objectives
47. The PDO of the PFMSP focused on capacity building activities in seven areas
important for better public finance management. At project closure, the ICR found that
the project had made relevant steps towards establishing a foundation for institutional
capacity development that supports the government’s reforms of PFM. However, taken
together, these achievements must be qualified as they were uneven and the results
achieved over the life of the project, while useful for building institutional knowledge and
skills, need further reinforcement lest they fail to be sustained. Other activities were not
completed due to the lack of time and funding. The ICR mission also faced challenges in
assessing the project’s activities, given that the results framework had not been
completed because it was still under discussion by donors and government stakeholders.
The following section summarizes project achievements against the seven PDO
indicators used for monitoring and evaluation which, as indicated in Section 1.2, were
based on the Public Expenditure Financial Accountability (PEFA) framework. As noted
above, the ICR mission also learned that work on the government financial information
system (GFIS) and the tax information management system (TIMS) had been suspended
as a result of the government’s decision to implement a comprehensive information and
19
communications technology (ICT) system for its operations. Most of the project-related
ICT activities were therefore postponed, pending completion the ICT system by a private
firm. Due to lack of information about the government’s planned ICT system, the ICR
mission could not assess the ITC outcomes, except to note the team’s uncertainty about
whether the project’s ICT components would be sustainable.
Stability and credibility of the budget. A legal framework for the new Budget
Law (approved in 2006) was put in place on February 14, 2008 with the release of
Implementing Decree No. 25/PM. The decree established the framework and
timetable for the budget planning and execution exercise within a medium-term
fiscal framework. Under the project, efforts have been underway to make the
budget more comprehensive. However, the budget process needs fine-tuning so
that it meets international standards.
Transparency of inter-governmental fiscal relations. Work is on-going to
develop the budget norms for the education and health sectors but these will face
a long road ahead.
Orderliness and participation in the annual budget process. On-going work to
implement the Budget Law was facilitated by its implementing decree, but
months of hard work still lie ahead on this. At the time this ICR was prepared, the
MOF faced tremendous challenges in strictly observing the budget calendar and
in establishing the indicative budget ceilings.
Recording and management of cash balances, debt and guarantees. The
project supported the Treasury Single Account comprised of consolidation of
technical revenue accounts and the zero-balance account (ZBA), both of which
have made good progress. The majority of the budget units’ accounts were closed
at the commercial banks and the budget units opened their revenue accounts at the
National Treasury. Also the ZBA has been rolled out to all state-owned
commercial banks.
Quality and timeliness of in-year budget execution reports. The budget
execution reports have been gradually improved, albeit slowly, reflecting some
progress in consolidating at the Treasury, the technical revenue accounts for the
central and local levels. The quarterly budget execution report is generated in
principle by the GFIS four weeks after the quarter ends. However, at the end of
the PFMSP-MDTF, commitment control had yet to be implemented.
Tax registration and tax assessment to be effective. Significant progress has
been made in the registration of VAT tax payers through the Lao TIS tax
registration module, and as of the end of August 2013, 6,700 VAT payers were
registered. However, activities related to processing tax returns and payments are
on-going.
Quality and timeliness of annual financial statements. Work is still very much
in progress to improve quality and timeliness in preparing the government’s
annual financial statements (budget execution reports) and laying the groundwork
for adopting and implementing the IPSAS-cash basis in the medium term. A
decree to support these activities was prepared and endorsed by the Prime
Minister, but to achieve greater impact, this decree was upgraded to a law which
was approved by the National Assembly in December 2013.
20
48. Overall Assessment. Taking into account work on the Project Development
Objectives’ seven key indicators and activities in the seven components, as well as the
history of the project’s implementation, the ICR rates the PDO’s overall achievement as
moderately satisfactory, with the qualification that sustainability of the PDO remains a
challenge in the medium term. This qualification is due to the changing direction PFM
reform, and questions about ongoing commitment to reform PFM and build the necessary
institutional and staff capacity to achieve the PFM strategy. The project’s PDO has been
strengthened through the Bank’s PRSO series and the NT2 project, both of which have
helped the Bank to maintain active dialogue with the government and keep up the reform
momentum. These operations highlight the need for deepening institutional and staff
capacity building activities in an effective and timely way. In general, the ICR
acknowledges achievement of the indicators supported by the project and considers these
to be a preliminary foundation for building and further developing the government’s
institutional capacity. But ongoing technical assistance is critically needed to deepen
capacity building activities and maintain PFM momentum and sustainability.
49. The overall ICR rating for the PDO concurs with the rating of moderately
satisfactory in ISR No. 6, and reflects as well the need to consider overall assessment of
the complete project, and take into account the restructuring periods.
3.3 Efficiency
50. The project was not required to undertake a net present value/economic rate of
return (NPV/ERR) analysis. Nor was an economic analysis of the project’s benefits
applicable, and thus not included in the PAD due to the challenge of defining, measuring
and separating out the specific benefits of capacity building projects. Nevertheless,
project training and other skill development activities have enabled the MOF and
implementing agencies to operate more efficiently.
3.4 Justification of Overall Outcome Rating
Rating: Moderately Unsatisfactory
51. The overall objective set for the PFMSP-MDTF was very broad, as is the overall
objective of the PFMSP. Thus, based on the project’s achievements and results at closing,
it was quite challenging to provide a meaningful rating. Given the uneven results across
all components and four restructurings, the project only laid preliminary foundations for
capacity building in the relevant government institutions, and thus, the ICR’s overall
rating for the PDO, is moderately unsatisfactory.
52. However, within the country context, and given the long-term need to build
government capacity in the Lao PDR, the ICR notes that the PDO remains relevant today.
So far, the evidence indicates that the PDO capacity building objective and its
achievements will be sustained if the government continues its commitment to PFM
reform, maintains the necessary enabling environment, and also continues to be interested
in relevant support from the Bank and other donors.
21
3.5 Overarching Themes, Other Outcomes and Impacts
(a) Poverty Impacts, Gender Aspects, and Social Development
53. There has been no direct impact on poverty, gender or social development.
However, as government capacity to manage public resources has improved, this should
result in better management of public service delivery. In turn, these gains should
translate into better allocation of resources for the government’s poverty reduction
strategy as well as delivery of public services to poor and disadvantaged people.
(b) Institutional Change/Strengthening
54. As discussed above, the project contributed to institutional strengthening and
capacity building for the concerned ministries (Ministry of Finance, Ministry of
Education and Sports, and Ministry of Home Affairs), other national institutions (the
State Auditing Organization (SAO) and the National Assembly), and the provinces and
districts, and this should have a positive impact beyond the life of the project.
Specifically, the MOF has already benefitted from: an improved government financial
information system (GFIS); a Treasury that provides better services to the central as well
as local governments; and Tax Department IT services for tax identification and records.
In addition, support to the SAO has enhanced its auditing capabilities and greater
transparency and accountability of public accounts. MOHA has benefitted too from
specific capacity building activities (workshops and study tours). These institution-
strengthening activities have provided foundations for long-term government action on its
extensive PFM reform program. However, the ICR notes that given the limited life cycle
of a TA project, any reasonable assessment of such changes requires a longer time frame
than that considered in this report.
(c) Other Unintended Outcomes and Impacts (positive or negative)
55. The PFMSP-MDTF laid foundations for public financial management reform and
achieving the government’s PFMSP objectives. Centralization of the Treasury, tax and
customs functions, and adoption and implementation of the Treasury’s Single Account
Framework, have brought some order to budgetary functions and set the stage for further
improvement. Introduction of VAT has contributed to the MOF providing better taxpayer
services. Implementation of the External Debt Management System has enabled
systematic monitoring and analysis of the government’s obligations and better
management and predictability of future debt service payments.
3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops
56. This section is not required for this report, which is a core ICR.
22
4. Assessment of Risk to Development Outcome
Rating: High
The risk to project development outcomes remained high at the time of preparing the ICR
at the end of August 2013. This was the case, despite the risk mitigation measures put in
place and implemented by the project. Risks to development outcomes include: the time-
consuming nature of specific activities; the long timeframe needed to see the impact of
TA; problems with administrative arrangements and anticipated changes in these;
challenges in coordination and cooperation among MOF departments and units, and
between MOF and other line ministries and agencies; and lack of government resources
and capacity to implement some very complex reforms. Although the focus on capacity
building during the project has been significant, and important outcomes have been
realized, key personnel-related risks remain high. As a result these challenges, the
government needs ongoing support in order to deepen capacity building activities that
address institutional challenges, and determine how best to sustain the capacity-building
activities initiated by the project. To keep up the momentum of PFMSP reform, the
substantial challenges facing the MOF are coordinating its own departments, and the
other concerned ministries and agencies, as well as the lack of adequate numbers of
qualified civil servants. It is important to note that some of these may have been reduced
by the ongoing Poverty Reduction Support Operations (PRSOs) and the NT2 project, as
these two Bank activities helped to further dialogue on reform with senior government
leaders.
5. Assessment of Bank and Borrower Performance 5.1 Bank Performance
(a) Bank Performance in Ensuring Quality at Entry
Rating: Moderately Satisfactory
57. The Bank worked in partnership with the government and donors on the design
and preparation of the project to support the country’s PFMSP, and was consistent with
government priorities reflected in, and aligned with, the CAS. The project built on the
Bank’s strong track record with previous TA and application of lessons learned through
these. In addition, the PFMSP-MDTF benefitted from the strong analytical underpinnings
and experiences of Bank staff through the PRSO series. Bank staff collaborated with their
Lao government counterparts and development partners to reflect the situation in the
PFM sector. The Bank also worked closely with all development partners to coordinate
and manage the MDTF throughout the project identification and preparation stage.
23
(b) Quality of Supervision
Rating: Moderately Satisfactory
58. Supervision of the project was considered moderately satisfactory. Several
strengths helped to bring the project to a satisfactory closing, despite several difficult
stages of capacity building and institutional and administrative challenges. These
contributed to moving the project from a moderately unsatisfactory rating at the onset to
a moderately satisfactory conclusion. The project benefitted from the continuous
presence of the same Task Manager (TM), extensive contributions from project team
members in the field as well as headquarters, and support from Bank management
throughout the implementation period. This continuity and extensive support helped build
a strong working relationship between the project team and government counterparts as
well as their flexibility in collaborating with, and adapting to, the capacity constraints of
the MOF. In addition, the Bank’s restructuring efforts after the MTR contributed to
resolving some critical bottlenecks and keep project implementation on track. The TM
and the project team members spent a significant amount of time on supervision to build
the capacity of the project implementation unit. Having the TM and team members
located in Vientiane facilitated easy communication with the client as well as building a
strong client-oriented and flexible approach to project supervision.
(c) Justification of Rating for Overall Bank Performance
Rating: Moderately Satisfactory
59. According to the ICR guidelines, overall ratings are dictated by the combination
of ratings for Quality at Entry and Quality of Supervision. This implies a rating of
Moderately Satisfactory for overall Bank performance
5.2 Borrower Performance
(a) Government Performance
Rating: Moderately Satisfactory
60. During project preparation, the government showed a strong commitment to the
important objective of capacity building by inviting the Bank and donors to contribute to
its PFMSP program. The government recognized the critical need for assistance in
undertaking comprehensive capacity building and strengthening its approach in
implementing the reform program for projects such as Nam Thuen 2. These projects
could not be realized unless inadequate institutional capacity was addressed. However,
sustained commitment to the project objective from relevant ministries, the MOF and its
departments, seemed to vary. The government’s coordinating mechanism—an important
factor in this project—was not strong and had not been tested enough to ensure that it
could manage the various requirements of managing, coordinating and meeting the
demands of the concerned departments and agencies. Taking into account the
24
combination of issues discussed above, the ICR rates the government’s performance as
moderately satisfactory.
(b) Implementing Agency or Agencies Performance
Rating: Moderately Unsatisfactory
61. The performance of the project management units (the PFMSU-MU, PFMSU, and
PFMSP-PCU) was uneven, with Implementation Status and Results (ISR) ratings for
overall project management ranging from moderately unsatisfactory to moderately
satisfactory. As discussed earlier, the roles of the project management unit were initially
designed with a detailed organizational chart and specific duties to ensure consistent
implementation. However, with subsequent changes and new formulations of these
administrative units by the MOF, and the unclear definition of their roles and
responsibilities, these units were not able to provide efficient support to the PFMSP-
MDTF. All three units serving the project suffered from inadequate capacity, especially
in managing multiple activities in different areas and, as a result, required close
supervision from Bank staff. For these reasons, the ICR rates the overall performance of
the implementing agency as moderately unsatisfactory.
(c) Justification of Rating for Overall Borrower Performance
Rating: Moderately Unsatisfactory
62. The ICR rates overall borrower performance as moderately unsatisfactory, based
on a moderately satisfactory rating for the performance of the government and the
moderately unsatisfactory rating for the performance of the implementing agency.
6. Lessons Learned
63. The following lessons can be drawn from the experience of the PFMSP-MDTF.
64. Need to manage expectations. Looking back, the project results framework was
overly ambitious. Although much has been achieved, considering the institutional
capacity constraints, the results framework was likely too ambitious. In addition, it is
important to recognize that PFM reforms are complex and outcomes are difficult to
measure. Unfortunately, while good PFM systems and TA can be developed, these may
not be implemented as intended due to competing political demands.
65. Accurate assessment of the recipient’s institutional environment and capacity
is crucial when designing a capacity-building TA project and its implementing unit.
The PFMSP-MDTF showed that although the project management unit was well
designed and functioned well on a previous Bank project, this was no guarantee of
continuing success. In retrospect, the Bank overestimated government capacity to manage
a TA project in a continually-changing environment.
25
66. The government must ‘own’ and implement the project. The PFMSP
convincingly demonstrated this principle as loss of the Steering Committee’s Chair part
way through the project, with no replacement, resulted in delays and uncertainties that
affected project outcomes. In addition, this loss of leadership and change in the PFSMP’s
emphasis and modalities, mid project, adversely effected project implementation and
results.
67. The degree of project flexibility should be carefully considered. As a result of
too much project flexibility, declining government commitment had adverse
consequences for PFMSP-MDTF. Past Bank experience shows that when the government
is highly committed to a project, a high degree of project flexibility leads to good results.
But in the case of the PFMSP-MDTF, project flexibility worked against successful
implementation since it allowed authorities to shift their attention to new priorities and
responsibilities, and pay much less attention to the Bank’s project and its results.
68. Operational procedures must be clear to all. The guiding principles for project
implementation must be clear to all involved—the project’s steering committee,
managing agency, project management units, and implementing units in order to ensure
that procedures are followed and results are carefully tracked. In the case of the PFMSP-
MDTF, the overlapping internal reviews and approval procedures of the borrower’s two
project management units resulted in numerous delays and other problems. In hindsight,
the project should not have had two managing units serving the project as these competed
with each other and duplicated each other’s efforts. These problems were compound by
lack of firm direction when the Steering Committee’s Chair was re-assigned part way
through the project.
69. Intensive supervision and adequate funding are crucial prerequisites for TA
project success. Adequate funding and human resources enable TA projects to cope with
unanticipated challenges that arise during implementation. Having a Bank Task Manager
and core team in country and well-supported in the region and by headquarters facilitates
the intensive supervision needed when a TA project faces unanticipated problems.
70. For a public finance management TA project, the correct mix of knowledge,
skills, adequate training, and clear and easy-to-follow procedures are crucial. These
would have enabled the PFMSP-MU/PFMSU/PFMSP-PCU staff to “hit the ground
running”, collaborate effectively with the implementing ministry, coordinate the many
agencies involved, spearhead project activities, and anticipate and cope with unexpected
problems. A Project Operations Manual tailored to the local context would have been a
valuable tool as well for project management.
26
7. Comments on Issues Raised by Grantee/Implementing Agencies/Donors
(a) Grantee/Implementing agencies
71. The Ministry of Finance thanked the World Bank and the PFMSP-MDTF donors
for their support and as well as their understanding of the many challenges which the
MOF and related departments and agencies faced in implementing this valuable project.
The MOF indicates that it is proud of the contributions to institutional strengthening and
capacity building achieved over the course of the PFMSP-MDTF by the MOF, other
national ministries and agencies, as well as local authorities, and through its strong
commitment and concerted efforts, the MOF expects to sustain project successes far
beyond the life of the PFMSP-MDTF. At the same time, the MOF acknowledged that due
to the unavoidable challenges discussed in the ICR, and concurred by donors, that the
project could have achieved much more. Going forward, the MOF is strongly committed
to applying the valuable lessons discussed in the ICR, and expects to achieve much
greater results in future public finance reform as a result of a combination of donor-
supported technical assistance and the government’s own efforts.
(b) Cofinanciers/Donors
72. The draft ICR report was shared with, and comments and feedback obtained from
the two contributors to the PFMSP-MDTF: Australia and the European Union. Copies of
their responses are included in Annex 7. Both donors broadly concurred with the ratings
of the ICR report and expressed their satisfaction with the positive achievements that
resulted from the project. At the same time, the donors acknowledged the challenges of
implementing a public finance management reform project in a country undergoing
extremely rapid political, economic and social change as well as lacking the
administrative infrastructure and qualified human resources needed to manage and
monitor such a complex and wide-ranging project. Although the donors recognize the
important gains that have been made over the course of the PFMSP-MDTF, they concur
with the ICR’s assessment that strong government commitment as well as ongoing
technical assistance will be needed to sustain the project’s achievements and realize the
crucial improvements that are needed in public finance reform in order to achieve
transparent and accurate budgeting and accounting for revenues and expenditures, and
through this significantly improve the lives of the people of Lao PDR.
(c) Other partners and stakeholders
(e.g. NGOs/private sector/civil society) NOT APPLICABLE
27
Annex 1. Project Costs and Financing
(a) Project Cost by Component (in USD Million equivalent)
Components
Appraisal
Estimate (USD
millions)
Restructuring
Estimate (USD
millions)
Actual/Latest
Estimate
(USD millions)
Percentage
of
Appraisal
A. Revenue Sharing, Fiscal
Planning and Budget
Preparation
0.38 0.13 0.85 223%
B. Treasury Centralization,
Budget Execution,
Accounting and financial
reporting
1.25 2.39 2.48 198%
C. Revenue Policy &
Administration 0.68 1.35 1.40 205%
D. Local Government Financial
Management - 0.09 0.20 -
E. Human Resource
Management 0.12 0.08 0.12 100%
F. Program Management 0.52 0.12 0.30 58%
G. External Oversight and Audit - 0.32 0.32 -
Total Project Costs 2.95 4.48 5.67 192%
(b) Financing
Source of Funds Type of
Cofinancing
Appraisal
Estimate
(USD millions)
Actual/Latest
Estimate
(USD
millions)
Percentage of
Appraisal
Lao PDR Public Finance
Management Strengthening
Program
RETF 3.86 5.19 134%
28
Annex 2. Results Framework and Monitoring for PFMSP MDTF
Project Development Objective (PDO): To improve the effectiveness of public finance management in Lao PDR through support to the Government’s Public
Financial Management Strengthening Program. The ultimate goal of the PFMSP are: improved policy consistency, efficiency, transparency and accountability in
public expenditure and revenue management by strengthening institutional systems and capacity and making progress towards appropriate international financial
management standards and effective use of foreign financing. MDTF will contribute to progress in four outcome areas of the PFSMP (Improved Macro-Fiscal
Discipline and Management, Improved financial management and control, Improved revenue management and control, Improved sectoral and local allocation and
management) which are critical to achieving the goal of the PFM reform.
PDO Level Results Indicators Core
Unit
of
Mea
sure
ment
Baseline
(2009
Progress by
2011
Target Frequency Data
Source/
Methodol
ogy
Responsibility
for Data
Collection
Comments
2013
1.Improved Macro-Fiscal
Discipline measured by PI-1
and PI-11
Aver
age
PEF
A
Scor
e20
2.75 2.75 3.0
One in second
year and at the
end of Project
PEFA MoF/PFMSP
MU
2.75 (Not Achieved)
PI-1: B (FY09/10 =
7.9%, FY10/11 = 6.6%
and FY11/12 = 8.1%)
PI-11: C+
2. Improved financial
management and control
measured by P1-17, PI-24, and
PI-25
Aver
age
PEF
A
Scor
e
1.6 2 2.5
One in second
year and at the
end of Project PEFA
MoF/PFMSP
MU 2.16 (Partially
Achieved)
PI-17: 2.5 (C+)
PI-24: 2.5 (C+)
PI-25: 1.5 (D+)
3. Improved revenue
management and control
PEF
A
Scor
C C B
One in second
year and at the
end of Project PEFA
MoF/PFMSP
MU C+ (Not achieved)
PI-14: (i: C, ii: B and iii:
C)
20 For averaging purpose, a numerical value is assigned to a PEFA score, a score A is equivalent to 4, B+ is 3.5, B is 3, C+ is 2.5, C is
2 and D+ is 1.5 and D is 1
29
measured by PI-14 e
4. Improved sectoral and local
allocation and management
measured by PI-8
PEF
A
Scor
e
D D+ C
One in second
year and at the
end of Project PEFA
MoF/PFMSP
MU C (Achieved)
PI-8: C (i: C, ii: D and
iii: B:
Intermediate Results and Indicators
Unit of
Measu
rement
Baseline
(2009)
Progress by
2011
Progress to
date (2012)
Target by
2013
Frequenc
y
Data
Source/Meth
odology
Responsibility
for Date
Collection
Actual value achieved
at project completion
Intermediate Result 1: Reliable Aggregate Expenditure Control
1. Deviation of out-turn to
budget (budget out-turn is
closed to budget plan)
% 13.8 6.6 8.1 5-10 (NA) Annual PEFA MOF
Achieved:
8.1% (FY11/12, the
latest outturn available;
and FY09/10 = 7.9%,
FY10/11 = 6.6%)
Intermediate Result 2: Budget Process becomes more orderly, providing adequate time for key stakeholders to participate
2. Annual Budget Calendar is
adhered to and Budget
Ceilings are issued to ensure
an orderly budget process
Narrati
ve
Budget
Calendar
exists but
not
followed
rigorously,
no budget
circular was
issued.
Budget
Circular was
issued (May
2011), but
with some
delay as per
budget
calendar. No
ceilings are
yet issued.
Budget circular
was issued in
April 2012 for
FY12-13 (one
moth earlier
than in 2011).
Budget Circular
for FY2012-13
instructed
ministries and
provinces to
include
technical
revenue in the
Stable Budget
Calendar and
budget
ceilings are
issued.
Annual Assessment
report MOF
Partially Achieved:
Due to the fiscal
difficulties faced by
GOL, instead of the
budget circular, PM
Decree on 1st Half and
estimates of the 2nd Half
of FY12/13 NSEDP
Execution and FY13/14
NSEDP Preparation,
including budget
planning was issued on
March 20, 2013,
providing overall
30
Intermediate Results and Indicators
Unit of
Measu
rement
Baseline
(2009)
Progress by
2011
Progress to
date (2012)
Target by
2013
Frequenc
y
Data
Source/Meth
odology
Responsibility
for Date
Collection
Actual value achieved
at project completion
budget and
revenue
collecting
agencies to
break down non-
resource and
resource
revenue (mining
and hydropower
separately. No
ceilings are yet
issued.
direction for the budget
preparation for FY13/14.
In general, the budget
calendar was not
followed strictly but the
budget plan for FY13/14
was submitted for the
NA’s Approval 15 days
before the NA plenary
session as defined under
the budget law. No
ceilings were yet issued.
Intermediate Result 3: Cash is actively managed to ensure it is available to support expenditures and to reduce borrowing costs
3. Technical revenue bank
accounts are consolidated into
Treasury and Treasury Single
Account Framework is fully
implemented to allow for more
active cash management.
Narrati
ve
Debt data
lack
accuracy,
spending
unit
accounts
not been
consolidate
d into
Treasury,
lending by
BOL and
provincial
debt
guarantee
outside
budget
framework
Technical
revenue bank
account
consolidation
is underway.
TSA has been
implemented
at BOL and
its branches.
TSA roll out
to one
commercial
bank is
scheduled for
March 2012.
Technical
revenue bank
account
consolidation is
progressing
well. TSA has
been
implemented at
BOL and its
branches, as
well as at two
commercial
banks (LDB and
APB). Roll out
to final
commercial
bank (BCEL) is
expected to
complete in
Completion
of the
consolidation
of technical
revenue
accounts into
Treasury and
TSA is rolled
out to
commercial
banks.
Annual Assessment
report MOF
Partially Achieved:
Technical revenue bank
account consolidation is
progressing well at the
time of the ICR
preparation. TSA has
been implemented at
BOL and its branches,
and all state-owned
commercial banks,
LDB, APB and BCEL
was completed in 2013.
31
Intermediate Results and Indicators
Unit of
Measu
rement
Baseline
(2009)
Progress by
2011
Progress to
date (2012)
Target by
2013
Frequenc
y
Data
Source/Meth
odology
Responsibility
for Date
Collection
Actual value achieved
at project completion
2013.
Intermediate Result 4: Improved budget execution reporting
4. Improved quality of in- year
budget execution report
through expanded coverage (to
include all technical revenue)
and utilization of up-graded
GFIS
Narrati
ve
Budget
execution
report
coverage
was not
completed
and no
report on
expenditure
financed by
technical
revenue.
Up-
gradated
GFIS is yet
to put in
operation
NA issued a
resolution to
enforce the
policy
requiring all
spending
units to pay
technical
revenues into
the Treasury.
Good
progress is
being made
with account
consolidation
at the central
level but
progress is
slower in
provinces.
PM is to issue
an Instruction
to further
enforce this
policy
As of Dec 2012,
MOF reported
that 683
technical
revenue
accounts have
been opened
with the NT for
transaction and
219 accounts out
of 982 to- be-
closed accounts
are still active in
the commercial
banks. Amount
of technical
revenue
included in
FY12-13 budget
was doubled
compared with
last FY. GFIS is
now used by all
central agencies
and provinces,
the system is
also rolled out to
a number of tier
Budget
execution
report
coverage will
include all
technical
revenue and
full utilization
of GFIS
Annual Assessment
report MOF
Partially Achieved:
By end of September,
2013 the balance of
technical revenue
accounts outside the NT
has been reduced from
75 billion Kip to 35
billion Kip and for
FY2012/2013 the
amount of technical
revenue brought onto
budget has increased
slightly. At the central
level, the number of the
bank accounts at the
commercial banks
reduced from 251 in
FY2011/12 to 216 in
FY2012/2013; whereas
the number of accounts
opened at the NT
increased from 324 in
FY2011/12 to 411 in
FY2012/2013. At the
local level, the review
shows that there still
were 352 accounts of
the budget units at the
32
Intermediate Results and Indicators
Unit of
Measu
rement
Baseline
(2009)
Progress by
2011
Progress to
date (2012)
Target by
2013
Frequenc
y
Data
Source/Meth
odology
Responsibility
for Date
Collection
Actual value achieved
at project completion
2 agencies of
MOE and MOH
commercials banks, of
which 289 are still
active; while the
number of the accounts
opened at the NT
increased from 359 in
FY2011/12 to 1,397 in
FY2012/2013 and the
amount of deposits
increased from 68
billion kip in
FY2011/12 to 185
billion kip in
FY2012/2013. GFIS
was now used by all
central agencies and
provinces; the system
was rolled out to a
number of tier-2
agencies of MOE and
MOH and is planned to
be rolled out to MOAF
and MPWT in 2014.
5.Improved quality of annual
financial statements through
enhanced completeness and
accounting standard
disclosure
Narrati
ve
Incomplete
coverage
and non-
compliant
with IPSAS
Consolidation
of technical
revenue into
Treasury is
on-going.
Coverage and
usage of GFIS
has been
improved,
resulting in
improvement
Work to design
the future
IPSAS
compliant
financial
reporting
framework for
the public sector
at both national
and sub national
levels has begun
Financial
statement will
include
revenue and
expenditure
from charges
for services
and the
IPSAS is
adopted for
phased
Annual Assessment
report MOF
Not Achieved:
Work had begun to
design the future IP-
SAS compliant
financial reporting
framework to the public
sector at the national
and sub-national levels
with an IMF TA but
there was some
uncertainty with
33
Intermediate Results and Indicators
Unit of
Measu
rement
Baseline
(2009)
Progress by
2011
Progress to
date (2012)
Target by
2013
Frequenc
y
Data
Source/Meth
odology
Responsibility
for Date
Collection
Actual value achieved
at project completion
of quality of
the annual
financial
statement.
MOF is
preparing
proposal to
Prime
Minister to
adopt IPSAS.
with IMF TA
and is expected
to continue
under the new
WB funded
PFM
project/MDTF2
implementatio
n.
continuing funding
sources.
Intermediate Result 5: Improved transparency of inter-governmental fiscal relations
6. Budget Allocation Norms
are developed to guide the
budget preparation process
Narrati
ve
Budget
allocation
to
provinces
and districts
is not based
on
transparent
rules
Decision is
pending on
whether to
formalize
non-wage
recurrent
budget
allocation
norms for
education and
health sectors
by PM
decree. MOF
claimed that
some
formulas used
for education
and health
budget
allocation in
FY 2011-
While no formal
budget
allocation norms
were approved
and issued,
MOF reported
that some
allocation norm
for education
sector based on
the ESDF were
used in
allocating
education
budget. In
addition, starting
from FY2011-
2012, the
Government has
implemented a
school block
Non-wage
recurrent
budget norms
for at least
education and
health sectors
and capital
budget norms
are in
operation.
Work under
way to
develop non-
wage
recurrent
budget norm
for other
sectors.
Annual Assessment
report MOF
Partially Achieved:
There had been no
formal issuance of
budget allocation
norms. However, MOF
reported that some
allocation norms for
education sector based
on the ESDF were used
in allocating education
budget.
In addition, from
2011-12, the
government has
implemented a school
block grant scheme to
channel the resources
directly to primary
schools one per-student
formula.
34
Intermediate Results and Indicators
Unit of
Measu
rement
Baseline
(2009)
Progress by
2011
Progress to
date (2012)
Target by
2013
Frequenc
y
Data
Source/Meth
odology
Responsibility
for Date
Collection
Actual value achieved
at project completion
2012 but
these
formulas were
not
formalized.
MPI informed
that they
continue to
use the
adopted
system of
capital budget
norm for
FY12-13
budget
preparation.
grant scheme to channel the
resources
directly to
primary schools
on a per student
formula.
Intermediate Result 6: Enhanced tax payer registration
7. Taxpayers are properly
identified and registered with
the tax authorities through the
number of tax payers
registered with the Tax IT
system (LaoTIS)
Numbe
r of Tax
Payers
are
register
ed
No unique
TIN exists.
Lao TIS
under
developmen
t for VAT
tax payer
registration
2400 tax
payers have
been
registered.
Lao TIS tax
registration
module has
been put into
full operation
6,500 Tax
Payers are
registered
4000 VAT tax
payer are
registered
Annual
Report/Statist
ics of Tax
Department
MOF
Achieved:
At the end of 2013, there
were 9,452 tax payers
registered, of which
6700 tax payers were
VAT payers.
35
Annex 3. Economic and Financial Analysis
Not applicable.
36
Annex 4. Grant Preparation and Implementation Support/Supervision Processes
(a) Task Team members
Names Title Unit Responsibility/
Specialty
Lending/Grant Preparation
Saiyed Shabih Ali Mohib Senior Economist EASPT Public finance
Nipa Siribuddhamas Financial Mgt Specialist EASFM Financial mgt
Sirirat Sirijaratwong Procurement Specialist EASR2 Procurement
Donald Herrings Mphande Lead Financial Mgt Specialist AFTMW Financial mgt
Roch Levesque Senior Counsel LEGES Counsel
L. S. Christine Wong Shui Wan Operations Officer EASPW Administration
Boualamphan Phoutthavisouk Team Assistant EACLF Administration
Supervision/ICR
Saysanith Vongviengkham Public Sector Specialist EASPT Task Team Leader
Leah April Sr Public Sector Mgt Specialist EASPT Task Team Leader
Minh Van Nguyen Sr. Public Sector Specialist EASPT Task Team Leader
Saiyed Shabih Ali Mohib Senior Economist EASPT Task Team Leader
Ahsan Ali Lead Procurement Specialist EASR1 Procurement
Sirirat Sirijaratwong Procurement Specialist EASR2 Procurement
Christopher Robert Fabling Sr Financial Mgt Specialist EASFM Financial mgt
Nipa Siribuddhamas Financial Mgt Specialist EASFM Financial mgt
Siriphone Vanitsaveth Financial Mgt Specialist EASFM Financial mgt
Malarak Souksavat Financial Mgt Analyst EASFM Financial mgt
Viengmala Phomsengsavanh E T Consultant EASPT Public finance
Phet Udom Mainolath Program Assistant EACLF Administrative
Boualamphan Phoutthavisouk Team Assistant EACLF Administration
Chanthaly Chanthavisouk Temporary EACLF Administration
(b) Staff Time and Cost
Stage of Project Cycle
Staff Time and Cost (Bank Budget Only)
No. of staff weeks USD Thousands (including
travel and consultant costs)
Lending
FY08 0
Total: 0
Supervision/ICR
FY09 54.1 224.28
FY10 72.9 484.99
FY11 131.1 503.68
FY12 129.5 469.88
FY13 78.8 653.10
FY14 47.8 263.39
Total: 514.2 2,599.36
37
Annex 5. Beneficiary Survey Results
[NOT APPLICABLE]
38
Annex 6. Stakeholder Workshop Report and Results
NOT REQUIRED
39
Annex 7. Summary of Grantee's ICR and/or Comments on Draft ICR
40
41
Annex 8. Comments of Co-financiers and Other Partners/Stakeholders
42
43
44
45
Annex 9. List of Supporting Documents
Project Documents of the World Bank
Project Appraisal Document, Lao PDR Public Finance Management
Strengthening Program Multi Donor Trust Fund, April 8, 2008, IBTF No. 2361.
Restructuring Paper, Lao PDR Public Finance Management Strengthening
Program Multi Donor Trust Fund, October 6, 2011, Report No.64963 v1 and v2.
Restructuring Paper, Lao PDR Public Finance Management Strengthening
Program Multi Donor Trust Fund, February 24, 2012, Report No. 67193 v1 and
v2.
Restructuring Paper, Lao PDR Public Finance Management Strengthening
Program Multi Donor Trust Fund March 21, 2012, Report No. 67347 v1 and v2.
Implementation Status and Results reports, Sequence 1-6.
Aide Memories of Various implementation support missions.
Publications of the Project
Lao PDR Public Expenditure and Financial Accountability (PEFA) (June 2010)
Public Financial Management Assessment, Report No. 61791-LA
Lao PDR Public Expenditure Review (PER) (2011) , Report No. 63200-LA
Lao PDR Civil Service Pay and Compensation Review: Attracting and Motivating
Civil Servant, June 2010
Supporting Documents
Implementation Completion Report for Lao PDR Trade Development Facility
Project, September 22, 2013, Report No. ICR2684
Implementation Completion Report for Lao PDR Financial Management Capacity
Building Project, December 30, 2011, Report No.ICR00001681
XAYABULY
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BOKEO
PHONGSALI
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ATTAPEU
XIENGKHUANG
LUANGPRABANG
LUANGNAMTHA
VIENTIANE
SAVANNAKHET
CHAMPASAK
KHAMMUANE
BORIKHAMXAY
SARAVANE
Vangviang
Ban Na Phan
Xiangkho
Gnot-Ou
Phokhoun
Samouay
Xaisomboun
Viangxai
PaklayKhamkeut
Meung
Xebangfai
Pakbeng
Nambak
Xanakham
Boun-Nua
Khong
MuangKhoa
Kasi
Xéno
Khongxedon
Ban Nalé
Pakxong
Kham
Phin
Nan
Xepon
Sanamxai
Pakxe
Thakhek
Luangprabang
Lamam
Samakhixai
PekXayabuly
Xai
Kaysone
Saravane
Luangnamtha
Phongsali
Viangkham
Xam-NeuaHouyxay
Pakxan
VIENTIANE
PREFECTURE OFVIENTIANE MUN.
C H I N A
VIETNAMMYANMAR
THAILAND
CAMBODIA
XAYABULY
OUDOMXAYHUAPHANH
BOKEO
PHONGSALI
SEKONG
ATTAPEU
XIENGKHUANG
LUANGPRABANG
LUANGNAMTHA
VIENTIANE
PREFECTURE OFVIENTIANE MUN.
SAVANNAKHET
CHAMPASAK
KHAMMUANE
BORIKHAMXAY
SARAVANE
Vangviang
Ban Na Phan
Xiangkho
Gnot-Ou
Phokhoun
Samouay
Xaisomboun
Viangxai
PaklayKhamkeut
Meung
Xebangfai
Pakbeng
Nambak
Xanakham
Boun-Nua
Khong
MuangKhoa
Kasi
Xéno
Khongxedon
Ban Nalé
Pakxong
Kham
Phin
Nan
Xepon
Sanamxai
Pakxe
Thakhek
Luangprabang
Lamam
Samakhixai
PekXayabuly
Xai
Kaysone
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Luangnamtha
Phongsali
Viangkham
Xam-NeuaHouyxay
Pakxan
VIENTIANE
C H I N A
VIETNAMMYANMAR
THAILAND
CAMBODIA
Kading
Don
Ta
Mek
ong
Ou
Ou
Xe Bangfai
Beng
Noy
M
ekon
g
Se Banghiong
Mekong
Gulf ofTonkin
Nam NgumReservoir
To Khon Kaen
To C
hian
g Ra
i
To Hanoi
To Khon Kaen
To Ubon
Ratchathani
To Lincang
To Vinh
To Gejiu
To Qui Nhon
To Daluo
P lain of Jars
Cammon Plateau
BolovensPlateau
Xiangkhoang Plateau
Phou Bia(2,817 m)
22°N
104°E 106°E
16°N
18°N 18°N
20°N
16°N
100°E
14°N
108°E104°E
22°N
102°E 106°E
14N
LAO P.D.R.
0
75
50
0 25 50 100 Miles
100 Kilometers
IBRD 33431R1
OCTOBER 2013
CITIES AND TOWNS
PROVINCE CAPITALS
NATIONAL CAPITAL
RIVERS
MAIN ROADS
RAILROADS
PROVINCE BOUNDARIES
INTERNATIONAL BOUNDARIES
LAO PEOPLE'SDEMOCRATIC
REPUBLIC
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.
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