The World Bankdocuments.worldbank.org/curated/en/...Document of The World Bank Report No: ICR00003988 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-56770 IDA-H6850 TF-12419) ON

Document of The World Bank

Report No: ICR00003988

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IDA-56770 IDA-H6850 TF-12419)

ON A GRANT

IN THE AMOUNT OF SDR 15.8 MILLION (US$25 MILLION EQUIVALENT)

A GRANT FROM THE MULTI DONOR TRUST FUND

IN THE AMOUNT OF US$14.5 MILLION

AN ADDITIONAL CREDIT

IN THE AMOUNT OF SDR 8.3 MILLION (US$11.6 MILLION EQUIVALENT)

AND AN ADDITIONAL GRANT FROM THE MULTI DONOR TRUST FUND

IN THE AMOUNT OF US$2.4 MILLION

TO THE

LAO PEOPLE’S DEMOCRATIC REPUBLIC

FOR THE

POVERTY REDUCTION FUND PROJECT II

June 26, 2017

Social, Urban, Rural and Resilience Global Practice Social Development Unit East Asia and Pacific Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective December 31, 2016)

Currency Unit = Lao KIP (LAK) LAK 1 = US$0.00012 US$1 = LAK 8,185.5

FISCAL YEAR

October 1 – September 30

WEIGHTS AND MEASURES

Metric System

ABBREVIATIONS AND ACRONYMS

AF Additional Financing AF PP Additional Financing Project Paper CAS Country Assistance Strategy CDD Community Driven Development CFA Community Force Account CLTS Community-Led Total Sanitation CPS Country Partnership Strategy CSP Comparable Sub-Project DFAT Department of Foreign Affairs and Trade (Government of Australia) DRM Disaster Risk Management DSEDP District Socioeconomic Development Plan EIRR Expected Internal Rate of Return ESMF Environmental and Social Management Framework FM Financial Management GESI Gender Equality and Social Inclusion GoL Government of Lao People’s Democratic Republic GFWS Gravity Fed Water System ICM Implementation Completion Memorandum IDA International Development Association IE Impact Evaluation IOI Intermediate Outcome Indicator JSDF Japan Social Development Fund KDP Kum Ban Development Plan KPI Key Performance Indicator Lao PDR Lao People’s Democratic Republic LONG Livelihood Opportunities for Nutrition Gains MDGs Millennium Development Goals MAF Ministry of Agriculture and Forestry

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MDTF Multi-Donor Trust Fund M&E Monitoring and Evaluation MIS Monitoring Information System MPI Ministry of Planning and Investment MTR Mid-Term Review Namsaat National Center for Environmental Health NLCRDPE National Leading Committee on Rural Development and Poverty

Eradication NPRDPE National Program for Rural Development and Poverty Eradication NPV Net Present Value NSEDP National Socio-Economic Development Plan ODF Open Defecation Free O&M Operation and Maintenance OP Operational Policy PAD Project Appraisal Document PDO Project Development Objective PM Prime Minister PMT Project Management Team PoM Project Operations Manual PPM Participatory Planning Manual PRF Poverty Reduction Fund RETF Recipient Executed Trust Fund RF Results Framework RMG Road Maintenance Group SDC Swiss Agency for Development and Cooperation SHG Self Help Group TA Technical Assistance ToT Training of Trainers VDP Village Development Plan VNC Village Nutrition Center Kum Ban Provinces in Lao PDR are divided into districts which are subdivided into

villages or ban; villages are further grouped into clusters known as kum ban. Sam Sang The ‘three builds’ ordinance was launched by the GoL in October 2012 to

strengthen local administration and foster local development and service delivery.

Regional Vice President: Victoria Kwakwa (EAP) Country Director: Ulrich Zachau Country Manager: Sally L. Burningham Global Practice Senior Director: Ede Jorge Ijiasz-Vasquez Global Practice Director: Maninder Gill Practice Manager: Susan S. Shen Project Team Leader: Erik Caldwell Johnson ICR Team Leader: Kamakshi Nadisha Perera Mubarak

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LAO PEOPLE’S DEMOCRATIC REPUBLIC

POVERTY REDUCTION FUND PROJECT II

CONTENTS

Data Sheet .......................................................................................................................... v A. Basic Information ....................................................................................................... v B. Key Dates ................................................................................................................... v C. Ratings Summary ....................................................................................................... v D. Sector and Theme Codes .......................................................................................... vi E. Bank Staff .................................................................................................................. vi F. Results Framework Analysis .................................................................................... vii G. Ratings of Project Performance in ISRs ................................................................. xiii H. Restructuring (if any) .............................................................................................. xiii I. Disbursement Profile ............................................................................................... xiv

1. Project Context, Development Objectives and Design .............................................. 1 1.1 Context at Appraisal ................................................................................................. 1 1.2 Original Project Development Objectives (PDO) and Key Indicators ..................... 2 1.3 Revised PDO and Key Indicators, and Reasons/Justification .................................. 2 1.4 Main Beneficiaries .................................................................................................... 2 1.5 Original Components ................................................................................................ 3 1.6 Revised Components ................................................................................................ 3 1.7 Other Significant Changes ........................................................................................ 4

2. Key Factors Affecting Implementation and Outcomes ............................................. 5 2.1 Project Preparation, Design and Quality at Entry ..................................................... 5 2.2 Implementation ......................................................................................................... 7 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization .......... 9 2.4 Safeguard and Fiduciary Compliance ..................................................................... 10 2.5 Post-completion Operation/Next Phase .................................................................. 10

3. Assessment of Outcomes............................................................................................. 12 3.1 Relevance of Objectives, Design and Implementation ........................................... 12 3.2 Achievement of Project Development Objectives .................................................. 13 3.3 Efficiency ................................................................................................................ 17 3.4 Justification of Overall Outcome Rating ................................................................ 19 3.5 Overarching Themes, Other Outcomes and Impacts .............................................. 19 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops ....... 20

4. Assessment of Risk to Development Outcome .......................................................... 21 5. Assessment of Bank and Borrower Performance .................................................... 22

5.1 Bank Performance ................................................................................................... 22 5.2 Borrower Performance ............................................................................................ 24

6. Lessons Learned .......................................................................................................... 25 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ....... 26 Annex 1. Project Costs and Financing .......................................................................... 28 Annex 2. Outputs by Component .................................................................................. 29

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Annex 3. Economic and Financial Analysis .................................................................. 35 Annex 4. Bank Lending and Implementation Support/Supervision Processes ......... 37 Annex 5. Beneficiary Survey Results ............................................................................ 39 Annex 6. Stakeholder Workshop Report and Results ................................................. 40 Annex 7. Summary of Borrower’s ICR and/or Comments on Draft ICR ................. 44 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ................... 50 Annex 9. Bank-Administered Multi Donor Trust Fund.............................................. 52 Annex 10. List of Supporting Documents ..................................................................... 56 Map: Lao PDR ................................................................................................................ 59

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Data Sheet

A. Basic Information

Country: Lao People’s Democratic Republic

Project Name: LA-Poverty Reduction Fund II

Project ID: P123480 L/C/TF Number(s): IDA-56770, IDA-H6850, TF-12419

ICR Date: 06/23/2017 ICR Type: Core ICR

Lending Instrument: SIL Borrower: LAO PDR

Original Total Commitment:

USD 25.00M Disbursed Amount: USD 35.38M

Revised Amount: USD 36.60M

Environmental Category: B

Implementing Agencies: Lao Poverty Reduction Fund

Co-financiers and Other External Partners: Department of Foreign Affairs and Trade (Government of Australia) Swiss Agency for Development Cooperation B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review:

12/15/2010 Effectiveness: 10/11/2011 10/11/2011

Appraisal: 03/23/2011 Restructuring(s): 01/15/2015

Approval: 06/09/2011 Mid-term Review:

12/01/2013 01/27/2014

Closing: 12/31/2016 12/31/2016 C. Ratings Summary C.1 Performance Rating by ICR

Outcomes: Satisfactory

Risk to Development Outcome: Moderate

Bank Performance: Moderately Satisfactory

Borrower Performance: Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower Ratings

Quality at Entry: Satisfactory Government: Moderately Satisfactory

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Quality of Supervision:

Moderately Satisfactory

Implementing Agency/Agencies:


Overall Bank Performance:


Overall Borrower Performance:


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):

Yes Quality at Entry (QEA):

None

Problem Project at any time (Yes/No):

Yes Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Satisfactory

D. Sector and Theme Codes

Original Actual

Major Sector/Sector

Public Administration

Public administration - Other social services 50 50

(Historic)Health and other social services

Other social services 50 50

Major Theme/Theme/Sub Theme

Social Development and Protection

Social Inclusion 50 50

Participation and Civic Engagement 50 50

Urban and Rural Development

Rural Development 50 50

Rural Infrastructure and service delivery 50 50 E. Bank Staff

Positions At ICR At Approval

Vice President: Victoria Kwakwa James W. Adams

Country Director: Ulrich Zachau Annette Dixon

Country Manager: Sally L. Burningham Keiko Miwa

Global Practice Senior Director:

Ede Jorge Ijiasz-Vasquez -

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Global Practice Director:

Maninder Gill -

Practice Manager / Manager:

Susan S. Shen Jeeva A. Perumalpillai-Essex

Project Team Leader: Erik Caldwell Johnson Ingo Wiederhofer

ICR Team Leader: Kamakshi Nadisha Perera Mubarak -

ICR Primary Author: Kamakshi Nadisha Perera Mubarak - F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document)

To improve the access to and the utilization of basic infrastructure and services for the project’s targeted poor communities in a sustainable manner through inclusive community and local development processes.

Revised Project Development Objectives (as approved by original approvingauthority) To help improve the access to and the utilization of basic infrastructure and services for the project’s targeted poor communities. The PDO would be achieved through inclusive community and local development processes with emphasis on ensuring sustainability. (a) PDO 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:

Improved access to and utilization of basic economic and social services in kum bans supported by PRF: % increase in school enrollment, % increase in access to and utilization of health services, % households with improved access to and utilization of safe water resources, % increase in access to and utilization of roads, lowest two quintiles benefit from above services

Value (quantitative or qualitative)

School: 90% (7-12 yrs) and 71% (13-15 yrs), health: 37%, water: 76%, roads: 30%, lowest two quintiles benefit: No

None

Health: 43%, water: 84%, roads: 38%, lowest two quintiles benefit: Yes

Health: 44.9%, water: 80.1%, roads: 36.1%, lowest two quintiles benefit: Yes

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Date achieved 10/31/2012 12/31/2016 12/31/2016 07/01/2016

Comments (incl. % achievement)

Supplemental indicator on school enrollment dropped at AF; outcome measured instead through level of beneficiary satisfaction (with improved school facility quality) (KPI #3) and number/type of sub-projects implemented (IOI #1). End targets for other supplemental indicators revised. Based on Endline IE (2016), health 104% achieved, water 95% achieved (includes rain water access), and roads 95% achieved. Largest impacts were achieved in water sector; compared to control groups, 58 percentage point increase for protected water sources in the dry season.

Indicator 2: PRF sub-projects are identified, planned and implemented through participatory processes that involve at least 40% of women and at least 60% of the poorest villagers


None Women: 40%, poorest: 60%

Women: 40%

Women: 48.2%

Date achieved 03/23/2011 12/31/2016 12/31/2016 07/21/2016 Comments (incl. % achievement)

Supplemental indicator on involvement of poor dropped at AF due to difficulty in distinguishing ‘poor’ from ‘non-poor’ participants at meetings. Women 120% achieved.

Indicator 3:

Greater than 75% satisfaction levels reported by beneficiaries in targeted villages regarding improved service delivery and participatory local development planning, implementation and monitoring in a representative subset of sub-districts


None 80% 75% 99%


Original target value corrected at AF. 132% achieved.

Indicator 4: Total number of beneficiaries of which x% are female Value (quantitative or qualitative)

None None

Total: 700,000, female: 50%, ethnic: 70%

Total: 970,431, female: 49.4%, ethnic: 72.2%


Ethnic beneficiaries added as supplemental indicator at AF. Total beneficiaries 139% achieved. Female beneficiaries 99% achieved. Ethnic beneficiaries 103% achieved.

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(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: #/type of sub-project activities implemented Value (quantitative or qualitative)

None None 1,600 1,931

Date achieved 03/23/2011 12/31/2016 12/31/2016 12/31/2016


Baseline not available because activities depended upon community priorities emerging from a participatory planning process. Target value updated at AF. 121% achieved.

Indicator 2: x% of sub-project activities are of high technical quality Value (quantitative or qualitative)

0 >85% No change 90%


106% achieved.

Indicator 3: x% of sub-projects are being maintained and are operational two years after sub-project completion


0 >90% N/A 95%


Dropped at AF.

Indicator 4: Sub-projects with post-project community engagement or O&M arrangements (%)


0 N/A 90% 95%


Added at AF in order to replace above indicator. 105% achieved.

x

Indicator 5: Sub-project activities are x% more cost effective compared to other means of delivering services (w/ similar technical standards)


None >30% N/A None


Dropped at AF. As per the Technical Audit (2016), except for roads, the design, specification and construction of sub-projects were cost effective.

Indicator 6: # of communities able to plan, implement and monitor their activities Value (quantitative or qualitative)

None 250 1,300 1,349

Date achieved 03/23/2011 12/31/2016 12/31/2016 07/21/2016


Target value changed to reflect AF. Actual value achieved represents number of villages that received one sub-grant at least once. 104% achieved although PRF staff continued to play a central role in community planning/implementation process.

Indicator 7: % of districts where district officials provide technical assistance and supervision to communities


0 85% No change 100%


118% achieved. Involvement of district officials limited to endorsement and technical inspection of PRF sub-projects.

Indicator 8: % PRF kum ban plans used by government and/or other development actors for planning and funding


None 35% No change 56%


160% achieved which is significant given that PRF operates as semi-autonomous government entity outside normal structures/procedures of line ministries and local government.

Indicator 9: X% of PRF fully staffed Value (quantitative or

None 100% N/A None

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qualitative) Date achieved 03/23/2011 12/31/2016 12/31/2016 12/31/2016 Comments (incl. % achievement)

Dropped at AF.

Indicator 10: X studies/evaluations completed in a timely manner Value (quantitative or qualitative)

0 5 (cumulative) N/A 6


Dropped at AF.

Indicator 11: Progress reports prepared on time Value (quantitative or qualitative)

None 1 annually N/A 1


Dropped at AF. Actual value achieved represents 1 report prepared on time.

Indicator 12: MIS is improved to produce necessary information for monitoring program effectiveness and results


None Qualitative assessment

N/A None


Dropped at AF.

Indicator 13: Grievances registered related to delivery of project benefits addressed (%) Value (quantitative or qualitative)

0 N/A 90% 100%

Date achieved 07/09/2011 12/31/2016 12/31/2016 07/21/2016


Added at AF. 111% achieved. However, according to assessment on Feedback Resolution Mechanism (July-October 2015), 24% of beneficiaries did not know how to use feedback box and 32% did not know how to use ‘free dial’.

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Indicator 14: Community contribution in the total project costs (%) Value (quantitative or qualitative)

0 N/A 10% 9.4%


Added at AF. 94% achieved.

Indicator 15: Improvement in dietary diversity among pregnant/lactating women and children aged 6–24 months


0 N/A 30% Not available


Added at AF. Data on value achieved not available.

Indicator 16: No. and type of livelihood activities supported by seed grant Value (quantitative or qualitative)

1,675 N/A 2,400 3,755


Added at AF. 156% achieved.

Indicator 17: % of beneficiary communities that successfully achieved Open Defecation Free (ODF) status


0 N/A 30% 29%


Added at AF. 97% achieved. This is based on preliminary results of a rapid review of Community Led Total Sanitation Pilot (CLTS) pilot presented in March 2017.

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G. Ratings of Project Performance in ISRs

No. Date ISR Archived

DO IP Actual

Disbursements (USD millions)

1 09/17/2011 Satisfactory Satisfactory 0.00

2 12/22/2012 Moderately Satisfactory


6.07


Moderately Unsatisfactory

12.74



17.12

5 01/02/2015 Satisfactory Satisfactory 20.51 6 08/21/2015 Satisfactory Satisfactory 22.08 7 02/24/2016 Satisfactory Satisfactory 23.82 8 09/06/2016 Satisfactory Satisfactory 30.13

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

01/15/2015 Yes S S 20.51

To scale up positive outcomes of the project by financing additional sub-projects, and to maintain implementation capacity of PRF in all provinces and thereby enable seamless transition to a prospective PRF III. Key changes were made to: (i) PDO and results indicators, (ii) project activities (Components 1 and 2 revised, and Component 4 added), (iii) project financing plan (AF of US$14 million), IDA/MDTF co-financing disbursement percentages, and cost

xiv

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

allocation under project components, and (iv) safeguard policies (three additional triggers).

If PDO and/or Key Outcome Targets were formally revised (approved by the original approvingbody) enter ratings below:

Outcome Ratings

Against Original PDO/Targets Satisfactory

Against Formally Revised PDO/Targets Satisfactory

Overall (Weighted) Rating Satisfactory

I. Disbursement Profile

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1. Project Context, Development Objectives and Design

1.1 Context at Appraisal The Lao People’s Democratic Republic (PDR) has achieved significant progress in poverty reduction since market-oriented economic reforms in the mid-1980s. From 1993 to 2008, the incidence of poverty declined steadily from 46% to 28%. Over the same period, about one third of the population gained access to improved water and sanitation services, and the proportion with access to electricity rose from 16% in 1995 to 71% in 2010. Yet, in 2008 Laos was classified by the United Nations as a Least Developed Country given its per capita income of US$740. There have been challenges in meeting Millennium Development Goals (MDGs) related to nutrition, measles immunization, skilled birth attendance and gender equality, and the country was ranked 133 in 2007 and 141 in 2014, out of 182 countries, in the United Nations Human Development Index. Some rural areas remain very poor and sparsely populated, especially in the northern provinces of the country. Poverty rates differ considerably by ethnic group.1 Against this backdrop, the Government of Lao PDR (GoL) identified a poverty reduction plan and priority districts for poverty reduction interventions in the 2004 National Growth and Poverty Reduction Strategy and the sixth National Socio Economic Development Plan (NSEDP) (2006–11). The seventh NSEDP (2011–15) emphasized achieving MDGs by 2015 and transitioning out of the Least Developed Country status by 2020. In 2011, the National Program for Rural Development and Poverty Eradication (NPRDPE), a key input to the NSEDP, identified five poverty goals: (i) small-scale infrastructure and service delivery and livelihood development; (ii) decreasing service and income gap between rural and urban areas; (iii) integrated socioeconomic development with consideration to natural resource management and environmental conservation; (iv) encouraging local participatory development approach; and (v) international and regional cooperation. The World Bank financed a first PRF project from 2003–11 to deliver basic services using community-based participatory methods with a total commitment of US$35 million (Credit 3675-LA and Grant H4180-LA). Key lessons were learnt in terms of the need to ensure appropriate community sensitization and facilitation in multi-ethnic environments, technical quality of investments, and adequate provisions for operations and maintenance (O&M), as well as supporting the coherence of PRF activities with other planning and investment processes at district and provincial levels. The GoL sought World Bank and other development partner assistance to continue the program with PRF II, with a focus on financing investments in small public infrastructure that facilitate poor communities’ access to basic services and markets in relatively remote and inaccessible parts of the country. World Bank support to PRF II was consistent with the 2005 Country Assistance Strategy (CAS), extended until 2011 at an Executive Directors’ discussion on March 31, 2005 (CAS Progress Report, 2005–11). CAS Objective

1 There are four main ethnolinguistic families (Lao-Tai, Mon-Khmer, Hmong-Iu Mien and Chine-Tibetan) which comprise 49 ethnicities and about 200 ethnic sub-groups.

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2 sought to improve social outcomes and reduce vulnerability through targeted poverty reduction programs. The PRF was identified as the Bank’s primary instrument for supporting development in vulnerable and remote communities (CAS 2005, p. 28). More broadly, the project supported the World Bank Group’s strategic twin goals of ending extreme poverty and boosting shared prosperity as it sought to help the GoL address some of the priority areas identified in the seventh NSEDP, including tackling increasing inequality and persistent rural poverty.

1.2 Original Project Development Objectives (PDO) and Key Indicators The original PDO, as stated in the Project Appraisal Document (PAD) and Financing Agreement was “to improve the access to and the utilization of basic infrastructure and services for the project’s targeted poor communities in a sustainable manner through inclusive community and local development processes.” Key performance indicators (KPIs) included: (i) improved access to and utilization of basic economic and social services in kum bans supported by the project (see KPI #1 in Datasheet for breakdown); (ii) sub-projects are identified, planned and implemented through participatory processes that involve at least 40% women and 60% poorest villagers; (iii) greater than 75% satisfaction levels reported by beneficiaries regarding improved service delivery and participatory local development planning, implementation and monitoring in a representative subset of sub-districts; and (iv) total number of beneficiaries, of which female.

1.3 Revised PDO and Key Indicators, and Reasons/Justification The PDO was changed on June 23, 2015 in a Level 1 restructuring coupled with an IDA Additional Financing (AF) Credit of US$14 million. The PDO was simplified as “to help improve the access to and the utilization of basic infrastructure and services for the project’s targeted poor communities.” KPIs were changed as follows: (i) supplemental indicator on school enrollment was dropped and target values revised for supplemental indicators on health, water and roads (KPI #1); (ii) supplemental indicator on involvement of poor was dropped (KPI #2); (iii) target value was corrected for beneficiary satisfaction levels (KPI #3); and (iv) ethnic beneficiaries were added as a new supplemental indicator (KPI #4). Further details are in the Datasheet.

1.4 Main Beneficiaries The project’s primary beneficiaries were communities in targeted poor kum bans or village clusters. Around 275 rural kum bans in 38 districts in 10 provinces were targeted. Six of the seven PRF I target provinces (Savannakhet, Saravanh, Houaphanh, Luang Namtha, Sekong and Xiengkhouang) and four other provinces (Phongsaly, Oudomxay, Luangphabang and Attapeu) received support. According to the PAD, 75% of sub-projects were expected to directly benefit the poorest villages in kum bans although the target

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number of beneficiaries was not identified at appraisal. The AF financed the same 10 provinces and identified an end target of 700,000 beneficiaries. District, provincial and central levels of government were secondary beneficiaries. The project intended to strengthen their capacity to support pro-poor local and community development processes.

1.5 Original Components Component 1: Community Development Sub Grants (US$40.9 million). This supported the selection of public infrastructure investments which would be responsive to community needs on alleviating key human development constraints, such as access to water, education, health, and roads. Two activities were covered: (i) planning for community and local development; and (ii) community sub-projects. Village Development Plans (VDPs) were prepared and integrated into Kum Ban Development Plans (KDPs) through an inclusive process led by elected village representatives. PRF district staff, district local government, and sector officials conducted technical appraisal and validated proposals. An annual budget allocation in the range of US$30,000–40,000 was made to target kum bans based on population, remoteness or cost of access, and implementation performance. The total average investment per kum ban was US$140,000 over four years. Component 2: Local & Community Development Capacity-Building and Learning (US$6.6 million). This was a pre-condition to Component 1 and financed activities at three levels. At the village level, facilitators trained communities on the participatory community development process. At district and provincial levels, officials were trained on community and local development planning and supervision, and provided resources to participate in project activities. At central level, the National Leading Committee on Rural Development and Poverty Eradication (NLCRDPE) was supported to refine national poverty targeting methods, provide oversight and strengthen staff capacity at the PRF, and strengthen coordination of PRF II investments with other sectors and entities supporting rural development. Equipment and operating costs for the project’s Management Information System (MIS), preparation and dissemination of progress reports, maintenance of the PRF website, and several key studies were also financed. Component 3: Project Management (US$9.0 million). This financed national, provincial and district level staff salaries, and costs associated with equipment and operation in specialized areas, such as accounting, procurement, financial management (FM), internal controls and auditing.

1.6 Revised Components Component 1: Community Development Sub Grants (US$43.76 million). This was revised under AF to: (i) provide about 200 additional community sub grants to build or improve tertiary infrastructure identified by beneficiary villages in seven provinces; and (ii) roll out a strengthened Community Driven Development (CDD) approach in 10 districts in three provinces following the success of a ‘Deepen CDD’ pilot. Component activities remained unchanged.

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Component 2: Local & Community Development Capacity Building and Learning (US$7.15 million). This was revised to strengthen bottom-up planning processes in the seven AF provinces. The focus was on improving the quality of KDPs as a planning tool for local spatial development, and O&M of PRF investments. The component included a new rural sanitation pilot to provide implementation support to the Open Defecation Free (ODF) campaign of the National Center for Environmental Health (Namsaat), Ministry of Health. Logistical costs (training and travel) of kum ban facilitators and Village Implementation Teams were financed to enable them to educate villagers on rural sanitation and Community-Led Total Sanitation (CLTS), and thereby facilitate behavioral change to help villages achieve ODF status. Component 3: Project Management (US$10.81 million). The financing allocation was increased by US$1.81 million to support the project’s expansion and additional activities under AF. Component 4: Livelihood and Nutrition Pilot (US$1.78 million). This was added to scale up the Livelihood Opportunities for Nutrition Gains (LONG) pilot initiated under a separate Japan Social Development Fund (JSDF) grant at the start of PRF II and based on a corporate mandate for increased engagement on nutrition issues. Self-Help Groups (SHGs) were set up to assist villagers solve problems of poverty, livelihood and nutrition; revolving funds supported economic activities and production inputs of members. Village Nutrition Centers (VNCs) supported behavioral change among pregnant and lactating mothers by providing supplementary meals for mothers and children, seeds for home gardening, livelihood linked nutrition education, and financial support to GoL’s ‘mother and child health’ service delivery. PRF II would provide seed funds to SHGs and nutrition grants to VNCs in 150 villages, which includes 64 villages added under AF.

1.7 Other Significant Changes Changes in project financing plan. Although the PAD indicated co-financing of US$12 million from the Bank-administered MDTF, the signed Grant Agreement was for US$14.5 million. The US$10 million committed by the Swiss Agency for Development and Cooperation (SDC) at appraisal for complementary project activities was subsequently increased to approximately US$13.6 million. The Board approved AF for US$14 million (IDA Credit of US$11.6 million and MDTF co-financing of US$2.4 million) became effective on August 17, 2015. The actual AF amount received by the PRF was US$13.8 million (IDA Credit of US$11.5 million and MDTF co-financing of US$2.3 million) due to exchange rate fluctuations. Revisions to disbursement arrangements and cost allocation. The relative joint co-financing disbursement percentages between IDA and MDTF financing were adjusted to reflect the AF. ‘Non-consulting services’ was added as an eligible expenditure under IDA financing in order to align it with the definition of eligible expenditures under MDTF financing. Cost allocations for Components 1, 2 and 3 increased while a new Component 4 was added.

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Additional safeguards policies. Three new safeguard policies were triggered under AF (see Section 2.4). 2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry Background analysis. The design of the project was supported by a sound background analysis. Several lessons from PRF I, other poverty alleviation programs in Laos, and Bank financed CDD projects in the region2 were incorporated. Poverty targeting was tightened by: (i) narrowing down the targeting unit from district to kum ban level (in line with GoL’s revised poverty targeting focus); and (ii) using clear, effective criteria for selection of kum bans based on the National Population and Housing Census (2005), Lao Expenditure and Consumption Survey III (2002–03), and project-specific selection criteria (operational access, absence of similar support from other development partners, and areas not under GoL’s village resettlement program).3 Other refinements included: (i) shifting from annual to multi-year planning cycles which enabled a concentration of sustained funding in targeted kum bans to graduate out of poverty and provided predictable budget allocations for these kum bans; (ii) using more facilitators from different ethnic groups and making communication materials more responsive; (iii) focusing more on technical quality and O&M of sub-projects; (iv) mainstreaming disaster risk management (DRM); (v) introducing community oriented procurement procedures; (vi) tackling gender disparities through a Gender Action Plan; and (vii) improving social and project accountability tools. Project design. As indicated above, the project built upon PRF I and other CDD models, ensuring that the poorest parts of the country were targeted and applying corrective actions to foster participatory local development approaches. The design was kept simple and focused on three interlinked components which directly contributed to the achievement of the PDO. Component 1 facilitated rural communities’ access to and use of infrastructure and services through participatory planning, budgeting and execution mechanisms while the list of allowed infrastructure focused on alleviating key human development constraints. Training activities under Component 2 were linked to sub-projects financed under Component 1. Component 2 also sought to integrate PRF into the national development framework through efforts to coordinate with sector ministries (Education, Health, Public Works & Transport, and Agriculture & Forestry) and relevant government programs.4 KPIs were in place to measure improvements in access and utilization in key sectors. The supplemental indicator on school enrollment, however, was not closely

2 E.g. Kecamatan Development Project-PNPM Rural in Indonesia (P115052), KALAHI-Comprehensive and Integrated Delivery of Social Services in the Philippines (P114048), and Northern Mountains Poverty Reduction Program in Vietnam (P113493). 3 For poverty targeting issues in PRF I, see ICR (2012) and Independent Evaluation Group’s Project Performance Assessment Report (2016). 4 This included the national village Participatory Planning Manual (PPM) led by the Ministry of Planning and Investment (MPI), the Lao Uplands Food Security Improvement Project for which the PRF served as implementing agency for two components, the Lao Northern Uplands Development Program which included components on local governance and planning and local infrastructure development in the Northern Uplands, and the Governance and Public Administration Reform/District Development Fund.

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attributable to the project since other factors beyond project control could influence this outcome (e.g. attendance fees, uniform costs, gender bias and ethnic minority status). A dedicated indicator on ethnic beneficiaries could have contributed to a more comprehensive monitoring of social inclusion. The project sought to assess sustainability under four dimensions: (i) developing a viable and replicable model of community planning and financing; (ii) increasing the role of local governments in coordinating and supporting the program; (iii) enhancing the capacity of communities and local governments to plan and undertake local development activities; and (iv) improving the overall design quality and O&M of sub-project infrastructure, including incorporating DRM designs into relevant sub-projects. The sustainability focus helped centralize the CDD approach and avoid focusing too narrowly on infrastructure provision and capacity building, an issue encountered in PRF I (IEG 2016). Yet, the Intermediate Outcome Indicators (IOIs) which were to monitor sustainability dimensions overlooked the fact that sustainability can also encompass higher-level objectives reliant on factors outside project scope (e.g. follow through of sector ministries on commitments for infrastructure maintenance). PRF II was implemented through the legally established autonomous entity, the PRF. This was sensible given the successful track record of this delivery modality under PRF I, the need for close oversight where the volume of transactions was high, significant experience resident in this structure, and lack of sufficiently robust alternatives. Implementation arrangements were enhanced through the MDTF, which co-financed key studies and technical assistance (TA), and enabled enhanced implementation support through consultancies (see Annex 9). The implementation period proved appropriate and the financing envelope was adequate. Adequacy of government’s commitment. The GoL consistently showed a high level of commitment to the project. This was confirmed by its decision to continue poverty reduction efforts under PRF II, and by its commitment of US$10 million from the national budget towards PRF II. The seventh NSEDP (2011–15, p. 56) defined poverty reduction as “the main mission, and a priority” and identified accelerated rural development in bans and kum bans as the main means of reaching this goal. The GoL was in constant dialogue with co-financers, DFAT and SDC, during project preparation. Key sector ministries were consulted to provide services for the design and maintenance of PRF financed infrastructure. Assessment of risks. The possibility of the PRF’s capacity being overstretched as the project expanded to three new provinces (a 25% increase in geographic coverage compared to PRF I) was identified as the main implementation risk. Appropriate mitigation measures were proposed including gradual scale-up, a careful assessment of opportunities for expansion, and using the existing PRF structure for implementation. This risk nonetheless materialized as a significant issue in the first two years of project implementation (see Section 2.2). The GoL and donors not meeting co-financing expectations was identified as a Low risk to be mitigated through gradual expansion, conditional on transfer of actual funds. Clearer procedures for follow up action should have been set out with regards to

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government co-financing given the national fiscal expansion underway at appraisal. Other risks and mitigation measures were appropriately identified. Quality at entry. The project was supported by a sound background analysis, and built on lessons learned during PRF I. GoL commitment was high. The causal chain was logically structured to support the achievement of the PDO, despite minor shortcomings in the sustainability assessment and some monitoring indicators. Critical risks were identified and addressed through overall satisfactory mitigation measures. The quality at entry is rated Satisfactory.

2.2 Implementation Appraisal to Mid Term Review (MTR). Implementation in the first two-and-a-half years was hampered by project management shortcomings. Staff turnover was high due to a rapidly expanding civil service offering improved compensation, recruitment and replacement of key staff was slow, and there were concerns about the capability of the newly appointed director to lead a scaled-up operation. The PoM was too complex for operational use. M&E studies and progress reports were delayed and of uneven quality. A disconnect between project and GoL budgeting cycles led to delays in the provision of staff and resources to some health centers and schools. Fiscal challenges resulted in delayed availability of non-wage recurrent budget for service delivery, risking the functioning and O&M of some recently constructed sub-projects. The start-up of a parallel JSDF grant in April 2011 to support livelihoods and nutrition diverted significant PRF management attention and added complexity during an already challenging scaling-up period. Implementation targets were not met; as of March 2013, only 68% and 8% of sub-projects for the first and second grant cycles respectively (2011–12 and 2012–13) had been completed. Implementation progress was rated Moderately Unsatisfactory in August 2013. There were also weaknesses in the quality of community engagement due to shortcomings in facilitation at village vision meetings,5 and there was limited progress on empowering women in decision making. Most sub-projects were implemented by contractors, though Community Force Account (CFA) was used for most gravity fed water systems (GFWS). Overall, it remained more of a community based development with the project still transitioning towards community driven development. Upon Bank recommendations, the PRF took several remedial measures, including process analyses of time required for sub-project completion, simplification of the PoM, and assigning a gender officer and gender focal persons. MDTF resources were used to provide TA through engineering and community development consultants (2013) and to conduct a Gender Equality and Social Inclusion (GESI) Assessment (2013) to improve management of gender and community engagement issues.

5 Village visioning meetings were often facilitated by district engineers, finance officers and M&E officers who lacked adequate facilitation skills.

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MTR and key decisions. By the time of the MTR (January–February 2014) the PRF had significantly improved its performance and sub-project implementation was substantively on track with the first two grant cycles nearly 96% complete. The MTR was used as an opportunity to reflect on implementation lessons and set key directions. TA provided by the abovementioned consultants and an M&E advisor (2014), and studies conducted through MDTF resources supported improvements in project management (see Annex 2). In particular, an Organizational Review (2014) recommended a Deepen CDD pilot to strengthen the project’s community engagement approach through participatory poverty assessments, visual tools (small posters), small sized group meetings, and measures to improve women’s participation.6 The pilot was tested in 196 villages in three provinces with encouraging results, especially in terms of the quality of participation among female and ethnic groups (see Aide Memoire, December 2014, Annex 3). Including the approach in the planning process was only 5% more than average cost of sub-projects. The PRF was encouraged to expand sub-projects implemented by CFA particularly in remote areas, while enhancing TA. Implementation progress was upgraded to Moderately Satisfactory. Additional Financing. The GoL requested a scale-up of PRF II in December 2014. An IDA AF Credit of US$14 million was prepared and became effective on August 17, 2015. The rationale was to scale up positive outcomes by financing about 200 additional sub-projects, and to maintain implementation capacity of the PRF to facilitate a seamless transition to a then prospective PRF III. Three key activities were brought in: scaling up Deepen CDD, a community led total sanitation (CLTS) pilot added to Component 2, and a new livelihoods and nutrition component. The PDO and RF were amended (Section 1.3) and three new safeguards policies triggered (Section 2.4). Deepen CDD was extended to 350 additional villages in three new provinces. A rapid review in three villages in Savannakhet Province, conducted under a Social Safeguards Performance Assessment (2016), showed improvements in the quality of participation compared to non-Deepen CDD villages. The CLTS approach was piloted in 41 villages to help Namsaat change the behavior of the rural poor by reaching ODF status, though plans for post-ODF support and monitoring were unclear. A small livelihoods and nutrition component was added to build upon and further refine investments under the LONG pilot (See ICM 2017). Despite an increase in the number of livelihood activities in SHGs supported by the seed grant, several issues persisted in this component: low saving values due to low saving rates,7 overall repayment rate at 70% but interest payments which remained outstanding at the same rate, lack of data on returns to livestock production, and lack of attention to linking SHG group plans with broader business plan development. VNCs lacked data to demonstrate improved dietary diversity among pregnant/lactating women and children, and meal costs were high.

6 This included having additional female kum ban facilitators who speak ethnic languages, setting up ‘women only’ spaces to discuss and draft VDPs or KDPs, facilitating women to sit in front of men at meetings, sensitizing facilitators and engineers on gender issues, and seeking support from local Lao Women’s Union to facilitate meetings. 7 Savings were an estimate US$8-9/household and savings rate was about US$0.24/member/month.

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Key studies on technical quality, safeguards, and institutional development were carried out under MDTF and used to inform management decision-making (see Annex 2). The use of the CFA method increased to 40% of sub-projects (26% as community and contractor combined execution) producing greater benefits related to local income, cost savings, increased opportunities for skills transfer, and local ownership of O&M (see Aide Memoire, August 2016). It was somewhat constrained by high operational costs due to its use in remote, relatively inaccessible areas in the North of the country.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E design. The design of M&E called for an impact evaluation (IE) using both quantitative and qualitative methods. The project aimed to conduct a baseline, mid-term, and final IE in 2011, 2012-13 and 2015, respectively. The evaluation would measure impacts on access to services, local governance issues including community satisfaction with PRF, and participation and decision-making. The qualitative component was to focus on the involvement and participation of the most vulnerable, ethnic minorities and women. Four groups of ‘special studies’ were anticipated: beneficiary assessments, technical quality studies, cost effectiveness studies and capacity studies (PAD, p. 26). To ensure an independent evaluation and quality oversight, most of these were to be undertaken by the Bank under MDTF financing in close cooperation with PRF staff. Day-to-day monitoring would be through PRF’s MIS, established under PRF I but with improvements envisaged for PRF II. The key outcomes in the PDO, “improved access to services” and “improved utilization,” were to be monitored through regular project supervision as well as the IE. Sustainability was measured through IOIs focused on enhancing prospects for institutional sustainability and O&M. M&E implementation. M&E suffered several challenges in the first half of the project, including late data entry, poor quality data, lack of a unified format for data submission, and generally poor quality progress reports. Following the MTR, the head of M&E was replaced in July 2014 and PRF management attention to M&E improved. Progress reports were submitted on time starting December 2014 with sufficient data and analysis. MIS was eventually refined and, prior to AF approval, all provincial and district staff were trained on MIS, standardized MIS forms were introduced, budget was allocated for MIS modification, online/offline data entry systems were established, and some RF indicators were refined. It is a testament to the GoL’s commitment that PRF made solid progress on the MIS by making significant staff changes and improving the quality of their reporting over time. A rigorous, randomized baseline IE was undertaken in four provinces in late 2012 and early 2013, using a ‘gold standard’ approach to provide an independent, robust basis for assessing project effectiveness. The IE was randomized, incorporated quantitative and qualitative components, and published the pre-analysis plan per international best practice. Key factors contributing to measurable differences in rural welfare were identified, including variations in access to infrastructure, ethnicity, education, occupational status and household size. IE data and methods were of high quality and reliability. The final IE was carried out in 2016, collecting data from 4,400 households in 44 treatment and control

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kum bans, and qualitative focus group discussions and key informant interviews with 677 respondents. The Bank mobilized an M&E advisor and took the lead in conjunction with the PRF M&E Unit on other special studies to gain a better understanding of key project aspects such as technical quality, cost-effectiveness, staff capacity, community participation and gender using MTDF resources (see Annex 2, Component 3). A tangible result of the M&E program was increased M&E capacity of PRF staff and local survey capacity in Laos, using a local research firm. At closing, PRF’s M&E staff and the local firm reported greater understanding and acquisition of rigorous M&E technical skills. M&E utilization. Despite a difficult start, the GoL managed to overhaul the M&E Unit in 2014 and improve its MIS to provide meaningful and useful data for progress monitoring and reporting. MIS data was reviewed by PRF management regularly to identify shortfalls, delays and implementation progress. Special studies were used proactively for continuous learning and management response, particularly the GESI Assessment (2013) which identified critical organizational and programming changes, the Organizational Review (2013) which resulted in ‘Deepen CDD,’ and the Safeguards Assessment (2016) which revealed the need for better reporting. The Technical Audit (2016) identified areas of additional training for project engineers which were incorporated into future technical training. The Baseline IE (2012) was used to refine indicators at AF, while the Endline IE (2016) provided robust information to measure project outcomes and inform the design of PRF III, especially regarding GoL’s service delivery plans and decentralized planning to support better links between community planning and education, health and other rural services.

2.4 Safeguard and Fiduciary Compliance Safeguards. PRF II retained its Category B environmental classification throughout implementation. Environmental Assessment (OP 4.01) and Pest Management (OP 4.09) were triggered at appraisal, and Natural Habitats (OP 4.04), Safety of Dams (OP 4.37) and International Waterways (OP 7.50) were triggered by the AF. An Environmental and Social Management Framework (ESMF) and simplified Pest Management Plan (PMP) were prepared and disclosed in project areas and on the project website in March 2011 and the Bank website on March 16, 2011. The ESMF was updated for the AF to address minor environmental issues found during implementation, incorporate new AF activities on livelihoods, nutrition and sanitation, and provide standard procedures for addressing safety of weirs (OP 4.37). It was disclosed locally and on the PRF website on March 12, 2015, on the Bank website on April 11 with minor updates, and re-disclosed by the PRF on May 8, 2015. In response to OP 7.50, the Bank, at the request of GoL, notified riparian countries/agencies prior to AF appraisal and no responses were received. There were no updates to the PMP at AF. Two social safeguard policies, Involuntary Resettlement (OP 4.10) and Indigenous Peoples (OP 4.12), were triggered. Along with the ESMF, a Compensation and Resettlement Policy Framework (CRPF) and an Ethnic Group Policy Framework (EGDP) were prepared and

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disclosed in project areas and on the project website in March 2011, and on the Bank website on March 16, 2011. They were updated for the AF with clarifications on protocols for voluntary land donations, implementation procedures, and principles and procedures for compensation at replacement value, strengthened grievance procedures, and guidelines for ethnic group engagement specific to the CLTS pilot with disclosure in project areas and on the website on March 12, 2015. The Bank incorporated minor updates to CRPF and ESMF, which were disclosed on April 11, 2015, and to EGDP with disclosure on April 13, 2015. No major adverse environmental and social impacts were observed. Minor issues included tree cutting without replanting and inadequate watershed management, and around 200 households (1,100 people) affected by small voluntary land donations and crops lost due to civil works. No household lost more than five percent of productive assets and 10 households claimed and received compensation for land and lost assets with cases satisfactorily documented in a Land Acquisition Report, equivalent to an Abbreviated Resettlement Action Plan. Safeguard performance was rated Moderately Satisfactory from 2014–16 for lack of systematic monitoring and documentation. MTR recommendations were taken on board by providing refresher training to PRF’s provincial and district staff, simplifying safeguard monitoring forms, and ensuring accuracy in data entry in MIS. The project had satisfactorily complied with Bank policies and procedures at closing. Fiduciary. Procurement was Moderately Satisfactory through the project’s life. Concerns stemmed from delays in procuring goods and consultants, and concerns with the project’s internalization of revised community procurement procedures. The PRF was responsible for procuring goods, works, and most TAs through its Procurement Unit and the selection of individual consultants through its Human Resources Unit. Procurement arrangements remained substantially unchanged at AF. Community level procurement was guided by a community procurement manual. During the first half of the project bid opening for sub-projects was moved from the district level to the village level thus enhancing community ownership. Challenges remained due to low literacy levels in communities and a shortage of contractors and suppliers located at the village level. Limited procurement capacity, especially at provincial level, was also an issue. FM was satisfactory throughout the project, except in 2012 where there was a delay in the reinforcement of internal control systems and recruitment of a consultant to lead this process. FM arrangements remained unchanged at AF. There were no significant delays in submission of interim unaudited financial reports and annual financial audit reports. Audits were carried out annually by independent auditors acceptable to the Bank, and all reports contained unqualified (clean) opinions and were satisfactory to the Bank. Compliance with both Bank procurement and FM policies was satisfactory at closing.

2.5 Post-completion Operation/Next Phase Sustaining assets. All sub-projects were required to have an O&M plan where villagers accepted the responsibility for maintaining their assets. As per the Technical Audit (2016), PRF sub-projects were well designed and O&M committees functioning in 93% of sub-

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projects with routine maintenance conducted by all committees. However, about half of the road sub-projects built four to six years ago (under PRF I) required major repairs due to poor maintenance, low initial inputs, and high maintenance costs. The Endline IE (2016) noted positive impacts for access to water, education and roads though trips beyond nearby villages were hindered due to poor road conditions. Returns on investment in water supply sub-projects were acceptable, though GFWS sub-projects were sensitive to a reduction in project lifetime by four years and pump water supply projects sensitive under all scenarios. Building on this experience, PRF III (Credit 5827-LA, approved FY16) aims to consolidate gains in increasing access to services for the rural poor. A stocktake of participatory rural development processes (2015) identified opportunities for institutionalizing PRF processes in GoL systems, including using PRF’s KDP in the District Socioeconomic Development Plan (DSEDP).8 Performance indicators. PRF III builds on the RF of PRF II. KPIs include percentage of households in targeted villages reporting improved access to basic services and number of direct project beneficiaries, disaggregated by gender and ethnicity. There is a continued focus on monitoring O&M through an IOI on percentage of PRF built infrastructure that is in a functioning quality. There is an enhanced focus on social inclusion and participation with eight IOIs, including new indicators: sub-projects prioritized by ethnic groups, beneficiary villages voting for village priorities, and households in beneficiary villages satisfied with the project’s participatory planning process. 3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation (a) Objectives Rating: High The relevance of the PDO remained High given the country’s increasing inequality and persistent rural poverty. Limited access to basic infrastructure and services, geographic, ethnic and gender disparities in growth and poverty reduction, and challenges in meeting MDGs remain key issues. The GoL’s current poverty reduction agenda, the eighth NSEDP, proposes investments in basic education infrastructure, rural access roads and safe drinking water along with tailored interventions to improve the welfare of ethnic groups and women. The PDO remained well aligned with the Bank’s CPS (2012–16). Specifically, it supported CPS Outcome 3.3 under Strategic Objective III: Inclusive Development which called for improved access to basic services and markets, and community participation in rural areas. The PRF was identified as the main building block for “community driven platforms” which could deliver “high quality services and livelihood improvements in poor remote areas using participatory, gender-sensitive bottom-up planning approaches, whilst also building community capacity to be more in charge of their own development” (p. 28).

8 This was conducted with financial and technical support from SDC, DFAT, UNDP and the Bank.

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(b) Design and Implementation Rating: Substantial The relevance of the original project design was Substantial. The causal chain from project activities to outputs and outcomes was clear. Component 1 provided facilitators to assist beneficiary villages in community planning and strengthen their participation in sub-project implementation. It was logically assumed that if villagers chose investments using a KDP and contributed in kind and labor, they were more likely to utilize the outputs of such investments. Sub-projects that could improve access to infrastructure and social services were financed; monitoring focused on four key sectors prioritized in PRF I (agriculture was eliminated due its small size). With regards to sustainability, the multi-year budget feature allowed villagers to improve budget predictability, deepen investments in poverty reduction, and develop budgeting skills. Mainstreaming DRM in sub-project design and having an O&M plan also enhanced sustainability. Component 2 provided capacity building and implementation support for pro-poor development processes. Component 3 financed project management support considering weak in-country capacity. The RF was generally sound, emphasizing the importance of improving services and basic infrastructure for the poorest communities; beneficiary satisfaction was an acceptable proxy for utilization and the supplementary KPI on lowest two quintiles benefit from services was suitable for capturing the PDO’s reference to targeted poor communities. Since the Baseline IE was after Board approval and the types of sub-projects chosen by communities were not known ex-ante, the best estimates on indicators were made, based upon first phase expenditure patterns, as to the types of services communities would choose. During the AF restructuring, the project design was modified to respond to lessons learned during implementation, from the JSDF pilot and to respond to emerging corporate priorities in the areas of nutrition and sanitation. Specifically, the AF scaled up ‘Deepen CDD,’ and included a CLTS pilot and a livelihoods and nutrition component. Adding the latter as a separate component was questionable given its limited contribution to the PDO, increased management complexity, and limited data on results of the preceding LONG pilot (see ICM 2017).

3.2 Achievement of Project Development Objectives Rating: Substantial This assessment is based on achievements of the original PDO/KPIs and those revised with the restructuring in 2015. Project beneficiaries. Table 1 summarizes project beneficiaries before and after the restructuring. As per KPI #4, the final number of direct beneficiaries was 970,431, more than double the number benefiting at the time of restructuring. Out of this, 49.4% were female (vs. 50% target) and 72.2% represented ethnic groups (vs. 70% target).

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Table 1. Project Beneficiaries Beneficiaries Original PDO & KPI Revised PDO/KPIs Overall

Achievement at Closing

Target Achievement (at Restructuring)

Target Achievement (at Closing)

Total (Direct) None specified; 200 kum bans

474,600 700,000 970,431 139%

Female None specified 49% 50% 49.4% 99% Ethnic No indicator No indicator 70% 72.2% 103%

According to IE results, households in the lowest two quintiles of per capita consumption benefitted in terms of access to safe water sources in the dry season, quantity of goods sold outside the village (a result of improved road connectivity), and perception of school building quality (KPI #1). Table 2 gives a breakdown of sub-projects completed by sector and beneficiaries. Table 2. Project Sectors and Beneficiaries (Component 1)

Sector (% of total) No. of Approved Sub-Projects

No. and Types of Beneficiaries

Total Female Ethnic Education (37%) 715 393,507 195,423 290,418 Water (30%) 588 284,030 140,880 206,690 Roads (18%) 356 158,902 78,046 120,919 Agriculture (7%) 137 64,464 31,077 37,507 Health (6%) 116 56,856 27,565 39,966 Electric Power (1%) 19 12,672 6,062 6,321 Total 1,931* 970,431 479,177 700,596 % - - 49.4% 72.2%

*Note: Of the 1931 (98%) sub-projects financed, 1894 had been completed at closing; the remaining 37 sub-projects (2%) are being completed under PRF III. Improved access to and utilization of basic infrastructure and services. End targets for increased access to and utilization of basic infrastructure and services were largely achieved. Outcomes in agriculture and electric power were expected to be minor and hence not assessed. As per KPI #3, beneficiary satisfaction was 80% prior to the PDO change and had reached 99% at closing, against an 80% target. Education (37%). Education sub-projects benefited 393,507 people. Of these, 561 sub-projects (78%) upgraded or expanded kindergarten/primary school buildings. About 1,300 classrooms were newly constructed or renovated, toilets were installed, walls and roofs were reinforced, dormitories and libraries were constructed, and furniture, learning materials, and medical and sports equipment were provided. KPI #1 on increasing school enrollment by at least 6% was dropped at the restructuring as the 2012 Baseline found school enrollment rates already stood at 90%, and it seemed that most of PRF’s educational investments were going towards improving school facilities rather than building new schools. It can be assumed that the increase in classroom numbers and space would lead to more classroom space per student and the ability to separate different grades, coupled with increased sanitary, dormitory (for pupils and teachers) and other facilities. Communities chose qualitative improvements to school facilities as a means of improving the learning environment for their children and enhancing their access to improved education. As per the IE, school renovations significantly improved beneficiaries’ perception of school

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building quality with PRF households perceiving their school building quality as much higher than in control villages.9 Water (30%). Water sub-projects reached 284,030 beneficiaries. New or renovated gravity fed water systems (GFWS) were the most commonly chosen water provision option, followed by drilled wells, community water taps and hand dug wells. As per KPI #1, access to and utilization of safe water supply rose from 76% to 80%, somewhat under the target of 84%. However, the IE showed that access to safe water in the dry season represented an increase of 58 percentage points in villages implementing PRF sub-projects compared to non-PRF (control) villages, and even higher for the poorest households (61 percentage points). In the wet season, poor households in PRF villages were 67 percentage points more likely to have access to protected water sources as compared with households in control villages. Access to protected water had the most significant benefits on women, who reported that reduced distances to safe water allowed them to spend more time on productive economic activity, caring for their families, or attending meetings. Overall, PRF II water sub-projects had significant impacts in improving access and utilization for the poorest, neediest households. Roads (18%). Roads sub-projects resulted in 158,902 beneficiaries. Around 1,185 km of rural roads were improved through upgrading or spot improvements. As per KPI #1, these sub-projects expanded road access and utilization from 30% to 36%, slightly below the target of 38%. PRF roads focused on improving inter-village connectivity and access to farmland. Travel time to the nearest village was reduced on average by 114 minutes in the dry season and 73 minutes in the wet season. The qualitative IE indicated that road improvements fostered an increase in the number of traders accessing villages. The result was both increased incomes for villagers who were able to sell their products to visiting traders as well as a significant decline in the prices of goods sold inside villages. Irrigation and agriculture infrastructure (7%). These sub-projects benefited 64,464 people. Irrigation was the most commonly selected option (47 sub-projects), along with weirs (37), livestock and farm space management (32), and community markets (10). KPI #1 did not include targets related to these types of sub-projects, nor did the random sample of the IE pick up a statistically significant number of these sub-project types. Nevertheless, it would be logical to assume that improved irrigation systems and weirs would increase farmers’ access to irrigated farmland and water for agriculture purposes, livestock, watering and gardens. With high beneficiary satisfaction rates and O&M plans in place, utilization and sustainability of such investments is likely. Health (6%). Health sub-projects accounted for 56,856 beneficiaries. Most were for dispensaries, though the project also financed new labor and delivery rooms, dormitories, water and sanitation, furniture and medical equipment. As per KPI #1, access to and utilization of health facilities rose from 37% at baseline to 45% at closing, slightly

9 Respondents were shown a card with six steps on a staircase from ‘1’ at the bottom to ‘6’ on top. They were asked to identify a poor quality school with ‘1’ and the best quality school with ‘6.’ They were also asked on which step they would place the school in their village.

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exceeding the 43% target. However, the IE found no significant impact on the rate of seeking care when sick, time to reach health care facilities, or cost of transport to these facilities. The IE’s qualitative research noted external factors such as poor quality roads and lengthy travel times during the wet season, cultural fears of using external medical facilities, lack of financial resources, affordability, and poor service quality at health centers (e.g. staff absence) as key obstacles to utilization. These factors lead many villagers to consider traditional medicine options locally or travel farther to district centers. Use of inclusive community and local development processes. In order to achieve the above outcomes, the project used a participatory planning and decision-making approach. Component 2 of the project trained 349 PRF staff on participatory development processes including kum ban facilitators, Village Implementation Teams and other village representatives. As per KPI #2, participatory processes had 48% female participation exceeding the 40% target. The sub-indicator for participation of the poorest was dropped at restructuring due to the impracticality of identifying the poorest. Nevertheless, PRF staff and GoL officials at district level continued to provide technical guidance to kum bans to identify sub-projects which would reach the poorest communities and generate optimal benefits in terms of infrastructure access and livelihood opportunities (also see Section 3.5). Sustainability (original PDO). Sustainability was assessed under four dimensions: (i) developing a viable and replicable model; (ii) increasing the role of local government; (iii) enhancing community and local government capacity; and (iv) improving design quality and O&M of sub-projects. Regarding item (i), the fact that the project received AF to scale it up, that PRF III was approved in 2016, and that PRF KDPs are being used in other GoL or donor funded activities points to success of the model. For item (ii), district officials provided TA and supervision to communities in 100% of project districts (vs. 85% target in IOI #7). For item (iii), 56% of PRF KDPs were used by the GoL or other development actors for planning and funding (vs. 35% target in IOI #8) while 278 communities could plan, implement and monitor their activities (vs. 250 target in IOI #6) (also see Section 3.5b). Concerning item (iv), 95% of sub-projects were reportedly maintained and operational two years after completion (vs. 90% target in IOI #3). The sustainability evaluation was dropped under the revised PDO. It was instead assessed through a Technical Audit (2016) which found that most sub-projects were functional after four to six years of operation and O&M committees active. The exception was roads where about half needed repairs. The issues related to roads may also be linked to PRF I since 68% of the sub-projects audited were from PRF I. Results for PRF II are likely to improve given the added emphasis on spot improvement approaches and O&M following sub-project completion. Sanitation, livelihoods and nutrition (revised PDO). The restructured Component 2 at AF included a sanitation pilot which successfully achieved its indicator “beneficiary communities in pilot villages achieving ODF status” at 29% vs. a 30% target (IOI #17). More than 100 kum ban facilitators and village leaders were trained on the approach, and community sanitation activities were conducted in all 41 target villages. Under the new Component 4, 3,755 livelihood activities were supported by the seed funds against an end target of 2,400 (IOI #16). No data was collected on how much dietary diversity improved

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(IOI #15). An evaluation conducted in 2016 in the two provinces where nutrition activities were piloted found that over 90% of pregnant/lactating women consumed rice, and that dark green leafy vegetables, various fruits, white tubers and other vegetables, organ meat, and eggs were consumed more frequently by VNC households.10 Both sets of activities were small ‘additions of opportunity’ and did not contribute significantly to achieving the PDO. Table 3. Outcome Assessment: Weighted Against Original and Revised PDO Targets

Until 2015 (Original PDO) After 2015 (Revised PDO) Overall Relevance (PDO/Design and Implementation)

High/Substantial High/Substantial -

Efficacy Substantial Substantial - Efficiency Substantial Substantial - Rating Value* 5.0 5.0 - Amount Disbursed US$20.51Million US$16.09 Million US$36.6 Million % Disbursed 55% 45% 100% Final Rating Satisfactory

*Note: Highly Satisfactory (HS)=6; Satisfactory (S)=5; Moderately Satisfactory (MS)=4; Moderately Unsatisfactory (MU)=3; Unsatisfactory (U)=2; Highly Unsatisfactory (HU)=1.

3.3 Efficiency Rating: Substantial The 2016 technical audit, initiated in January 2015 and supported through MDTF, included comparable sub-projects (CSPs) financed by the GoL or other donors in the same geographical area. It focused on a random representative sample of PRF sub-projects completed in 2009 and 2010 (PRF I) and 2011 (PRF II).11 The rationale for including PRF I sub-projects was that the condition of more recent PRF II infrastructure would mostly reflect quality of construction rather than maintenance. A total of 60 PRF sub-projects were sampled: school and health buildings (19), bridges (2), GFWS and drilled wells (24), roads (8), and weirs and channel control structures (7). No materials or methodologies could have been altered to increase cost effectiveness of these sub-projects. They were designed, specified and constructed to maximize value for money, except for roads which lacked structures to transmit road runoff. The audit recommended focusing more on spot improvements to increase longevity and cost effectiveness of PRF’s road program. The project also demonstrated administrative efficiency (see Annex 3). Roads. Eight PRF roads sub-projects and two CSPs were sampled. The cost of PRF sub-projects averaged at LAK 7,700/m2 and CSPs at LAK 21,015/m2. PRF roads were deemed economically desirable with a conservative analysis showing a net present value (NPV) of

10 Draft Endline Survey on LONG Project (2016) 11 Sub-project selection criteria included: (i) 50/50 representation of sub-projects from the North and South of the country; (ii) proportional representation by sub-project type; (iii) proportional representation of construction implementation modalities (CFA, contractor or joint community/contractor); (iv) at least half of sites selected from remote locations; and (v) samples from 2009, 2010 and 2011, i.e. Cycles 7, 8 and 9, respectively.

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LAK 1,004,750,747 and an expected internal rate of return (EIRR) of 43.5%. However, the lack of drainage structures in PRF roads to transmit road runoff and overland flows reduced their cost effectiveness compared to CSPs. Water. GFWS in 13 PRF sub-projects and nine CSPs, and drilled wells (hand pumps) in four PRF sub-projects and four CSPs were analyzed. Construction costs for GFWS averaged at LAK 2.6 million/household under PRF, twice that of CSPs where costs were on average LAK 1.25 million/household. However, the design quality and user/tap stand ratio of PRF systems were superior at 12 households/tap stand in PRF vs. 21 households/tap stand in CSPs. The cost of drilled wells varied greatly as it depended on finding groundwater at reasonable depth. In PRF sub-projects, costs averaged at LAK 63.5 million/well (lowest at LAK 25 million and highest at LAK 151 million) and in CSPs at LAK 29.425 million/well (lowest at LAK 18 million and highest at LAK 39 million). NPV was LAK 71.4 million and EIRR 20% for GFWS sub-projects while NPV was LAK 245 million and EIRR 126% for drilled well sub-projects, suggesting high rates of return from PRF investments. Buildings. Data for schools and health centers were gathered from 19 PRF sub-projects and 21 CSPs. Average construction costs were mostly similar at LAK 2.4 million/m2 for PRF and LAK 2.6 million/m2 in CSPs. Distance from a district town was a strong determinant of the unit cost of buildings. Health buildings were more expensive than schools and unit cost data was therefore analyzed only for schools. NPV of LAK 271.8 million and EIRR of 26% suggested that PRF schools were economically desirable. Bridges. Four bridges were evaluated, two PRF sub-projects (suspension bridge for pedestrian/motorcycles and reinforced concrete/wood vehicle bridge for small four-wheel vehicles) and two CSPs (wood bridge and concrete vehicle bridge for large trucks). Key differences between these bridges in terms of size and materials used in construction and made them not comparable. Irrigation. Concrete weirs and channel control structures in seven PRF sub-projects and three CSPs were evaluated. Construction costs averaged at LAK 9.37/ha for PRF and LAK 9.21/ha in CSPs. Despite the lesser number of CSPs evaluated, PRF investments in irrigation related rural income-generating sub-projects are reasonably comparable. The average community contribution to a PRF sub-project, in the form of local materials or labor, was 14% of the infrastructure budget which was reasonable for the size of PRF investment. Sub-projects which relied on labor based methods (e.g. large excavations for road alignments) benefitted more from community contributions than sub-projects which required more skilled labor and purchased materials. Factoring in community contributions was found to enhance cost effectiveness of building and irrigation sub-projects.

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3.4 Justification of Overall Outcome Rating Rating: Satisfactory The relevance of the PDO remained High throughout the project’s life in both the Bank’s CPS and the borrower’s strategic documents. The relevance of the design was Substantial throughout, though the inclusion of additional activities increased complexity during the AF phase. Any judgement on project outcome must consider the local country context including the limited capacity of government staff, the complexities of working with ethnic minority groups (76% of the PRF beneficiaries), and the extreme remoteness of the areas in which PRF operates. Given these challenges, the project objectives are deemed sufficiently met in terms of improved services and community participation. The project’s efficacy is deemed Substantial, both in meeting the original and revised PDOs, especially given the very large number of beneficiaries and high beneficiary satisfaction rates for project assets. Efficiency is rated Substantial with generally comparable prices achieved, viable EIRRs and demonstrated administrative efficiency. The overall outcome rating is therefore Satisfactory.

3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development Poverty impacts. PRF II delivered a significant number of community level infrastructure investments in poor rural communities. In Laos, lack of access to basic services is highly correlated with poverty, especially amongst ethnic minority groups. PRF water sub-projects increased access to protected water sources and reduced time needed to fetch water, amenities were added to school buildings and their quality improved from the perception of community members, and time to travel to the nearest village in both rainy and dry seasons lessened. The final IE showed the bottom two quintiles benefitting significantly from improved access to clean water, reduced time travel to nearest village in wet and dry seasons, reduced cost for travelling to district centers, and greater access to markets. High satisfaction levels were reported by beneficiaries and there was increased community engagement, particularly in areas piloting Deepen CDD. Gender aspects. Women’s participation on allocation of PRF resources was 48%, against a 40% target (KPI #2). The final IE found that women in PRF villages felt that their inputs in village affairs and decision-making was greater, and there was greater attendance in village meetings, especially for poor women. However, higher rates of attendance did not necessarily result in increased active participation such as speaking at meetings, activity planning, and filing complaints (Endline IE 2016). Women, especially in ethnic rural communities, tend to identify their role in the house and the field, do not voice their opinion in public or participate in community decision making, and have limited or no leadership experience. Empowering women to alter or transform these gender relations through the project’s community engagement approach will remain challenging and may take much longer than the three-year time period measured in the IE. The Deepen CDD pilot indicated

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positive trends in 316 villages where female participation rose to 61% and more than 90% of sub-projects had been prioritized by women. Social development. PRF II created greater voice for communities in decision-making. It increased villagers’ perceptions that their input in village affairs and decision making was sought and had significant influence (Endline IE 2016). There was a strong focus on community participation particularly in Deepen CDD areas. Innovative ideas were proposed by villagers and included in VDPs, such as community managed rice banks, revolving funds for latrine construction, and solar powered lighting equipment for evening classes for children. Although these were ineligible for project funding, they were included in KDPs for possible funding by other agencies. (b) Institutional Change/Strengthening Training activities conducted under PRF II helped to improve the capacity of communities and local government officials to carry out local level planning and development (see Annex 2). A cascading approach was used under Deepen CDD whereby the PRF would train a cadre of ‘master trainers,’ who in turn would train ‘trainers,’ who then trained kum ban facilitators, Village Implementation Teams and other village representatives. Local government officials from planning and rural development departments participated in training activities conducted by the PRF. District officials engaged in learning-by-doing through their involvement in the endorsement and technical inspection of PRF sub-projects. The stocktaking of rural development processes (2015) found many district officials appreciated the project’s capacity development support and on-the-job training opportunities. The number of communities able to plan, implement and monitor their activities was 1,349, against a 1,300 target (IOI #6). There were considerable efforts to institutionalize PRF village planning approaches in government systems through the aforementioned stocktaking exercise, a subsequent workshop on DSEDP, and technical inputs provided by the PRF on MPI initiatives (pilot study on PPM and plan to strengthen DSEDP as an integrated special development plan). (c) Other Unintended Outcomes and Impacts (positive or negative) None.

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops IE workshops. The Bank carried out several M&E workshops in partnership with government stakeholders, DFAT and SDC. The objective was to discuss the design of the IE framework, review key hypotheses, research questions and preliminary research findings from baseline and endline surveys, and present findings. A summary of an IE workshop held in June 2015 is in Annex 6. Poverty mapping workshop. This was held on November 19, 2016 to discuss the potential to expand the Deepen CDD approach for household poverty targeting. The Bank shared international experiences on household poverty targeting. The NCRDPE expressed its

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interest to include household poverty targeting in its Poverty and Development Criteria (PM Decree #309), and requested Bank support to develop a targeting methodology tailored to the Laos context. National Lessons Learnt Workshop on DSEDP. This was held on November 16, 2016 to share lessons learned from the DSEDP pilot and discuss means to strengthen integration of VDPs and KDPs with DSEDP. Participants included piloted provinces, districts, key central ministries, NGOs, development partners and SDC. Discussions revolved around cost-benefit from integrated local planning, how to improve the process of village planning and integration of VDPs with district sector plans, and the need for capacity building to apply the local planning process. It was agreed that MPI would: (i) develop a comprehensive local planning guideline linking village level PPM with the DSEDP Manual, launched in 2012, based on lessons learned from this pilot and relevant experience from Vietnam; (ii) pilot the revised process; and (iii) finalize and legalize the guidelines to be adopted by development projects/programs nationwide. 4. Assessment of Risk to Development Outcome Rating: Moderate Sustainability of infrastructure. Risk to infrastructure sustainability is rated Moderate. The Technical Audit (2016) found that PRF sub-projects are generally well designed, built, maintained and cost-effective compared to similar investments financed by other agencies in Lao PDR. It also found that most sub-projects were functional after four to six years of operation and O&M committees remained active, except for roads. Technical audit recommendations have been incorporated in the design of PRF III, especially for the road sector with attention paid to establishing rural road maintenance groups (RMGs). Meanwhile, DRM will continue under PRF III to make investments more resilient against disasters. This includes provisions for on-site inspection for selected sub-projects, improved site screening and investigation, and climate and DRM training to PRF engineers. Counterpart funding. Macroeconomic risk is Substantial given the continuing fiscal challenges facing the GoL. The risk is expected to be mitigated in PRF III through continued use of procedures developed during PRF II which ultimately helped to ensure timely allocation of GoL funding. Financial and operational autonomy of the PRF. Political risk is rated Moderate. At closing, the NLCRDPE had been transferred from the PM’s Office to the Ministry of Agriculture and Forestry (MAF), now mandated to coordinate the rural development agenda. This creates an opportunity to institutionalize PRF’s bottom-up process, though it may also affect the implementation capacity of the PRF. The risk will be mitigated in PRF III through: (i) continued policy dialogue to help the GoL make informed decisions on the legal and institutional arrangements of the PRF in consultation with the Bank; (ii) management of potential elite capture by using objective selection criteria, strengthened

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community engagement and social/technical audit processes; and (iii) greater community oversight of procurement and sub-project implementation processes under PRF III. 5. Assessment of Bank and Borrower Performance

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory The project was well aligned with the CAS (2005 and extended until 2011) and GoL’s poverty reduction agenda. The PDO reflected a key development priority in Lao PDR and project components were well structured to achieve the PDO through a participatory approach. The sustainability piece linked to the PDO was based on four relevant IOIs, but not strictly limited to project-related factors. Several lessons learned from the implementation of PRF I and other poverty alleviation programs were drawn upon during project preparation. The poverty targeting process was clearer and more methodical and transparent than PRF I. The project integrated elements meant to strengthen community engagement, including multi-year investment plans which introduced four rounds of grants per kum ban, and a greater focus on gender. The strength of the existing implementing agency, the PRF, was drawn on to provide grants and capacity building to villages to realize community infrastructure. The risk assessment was satisfactory with mitigation measures identified and integrated in project design. Safeguards documents were prepared in response to relevant policy triggers. The RF was relatively sound though it may have helped to include separate indicators for access and utilization, a clearer definition for road access, and a more comprehensive design for monitoring social inclusion (ethnic group involvement and women’s voice and agency). The task team at appraisal comprised a mix of relevant skills, with some members based in-country which was useful to ensure close consultation with counterparts on project design. The appraisal process was very efficient with less than a year elapsing between Concept Review (December 2010) and Board approval (June 2011) and only US$229,800 spent on preparation (see Annex 4). (b) Quality of Supervision Rating: Moderately Satisfactory Bank implementation support missions were undertaken three times in 2012, once in 2013, and twice a year in 2014, 2015 and 2016. The fact that the Task Team Leader (TTL) and some key members of the Bank task team were based in-country throughout the project was helpful to ensure strong implementation support and almost weekly contact with PRF staff. Consultants played a role in providing extensive technical inputs during and between missions.

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Safeguards threats were proactively identified and resolved. For example, weak monitoring and documentation of safeguards compliance during the first half of the project were mitigated through refresher safeguards training for staff. There was close collaboration between the Bank task team and the Country Management Unit in monitoring the delay in GoL co-financing. Learning-by-doing approaches, such as Deepen CDD and CFA, were introduced allowing the project to test design adjustments based on evolving needs. The level 1 restructuring at AF helped simplify the PDO and RF to focus more on outcomes and allowed a further scaling-up project activities. The AF helped expand the Deepen CDD pilot which had demonstrated positive results. Albeit small in value, the new livelihoods and nutrition component was not clearly attributable to the PDO and did not have measurable results indicators. Implementation shortcomings in the first half of the project were documented through candid Aide Memoires and ISR ratings which reflected the reality of project performance. Following the MTR, the ISR rating on overall implementation progress was upgraded from Moderately Unsatisfactory to Moderately Satisfactory, which was justified given that the pace of sub-project implementation was back on track. ISR ratings for Component 4 during the AF period underestimated significant shortcomings in terms of the ability of SHGs to manage revolving funds, low repayment rates, capacity of the PRF to support and oversee SHGs, and lack of data on VNC outcomes. A notable attribute of Bank supervision was the effort taken to fill gaps in local capacity through external consultant support using the MDTF. Given limitations in the analytical capacity of PRF’s M&E Unit, it was appropriate for the Bank to take the lead in evaluation studies using MDTF resources. Seven studies were completed or initiated (see Annex 2). These helped identify critical organization and project related issues, which were absorbed in improvements to project implementation and the design of PRF III. The successful execution of the IE was a key accomplishment in a low capacity context. The Bank provided the opportunity for select staff at the PRF to participate in regional fora including three Asia CDD Conferences in Indonesia (2014), the Philippines (2015), and Vietnam (2016), and an East Asia and Pacific Gender Capacity Program on Transport in Vietnam (2016). (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory The services provided by the Bank ensured a satisfactory quality at entry to the project despite minor flaws in the PDO and RF. Strong implementation support was provided through regular missions. TTLs and task team members who were based in-country provided timely and applicable TA, including through consultancies and performance studies. The IE was a key accomplishment in a low capacity context. There were moderate shortcomings in addressing issues arising early on in the project, design aspects at the restructuring, and accurate reporting on some aspects of project performance. Transition

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arrangements for PRF III and towards the achievement of development outcomes were satisfactory.

5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory Strong commitment to the project was demonstrated by the GoL’s decision to commit US$10 million to PRF II from the national budget. The GoL commitment to sustain the CDD approach was also evident in its request for AF in order to scale up the project and decision to pursue PRF III as a follow-on operation. The value of CDD approaches had also been increasingly recognized over time. The delay in counterpart funding three years into the project significantly affected sub-project implementation in the first two years. This was part of a broader fiscal issue affecting civil service across sectors in Lao PDR. Notwithstanding these challenges the GoL continued to finance sub-project implementation, albeit with some delay. The GoL’s shortfall in the first grant cycle (US$2 million out of a total project commitment of US$10 million), was made up during the last grant cycle, i.e. provided in two stages, an estimate US$0.6 million and US$1.4 million in December 2016 and January 2017, respectively.12 To date, 37 sub-projects are in progress under the GoL’s budget. Increased access to and utilization of intended services cannot, in many cases, be delivered without the explicit involvement and support of line ministries. At the start of PRF II, the GoL facilitated Memorandums of Understanding (MoUs) with key sector ministries/agencies as a formal framework for corporation. These MoUs were modified following the MTR to ensure timely provision of staff and resources, such as teachers, nurses, schoolbooks and medicine, for PRF investments. The Endline IE (2016) noted staffing issues in new PRF-constructed health facilities with long waits until staff were allocated from the district, notwithstanding an existing agreement with the District Health Office that new facilities should be resourced as soon as they are constructed. The GoL supported measures for the institutionalization of PRF village planning approaches in government systems. Starting in 2013, the MPI, in collaboration with NPRDPE, developed a PPM to establish standardized procedures for village and local development planning. The MPI piloted PPM in three provinces, sought feedback from the PRF, the SDC and the Bank, and since January 2016 started collaborating with the PRF to strengthen the DSEDP as an integrated special development plan in six pilot districts. The GoL’s commitment to strengthening local administration and fostering local development and service delivery was also evident through the initiation and piloting of the Sam Sang ordinance in 2012–14.

12 The last grant cycle of PRF II included 505 sub-projects of which 110 sub-projects were supported by the GoL and implemented in two phases, 2016 and 2017.

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(b) Implementing Agency Performance Rating: Moderately Satisfactory Notwithstanding initial delays, the Project Management Team ensured a timely, efficient and effective implementation of project activities, surpassing the number of beneficiaries and without the need for an extension of the implementation period. Sub-project implementation in the first two years was hampered by challenges of expanding into three new provinces and integrating design changes, high staff turnover rates, and the diversion of management attention to address the startup of the separate JSDF pilot. Weak management of the M&E Unit led to delayed progress reporting. The agency’s achievement in setting up a progressively robust M&E system during the project period is commendable. Its ‘turn-around’ progress from a slow start, should be acknowledged, especially given the shortage of qualified persons with M&E skills locally. The PRF, in coordination with district level government, provided technical guidance to kum bans to identify sub-projects which would reach the poorest communities and generate optimal benefit in terms of access to infrastructure and livelihood opportunities in the district. The PRF also developed a constructive working relationship with the World Bank, co-financiers and MPI. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory The government showed a high level of commitment to the project. The fact that the GoL provided an enabling environment to ensure PRF becomes a sustained poverty reduction strategy for the country is significant. The PRF’s achievements in overall coordination with partners/stakeholders, setting up a progressively robust M&E system, and ensuring adequate transition arrangements after project closing are notable. At the time of closing the Borrower had complied with all the covenants and agreements needed to achieve development outcomes. 6. Lessons Learned Fill gaps in local capacity through external experts and specialized studies. In a context of relatively weak analytical and supervision capacity, it is important to sponsor independent studies to learn and adapt. Involving consultants who can provide expert inputs on specific issues such as M&E, community participation, nutrition, and engineering is useful for project planning and implementation. The Bank made effective and appropriate use of MDTF resources in this regard; this contributed to PRF’s operational learning and improved performance over time. Apply simplified and updated standard operating procedures. Step-by-step procedures for key aspects of implementing a CDD project, such as community engagement, quality assurance, CFA, fiduciary aspects, and project monitoring, can help to simplify activities

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and smoothen implementation progress. In PRF II, simplifying and continuously updating the PoM while providing close guidance for actual application helped to improve project quality and implementation rates over time. Pilots and adaptive learning as a valuable approach. Experimentation is critical for reducing risks and building confidence and capacity of staff and communities to scale up. The Deepen CDD approach in PRF II introduced a few changes to the organization structure, and fine-tuned the community planning and implementation management process. The PRF adopted learning-by-doing approaches, such as CFA and CLTS, which allowed the project to trial design changes based on evolving needs. Such adaptive learning cycles based on pilots, reviews and lessons learnt proved valuable to the PRF. Yet, it is paramount to have agreed measurable outcomes when scaling up pilots. Adding a livelihoods and nutrition component at AF was questionable given its weak link to the PDO and the risk to sustainability recognized at closing of LONG. Appropriate O&M is critical. A road maintenance strategy is critical, especially to preserve and improve rural access roads financed in a CDD project. Most PRF sub-projects were functional after four to six years of operation and O&M committees remained active, with the exception being roads. PRF III is addressing these issues by helping communities establish rural RMGs and allowing villages to use part of the sub grant for O&M activities. The model is expected to provide flexible employment for women and builds on global learning (Latin America and Asia). Focus on institutionalizing CDD approach. PRF II demonstrated the importance of integrating the PRF’s bottom-up processes with district planning processes to tackle issues which cannot be addressed solely through kum ban block grants (e.g. funding VDP proposals for community managed rice banks or solar powered lighting). Opportunities exist to improve the link between PRF and GoL planning processes, such as using the PRF’s KDP in the GoL’s district planning process to resolve gaps in funding or public services through integrated planning and pooling of resources. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies The Draft ICR was submitted for Borrower comments on May 15, 2017. The Borrower was satisfied with the report as it provided an accurate reflection of the project. Minor comments provided were incorporated in the final report. A summary of the Borrower’s completion report is in Annex 7. (b) Cofinanciers The Draft ICR was shared with DFAT and SDC on May 15, 2017. DFAT found the report covered all key aspects of the project and the findings of the various evaluative studies. In response to DFAT’s request, the Bank team will look into the possibility of providing DFAT with a version of the Final ICR where the cover page mentions the total MDTF

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amount (AUS$20 million equivalent to US$16.9) and displays the logos of donors. Regarding Annex 9, the suggestion to include the rationale for using MDTF for Component 4 along with component outputs has been addressed. The total row in Table 2 of this annex was corrected to reflect the actual value, i.e. US$16.88 million and not US$16.9 million. The SDC noted that the report was comprehensive, and reflected the challenges and accomplishments of PRF II. As suggested, the integration of PRF’s bottom-up processes in local district planning processes was added as a lesson learned. The stakeholders involved in the stocktaking of local participatory planning (2015) were mentioned in a footnote in Section 2.5. A paragraph on the ethnic beneficiary indicator was not added to Section 3.5a, as advised, since this was addressed elsewhere in the report and for conciseness. SDC’s completion report is in Annex 8. (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) Not applicable.

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Annex 1. Project Costs and Financing Table 1. Project Cost by Component

Components Appraisal Estimate (US$)

Actual/Latest Estimate (US$)*

Percentage of Appraisal

Component 1: Community Development Sub-Grants

40,900,000.00 53,910,840.18 131.8

Component 2: Local & Community Development Capacity Building and Learning

6,600,000.00 8,543,225.66 129.4

Component 3: Project Management 9,000,000.00 13,647,967.05 151.6 Component 4: Livelihood and Nutrition - 1,930,388.86 - Total Baseline Costs 56,500,000.00 - - Physical Contingencies 500,000.00 - - Total Project Cost 57,000,000.00 78,032,421.75 136.9

*Note: Data from Finance and Administration Unit, PRF (as of December 2016) Table 2 (a). Financing at Appraisal

Source of Funds Type of Financing Appraisal Estimate (US$)


Percentage of Appraisal

IDA Grant Grant 25,000,000 23,821,711 95.30 MDTF Trust Fund 12,000,000 14,500,000 120.83 Borrower Parallel 10,000,000 10,000,000 100.00 SDC Co-financing 10,000,000 13,636,000 136.36 Total 57,000,000 61,957,711 108.70

Table 2 (b). Financing Plan in AF Project Paper

Source of Funds Type of Financing AF Estimate (US$)


Percentage of AF

IDA Credit Credit 11,600,000 11,554,161 99.60 MDTF Trust Fund 2,400,000 2,300,000 95.83 Total 14,000,000 13,854,161 98.96

*Note: Data from Finance and Administration Unit, PRF (as of December 2016)

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Annex 2. Outputs by Component Component 1: Community Development Sub Grants Table 1. Sub-Projects Approved and Completed, by Sector

Sector No. of Sub-Projects % of Sub-Projects out of Total Completed

Completed Approved

Education 685 715 36 Water 585 588 31 Roads 354 356 19 Agriculture 137 137 7 Health 114 116 6 Electric Power 19 19 1 Total 1,894 1,931* 100

Source: M&E Unit, PRF *Note: The 37 incomplete sub-projects are those supported under GoL’s budget. Table 2. Project Beneficiaries

Sector No. of Beneficiaries Total Female Ethnic

Education 393,507 195,423 290,418 Water 284,030 140,880 206,690 Roads 158,902 78,046 120,919 Agriculture 64,464 31,077 37,507 Health 56,856 27,565 39,966 Electric Power 12,672 6,062 6,321 Total 970,431 479,177 700,596 % - 49.4% 72.2%

Source: M&E Unit, PRF

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Table 3. Project Outputs, by Sector Sector Output New / Renovation Detail No. of Sub-

Projects Quantity

Education Classroom New / Renovation New kindergarten/primary schools, including extensions (545 sub-projects / 1,297 nos.), renovated primary schools (16 sub-projects / 38 nos.)

561 1,335 nos.

Toilet New Usually 2 toilets per classroom 21 44 nos. Dormitory New Student and teacher dorms 35 100 nos. Library New Primary schools 2 3 nos. Medical Equipment New Medical equipment for dispensary 3 4 nos. Roof New Primary schools 1 2 nos. Furniture New Desks and chairs 38 2,039 nos. Teaching / Learning Material New Student books and teacher guide books 50 1092 nos. Sports Equipment New Football, basketball, etc. 4 6 nos.

Water Gravity Fed Water System New/ Renovation New (285 sub-projects / 948 km), renovation (197 sub-projects / 305 km)

482 1253 km

Community Water Supply Taps New / Renovation New (20 sub-projects / 236 nos.), renovation (3 sub-projects / 14 nos.)

23 250 nos.

Drilled Well New / Renovation New (72 sub-projects / 423 nos.), renovation (1 sub-project / 5 nos.)

73 428 nos.

Hand Dug Well with Pipe New - 10 88 nos. Roads Road Upgrade/Spot Improvement Renovation Rural roads 356 1,185 km Health Birth Delivery Room New - 2 3 nos.

Water Pipe New - 4 7 km Dispensary New / Renovation New (35 sub-projects / 82 nos.), renovation (1 sub-

project / 3 nos.) 36 85 nos.

Furniture Set New - 4 4 nos. Toilet New - 21 92 nos. Toilet Accessories New - 4 12 nos. Medical Equipment Set New - 6 6 nos. Nurse’s Dormitory New - 24 47 nos. Nurse’s Stipend Set New - 1 1 no. Village Medicine Kit Box New - 14 54 nos.

Agriculture Community Market New / Renovation New (9 sub-projects / nos.), renovation (1 sub-project / no.)

10 10 nos.

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Livestock and Farm Space Management

New Farm space for livestock (11 new sub-projects no nos.), animal stable (1 new sub-project / no.), barbed wire fence (20 new sub-projects / nos.)

32 32 nos.

Fish Pond New - 1 1 no. Irrigation Systems, Canals and Pipes

New / Renovation New (26 sub-projects / nos.) renovation (21 sub-projects / nos.)

47 47 nos.

Gabion Wall New - 1 1 no. Erosion Protection New - 3 3 nos. Rice Storage Area New - 1 1 no. Soil Dam New / Renovation New (2 sub-projects/nos.), renovation (2 sub-projects

/ nos.) 4 4 nos.

Waste Water Canal New - 1 1 no. Weir New / Renovation New (33 sub-projects / nos.), renovation (4 sub-

projects / nos.) 37 37 nos.

Electric Power

Electrical Network Installation New For school 1 1 no. Low Voltage Electricity Network New For villagers 16 16 nos. Electricity Transformer New - 2 2 nos.

Source: M&E Unit, PRF

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Component 2: Local & Community Development Capacity-Building and Learning Table 1. Training Conducted by PRF

Source: HR Unit, PRF

Type Detail No. of Participants

Community Development

- Training of trainers (ToT) - Participatory community development and facilitation skills - KDP review - How to be a trainer and how to plan and invest - How to be an effective facilitator in community development - Deepen CDD approaches - ToT on social and environmental safeguards - Project orientation meeting

349

Engineering - Rural access road standard design - Survey and design of infrastructure sub-projects - Exchange experiences/lessons learnt - Water Computer Aided Design Programme - Bioengineering for riverbank protection - Environmental and social safeguards - Bio-engineering application techniques

227

Finance, Procurement, and Administration

- Basic procurement principles - General procedures and guidelines of personnel procurement - Finance and procurement - Engineering and procurement - Procurement of consultancy - Exchange experiences/lessons learnt on procurement

implementation for cycle XII - office administration - secretary training - project and international accounting - exchange lessons between provincial finance officers

280

GESI - Gender and vulnerable groups - Social inclusion

615

M&E - Monitoring - MIS (including online) - M&E annual review

71

Rural Development

- Opening black box of business development services for water supply providers

- Innovation in public investment and employment programmers - Rural development and poverty eradication - Exchange lesson implementation with Livelihood Upland for Food

Security Project

5

Management and Leadership

- Project management - Leadership training for provincial staff - Training on finance, administration, procurement, engineering,

community development and M&E for Central level staff

109

Vehicle - Good driving technique and vehicle usage 12 Total 1,668

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Component 3: Project Management Table 1. Studies Conducted

No. Name of Study Commissioned By Started Completed Application 1 Baseline Impact

Evaluation World Bank (MDTF) 2012 2013 Used to refine indicators at AF and as basis for Endline IE (2016)

2 Technical Audit PRF (outsourced to consulting firm)

2012 2013 PRF staff needed help procuring and providing quality control of outputs. Local firm had difficulties analyzing data. Bank responded by providing more international M&E assistance to build skills of PRF’s M&E Unit.

3 Capacity Assessment PRF (outsourced to consulting firm)

2012 2013 PRF staff needed help procuring and providing quality control of outputs. Local firm had difficulties analyzing data. Bank responded by providing more international M&E assistance to build skills of PRF’s M&E Unit.

4 Community Beneficiary Assessment

World Bank (MDTF) 2012 Cancelled Cancelled after first pilot round due to initial lack of access to ethnic minority villages, lack of qualified staff, translation difficulties, and illness of lead researcher

5 GESI Assessment World Bank (MDTF) 2013 2013 Used in management response for key organizational and programming changes including staff skills training on facilitation and social inclusion, preferential recruitment practices to increase the number of women and non-Lao Tai members of staff, and regularly discussing social inclusion issues at PRF meetings.

6 Organizational Review of Participatory Processes

World Bank (MDTF) 2013 2014 Used in management response for organizational improvements at PRF including division of responsibilities, professionalization of human resource management, and strengthening of front line staffing (kum ban facilitators and district staff), and to carry out new Deepen CDD pilot

7 Sub-Project O&M Survey PRF 2014 2014 Used in management response on O&M 8 Internal Social Safeguards

Assessment World Bank (MDTF) 2016 2016 Used in management response to improve safeguards reporting and as

continuous learning on Deepen CDD aspects 9 Endline IE World Bank (MDTF) 2015 2016 Used as inputs to RF and in design of PRF III 10 Technical, Cost

Effectiveness, Cost Benefit and Sustainability Audit

World Bank (MDTF) 2016 2017 (ongoing)

Confirmed that technical quality of sub-projects was satisfactory with most sub-projects functional after four to six years of operation, and pointed out areas of improvement in technical and safeguards training, O&M, and technical designs; used as continuous learning and in design of PRF III; Draft Final Report submitted in April 2016 is under review

11 Institutional Development Review


Used in management response to further improve internal coordination and communication, human resource processes, internal controls and checks and balances, and decentralized budgeting

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12 Participatory Planning Process and Capacity Development Assessment


Draft Report submitted in December 2016 is under review

13 Impact Study on Village Nutrition Centers

World Bank in partnership with Ministry of Health’s National Nutrition Center

2016 2017 (ongoing)

Field observation in December 2016, work plan submitted in January 2017, data collection/analysis underway with Draft Report expected April 2017

14 CLTS Integration into PRF


Findings/recommendations presented in March 2017; Final Report expected end March 2017

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Annex 3. Economic and Financial Analysis An economic analysis of sub-projects was performed for three types of infrastructure sub-projects which will likely remain priority areas for investment, namely, farm to market roads, water supply (gravity and pump), and school buildings. The general assumptions were: (i) full benefit is realized in Year 1 of each sub‐project and over the full lifetime of the infrastructure; (ii) O&M costs are constant over time and spent annually (rationale being for full expected benefit realization throughout the life of the project physical infrastructure must be repaired and maintained on a regular basis);13 (iii) discount rate of 11.25% was used in computing NPV and EIRR and the decision rule is to accept a project where the EIRR is greater than the hurdle rate of 11.25% and the NPV is greater than zero, and (iv) shadow wage rate is used to reflect the true economic value of unskilled labor employed in the project.14 Other non-tangible benefits, such as increased participation in village and local government planning and impact of livelihoods support, are not quantified in the economic analysis. Their impact has partially been captured by the IE which shows that PRF supported households perceive increased participation in and influence on village decision-making. The cost effectiveness of PRF investments was determined by including visits and evaluations of similar rural infrastructure, funded and constructed by other donors or the GoL. Bills of quantity, designs, specifications and other sub-project documents were examined to record relevant data for these comparisons. Sub-project dimensions were checked at the sites to confirm both as built drawings and unit area costs of construction. Unit costs for PRF buildings, drilled wells and irrigation schemes were competitive with comparable agencies’ works and therefore cost effective. PRF’s investment in roads was negatively affected by the lack of drainage ditches and structures to transmit road runoff and overland flows in an effective manner. GFWS sub-projects incurred unit costs twice that of other agencies, but the design quality and user/tap stand ratio of PRF systems were superior at 12 households/tap stand in PRF vs. 21 households/tap stand in CSPs. This also compares with World Water Partnership recommendations for design of water systems for a maximum of six households/tap stand. The cost of drilled wells was slightly below those of CSPs though budgets increased in areas where groundwater was deeper and harder to access. Factoring in local labor and material contributions increased cost effectiveness of sub-projects, i.e. total cash investment required from the GoL for infrastructure was less because of local contributions. There were no materials or methodologies that could be changed or altered to increase cost effectiveness of sub-projects. The analysis highlighted the following generally recognized benefits, although there was no supporting data.

13 While O&M costs vary by project and by year with more costs towards the latter part of the investment life, a constant amount can be assumed as the average annual cost over the life of the sub-project. 14 The value of unskilled labor in PRF project areas is around LAK 41,000/day. The social discount rate, currently pegged by the Laos Central Bank at 11.25%, was used.

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Roads. (i) Increase in farm incomes because of improved access to markets; (ii) cost savings in transporting agriculture produce to the market; (iii) additional earnings from a reduction in post-harvest losses; and (iv) cost savings in transporting agricultural inputs to farm sites. Water supply. (i) Opportunity cost of time saved from fetching water, especially for children and women; and (ii) increased safe water consumption for households. The health benefits are difficult to estimate and are not included in this analysis though clean water is well known to reduce disease. School construction. (i) Reduction in dropout rates; (ii) increase in enrollment rates as a result of having more and better equipped classrooms and teachers; and consequently (iii) higher earnings over a lifetime due to increased education. The above three sub-project types were tested for their sensitivity under three scenarios: (i) reduction in sub-project lifetime as result of poor infrastructure maintenance; (ii) increase in construction cost by 20%; and (iii) reduction in project benefits by 20%. The analysis found that GFWS are sensitive to a reduction in project lifetime by four years while pump water supply projects were robust under all scenarios as were the improved classrooms and new road sub-projects. Administrative efficiency. The project, including the AF, was completed by the original closing date of December 31, 2016. Average cost of project management per beneficiary decline from US$19.5 under the original project to US$8.8 at project closure. Project management cost per beneficiary for PRF II was slightly higher than for PRF I, estimated at US$14 and US$10.8, respectively. Yet, the fact that additional sub-projects were completed under AF of PRF II resulting in an additional 495,831 beneficiaries at closing, without a time extension, is notable.

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Annex 4. Bank Lending and Implementation Support/Supervision Processes Table 1. Task Team Members

Names Title Unit Responsibility/ Specialty

Lending Helene Monika Carlsson Rex Senior Social Development Specialist GSU07 Task Team Leader Chinnakorn Chantra Procurement Specialist EASRP-

HIS Procurement Specialist

Sladjana Cosic Social Development Specialist GSURR Team Member R. Cynthia Dharmajaya Program Assistant GFA02 Team Member Florian Kitt Knowledge Management Officer EASER -

HIS Team Member

Markus Kostner Practice Manager GSU04 Team Member Roch Levesque Senior Counsel LEGAM Senior Counsel James Orehmie Monday Senior Environmental Engineer GEN06 Team Member Thao Le Nguyen Senior Finance Officer WFALN Team Member Ngozi Blessing Obi Malife Program Assistant GEN2B Team Member Sybounheung Phandanouvong

Senior Social Development Specialist GSU02 Team Member

Viengkeo Phetnavongxay Environmental Specialist GENDR Team Member Nipa Siribuddhamas FM Specialist EASFM

- HIS Team Member

Souksavanh Sombounkhanh Program Assistant EACLF Team Member Sombath Southivong Senior Infrastructure Specialist GTI02 Team Member Manida Unkulvasapaul Consultant CRKE1 Team Member Carmenchu D. Austriaco

Finance Analyst WFALN Team Member

Sidet Kim Senior Program Assistant GG021 Team Member Ingo Wiederhofer Lead Social Development Specialist GSU02 Task Team Leader Susan Wong Lead Social Development Specialist GSUSD Team Member

Supervision/ICR Erik Johnson Caldwell Senior Social Development Specialist GSU02 Task Team Leader Sybounheung Phandanouvong Senior Social Development Specialist GSU02 Team Member Satoshi Ishihara Senior Social Development Specialist GSU03 Task Team Leader Siriphone Vanitsaveth Senior FM Specialist GGO20 Team Member Peter Crawford Environmental Specialist GEN2B Team Member Khamphet Chanvongnaraz Procurement Specialist GGO08 Team Member Kamakshi Nadisha Perera Mubarak

Social Development Specialist (Young Professional)

GSU02 Team Member

Susan Wong Lead Social Development Specialist GSUSD Team Member Helene Monika Carlsson Rex Senior Social Development Specialist GSU07 Task Team Leader Ingo Wiederhofer Lead Social Development Specialist GSU02 Task Team Leader Viengkeo Phetnavongxay Environmental Specialist GENDR Team Member Anita Soukhaseum Program Assistant EACLF Team Member Sladjana Cosic Social Development Specialist GSURR Team Member Miki Terasawa Consultant GFA06 Team Member Nodoka Hasegawa Social Development Specialist GSU02 Team Member Manush Hristov Senior Counsel LEGES Team Member Gamini Batuwitage Institutional Development Consultant GGELI Team Member Sean Bradley Lead Social Development Specialist GSUGL Team Member

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Garvan O’Keeffe Infrastructure Consultant GED02 Team Member Chanhsom Manythong Rural Development Specialist GFA02 Team Member George Collett M&E Consultant Team Member Bappa Chakravarty Institutional Development Consultant Team Member Pham Thai Hung Local Planning Consultant GSUID Team Member Jutta Krahn Nutrition Consultant GSU02 Team Member Gayatri Acharya Lead Economist GSU02 Team Member Viengvilay Sirimoungkhoun Consultant Team Member Kaysone Vongthavilay Program Assistant Team Member Philaiphone Vongpraseuth Consultant, Operations Specialist Team Member Table 2. Staff Time and Cost

Stage of Project Cycle Staff Time and Cost (Bank Budget Only) No. of staff weeks US$ Thousands (including travel and consultant costs)

Lending FY11 39.75 229.8 Sub Total: 39.75 229.8

Supervision/ICR FY12 34.81 168.9 FY13 31.26 93.5 FY14 27.78 131.3 FY15 36.45 116.56 FY16 46.06 131.53 FY17 43.03 162.6 Sub Total: 219.39 804.39 Total

259.14

1,034.19

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Annex 5. Beneficiary Survey Results See findings of IE cited in Annex 10.

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Annex 6. Stakeholder Workshop Report and Results Workshop to Discuss Endline Survey for Impact Evaluation, June 10, 2015 Background. The World Bank supported the PRF to undertake an IE. The IE process began with the baseline survey in 2012. The final round survey (endline) was conducted in September–October 2015. The endline survey instrument was designed to reflect implementation effects over the evaluation period (2012–15) in relation to several KPIs. The workshop was a venue to discuss potential changes to the survey instrument and research design for the endline survey with counterparts (Project Management Team) and stakeholders (DFAT). Participants included key PRF staff, DFAT and WB IE team. Objectives and discussion. Workshop objectives included: (i) come to a common understanding as to what PRF II has implemented with respect to sub-project infrastructure and village meetings; (ii) review the baseline survey instrument and suggest revisions/additions to be incorporated into the endline survey instrument that would ensure availability of sufficient data to address indicators in the RF; and (iii) agree on the methodology to be used to evaluate the impacts of PRF II based on the initial discussion, certified by subsequent revision and circulation of the endline instrument and pre-analysis plan. The following matters were discussed. Review of IE process including a brief review of the methods (randomized, mixed methods approach), content of the survey instruments, research questions and key findings from the baseline survey. Review of interventions by the PRF on sub-project construction in control kum bans: number and type of sub-projects built to reach a common understanding of what PRF II has implemented in treatment kum ban. In addition, the number of sub-projects built in control and treatment areas (non-PRF) were presented to confirm lack of threat of resource diversion, confirming the viability of the randomized design Review of PRF RF and relevant indicators to be collected by the IE: (i) greater than 75% satisfaction levels reported by beneficiaries in targeted villages regarding improved services and local development planning; (ii) improved access to and utilization of basic economic and social services in kum bans supported by the PRF; (iii) percentage increase in access to and utilization of health services; (iv) percentage of households with improved access to and utilization of safe water resources; (v) percentage increase of households with access to all weather roads; and (vi) lowest two quintiles benefit from above services. Walk-through of the survey instrument by sector (Education, Health, Road and Market Access, Water, Social Capital/Governance). The following five questions were discussed for each sector: (i) what has PRF built?; (ii) what types of impacts can we expect from this type of sub-project?; (iii) do we have indicators which capture these impacts in the IE survey instrument?; (iv) do these indicators fulfill RF reporting requirements?; (v) what additional indicators should be added to the IE survey instrument (including the qualitative component)?

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Education What was built 22 primary schools and 3 kindergartens. The PRF team indicated that over

90% of primary school construction projects are renovations where old facilities are replaced by new facilities.

Types of impacts

Discussion centered around whether this kind of project could produce greater enrollment rates through: (i) parents perceiving that the school was of better quality and therefore providing better learning; and (ii) increase in capacity or grades offered. It was noted that the new infrastructure likely creates a positive perception among parents, as the projects were selected by villagers. Other potential impacts mentioned were student attendance, teacher attendance and incidence of sickness among students (due to cleaner facilities). It is not clear that the former two can be measured accurately via household responses. For the health indicators, given the additional factors influencing illness it is unlikely that impacts will be detected.

RF indicator Currently, none. Relevant indicators from the baseline

% of children enrolled in appropriate age cohort (7-11 years) years of schooling completed by age cohort (7-11 years)

Feasibility in addressing RF

It was noted the already high rates of enrollment in primary schools (over 90%) may make the detection of impacts difficult as the constraints to the remaining 10% not enrolled are likely not due to infrastructure quality. However, given the lack of grades 4 and 5 in many primary schools the PRF team will check to see if enrollment rates are lower for these grades. Regardless of whether the above is viable, there was agreement that a short module on motivations for and perceptions of infrastructure that was built should be included. For primary school construction, this would involve asking: (i) why households advocated for the school project; (ii) what needs it is intended to fulfill; (iii) satisfaction with the outcome of the project; and (iv) whether the project has addressed identified needs. It was noted that given that 30% of sub-project funds went to school projects, having an outcome indicator beyond perception would be preferable. However, PRF and Bank teams must be convinced that such an impact is viable to proceed. The decision will be based in part on enrollment rates in Grades 4–5 once data is available.

Additional indicators needed in survey instrument

Motivation and perception module (to be developed by the World Bank IE team) as described above.

Health

What was built 4 dispensaries in kum ban centers. The PRF team will confirm if these are new to the kum ban or renovations.

Types of impacts Increased seeking of care, reducing travel times and cost to reach facilities. RF indicator % increase in access to and utilization of health services Relevant indicators from the baseline

% of those sick seeking care Time to point of health care service Cost of transport to health care service


While the PRF reaches agreements with local government that new facilities built by the project are to be staffed and resourced, there have been delays. This could limit impacts for a period of time. This can also be a problem with school construction sub-projects.


Include indicator on length of time needed to staff and resource dispensary or primary school in village module.

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Water systems

What was built 16 clean system renovations, spring gravity constructions and wells. Water sources are protected.

Types of impacts Access to protected water source. Reduction in travel time to access water source.

RF indicator % households with improved access to and utilization of safe water resources

Relevant indicators from the baseline

% of households with access to protected water source in dry season % of households with access to protected water source in rainy season Time needed to get to water source


No issues.


None.

Roads

What was built 19 road sub-projects including repair, improvement and spot improvement. One of the 19 was a bridge sub-project.

Types of impacts Reduced travel time to markets and services.

RF indicator % increase of households with access to all weather roads Relevant indicators from the baseline

Months of the year with access to roads % of villages with access to roads in the rainy season % of villages with access to roads in the dry season Access to district and kum ban markets


Sufficient. However, it was noted that not all roads are intended to connect to the network leading to the district center and may have other intended purposes including access to fields and nearby villages. It was suggested to place road sub-projects in four categories: (i) road to village closer to Kum Ban Center or district; (ii) road to village away from Kum Ban Center or district; (iii) road to village closer to another Kum Ban Center or District; and (iv) road within village. Measuring impact via access to all-weather roads should be based on the intended destination rather than only looking at access to district centers.


Modifying existing road and market access questions in the household module with the intended destination rather than only district center.

Social capital

What meetings were held Planning meetings were held in the first cycle of implementation (Cycle 9 for Attapeu and Cycle 10 for other provinces). Implementation meetings are held frequently in villages targeted to receive funding during sub-project construction process.

Types of Impacts Participation in planning and sub-project construction processes. RF indicator Greater than 75% satisfaction levels reported by beneficiaries in targeted

villages regarding improved services and local development planning Relevant indicators from the baseline

Receipt of information on PRF and other development planning processes Participation and quality of participation in PRF and development-related meetings Satisfaction with local government response to identified problems

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The survey instrument does not contain explicit questions about perception of quality of services or local development planning. There is some concern that only two meetings over three cycles would not be sufficient to generate impacts. Project Management Team will follow up on whether yearly meetings were held which might mitigate these concerns.


Include specific questions on perception of quality of services and quality of local development planning in addition to existing questions.

Additional research topics

O&M

Determining how successful the project is at maintaining infrastructure in comparison with control areas due to the incorporation of O&M into project process. This is likely be addressed via a planned, dedicated study which will not only look at perception and participation but quality and frequency of maintenance.

Use of PRF planning process in local development decision-making

Understanding to what extent local development actors (local government, NGOs, donor supported projects) are utilizing PRF planning mechanisms for resource-targeting and planning. This should not be addressed via a household-based IE. A separate dedicated study on PRF influence on local development planning will be undertaken.

Capacity to attract resources

To what extent are PRF kum bans/villages able to attract additional resources, both in the form of infrastructure projects, and staffing/materials for existing facilities? It is not clear that a limited number of planning and implementation meetings are sufficient to create capacity and motivation to draw in additional resources for impacts to be detected via the IE. A separate study (in coordination with local development planning process above) will be conducted to look at this issue.

Livelihoods

What kind of impacts are PRF sub-projects having on livelihoods opportunities? As the project is not designed to address these issues directly and typical impact on consumption/household welfare in CDD projects is four to six years, the potential to detect impacts is unlikely. However, data on market access, movement of agricultural outputs and sale of outputs at different locations outside the village is included in the survey and can be used in other research activities to look at the issues.

Next steps were discussed in terms of revising the endline survey instrument: (i) PRF team completes additional data collection to resolve outstanding questions (June 19); (ii) Bank IE team presents pre-analysis plan and revised questionnaire for workshop participants’ and other stakeholders’ review; (iii) revised version of IE questionnaire is completed and translated; revised pre-analysis plan completed; (iv) field testing of questionnaire is conducted mid-July; (v) final revision of questionnaire based on field test; and (vi) workshop participants and stakeholders certify methods in pre-analysis plan and final survey instrument.

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Annex 7. Summary of Borrower’s ICR and/or Comments on Draft ICR The following comments were provided by the Borrower on the Draft ICR: “Overall, we think that the report provides a very good reflection of the PRF II story and we would like to thank the ICR team for having been able to produce such an accurate report.” What follows is a summary of the Borrower’s ICR. Overall achievement. Throughout five years of project implementation, PRF II has supported the implementation of five cycles (Cycles 9–13) with a total of 1,931 sub-projects. One of the most memorable events for PRF II was to be selected for the 2015 ASEAN Rural Development and Poverty Eradication Leadership Award (October 2015).15 With more than 10 years’ experience (since 2003) the PRF is considered an outstanding project in rural development and poverty using a CDD approach.

Sub-project implementation. As of December 2016, 505 sub-projects were selected and implemented for Cycle 13. As shown in the Table 1, most requests were in the Education sector (52.3%) followed by Water & Sanitation (22.4%). Agriculture & Forestry, Health, Public Works & Transport (Roads) and Energy (Electric Power) sectors combined contribute to approximately one fourth of the total number of sub projects selected. Table 1. Sub-Projects of Cycle 13 (2015-2016), by Sector

Sector No. of Sub-Projects % Agriculture & Forestry 21 4.2% Education 264 52.3% Energy 1 0.2% Health 34 6.7% Public Works & Transport 72 14.3% Water & Sanitation 113 22.4% Total 505 100%

Source: MIS, December 2016 The implementation of PRF II has made consistent good progress. Out of a total 1,931 sub projects in the five cycles, 1,882 sub projects were completed representing 97% of the total number of sub-projects (see Table 2). Most unfinished sub projects were those under the GoL budget (Cycle 13) and these continue to progress. Table 2. Sub-Project Completion Rates, by Sector

Sector No. of Sub-Projects 100% >=50% <50% 0% Agriculture & Forestry 137 136 0 1 0 Education 715 678 23 9 5 Energy 19 19 0 0 0 Health 116 113 1 1 1 Public Works & Transport 356 351 4 1 0 Water & Sanitation 588 585 2 1 0 Grand Total 1,931 1,882 30 13 6

Source: MIS, December 2016

15 The awards are for non-government organizations/civil society organizations in Lao PDR with outstanding achievements and contributions to sustainable rural development and poverty eradication.

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As Table 3 shows, most projects were carried out by the contractor through small workers’ contracts. A total of 288 sub-projects were exclusively implemented by communities under the CFA approach (15%). Table 3: Type of Sub-Project Contracts

Procurement Type Nos. of Sub-Projects Cycle 9 Cycle

10 Cycle 11 Cycle 12 Cycle 13 Total

By Community (CFA) 56 46 39 50 97 288 By Community and Contractor (CFA + Small Workers)

29 64 40 37 127 297

By Contractor (Small Workers) 177 283 254 351 281 1,346 Total 262 393 333 438 505 1,931

Source: MIS, December 2016 From a total budget of US$12,769,851 for 505 sub-projects in Cycle 13 (2015–16), beneficiaries pledged to contribute an equivalent of US$1,007,768 (8%). Most of this contribution was in the form of community labor. Expressed as a percentage of the PRF contribution, this community contribution is expected to reach approximately 11%. The contribution has varied between provinces, with an average contribution of 6% in Luangprabang and up to an average contribution of nearly 10% of PRF’s contribution in Oudomxay. Water & Sanitation sub-projects reached the highest percentage (11%), while the lowest community contribution was in Public Works & Transport and Education sub-projects. Table 4. Community Contributions in 2015–16 (US$)

Province Community Contribution PRF Contribution % Attapeu 78,968 881,370 9% Huaphanh 137,274 2,042,181 7% Luangnmtha 39,794 495,326 8% Luang Prabang 110,035 1,878,461 6% Oudomxay 241,015 2,445,351 10% Phongsaly 54,114 803,796 7% Saravane 57,366 675,477 8% Savannakhet 108,985 1,466,848 7% Sekong 90,342 1,124,373 8% Xiengkhuang 89,875 956,667 9% Total 1,007,768 12,769,851 8% Sector Agriculture & Forestry 52,205 530,162 10% Education 495,866 7,157,470 7% Energy 969 12,098 8% Health 54,730 537,272 10% Public Works & Transport 164,025 2,268,653 7% Water & Sanitation 239,973 2,264,197 11% Total 1,007,768 12,769,851 8%


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The overall community contribution in PRF II is around 10%. The lowest community contribution has been in Energy (6%) and Public Works & Transport (7%). The rationale is that the implementation of sub projects in these sectors requires relatively higher technical input. Across, provinces, community contribution ranged between 8% and 14% as it depended on the availability of resources and labor at the different locations. Table 5. Community Contribution in PRF II (US$), by Province and Sector


Livelihoods and nutrition. Through four years of implementation under LONG pilot and the AF component, livelihoods and nutrition activities were implemented in seven districts of Houaphanh (four districts) and Savannakhet Provinces (three districts). Livelihood activities were implemented in 165 villages and nutrition activities in 23 villages. As Table 6 shows, 696 SHGs were established with more than 8,000 members, of whom 6,974 were female (97%). These groups had generated more than 8,400 income generating activities. As of September 2016, nine key livelihood activities were selected and proposed in the Family Investment Plan of SHG members. The majority of loans invested for livelihoods were classified as livestock raising, including poultry raising (chicken and duck raising), pig raising, goat raising, aquatic raring (cat fish and frog), crops (maize, cassava), banana growing, vegetable, and weaving. Among activities selected by women 51% were poultry raising, 20% pig raising, 12% goat raising, 7% aquatic rearing, 7% weaving, 27% banana plantation, 1% horticulture, and 1% cassava plantation.

Province Community Contribution PRF Contribution % Attapeu 325,166.52 3,113,551.07 10% Huaphanh 978,451.41 10,147,665.51 10% Luangnmtha 241,547.77 2,540,934.13 10% Luang Prabang 584,264.75 5,962,330.14 10% Oudomxay 857,070.13 8,791,522.05 10% Phongsaly 325,345.85 4,285,552.33 8% Saravane 290,819.18 3,723,919.01 8% Savannakhet 1,198,579.57 13,170,696.35 9% Sekong 297,923.54 3,119,039.55 10% Xiengkhuang 470,409.42 3,358,048.24 14% Total 4,197,016.63 43,099,863.79 10%

Sector Agriculture & Forestry 374,683 2,923,909 13% Education 1,819,602 22,115,248 8% Energy 37,260 624,211 6% Health 1,852,127 14,140,175 13% Public Works & Transport 799,625 10,853,019 7% Water & Sanitation 4,883,297 50,656,562 10% Total 9,766,594 101,313,124 10%

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Table 6. Livelihood and Nutrition Activities, 2013–16 District Villages SHGs VNCs SHG/Members SHG/Female Members 1 Sepone 30 103 4 1,317 1,000 2 Nong 19 85 4 1,196 1,156 3 Thapangthong 24 120 2 1,200 1,200 4 Hiem 20 67 6 854 576 5 Sone 20 68 2 1,018 615 6 Huamueng 32 160 3 1,534 1,534 7 Xiengkhor 20 93 2 893 893 Total 165 696 23 8,012 6,974

Source: Livelihood and Nutrition Unit, December 2016 The Livelihood-Linked Nutrition Endline evaluation conducted during the second half of 2016 in Huaphanh and Savannakhet provinces indicated that over 90% of pregnant/lactating women consumed rice. Fish was frequently consumed in both provinces. Dark green leafy vegetables and fruits of all types, as well as white tubers, other vegetables, organ meat, and eggs were consumed by more VNC households. In addition, about 85% of mothers reported starting breast feeding within one hour of birth, and all mothers had started within 24 hours of birth. Meanwhile, 95% of mothers in both provinces reported they were satisfied with VNCs. Disbursements. The progress of sub-project budget transfers to community bank account has been timely and met the financial needs for sub-project physical implementation. As of December 31, 2016, disbursement reached 100% for the IDA Grant (H6850), 100% for IDA Credit (56770) and 100% for the MDTF (TF 12419). The SDC disbursement rate reached 100% and the GoL’s contribution was 100% for the total budget received during the implementation of PRF II (see Table 7). Table 7. Summary of Funds Used as 30 December, 2016

Fund Source Allocation Fund Received

FY 2012–16

Expenditure FY

2012–16

Percentage of Uses

WB (IDA6850) 25,000,000 23,821,711 23,821,711 100% WB (IDA56770) 11,600,000 11,554,161 11,554,161 100% MDTF (TF12419) - DFAT 16,900,000 16,899,962 16,899,962 100% SDC 17,256,000 17,256,000 17,256,000 100% GoL 10,000,000 8,625,000 8,625,000 100% JSDF 2,500,000 2,500,000 2,500,000 100% Others - - 1,021

Total 83,256,000 80,656,834 80,657,855 Source: Finance and Administration Unit, December 2016 M&E. The M&E system has been progressively strengthened over the period of PRF II implementation (2012-16). Data forms have been developed and/or revised to record key information from the field (district, kum ban and village levels) needed for both management purposes and M&E. An ONLINE and OFFLINE system was developed to avoid difficulties with internet connections at district and provincial levels as well as enabling data checking before incorporation in the database. A summary of key tasks carried out by the M&E team is as follows: (i) developed M&E framework to reflect a

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comprehensive developmental approach focusing on all stages of the project cycle and the continuing soft support after infrastructure construction (M&E system now monitors data related to all key steps in sub-project planning, implementation and post-handover to community); (ii) MIS system developed to include a robust system for data validation and verification at data entry (MIS data are entered offline and checked by concerned staff followed by the provincial coordinator before it is uploaded to the server and incorporated into the MIS database ); (iii) eliminated parallel channels of information and duplication of data in spreadsheets held by different units (developed a manual of PRF II (AF) and PRF III’s results indicators and data used for project management); (iv) M&E system can capture key data that can be used for indicators as well as progress reporting; and (v) all forms used in PRF II were reviewed and updated for PRF III. Community development. In its capacity building strategy and approach, the PRF has used the following principles: (i) participatory and interactive (not relying primarily on classroom-style lectures); (ii) experimental and hands on (giving participants the opportunity to learn by doing whenever possible, ideally in the field rather than in a classroom, using peer learning); (iii) practical (with theoretic focus only as needed to underpin/explain considerations for practical implementation); (iv) sensitive to gender and ethnicity (encouraging female participants and small ethnic groups to participate); (v) evaluative (with participants empowered to evaluate training activities through questionnaires and surveys); and (vi) progressive (training content reviewed annually based on evaluation of the capacity of the participants). A “cascading approach” has been be used, whereby PRF trains a cadre of Master Trainers, who in turn trains Trainer of Trainers, kum ban facilitators, and village representatives. The Deepen CDD approach piloted under PRF II had shown significant results in women’s participation, both in terms of numbers and involvement in the decision making process. Through five years of implementation, several Information, Education and Communication tools were produced such as documentary/film, TV-radio spots, community development tool kits, leaflets and posters. To ensure the quality of planning, support to DSEDP was added to the planning stages in order to support the district to develop a consolidated and integrated plan. During this meeting, representatives from many kum bans including non-PRF kum bans present their priorities to district officials to ensure that their priorities will be integrated in the plan. PRF III will continue to roll out the pilot in other districts and support the capacity development of district planning officials to better manage the bottom-up processes as part of their district planning process. A total of 2,269 responses (feedback) were received from communities between 2011–16 of which 120 were information requests (5%), 1,533 were requests for additional funds/TA (68%), 78 were complaints (3%), and 538 were expressing their satisfaction/thanks to the PRF (24%). In comparison with the total number of responses received in 2011, the number of responses has increased gradually every year as shown in the table below.

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Table 8. Feedback Received During PRF II Feedback Type Feedback Received Total

2011 2012 2013 2014 2015 2016 Request for information - 7 23 22 26 42 120 Request for funds/TA 44 193 445 229 387 235 1,533 Complaint 17 10 11 8 8 24 78 Satisfaction (Thanks to PRF) 47 40 91 55 105 200 538 Total 108 250 570 314 526 501 2,269

Source: Monitoring and Evaluation Division, December 2016 Use of KDPs in local development processes. The contribution of PRF’s bottom-up process had gone beyond PRF II investment. As shown in Figure 1, the percentage of KDPs used by other organizations and the GoL has increased gradually from 25% in 2013, 34% in 2014, 48% in 2015, and up to 56% in 2016.

Figure 1. Percentage of PRF kum ban plans used by government and/or other development actors for planning and funding Source: MIS, December 2016 To ensure that KDPs developed with the support of the PRF are more effectively used by other agencies, the cooperation with the MPI will be strengthened under PRF III. A pilot has been implemented in six districts with the aim at supporting the DSEDP and initial results are positive. All stakeholders who participated in the pilot expressed strong support to the pilot. District officials participated in and gained first-hand experience in PRF’s village planning process. Representatives from many kum bans, including non-PRF, presented for the first time their priorities to district officials as inputs to the Annual DSEDP.

25%

34%

48%

56%

0%

10%

20%

30%

40%

50%

60%

Sept 2013 Sept 2014 Sept 2015 Sept 2016

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Annex 8. Comments of Co-financiers and Other Partners/Stakeholders Department of Foreign Affairs and Trade, Government of Australia (DFAT). “The PRF II completion report covers all key aspects of the project and the findings of evaluation and research reports in the last period. We have minor comments as follows: (i) the completion report will be uploaded to DFAT reporting system so the cover page should mention the accurate fund which the Australian Government provided the grant aid (AUS$20,000,000 equivalent to US$16,900,000) to Lao PDR through MDTF; we would be grateful if the cover page also has the logos of donors, (ii) Annex 9 should mention a rational on using MDTF (US$0.27 million) for livelihood and nutrition component and its output in the last year of the PRF II, and (iii) in Table 2 (page 51), please check on the total row 3.34 + 3.81 + 6.49 + 3.24 = 16.88 (not 16.9).” Swiss Agency for Development and Cooperation (SDC). “Overall, we think the report is very comprehensive and interesting to read, also reflecting well the difficulties and shortcomings of PRF II. We would like to suggest adding on the PRF’s bottom-up processes as one of the lessons learned. In our view, it should be more integrated with district planning processes to address problems which cannot be addressed by kum ban block grants provided by the PRF. The joint Stocktaking of Local Participatory Planning Processes in Lao PDR (June 2016) identified potential opportunities to link PRF processes more effectively with the GoL’s planning processes, such as the use of the PRF’s KDP in the GoL’s district planning process to ensure that gaps in funding or implementation of public services can be resolved via integrated planning and pooling of resources, as already mentioned on page 14 of this report.” The SDC has contributed to the budget of the PRF since 2008 (under PRF I and PRF II, 2008-16) with a total amount of about US$25 million. This support has allowed the PRF to expand its activities to new provinces and districts, to enhance the targeting towards the poorest, especially ethnic communities, and to promote the value of strong community participation in local development processes at community and at local and national levels of government. The PRF has evolved from a donor initiated project toward a government-owned and co-financed national programme. The SDC commends the GoL for its financial contribution of US$10 million to PRF II (2011–16) and its further commitment to PRF III (2016–20). This represents an important commitment to poverty reduction. PRF II has succeeded to deliver pro-poor goods and services, and to promote and to implement CDD in the most remote rural areas. Thus, the number ethnic beneficiaries benefiting from the PRF activities have increased. Numerous village volunteers trained by PRF have and will continue to be an effective platform to implement local development programs. The project’s wide outreach has allowed several innovative pilots and partnerships, for instance the construction of three suspended bridges in Luang Namtha province in collaboration with HELVETAS Swiss Intercooperation, based on models in Nepal.

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In view of the positive experiences so far, the SDC has renewed its commitment to PRF III until mid-2020. However, the main challenge of the PRF is that of sustainability beyond the intervention of donor agencies. The SDC would therefore encourage the GoL and the PRF to reflect on perspectives for gradual integration of the PRF into the government structure during PRF III implementation, also in view of the new set up of the PRF within MAF. Further efforts should be made to examine how the PRF planning approaches could be taken up into the regular GoL planning processes. Further increases in GoL funding to the operation costs of the PRF, including fiscal decentralization with increased state-budget allocation to finance local public service delivery and development will be necessary in order to ensure its continuity beyond the support of external donors. The SDC would be ready to support this reflection process, as appropriate.

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Annex 9. Bank-Administered Multi Donor Trust Fund Project appraisal and Additional Financing (AF). At project appraisal, AusAID (later DFAT), committed US$12 million equivalent in Australian dollars, representing 21% of total project financing, through a Bank-administered Multi-Donor Trust Fund (MDTF). The trust fund was to co-finance project activities in three specific areas: (i) key studies and TA; (ii) implementation support through consultancies; and (iii) trust fund management. The Bank was in discussion with AusAID and other donors to further increase contributions to the MDTF. The MDTF Grant Agreement was eventually signed between the Bank and the GoL for a higher commitment amount of US$14.5 million through a Recipient Executed Trust Fund (RETF). The Board approved AF of US$14 million on June 23, 2015 included co-financing of US$2.4 million from DFAT through MDTF. The existing Grant Agreement of RETF was amended to reflect the change. The final RETF amount thus became US$16.9 million. Disbursements and expenditures. The initial disbursement of MDTF was delayed because of delay in its approval. The co-financing ratio between the IDA and MDTF contributions was adjusted in December 2014 to accelerate this disbursement. At the time of AF, MDTF disbursement was at 65%. The relative joint co-financing disbursement percentages between IDA and MDTF financing was re-adjusted at this juncture to reflect the AF. Table 1 shows projected and actual MDTF disbursement amounts for the duration of the project. Table 1. MDTF Disbursements by Year (US$ million)

2011 2012 2013 2014 2015 2016 Total Appraisal projection 1 2 3 3 2 1 12 Actual - - 4.37 3.5 6.63 - 14.5 Actual (AF) - - - - 0.11 2.29 2.4

Source: Data from PRF II PAD; Finance and Administration Unit, PRF, November 2016 Note: Appraisal projections are by calendar year while actual projections are in line with financial year estimates. MDTF financing provided US$8 million for Component 1, US$1.7 million for Component 2, and US$2.3 million for Component 3. At AF, these were topped up with US$1.44 million for Component 1, US$0.3 million for Component 2, and US$0.36 million for Component 3 while US$0.3 million was included in the new Component 4. Table 2 presents a breakdown of MDTF expenses by project component as of September 2016. Table 2. Breakdown of MDTF Expenditure as of September 2016 (US$ million)

Project Component 2011 2012 2013 2014 2015 2016 Total Community Development Sub-Grants - - 2.47 2.62 4.41 2.16 11.66 Capacity Building - - 0.29 0.42 0.52 0.18 1.42 Project Management - - 0.58 0.77 1.56 0.63 3.55 Livelihood and Nutrition - - - - - 0.27 0.27 Total 3.34 3.81 6.49 3.24 16.88

Source: Data from Finance and Administration Unit, PRF, November 2016

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Livelihoods and nutrition. The rationale for the MDTF allocation at AF towards a new component on livelihoods and nutrition was to scale up the LONG pilot, initiated under a JSDF grant at the beginning of PRF II, and to increase engagement on nutrition issues. Around 3,755 livelihood activities had been supported by the seed grant against an end target of 2,400. Around 696 SHGs were established with more than 8,000 members, 97% of whom were female. These groups had generated more than 8,400 income generating activities. An evaluation conducted in 2016 in the two target provinces indicated that over 90% of pregnant/lactating women consumed rice, that fish was consumed more frequently by such women, and that dark green leafy vegetables, various fruits, white tubers, other vegetables, organ meat, and eggs were consumed more frequently by VNC households. Key studies and TA. The MDTF provided approximately US$1.1 million for two rounds of a rigorous impact evaluation (IE), M&E technical support to PRF, and a series of studies related to technical evaluations and community participation executed by the World Bank. A summary of main activities supported is as follows. IE. The bulk of MDTF resources were used to support two rounds of a rigorous IE. The evaluation is a ‘gold standard’ study using a randomized, mixed-methods methodology with the baseline completed in 2012 and the endline survey data collection completed in late 2015, after 36 months of project implementation. A panel of 4,400 households were surveyed across 44 kum ban in eleven districts in four provinces of Laos along with an additional 700 focus group respondents and key informants interviewed. The evaluation found that PRF II had generated significant positive impacts at the village level. Water sub-projects increased access to protected water sources, school building quality improved from the perception of community members, and time to travel to the nearest village in both the rainy and dry seasons was decreased. Poor households and women were able to share in the benefits of village-located infrastructure, including water systems, school rehabilitation and road access to nearby villages. In the case of water systems, villagers recognized the benefit of access to protected water in the wet season. However, PRF II did not generate impacts when households needed to travel far away from the village to receive benefits, for example access to district centers or far away health centers. In terms of governance impacts, PRF created greater voice for communities in decision-making, and increased respondents’ perceptions that their inputs on village affairs and decision-making were sought out and had significant influence. Technical audit. Two rounds of independent technical audits were conducted for PRF II, one supported through project funds by PRF PMU directly and the other through this MDTF. The 2016 technical audit reviewed the technical quality, operations and maintenance arrangements, cost effectiveness, and safeguards compliance of PRF II sub-projects. A total of 60 PRF sub-projects were sampled. Five types of sub-projects were evaluated: buildings for schools, health centers and village halls, bridges, water supply and roads. The audit found that PRF sub-projects were generally well built and maintained, but communities faced difficulties maintaining road sub-projects. PRF sub-projects were overall well designed and built, and cost-effective in comparison to similar investments financed by other agencies in Lao PDR. Most PRF sub-projects were functional after four to six years of operation, and O&M committees remained active. The exception was road

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sub-projects with about half of the road sub-projects built four to six years ago needing major repairs due in part to lack of maintenance. The audit provided valuable independent quality control for the project’s infrastructure works. Some overall lessons learned are: (i) it is important for projects to sponsor rigorous independent studies to learn and adapt; (ii) investing in capacity building for management information and reporting systems is essential to manage the project effectively and take correct action when needed; and (iii) availing of international M&E guidance and specialized skillsets is essential to ensure that studies and MIS are as robust as possible. M&E guidance. The Bank task team and two international M&E advisors provided continuous support to PRF management and M&E teams. The advisors also worked closely with the Lao survey firm to improve their capabilities in survey design, questionnaire development, data quality oversight and analysis. The support included guidance on improving the project MIS and reporting procedures, quality oversight of data, guidance on the terms of reference, sampling frames, draft reports, and implementation of various studies including those funded by the GoL. The lessons learned from this TA include (i) continuous guidance is needed to improve systems, especially in low-capacity environments such as Laos; and (ii) key project staff with the right skillsets are needed to spearhead the activities. Without the commitment of senior PRF leadership and the M&E team to learn and improve their procedures, progress on the M&E front would have been limited. Community beneficiary assessment. The objective of this assessment was to carry out an ethnographic study with the aim of understanding better the local dynamics behind PRFII implementation at the village and kum ban levels. This work was originally designed to provide useful lessons for how PRF could better analyze individual, household, and community norms and behaviors to inform the design and implementation strategy of PRFmII and add to the project team’s understanding of the complex set of constraints and conditions which exclude vulnerable groups, ethnic minorities and others from participating or availing of various decision-making processes and services. It was designed as a longitudinal study to measure PRF II performance over four years. While the objective was commendable the study was halted after the first round in 2012 due to numerous difficulties. Implementation support. The MDTF financed the cost of implementation support consultants who played a notable role in results achieved during PRF II. This included an engineering (technical) consultant, a community development consultant, a nutrition specialist, and an institutional development consultant. MDTF resources were also used to finance the costs of consultants to assess project performance. Thus, in addition to the technical audit (2016), this covered the costs of an assessment of GESI (2013), an organizational review of participatory processes in the project (2013), a safeguards performance review (2016), a rapid assessment of CLTS integration into PRF (2016), and a study on capacity development of communities and local government officials (2016). These helped identify critical organizational and program related issues and proposals for improvements which were readily acknowledged by PRF and usefully absorbed in project implementation.

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Trust fund management. The cost associated with managing the trust fund was borne through MDTF resources. For example, this covered the cost of trips for the Bank task team to participate in PRF Board meetings and the time spent for administrative work associated with the implementation of MDTF.

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Annex 10. List of Supporting Documents Legal Agreements World Bank 2015. Amending and Restating the Original Multi Donor Trust Fund Grant

Agreement, Lao Poverty Reduction Fund Project II. August.

2015. Amending and Restating the Original Multi Donor Trust Fund Project Agreement, Lao Poverty Reduction Fund Project II. August.

2014. Multi Donor Trust Fund Project Agreement, Lao Poverty Reduction Fund Project II. July. 2013. Multi Donor Trust Fund Grant Agreement, Lao Poverty Reduction Fund Project II. January.

2015. Providing Additional Financing and Amending and Restating the Original Financing Agreement, Lao Poverty Reduction Fund Project II. August. 2011. Financing Agreement, Lao Poverty Reduction Fund Project II. July.

Project Appraisal Documents and Project Papers World Bank 2016. Project Appraisal Document, Lao Poverty Reduction Fund Project III. May.

2015. Project Paper on a Proposed Additional Credit and Restructuring and a Proposed Additional Grant from the Multi Donor Trust Fund, Lao Poverty Reduction Fund Project II. June.

2011. Project Appraisal Document, Lao Poverty Reduction Fund Project II. April.

Evaluative Studies GIZ and DFAT 2016. Assessment on Performance of Self Help Groups, Access to Finance

Project. February and March. Laos. PRF 2016. Endline Survey (Draft Report): Livelihood Opportunities and Nutritional Gains

Project. Hiem District of Huaphan Province and Nong District of Savannakhet Province. IndoChina Research, October.

World Bank 2017. Briefing Note: Impact Assessment of the Village Nutrition Centers of

the Poverty Reduction Fund, January 31.

2016. Social Safeguards Performance Assessment of PRF II and Social Safeguards Assessment of PRF III, Poverty Reduction Fund, Vientiane. January.

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2016. Impact Evaluation: Final Report, Lao Poverty Reduction Fund Phase II, December.

2016. Participatory Planning Process and Capacity Development Assessment, PRF II. December (Draft). 2014. Lao Poverty Reduction Fund Phase II Impact Evaluation: Baseline Report. January

Project Completion Reports PRF 2016. PRF II Report 2012–2016. Poverty Reduction Fund, December. IEG 2016. Project Performance Assessment Report: Lao People’s Democratic Republic

Poverty Reduction Fund Project, Independent Evaluation Group, Washington, DC. June 29.

World Bank 2017. Implementation Completion Memorandum (ICM), Mobilizing Ethnic

Communities for Improved Livelihoods & Wellbeing (LONG). December.

2016. Gender and Social Inclusion in the Work of the Poverty Reduction Fund Phase II: An Assessment. October.

2016. Technical, Cost Effectiveness, Cost Benefit and Sustainability Audit, Findings and Recommendations, Draft Final Report. March.

2012. Implementation Completion Report for Lao Poverty Reduction Fund I. March.

Aide Memoires, Implementation Status Reports and Annual Progress Reports PRF 2016. Annual Progress Report October 2015 – September 2016, Poverty Reduction

Fund, Ministry of Agriculture and Forest, Vientiane. November. World Bank 2011–16. Aide Memoires, Lao Poverty Reduction Fund Project II.

2011-16. Implementation Status Results (ISR) Reports 1–8, Lao Poverty Reduction Fund Project II.

Safeguards Documents PRF 2015. Environmental and Social Safeguard Framework (Revised), Lao Poverty

Reduction Fund Project II, April.

2015. Ethnic Group Policy Framework (Revised). Lao Poverty Reduction Fund Project II, April.

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2015. Compensation and Resettlement Policy Framework. Lao Poverty Reduction Fund Project II, April. 2011. Environmental and Social Safeguard Framework, Lao Poverty Reduction Fund Project II, March. 2011. Ethnic Group Policy Framework. Lao Poverty Reduction Fund Project II, March. 2011. Compensation and Resettlement Policy Framework. Lao Poverty Reduction Fund Project II, March.

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Map: Lao PDR