Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 22237-AL

IMPLEMENTATION COMPLETION REPORT(CPL-40060; SCL-4006A; SCPD-4006S)

ONA

LOAN

IN THE AMOUNT OF US$50.0 MILLION

TO THE

DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA

FOR A

SOCIAL SAFETY NET SUPPORT PROJECT

June 28, 2001

This document has a restricted distribution and may be used by recipients only in the performance of theirofficial duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective March 31, 2001)

Currency Unit = Algerian Dinar77.06 DZD = US$ 1.00

US$ 1.00 = DZD 77.06

FISCAL YEARJanuary 1 December 31

ABBREVIATIONS AND ACRONYMS

ADS Agence de Developpement Social (Social Development Agency)AFS Allocation Forfaitaire de Solidarite (Contractual Solidarity AUlocation)AIG Acivitis d'Interet Getneral (Activities in the public interest)APC Assemblie Populaire Communale (Community Council)BASC Bureaux d'Action Sociale Communautaire (Community Social Action

Offices)CDP Ceilules de Proximite (Community-level social service units)CPE Contrats de Pre-Emploi (Pre-employment contracts)DAS Direction de l'Action Sociale (Directorate for Social Action)CD Community DevelopmentDEJ Direction de l'Emploi des Jeunes (Directorate for the Employment of

Young People)SDF Social Development Fund1IAG Indemniti pour Activiti d'Interit General (Indemnity for activities in

the public interest)MC Micro-CreditMTPS Ministere du Travail et de la Protection Sociale (Ministry of Labor and

Social Protection)PAIG Programme d'Activiti d'Intirit General (Program of Public Interest

Activities)PTT Poste, Tiligraphe et Teliphone (Postal & Telephone Service)IRR Internal Rate of ReturnERR Economic Rate of ReturnTUP-HIMO Travaux d'Utiliti Publique a Haute Intensiti de Main

d'Oeuvre (Labor-intensive public works program)

Vice President: Jean-Louis SarbibCountry Manager/Director. Christan Delvoie

Sector Manager/Director. Jaques BaudouyTask Team Leader/Task Manager: David Steel

ALGERIA

SOCLAL SAFETY NET SUPPORT PROJECT

TABLE OF CONTENTS

Page No.

1. Project Data ................. 12. Performance Ratings. 13. Assessment of Objectives, Design and Project Quality .24. Achievement of Objectives .45. Major Factors Affecting Implementation and Outcome .136. Project Sustainability .147. Bank and Borrower Performance .......... ......................................... 158. Lessons Learned ...................... 169. Partner Comments ....................... 17Annex 1. Performance Indicators ...................... 18Annex 2. Project Costs and Financing ...................... 20Annex 3. Economic Costs and Benefits ....................... 22Annex 4. Bank Inputs.......... ..... 25Annex 5. Ratings for Achievement of Objectives .26Annex 6. Ratings of Bank and Borrower Performance .27Annex 7. Supporting Documents .28

Project ID: P004978 Pro ect Name: SOCIAL SAFETY ITeam Leader: David J. Steel TL Unit: MNSHDICR Type: Core ICR Report Date: June 2 7, 2001

1. Project Data

Name: SOCIAL SAFETY I L/CITF Number. CPL-40060;SCL-4006A;SCPD-4006S

Country/Department: ALGERIA Region: Middle East and NorthAfrica Region

Sector/subsector: SE - Labor Markets & Employment

KEY DATESOriginal Revised/Actual

PCD: 08/25/94 Effective: 11/01/96Appraisal: 02/05/96 MTR: 03/16/98Approval: 04/25/96 Closing: 12/31/2000 03/31/2001

Borrower/Implementing Agency: GOVT OF ALGERLAMINISTRY OF LABOROther Partners:

STAFF Current At AppraisalVice President: Jean-Louis Sarbib Kemal Dervi,Country Manager: Christian Delvoie Christian DelvoieSector Manager: Jacques Baudouy Roslyn HeesTeam Leader at ICR: David Steel Lawrence WolffICR Primary Author: Eileen Brainne Sullivan; Setareh

Razmara

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=HighlyUnlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: L

Institutional Development Impact: H

Bank Performance: S

Borrower Performance: S

QAG (if available) ICRQuality at Entry: S S

Project at Risk at Any Time: Yes

3. ASSESSMENT OF DEVELOPMENT OBJECTIVES, DESIGN AND QUALITY AT ENTRY

3.1 Original objective:The project would pilot new ideas and institutional arrangements for delivery of social protectionprograns, which, if successful, could eventually be broadened and generalized. The first andmost important project objective was to create employment and improve infrastructure andservices in disadvantaged areas, and demonstrate the Government's commitment to mitigate theimpact of economic reforms on the poor. The second objective was to enhance the effectivenessof Algeria's social safety net system. The third objective was to prepare, on a pilot basis, socialdevelopment programs aimed at developing social infrastructure and alleviating poverty. Theproject was prepared as a complement to the 1996 Structural Adjustment operation, in order toimprove the social safety net system.

3.2 REVISED OBJECTIVE:

The project was not restructured, and the objectives were retained for the duration of the project.

3.3 ORIGINAL COMPONENTS

The project had three components : a) labor-intensive public works ; b) strengthening of theexisting social safety net; and c) pilot implementation of a program to improve socialinfrastructure, including feasibility studies on the development of a social fund. The summarydescription of components is as follows:

Component 1: Labor-intensive public works programs:The project was to support labor intensive public works programs (travaux d'utilitepublique, or TUP) in rural roadside maintenance, agriculture, water supply and sanitation,in underserved urban and rural areas. These programs (geared to the unemployed),accounted for over 80 percent of project costs, and would differ significantly from theProgram of Indemnities for Public Interest Activities (IAIG) (which targets the poor), inthat there would be increased emphasis on social and economic value added, with closersupervision of works, and greater private sector participation. The programs wereexpected to provide short-term employment, encourage the growth of small enterprises,maintain basic infrastructure and services, and improve the environment in selected poorcommunities. In most cases, local authorities were to identify the specific works, whichwould be undertaken on a contract basis by small firms.

Component 2 : Strengthening of the social safety netTwo sub-components were identified to strengthen the Government's social safety netprogram. The first was to focus on improving management, targeting and monitoring ofthe Govemment's social assistance programs. The second sub-component was tostrengthen the Government's pilot community social service program (Cellules deproximite), which would identify problems faced by slum dwellers, provide guidance andbasic health services, and link slum dwellers with other public social services.

Sub-component a) Improvement of the existing social safety net. In order to assistin the Government's program, the project would build institutional capacity byfinancing technical assistance, training, studies, equipment, and documentation. Thestudy financed under the project made recommendations to improve the social safetynet programs primarily by setting-up an MIS and related improved computerization,

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communication and training programs. The study, completed in December 1996,would build on the monitoring indicators that had been agreed upon with the Bankduring appraisal. At the completion of the study, purchases of computer equipment,software, fax machines, and photocopiers were made including the implementationof a training program. Vehicles were to be supplied for about 20 provinces, andfunds were to be made available to the agency and the wilayas for the purchase ofdocumentation (including books and journals).

Sub-component b) Community Social Service Units (Cellules de proximite). TheGovermnent had established mobile social service units in 20 locations. Each unitwas comprised of a health professional, an educator, a social worker/psychologist,and a representative of the Ministries of Sports and Culture. The units wouldidentify local community problems, link poor communities with existing socialservices, and provide certain key social services, at a relatively low cost. The projectprovided support by strengthening the existing 20 social service units, as well aswilayas and central management. At the local level, assistance consisted of aboutUS$5,000 per unit. Each unit, with community participation, prepared a proposal forthe necessary assistance. The project financed the purchase of computers and relatedsoftware, and vehicles for each of the seven wilaya coordinating units. At the centrallevel, the project financed the purchase of a vehicle, national seminars, and anational training program.

Component 3: Testing and preparation of a social fundThe third component supported small-scale testing of a community development programand the preparation of a social fund.

Sub-comDonent a) Pilot community development project. The project would supporta pilot program for community development. The communities were selected on thebasis of a selection criteria. The pilot program included a study to identify the needsof three communities, and to determine the Government's capacity to deliverservices. On the basis of this study, a pilot program of social and infrastructureinterventions was identified, including implementation arrangements to be financedunder the project. These interventions could include the construction of communityinfrastructure (pre-school, wells, community development centers, school expansionand repair), community road improvement, sites and services, etc., as well as socialservices such as training and institutional support.

Sub-Component b) Preparation of a social fund. The Government established an autonomousagency, the Agence de Developpement Social (ADS), to manage the social fund. In order todefine the nature of the Agency and the activities of the social fund, the project financed anumber of preparatory studies. In particular, a study was planned to identify, on the basis of anational sample, community needs for social infrastructure, and the means of undertaking ademand-based program of local infrastructure development.

3.4 REVISED COMPONENTS:N/A

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3.5 QUALITY AT ENTRY:The project was not subject to quality review (QAG) nor a performance rating for quality atentry.

4. ACHIEVEMENT OF OBJECTIVES AND OUTPUTS

4.1 Achievement of objectives:In 1992, the Government launched a radical revamping of the social policy framework. The newsocial policy framework was to encompass a coherent set of social service programs targeted tobeneficiary groups. Created in 1996, the Agence de DIveloppement Social (ADS) undertook theresponsibility of rationalizing the social safety net program, which had been introduced in 1994and managed until 1996 by the Central Administration of the Ministry of Labor and SocialProtection (MTPS), including the programs identified under the Social Safety Net SupportProject.

In 1997, a pilot project was undertaken with World Bank financing - << Support to the SocialSafety Net >> . Aside from improved management of the Social Safety Net as such, three otherprograms were to be launched in the context of this project : a) a labor-intensive public worksprogram (Travaux d'Utilite Publique ai Haute Intensite de Main d'CEuvre, TUP-HIMO) ; b) apilot community development (CD) program; and c) a program of community social actionrelying upon community social service units (Cellules de Proximite-CDPs) responsible foroutreach services to disadvantaged groups.

In 1998, two new programs, not financed by the World Bank, were added to the ADS's portfolio:a) the Pre-Employment Contracts program (Contrats de Pre-Emploi-CPE) aimed at fostering theprofessional insertion of university graduates seeking employment ; and b) the Micro-Credit(MC) program, which was open to all unemployed persons who could generate income with thehelp of a small loan at preferential interest rates.

The project's objectives were achieved in a satisfactory manner. The first objective wasattained, as the number of jobs created exceeds projections made at the time of appraisal, andunit costs achieved were lower than the norms established at appraisal ; the second objective,i.e., improvement of the social safety net, was achieved, since program management wassignificantly improved and the rationalization of the AFS and IAIG programs were implemented,although the information management system could be further strengthened; and the thirdobjective on pilot community development programs, yielded satisfactory results to the extentthat this project was prepared under difficult circumstances, and in the context of a reluctance onthe part of communities to take responsibility for their own developmental needs.

The project was designed as a pilot operation. The activities undertaken were tested, evaluated,modified and improved, in order to achieve the objectives of each program and derive lessons forthe eventual preparation of a second phase. The ADS took the initiative of conducting severalstudies, analyses and impact evaluations, as well as an operational audit, in order to improveinternal management and implementation of its programs - this was very much appreciated bythe World Bank team.

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4.2 Output by component:COMPONENT 1: Labor-Intensive Public Works Proeram (TUP-HIMO)

Objective #1 : Creation ofjobs and improvement of infrastructure and services to the mostdisadvantaged communMies.

During the 1990s, the absence of economic growth led to a decline in job creation in the formaland public sectors, which until the 1980s had absorbed about 60 percent of jobseekers. With thenumber of jobs growing at a rate significantly lower than that of the working-age population, theunemployment rate rose from 17 percent to 29 percent between 1985 and 2000. Unemploymentwas particularly high (56 percent for those aged 16 to 24 years) among first-job seekers. Duringthe 1990s, however, unemployment increased among older adults and there was a trend towardsgreater unemployment among young people with lower levels of education. This, combined witha decline in living standards and the acute shortage of housing, were at the root of increasedsocial unrest. Although Algeria's unemployment is a structural problem requiring medium- tolong-term remedies, short-term remedies such as temporary employment programs constitute anessential stopgap measure. In this connection, the project was one of the first of its typedeveloped in Algeria. The project was all the more important considering the country's increasedunemployment, especially in the countryside, and growing internal violence.

The TUP-HIMO program targeted three sectors: road maintenance, agriculture and forestry, andwater and sanitation. Each sub-component had two objectives: development of public works toimprove social infrastructure; and creation of a maximum number of temporary jobs.

Overall, the program's rate of return was positive, since the average internal rate of return (IRR)for the roads sector reached 12 percent and exceeds the rate of pure time preference of 10 percentwhich was set at appraisal. The rate of return covers internal as well as external project costswhich leads to a positive result.

The labor-intensive public works (TUP-HIMO) took up the major share of the loan (87percent). The main thrust of the TUP-HIMO program was to generate a large number oftemporary jobs in a relatively short timeframe. With this in mind, the project relied upon labor-intensive methods carried out by local entrepreneurs in rural and urban areas. While creatingtemporary jobs geared towards the maintenance of basic infrastructure and services indisadvantaged communities, the construction works undertaken promoted the developmentand/or growth of small enterprises. Since the simple works envisaged under this programrequired little training or prior experience, the target population consisted of unskilledunemployed individuals.

Initially, the program was expected to create 148,563 temporary jobs, or the equivalent of20,000 full time jobs/year, while respecting a labor rate of 60%. For lack of adequate tools tomeasure the actual number of jobs created during project implementation, it was necessary toresort to a theoretical hypothesis to estimate the quantity of labor actually utilized. Under allhypotheses, the number of jobs created proves to have exceeded projections. Under thehypothesis that labor costs account for at least 50 percent of total project costs, it was estimatedthat about 24,500 person-years were created under the TUP-HIMO component. In addition,according to the operational audit report, the average actual cost of a job created under the TUP-

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HIMO did not exceed US$2,600/year, which is below the amount estimated at project appraisal(US$2,800/year).

Strong points* Temporary job creation;* Strengthening of program management capacity at the decentralized level of the

Ministry of Labor (Directorate for Employment and Young People (DEJ)) by theADS;

* Adherence to World Bank procedures;* Opening of the public works program to the private sector through the use of

public announcements, transparency in procurement methods, contractmanagement, etc.;

* Development of small enterprises;* Works carried out with private contractors at a cost two to three times lower than

works undertaken under force account, and with better quality.

Points to improve* Monitoring of the small works contractor (tacheronnat) or micro-enterprises needs

to be strengthened in order to have a better overview of the program's viabilityover time;

* Preparation of projects and bid packages by local consulting firms rather than bygovernment agencies (in order to encourage the development of local consultingfirms);

* Supervision of works by local technicians rather than by firms directly affiliatedto the different ministries (in order to reduce costs and encourage localemployment);

* Improved targeting of regions with high rates of unemployment (on the basis ofan updated and reliable poverty map);

* Enhanced data collection on actual number of jobs created, actual salaries paidand actual duration of employment;

* Better coordination between TUP-HIMO and IAIG programs in order to avoidduplication.

* Greater community participation in the identification of projects and thedevelopment of TUP-HIMO technical information forms in order to ensureproject sustainability.

In general, the TUP-HIMO program is well managed by the ADS and the local authorities, whobenefited from management training supplemented by computer equipment and software. Theprogram consumed about 90 percent of the loan due to the reorganization of loan categories andthe fluctuation in the parity of the local currency (the dinar). The ADS introduced correctivemeasures to improve its management, and revised the technical project information forms,which would allow for better monitoring of micro-enterprise development, including thecollection of data and information which is not currently being tracked. Under the second phase,the ADS intends to use consulting firms to monitor work sites which will enable the collectionof reliable data on the number of jobs created and salaries actually paid. The managementinformation system will also be strengthened. The ADS also intends to use a participatoryapproach similar to the one developed under the Community Development Programs, in orderto obtain a better appreciation of the demands expressed by communities. In addition, future

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TUP-HIMO projects would be undertaken which would benefit bordering communities and/orareas (for example, hydraulic or forestry projects).

COMPONENT 2: Stren2thenine the social safetv net

Sub-component a) Improvement of the existing social safety net:

The purpose of the social safety net program, introduced in 1994 was to: (i) provide transfers offunds (Allocations Forfaitaires de Solidarite - AFS) to the elderly (i.e., those aged 60 and over)and low-income handicapped persons not covered by the traditional social assistance programs;and (ii) create temporary job programs for the poor unemployed at a salary below the minimumwage (Indemnites pour Activites d'Interet General - IAIG). However, since the eligibilitycriteria were not always respected, (e.g., half of the minimum wage is paid for a half day's workinstead of for an 8-hour day, and the activities are not always labor-intensive), many IAIGbeneficiaries are young unemployed urban dwellers, usually living at home with their parents,and who do not necessarily fall in the poverty category. The financing mechanism functions in adecentralized environment and requires the participation of elected community officials(Assemblees populaires communales (APC) - and the Directions de l'Action Sociale (DAS) ofeach wilaya, which, in every community, falls under the aegis of the Community Social ActionOffices (Bureaux d'Action Sociale Communautaire, BASC).

Strone Points* In order to assess the impact of the social safety net program on beneficiaries, a

study was undertaken and a series of measures introduced to improve the efficacyof the programs (AFS and LIUG);

* Many unintended beneficiaries were identified through an annual rationalizationprocess of beneficiary lists;

. The system has become more transparent with the public dissemination ofbeneficiary lists;

* Timely monthly payments, rather than quarterly, are made to beneficiaries;* Financial management of the AFS program was significantly improved (using the

postal service);* Managers of the social safety net program received training, albeit towards the

end of the project;• Indicators were put in place for program monitoring;* Skilled technicians took up their local posts and program monitoring was

improved by this approach.

Points to be improved* The information management system will need to be expanded to include

additional indicators (distribution of beneficiaries by rural and urban areas, etc.).

The ADS made considerable strides in improving the management of these two programs. Theeffort involved in rationalizing beneficiary lists encompassed the following: disseminationseminars, site visits, activation of community validation commissions, public posting ofbeneficiary lists, audits in problematic wilayas, and the recruitment of over 680 skilledtechnicians to work on location.

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Certain problems arose in connection with this program: the use of quotas (by wilaya) instead ofa more pragmatic system (e.g., a reliable poverty map) that would make it possible to targetprograms to poor regions; governance issues associated with non-adherence to selection criteriaand manipulation of beneficiary lists by some local authorities; using the program for ends thatare contrary to what was originally envisaged, resulting in a permanisation of positions; andcollaboration between wilayas and APCs, which is still not assured.

One proposal put forth by the ADS is to revise the legislative texts in order to fine-tuneeligibility criteria (e.g., to allow more than one member of a family to participate in IAIGprograms, eliminate activities that are not labor-intensive and reduce overlap with TUP-HIMOactivities), promote a targeting system by eliminating the system of quotas by wilaya, enforceadherence to the principle of a full day's work for a salary below the minimum wage, anddisseminate and reinforce this new procedure at the level of the wilayas and APCs in order toensure better collaboration between the different parties involved.

Sub-component b) Social Services Units (Cellules de proximiti).

The experiment with Social Service Units was launched in the context of increased povertysubsequent to a decline in purchasing power, the deterioration of basic public services, and aresurgence of unemployment. Initially, the Units' general mandate was to establish contact withthe marginalized and socially excluded members of the population, and take certain actions a'ndconcrete steps to provide assistance. The priority aim of these initiatives was to improve thepopulation's access to basic social services in such areas as: health/hygiene, psycho-socialservices, education, cultural and athletic activities.

The 28 Units distributed among 7 wilayas, and under the auspices of the wilaya-level Directionsde l 'Action Sociale, benefited from the project loan. In addition to this pilot network there existsa Unit specialized in assisting victims of terrorism.

A key point to take into consideration is that since 1999, the Ministry of National Solidarity hasbeen introducing its own Social Service Units into the field to assist those suffering from theeffects of terrorism. Up to now, the ADS's Social Service Units do not benefit from a legalstatus and are governed by the same statutes as the Units established by the Ministry of NationalSolidarity.

Stron2 points* The units were provided with computer equipment, software, office space

(generally through the community), supplies/fiurniture/equipment, and financingfor key personnel;

* A key player in re-establishing social links within communities throughoutreach/advisory and basic services (referral service), including family contactand provision of home-based services;

* The Unit staff attended several seminars to improve their technical skills.

Points to be improved* Computer equipment and software were purchased only towards the end of the

project;* Staff qualifications need to be strengthened to meet community needs;

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* There is a risk of overlap between the ADS's Units and those created under theMinistry for National Solidarity. As a result, there is a need to coordinate theactivities of these units so that they can better complement each other;

* The Units do not yet have the technical capacities to fulfill the intermediationfunctions under the community development program nor to assist thecommunities in selecting sub-projects.

The Social Service Units can play a greater role in community development by helping to rallyand strengthen the social fabric around a common goal or community project. The Units'capacities needs to be strengthened through funding of key staff salaries and specific training sothat they can provide assistance to the ADS's community development strategy during the secondphase. It is important to note that the Units played an important role in helping identify pilotprojects in connection with the October 2000 Poverty Conference.

It would be particularly opportune to coordinate the activities of the Ministry of NationalSolidarity Units with those of the ADS's Units in order to avoid overlap, and to clearly define therole that each will play in the poverty alleviation strategy.

COMPONENT3: Testing and preparation of a social fund

Objective #3. Community development programs for social infrastructures and povertyalleviation

The Community Development Program was launched in an environment which did not lenditself easily to the concept of community development, neither by the beneficiaries nor by thelocal authorities in Algeria. Despite these constraints, the ADS devoted a great amount of effortin implementing this pilot program, and reaped the benefits from lessons learned with regard toparticipatory methods which needed to be put in place so that beneficiary populations couldbetter grasp the concepts of community development and assume increased responsibility for thedevelopment of their communities. The ADS set up procedures and developed closecollaboration among all stakeholders. The experience was extremely enriching.

The Social Development Agency (A4zence de Developpement Social. ADS). The ADS wascreated in 1996, and placed under the Head of State. Operational monitoring of all the agency'sactivities is handled by the Ministry of Labor and Social Protection. The status and structure ofthe ADS were entirely novel for Algeria, and by virtue of its autonomy, it was able to efficientlymanage the programs entrusted to it.

Sub-component a) Community Development Program:

The community development program was launched on a pilot basis as the concept was new toAlgeria. The program was geared towards populations living in poor and marginalized areas,and provided them with basic equipment and infrastructure to improve living conditions.

The pilot program consisted of 25 small projects in three wilayas (Souk-Ahras, El Bayadh andNaama). The financial saving which resulted from the devaluation of the dinar made it possibleto implement a complementary program with a total of 91 projects expanded to 40 wilayas. Thecharacteristic of community development is developed in technical specification forms submitted

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by local authorities, and implemented by a local association, NGO or APC, with 25 percent ofthe cost financed by the beneficiaries.

Strong DOints

* Most projects are in line with local priorities;. - Studies and impact assessments were carried out towards program improvement;* The ADS conducted analytical studies to improve the participatory methods used,

and introduced a strategy to attain greater community involvement in projectdesign.

Points to be improved* Community involvement in the form of a financial contribution, material or labor

valued at 25 percent of project cost, was too high, particularly for poorcommunities. During the pilot phase, the ADS took note that the contributionrates could not be applied uniformly to all community projects. The rate will bereduced during the second phase, depending on the activities and financialcapacities of the communities;

* Based on lessons learned during the first phase, the ADS needs to improve itsparticipatory approach during project identification, and implement the means tolegally transfer the investments to the communities. This requires a progressivechange of mentality and behavior on the part of communities regardinginfrastructure management and community development projects;

. A more in-depth analysis is needed to resolve the issues of unsuccessfulprocurement;

• Provide a legal status to community development projects in order that they canbe sustainable.

Out of all the community projects selected, 80 percent are operational. These projects areconcentrated on the following qualitative issues: access to potable water under hygienicconditions; better health service coverage; improvement of neighborhood hygiene conditions bymeans of hook-ups to sanitation networks ; improvement of conditions in schools ; improvedneighborhood lighting and therefore of personal safety ; and outreach to those affected byphysical handicaps or mental illness. In the productive sector, the project re-energized thetraditional professions, especially in rural areas.

The ADS encountered difficulties in encouraging direct participation during projectimplementation, especially when this was expected in the form of labor. The prevailing culturewas not conducive to communities taking responsibility for the activities being implemented, andthe concept requires time and patience, as well as intensive outreach efforts and informationdissemination. The ADS, as implementing agency, fulfilled its mandate by launching outreachand information campaigns, and setting up procedures to improve the efficacy of the program.

It is important to remember that the community development program is still in evolution.ADS's community development team has taken into account lessons learned, and implementedmeasures to correct weaknesses, including a re-examination of the project identification forms;documenting the synergy between pre-identified projects and other types of interventions;drafting of a decree which would complete the official transfer of projects to the respectivecommunities; project selection and focussing on those that are easiest to implement; monitoring

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and maintenance of completed projects; and launching of feasibility studies prior to thecommitment and implementation of new projects.

Sub-component b) Social Development Agency (Agence de Developpement Social(ADS):

The Social Development Agency (ADS) manages programs assigned to it by the Head of State.The ADS was set up in an environment of social urgency and has amply demonstrated itsmanagerial capacities. The ADS is complemented by a professional staff, who are skilled andmotivated. In addition, independent advisers and consulting firms are available to the ADS,providing expertise on an ad-hoc basis.

Strong Points* Financial inputs come from the State budget and have enabled the agency to

implement the programs under its purview without significant delays.* Bank investments (granted under Article 24 of the decree) have provided the ADS

with the flexibility to cover the financing of supplemental programs.* The ADS has a reliable financial management system in place, which is

noteworthy given the relative young age of the agency, and the inherentdifficulties in Algeria, especially with regard to good communication and lack ofwidespread use of computerized systems.

? The financial monitoring of programs is satisfactory.* The development of a highly detailed operations manual allowed the ADS to

satisfactorily manage its programs, and has also assisted the Directorates ofEmployment and Young People (Directions de l'Emploi et des Jeunes, DEJ) andSocial Action (DAS) in managing their sub-projects.

* The ADS made an important effort at training the staff in the DEJ and the DAS inorder to inprove their performance and management of the operations, andinstituted a solid foundation for institutional capacity.

* The ADS strengthened its management capacity through study tours to socialfunds in Egypt, Peru and Chile.

* The ADS is a dynamic and professional agency.

Points to be improved. The Management Information System (MIS) is still embryonic, and a clear

definition of program objectives and related performance indicators needs to beput in place.

* Each program objectives needs to be reviewed and further defined, mainlythrough the use of an outcomes-based management framework including theidentification of output and quality indicators.

. The volume of information produced by the ADS for purposes of programmonitoring is primarily financial in nature; qualitative analysis and outputs needsto be further developed.

The ADS operates in a very complex environment. It requires the cooperation of numerouspartners. The programs managed by the ADS would benefit from better cooperation by theconcerned ministries in order to avoid overlapping objectives, and strengthen collaborationamong the parties involved.

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Several studies have been commissioned by the ADS to improve the management of itsprograms and internal functions. The ADS participated in study tours to countries that have setup Social Funds and has been able to draw on this experience. Management implemented mostof the recommendations emerging from the various studies and analyses undertaken under theproject, and the ADS has continuously progressed in a positive direction since the inception ofthe project. The ADS has evolved into a high-performing agency, and represents the modelagency in the Algerian context.

4.3 NET PRESENT VALUE/ECONOMIC RATE OF RETURN (ERR):

During project preparation, the economic rate of return was not calculated for lack ofinformation and logistical difficulties associated with quantifying the direct and indirecteconomic benefits of the TUP-HIMO public works and community development programs(which represented 90 percent of the loan), i.e., modernization of public health services andenvironmental improvement. During project preparation, the public works (TUP-HIMO) sub-projects were pre-selected. Selection criteria were based on anticipated objectives and activitiesthat had demonstrated acceptable rates of economic return in other countries. Overall, it wasexpected that the project would help to: (i) create temporary employment that would boostincome levels; (ii) improve the economic and social infrastructure of disadvantagedcommunities; and (iii) introduce participatory approaches to the selection and implementation ofprojects in the framework of community development. As previously mentioned, public worksactivities contributed to the creation of temporary jobs and exceeded appraisal projections. Inthe course of project implementation, the ADS conducted an ex-post economic evaluation ofroad maintenance activities. On the basis of this evaluation, the ERR was estimated at about 12percent for road works. In addition, supervision missions estimated that the rate of return for thepublic works programs, based on quantifiable benefits, is about 16 percent. This is ademonstrable effect of the project's economic viability; however, caution must be used in theinterpretation of the figures as these are only rough estimates. An economic analysis carried outunder the companion Rural Employment Project in Algeria (Loan No. 16343-AL), indicates arate of return of around 26 percent for agricultural activities. This rate can only be anapproximation of the return on agriculture and forestry activities financed under this project dueto the differences between the activities financed by each project, but it is indicative of theeconomic viability. As for water and sanitation activities, rates of return should be around 15percent, taking into account the social advantages that will result: e.g., improved conditions ofhygiene, time savings and increased water consumption. During the second phase, the ADSshould undertake ex-post economic evaluations of other sub-components of the public worksprograms (agriculture and forestry, and maintenance of water supply and sanitation system) aswell as impact assessments for the other components of the program.

4.4 FINANCIAL RATE OF RETURN:

The FRR is not relevant to this project since the implementing agency is a non-revenue earningentity.

4.5 INSTITUTIONAL DEVELOPMENT IMPACT:

The ADS is under the aegis of the Ministry of Labor and Social Protection, and a detailedoperations manual outlines the management functions and work program of the Agency. The

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institutional development impact has been entirely satisfactory given the level of workundertaken by the ADS in the field, and the considerable effort made to ensure bettermanagement and monitoring of programs. Compared to other implementing agencies in Algeria,the ADS is highly effective, and has a flexible approach in responding to emerging needs fromthe field, while at the same time demanding greater quality work from its staff. There exists anexcellent spirit of collaboration between the ADS and its partners, which could not have beenbrought to fruition without good management practices on the part of the ADS' administration.In short, this is a dynamic agency.

5. MAJOR FACTORS AFFECTING IMPLEMENTATION AND OUTCOMlE:

5.1 Factors outside the control of the Government or its implementing agency:* Low economic growth, deterioration in social conditions and resultant increase in

poverty;* Lack of job creation and increased unemployment;* Internal instability and the effects of terrorism.

5.2 Factors generally subject to Government control:D Program monitoring;3 Strengthening of eligibility criteria..

5.3 Factors generally subject to the control of the implementing agency:* Institutional strengthening by the ADS of the DEJ and DAS, and of the CDPs;* Stronger linkages in general with line ministries;• Limited authority in the coordination of programs and duplication by other line

ministries.

5.4 Costs and fmancing:

Components World Bank loan Government Total(in US$ millions) contribution (in (in USS millions)

_______ ________ JUS$ millions)Projected Actual Pro-jected Actual Pro- Actual

____________ ___________ ~~~~jected _ _ _ _ _ _

TUP-HIMO 43.50 44.79 18.60 19.20 62.10 63.99Community 2.30 2.49 0.90 0.76 3.20 3.25developmentSocial Service Units 1.30 0.23 0.50 0.05 1.80 0.28Institutional 2.90 2.47 0.40 0.49 3.30 2.96developmentTotal 50.00 50.0 20.40 20.50 70.40 70.48

The loan was almost entirely disbursed, although there was a devaluation of the dinar duringproject implementation that allowed the ADS to finance additional activities within eachprogram. The undisbursed balance is estimated at US$700,000 dollars, and will be cancelledafter July 31, 2001 - the date marking the end of the grace period following the project's closingdate of March 31, 2001.

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6. SUSTAINABILITY

6.1 Rafionalefor Sustainabiity Rating:

The sustainability of programs is likely to be assured for the following reasons: a) the TUP-HIMO program was successful, owing to good management that will further be strengthenedunder the second phase; b) the management of the social safety net has substantially improved,including the targeting process through rationalization, and the information management systemwill be strengthened in the area of performance indicators ; and c) the pilot phase of thecommunity development program yielded valuable lessons, for which corrective measures wereintroduced under the second phase.

However, the World Bank team raised a concern with the authorities about the sustainability ofthe TUP-HIMO programs, as the ADS has been using IAIG program funds for TUP-HIMO typeactivities. Funds earmnarked for IAIG should not be transferred to ensure the sustainability of theTUP-HIMO programs, as the two programs are aimed at different groups (IAIG towards thepoor, and TUP-HIMO towards the unemployed). Given that poverty has substantially increasedduring the 1990s, it is imperative that IAIG programs be maintained as part of the Government'spoverty alleviation programs, while at the same time improving targeting and strengthening theself-targeting mechanisms. Worldwide experience indicates the complementary nature of theseprograms because their target groups are different. To ensure the financial sustainability of theTUP-HIMO, the Government needs to allocate additional budgetary resources to the ADS.

Moreover, the impact of the TUP-HIMO programs in the field could be improved byimplementing the revised needs-assessment procedure that was set up under the communitydevelopment program. The procedure will allow the beneficiaries to identify priority activities atthe community level, thereby a more demand-driven approach. This change will encouragecommunity maintenance of infrastructure created under the TUP-HIMO and will eliminatepossible overlaps between the TUP-HIMO and IAIG activities.

In addition, given the changes being introduced at the level of the Ministry, and discussed below,the sustainability of the ADS may be being compromised. The mission noted changes at thelevel of the ADS administration specifically in decreased management flexibility compared towhat was provided for undeT the established decree.

The 2001 Appropriations Law eliminates the Social Development Fund and reverts budgetallocations back to the indicative budget lines of the Ministry of Labor and Social Protection.This means that the Agency will now operate at the same pace as the official budget process:

* yearly, rather than multi-year, allocations;* abiding by the same rigid procedures as that of the Treasury account;* a ban on investing cash reserves that would generate additional income thereby reducing

managerial flexibility and the responsiveness of the ADS;* a three-month delay in the release of annual budget allocations, with the budgetary cycle

closing in mid-December.

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The ADS's ability to manage and finance the programs in a satisfactory manner is at risk.

6.2 Transition arrangement to independent operation:The movement towards an independent operation risks being compromised due to these changesthat are occurring within the Ministry of Labor and Social Protection, and its view on the ADS'sfuture role. Although the Ministry confirmed that the ADS would maintain its autonomousstatus, the Bank noted that the agency's functions are in the process of being modified.

7. BANK AND BORROWER PERFORMANCE

7.1 Lending:

Project preparation by World Bank staff was satisfactory. The project benefited from a Japanesegrant for the preparatory phases of the project. The grant financed consultant services to carryout studies and detailed analyses of project components (technical project specification forms forTUP-HIMO, social safety net, etc.). In addition, the Bank conducted a seminar on experienceswith social funds around the world to the Borrower's tearn. It is also important to note that themajority of preparation missions took place outside the country due to internal instability andsecurity concerns.

Given the inability of the team to prepare the project in-country, development objectives werenot as clearly defined during project preparation, and field visits were not carried out whichwould have made for a more detailed appraisal of project components.

7.2 Supervision:Starting in 1996, the World Bank conducted nine supervision missions - on average one everyfive months and with an average duration of eight days. The missions were led by the teamleader with the support of specialists in the following fields: economist, project management,transportation/road engineer, social funds, agriculture, financial management, communitydevelopment, micro-credit, and sociologist. In addition, the specialists in transportation/roads,agriculture and financial management made separate supervision trips, thus providing additionalneeded support to the project.

The missions were unable to conduct field visits (with the exception of site visits to Bejaia,Ghardaia, Oran, Tiaret, and Tissemsilt) in order to carry out an in-depth assessment of projectactivities, which led to gaps in monitoring and evaluating qualitative issues. However, it isimportant to note that in the course of preparing the operational audit report, consultants fromSECOR/M3E conducted field visits in 2000.

7.3 Overall Bank performance:The Bank's overall performance was satisfactory. The Bank missions were strengthened bytechnical experts in social funds, and seminars were conducted to disseminate experiences withsocial funds to Government authorities in order to help them make in the decision-makingprocess. Supervision missions took place at regular intervals and were strengthened by additionalexperts in different fields. Close contact was established so that the Agency could receive timelyadvice and assistance as needed. A new team leader, as well as some new technical experts,were appointed when the project went into the supervision phase.

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Borrower

7.4 Preparation:Although the Project Coordinator appointed to manage the preparation of the project was not ofthe right caliber, Government participation in project preparation was satisfactory. TheBorrower's team was supplemented with technical experts from the ministries involved in theproject.

7.5 Borrower performance in project implementation:The Government's performance was satisfactory during project implementation, although themission noted some changes in the management of the ADS in the course of implementation (themain aspects of which are highlighted in the << Lessons Learned o section).

7.6 Implementing agency:Program management was satisfactory throughout project implementation, and the ADS staffdemonstrated a high level of professionalism in the performance of their jobs.

7.7 Overall Borrower Performance:In general, Borrower performance was satisfactory. The dialogue was constructive over theperiod of project preparation and implementation, and the Bank was able to increase itsknowledge on social policy trends and the evolving economic environment in Algeria.

8. LESSONS LEARNED

The experience acquired over the last three-years (implementation period) confirms the validityof the general project design. The creation and establishment of the ADS, with its innovativestructure, enabled a learning environment, especially from experience from the field. Inaddition, the ADS promoted the use of a constructive self-evaluation mechanism with the goal ofself-improvement, and improved program management. The ADS (and through the agency, theimplementation of the project) had a catalytic effect because it demonstrated that a public agencyoperating in the social service sector can be innovative, effective and obtain good results. Theproject also demonstrated and confirmed the successful use of private contractors as opposed toforce account which is widely used in Algeria. In addition, the ADS launched a process ofdecentralized management and encouraged community participation (the communities had beenpoorly served up to that time), and ensured effective collaboration with line ministries andprovincial/local administrations. Although the administrative framework of the ADS is notdesigned on the typical worldwide model of autonomous social funds (taking into account the 66social funds throughout the world), the Agency is obtaining good results and its structure isobviously well suited to the administrative environment of Algeria.

Several studies were carried out, particularly social safety net program beneficiary assessments(AFS and IAIG). The studies did not yield the expected results as the assessments wereprimarily based on quantitative rather than qualitative inputs. The terms of reference will beenhanced during the second phase so as to collect concrete data on impact. However, thecommunity needs assessment study was the first of its kind ever undertaken in Algeria and was amajor learning experience for the ADS and the partner institutions involved.

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The Community Development Program is a new concept in Algeria, and implementation of thisnew approach requires application of lessons learned and increased effort; two elements that theADS management supports so that the program can have the desired impact.

It is important to underline that, although the ADS is a solid agency and has carried out itsmandate in a-fully satisfactory manner (justifying the investment of the past three years), thestructures responsible for implementing the individual programs are still in need of support. Inparticular, the recent changes made at the administrative level have reduced the ADS'smanagerial flexibility. The Appropriations Law for 2001 eliminates the Social DevelopmentFund and re-integrates budget allocations into the budget lines of the Ministry of Labor. Thismeans that the release of budget allocations occurs with a three-month delay, thus compromisingprogram management and timely financial execution.

9. PARTNER COMMENTS

(a) Government/mplementingAgency:

The Implementing Agency's report (summary) is attached below, and the full report is in theproject files.

In general, the Implementing Agency concords with the Bank's assessment. The Governmentcounterpart (Ministry of Labor) did not submit comments as of the date of this report.

Certain aspects with regard to the Borrower's and the Bank's performance are as follows:

With regard to the Borrower's performance, the implementing agency was quickly put in place,with minimal turnover at the personnel level, and the establishment of strong management, andeffective organizational and work processes led to the success of the project; including goodcoordination between the ADS and technical ministries; the Bank loan was almost fully utilized;additional funds were obtained following the devaluation of the dinar; and additional programsexecuted due to the devaluation. The timely development and implementation of the MIS didnot keep pace with that of the programs.

The Bank's performance was evaluated as satisfactory, because of the flexibility in preparing andsupervising the project, and timely response to the Borrower's requests. The main weaknessnoted was the turnover of Bank team members.

The agency believes that the progress achieved is based on sound analyses carried out duringphase I, and that the agency will use to build upon in order to remain a strong and competitiveagency.

(b) Co-financiers:

Not applicable.

(c) Other partners (NGOs/private sector):

Not applicable.

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Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome I Impact Indicators:

indicatoriMatrix Projected in last PSR ActuallLatest Estimate

Output Indicators:

IndlcatoriMatrix Projected in last PSR Actual/Latest EstimnatePublic Work Programs

a) Employment creation - 20,000 person 21,000 person/years were created by It is estimated that about 23,000 person/yearyears over prject life. 02J29/00. was cread by 03/31/01.

b) Maintenance of assets:i) Roads - 10,000 kms.; i) PAD estimates 11,000 km (i) Actual 13,000 kmi) Water/sewage systems - 1,200 kms.; (ii) NA Cii) 40 different types of works and unable to

aggregateiii) Agriculture:- environmental protection

measures - 105,000 ha.; drainage system - (iii) PAD estimates 115,000 ha (iii) 154,000 ha600,00 ML; flood prevention works -4,000m3; wind breaks - 1,000 km.; othermisc. 1,500 ha.

c) Development of small private enterprises. Small contractors (Tacherons bid on The total number of contracts awarded wascontracts in large numbers 27,500 bids on 3934.3,790 contracts awarded.

d) Decentralization of decision making. Wilya level offices of technical ministries Improvements continue to be made regardingselect and technically supervise projects; institutional building at the local level, throughcommune levels offices (DEJ) of Ministry of the application of writen procedures andLabor authorize payments to contractors; training of personnel.payments are made by local offices ofcomnmercial bank (BNA). Quality ofcoordination and levels of competence varywidely by wiiaya but overaUl vel is improving.

As of 12/31/99 3,396 (89% of total) contractssigned worth $56.9 million (94% of the total All works cormpleted under signed contracts.program amount). Payments of $51.3 millionmade to contractors. These contracts cover37 wilayas.

Strengthening the Social Safety Net Improved targeting. In 1999 to date the In 2000, the total number of beneficiariesaverage number of beneficiaries per month (AFS, PAC, IAIG) was 810,972, due to theunder all 3 SA programs (AFS, PAC, IAIG) vigilence in ensuring the right beneficarieswas 970,000 (1998: 953,000; 1997: were listed. The monthly payment also936,000). Average monthly payment per increased in 2001: AFS increased from 900beneficiary, excluding social security DA to 1,000 DA; and MAG has increasedpayments was 840 DA ($14). from 2,500 DA to 3,000 DA. The average

monthly payment per benefeciary hasAFS and IAIG programs are still not well readied 909 DA ($12).targeted. Govemment took a major step on Governance is one of the rajor issues inOctober 18, 1999 by announcing the public implmenbng the programs. ADS haslisting of all welfare beneficaries to bring substantally improved the targeting of themore transparency to the program at the programs but efforts still need to be made inlocal lvel. enforcing self-targeting mechanisms;

reviewing eligbility criteria; and revising thegislation in the cDntext of the poverty

reduction strategy.

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Prepare Pilot Social Development Programs The ADS management and staff increased Sustainability of the ADS is at risk becauseform 38 in June 1998 to 74 by end 1998 to changes have been introduced at the117 by 12131199. Project Management management level that will reduce theremains good and financial management agency's flexibility in managing its operationsexcellent. (ADS is cose to LACI ready). and will impede efficiencies in its activities.Program management reporting capability is The April mission noted that new proceduresgood, but data collecdon and MIS for project will force the agency to rely on annual budgetperformance performance monitoring needs allocations rather than multi-year. This willimprovement lead in practice to delays in effective

disbursement and as a result would affectADS is attracting very capable new people in the programs of the ADS.management, finance, communitydevelopment, filet social. It has opened tworegional offices of six planned. It now hasthe capacity (data, people and resources) tomanage large program,s and undertake moreigorous analysis of programs. It now has aproven track record, it is being asked by theGovemment to manage an increasingnumber of program.s Recent additons are apreemployment program for universitygraduates and a microcredit program. It willsoon need to undertake a strategic planningprocess.

End of project5/15/01

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Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent)Appraisal ActuaULatest Percentage ofEstimate Estimate Appraisal

Project Cost By Component US$ million US$ millionPublic Works 55.60 62.10 1.12Social Safety Net 3.00 3.80 1.26Social Fund 4.10 3.70 0.91Coordination Unit 0.80 0.80 0.96

Total Baseline Cost 63.50 70.40Physical Contingencies 5.40Price Contingencies 1.60

Total Project Costs 70.50 70.40Total Financing Required 70.50 70.40

Project Costs by Procureme nt Arrangements (Appraisal Estimate) (US$ million equivalent)Procurement Method

Ex' V 0 penditure Cat0Megory 2 N.B.F. Total CostExpenditur Category CB NCB Other2 N______ _F___

1. Works 0.00 64.20 0.00 0.00 64.20(0.00) (44.90) (0.00) (0.00) (44.90)

2. Goods 2.00 0.00 1.50 0.00 3.50(1.50) (0.00) (1.10) (0.00) (2.60)

3. Services 0.00 0.00 2.60 0.00 2.60(0.00) (0.00) (2.50) (0.00) (2.50)

4. Miscellaneous 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

5. Miscellaneous 0.00 0.00 0.00 0.10 0.10(0.00) (0.00) (0.00) (0.00) (0.00)

6. Miscellaneous 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

Total 2.00 64.20 4.10 0.10 70.40(1.50) (44.90) (3.60) (0.00) (50.00)

Project Costs by Procurement Arrangements (ActuaULatest Estimate) (US$ million equival nt)Procurement Method,

Expenditure Category ICB NCB ether' N.B.F. Total Cost

1. Works 0.00 66.00 0.13 0.00 66.13(0.00) (45.86) (0.09) (0.00) (45.95)

2. Goods 1.87 0.43 0.63 0.00 2.93________ __ _ (1.58) (0.37) (0.54) (0.00) (2.49)

3. Services 0.22 0.33 0.79 0.00 1.34(0.22) (0.33) (0.79) (0.00) (1.34)

4. Miscellaneous 0.00 0.00 0.00 0.00 0.00

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(0.00) (0.00) (0.00) (0.00) (0.00)5. Miscellaneous 0.00 0.00 0.00 0.00 0.00

(0.00) (0.00) (0.00) (0.00) (0.00)6. Miscellaneous 0.00 0.00 0.00 0.00 0.00

(0.00) (0.00) (0.00) (0.00) (0.00)Total 2.09 66.76 1.55 0.00 70.40

(1.80) (46.56) (1.42) (0.00) (49.78)

1' Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies.

2' Includes civil works and goods to be procured through national shopping, consulting services, services of contractedstaff of the project management office, training, technical assistance services, and incremental operating costs related to(i) managing the project, and (ii) re-lending project funds to local government units.

Project Financing by Component (in USS million equivalent)Percentage of Appraisal

Component Appraisal Estimate Actual/Latest EstimateBank GovL CoF. Bank Govt. CoF. Bank Govt. CoF.

Public Works 43.50 18.60 44.70 19.18 102.8 103.1Social Safety Net 2.80 0.30 2.73 0.55 97.5 183.3Social Fund 3.00 1.30 2.40 0.83 80.0 63.8Coordination Unit 0.70 0.20 0.0 0.0

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Annex 3. Economic Costs and Benefits

1. Links to CAS: The CAS, discussed by the Board on February 27, 1996, proposes athree-pronged strategy during the transition period in Algeria: (i) acceleration of the reform programns;(ii) support for social projects targeting poverty reduction, job creation schemes, and low-incomehousing; and (iii) assistance to mobilize external financing. The CAS recognizes that in the short-termquick employment generation and protection of vulnerable groups will be crucial to safeguard thereform program and reduce the social crisis which has plagued the country for the last decade. In thiscontext, the SSN I has served the CAS strategy by addressing unemployment through creating quicelytemporary labor intensive employmnent programs, particularly in communities with high unemployment,to improve social services in poor communities.

2. Macroeconomic Environment: Macroeconomic stabilization and structural reforms have beenundertaken since 1987 to reverse the economic decline which began in the mid-1980s. However,important reversals in economic policy during the first phase of transition to a market economy(1989-94) resulted in prolonged economic recession, accompanied by increasing inflationary pressure,high external debt, growing unemployment, and mounting social discontent. During the second phaseof the transition, beginning in 1994, the stabilization and adjustment programs were relaunched andmacroeconomic balances were restored. Despite structural reforms, the development of the privatesector has not picked up and the restructuring of the public enterprises has been slow. In the meantime,due to a lack of economic growth, per capita GNP declined by almost 50% from US$2,880 in 1987 toUS$1,600 in 2000 and per capita private consumption fell by an average of 2.5% per year over thesame period. As a result poverty incidence has increased from about 8% of the population in 1988 toabout 20% in 2000. The number of unemployed workers has also almost doubled during the lastdecade, with the official open unemployment rate reaching almost 30% in 2000, compared to 17% in1985. This combined with a deterioration in living standards have led to severe discontent and civilunrest. It is expected that the unemployment will further increase in the near future as public enterprisereform and privatization result in labor shedding. Although unemployment is a structural problem inAlgeria, requiring medium- and long-term solutions, short-term solutions such as temporaryemployment programs are necessary adjuncts. To reduce unemployment, the Government's highestpriority is the promotion of broad-based sustainable economic growth. Reforms designed to make theeconomy more responsive to market signals can be expected to improve employment and incomeopportunities for the broader population in the medium-term. At the same time, to assist the short-termunemployed, the Government promoted various active labor market policies, including labor intensivepublic works programs designed to provide income support to the poor unemployed (IAIG) andgenerate short-term jobs for the unskilled unemployed (Tl)P), particularly first time job seekers. In thiscontext, the project pursued a multi-sectoral program of public works programs, mainly in roadsidemaintenance, forestry, social infrastructure (health centers and primary schools), agriculture, and watersupply and sanitation. The Government has already undertaken similar free standing programs inagriculture. In this approach, using multi-sectoral programs, the Government has coupled employmentgeneration and asset maintenance with efforts to develop the private sector and encourage bottom-updecision making for public works programs.

3. Fiscal Impact: In 2000, the Government spent about 9%/o of GDP in social protection programs(including, employment programs, assistance programs, public works, social insurance and othertransfers). The project imposed a minimal fiscal burden on the government, accounting for less than0.2% of GDP.

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4. Economic Rationale for Public Sector Involvement: Public intervention in the project wasjustified by public goods and redistribution arguments. In respect to the public goods argument, theprivate sector was not expected to undertake short-term labor intensive public works programs in thesocial infrastructure sector. These public works have had long-term benefits to the whole populationbeyond the immediate impact of income supports or the medium-term impact of service delivery.Government support has helped strengthen the capacity of small scale local private contractors whichin turn helped to create employment in the short- and medium-term. Creation of temporary laborintensive jobs were expected to reduce the social unrest and political instability in the long run.Regarding the redistribution argument, Government needed to help those who are negatively affectedby lack of employment creation and who cannot benefit from public works programs (IAIG) targeted tothe poor. Since resuming labor intensive growth, particularly led by the private sector, will take time,Government needed to promote creation of temporary labor intensive employment to reduce low-skilledunemployment in the whole country. Moreover, because of the deteriorating conditions of the basicsocial infrastructure and services in rural and urban areas, Government needed to rehabilitate theinfrastructures in poor rural and urban communities and targeted benefits to poor communities unlikelyto be reached by the private sector.

5. Achievements to Date: ADS has made progress in terms of launching TUP-HIMO andcommunity development projects, despite a slow start due to the existing circumstances and difficultiesputting proper procedures in place.

6. Public Works: Table 1 shows fund allocations, employment generation per year and cost per jobcreated under the SSN I. As of April 30, 2001, total cost of TUP-HIMO component was aboutUS$64 million, and disbursements under the Bank loan total about US$44 million.

7. During the implementation of the project ADS collected information on the number ofjobs createdbased on administrative records (person/project basis). This needs to be treated with caution and maynot accurately reflect the temporary employment actually created by the project. According to theadministrative data, which are based on 3,934 completed contracts during the project, for a totalamount of US$63.9 million (DA 4.128 billion), and as of April 30, 2001, the total number ofemployment created was estimated at 24,500 person/years over the three years. The number ofemployment is estimated on the average total cost per job of about US$2,600/year (somehow below thevalue of $2,800/year estimated in the SAR), with the assumption that the average share of labor intotal costs was about 50%. Given that the administrative records are the only infornation available, thelabor cost (wage bill and social charges) during the first phase can be assumed to have been around50%/o of total project cost (including TVA and Social Charges) for all components of the TUP-HIMO(road maintenance, agriculture, hydraulics and sewerage, and urban infiastructure). To ensure that theinformation on employment creation is based on the realization in the field, an adequate monitoringsystem will need to be implemented in the future.

8. According to these estimates, the cost of jobs created by TUP-HIMO compares favorably withinternational standards. Based on international experience, cost per job created (with emphasis onmaintenance activities) ranges from a high of approximately 590% of GDP per capita for averagesocial fund cost in Latin America to a low of 46% in Indonesia. At about 160% of GDP per capita,the cost per job created in SSNI is well within this range. The cost of a job in Algeria includes the highinvestment cost in equipment, materials, transport and security costs of the workers to the work sites.If we had assumed that the share of labor in total cost is about 40%, the number of jobs created wouldhave been about 19,000 person/years at an average cost of US$3,250/job. This is still within the rangeof SAR estimates. Although the wage rates are fixed at the minimum wage, the private contractors

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have to pay the payroll taxation which amounts to about 34.5% of the gross wage bill as well as the14% Value Added Tax (VAT). If these additional taxes were not imposed by the legislation, the publicworks could have generated additional employment

Table 1: SSN I Targets Achieved as of April 30, 2001

Total Total # jobs # jobs Cost Cost Labor Labor Labor/ Labor/Funds Funds (prsn/ (prsn/ per per Costs Costs Tot Tot(Plan (Act. yr) yr) Jobs Jobs TTC TTC Cost. Cost.USS US$ Plan Esti- year year (year) (year) Pind Esti-mln) m1n)" mated (US$) (USS) US$ USS mated

Plnd Esti- Plnd Esti-mated mated

Total Public 55.6 63.9 19,800 24,500 2,800 2,600 1,600 1,300 60% 50%Works

Road maint. 24.2 29.2 5,200 11,200 4,600 2,600 2,500 1,300 55% 50%

Agricul. 18.7 17.0 10,000 6,500 1,800 2,600 1,300 1,300 73% 50%

Water Supply 12.7 17.7 4,600 6,800 3,000 2,600 1,800 1,300 63% 50%/& Sewer.__________

* At the beginning of the program the exchange rate was IUS $=53.70 DA; and at the end of the project theexchange rate has reached IUS$ = 64.51 DA.

The actual financial resources include the restructuring, the contingencies and the additional fimds obtained as aresult of the devaluation of the DA.

Source: SSNI, SAR, March 1996; and ADS & Bank staff estimates.

9. Pilot Community Development Projects: During project implementation, about 91 sub-projectswere completed at a total cost of US$3.4 million. On a temporary basis, the size of communitydevelopment projects increased from US$100,000 to US$200,000. Monitoring of sub-projectsindicates adequate targeting to poor communities, prompt physical implementation and payments tocontractors within 30 days. However the main issues raised during the pilot phase are as follows: (i)severe difficulty of implementing the program in the prevailing security conditions because bydefinition the program is mainly implemented in less secure areas of Algeria; (ii) difficulty inresponding to real needs of a community as sub-projects are often proposed by local authorities(commune) or by the Govemment's technical services; (iii) lack of promotion and outreach campaigns;(iv) lack of community participation in selection or in implementation (other than financial or laborcontribution); (v) lack of sustainability of the projects and impact analysis of the programs on thecommunities; and (vi) lack of familiarity of the ADS and partners (including community leaders) inparticipatory techniques and approach. Therefore there is a need to train ADS and partners inparticipatory techniques; to manage the project selection process better at the local level, includingroutine use of community needs assessments; and establish clear performance indicators. During thefirst phase ADS completed a Participatory Needs Assessment Study and the Bank undertook a quickimpact assessment study of the pilot programs. Based on lessons learned during the pilot phase, ADSshould continue expanding the community development component.

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Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle No. of Persons and Specialty Performance Rating

(e.g. 2 Economists, 1 FMS, etc.) Implementation DevelopmentMonth/Year Count Specialty Progress Objective

Identification/Preparation9/1994 6 1 DC, I RE, I 00, I CO, I PW,

I SO6/1995 9 2 CD, 4 EC, I CO, 1 OA, I TL

Appraisal/Negotiation2/1996* 13 5 EC, I TL, I RH, I AO,

2 ENG, 1 LA5/1996 1 1 TR

Supervision7/1997 3 I TL, I HREC, I IMP S S3/1998 2 1 TL, I IMP U S

11/1998 6 1 TL, 2 EC, 1 CO DV, 1 ENG, U S1 SOC

5/1999 5 1 TL, 1 CO DV, I FIN, I MIC U SI AG

10/1999 6 1 TL, I EC, I ENG, I SF, S SI AG, I FIN

3/2000 3 1 TL, 2 SOC S S

ICR4/2001 3 1 EC,100,1OA

TR: Transport Specialist; EC: Economist, FIN: Financial Specialist; 00: Operations Officer: ENG: Engineer; CODV: Community Development;

IMP: Implementation SpecialistNote: * Appraisal/Neg. was conducted as a reverse mission in Washington, DC.

(b) Staff

Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks US$ ('000)

Identification/Preparation 309216Appraisal/Negotiation 33800Supervision 327289ICR 40000Total 710305

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components

(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)Rating

IMacro policies O H OSUOM O N * NAISector Policies OH OSUOM ON * NA

Z Physical O H * SUOM O N O NAO Financial O H *SUOM O N O NAZ Institutional Development * H O SU O M 0 N 0 NAI Environmental O H OSUOM O N * NA

SocialO Poverty Reduction O H OSUOM O N O NAO Gender OH OSUOM ON *NAO Other (Please specify) OH OSUOM ON * NA

Private sector development 0 H O SU O M 0 N 0 NAO Public sector management 0 H O SU O M 0 N 0 NAL Other (Please specify) O H O SU O M O N * NA

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Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

Z Lending OHS*S Ou OHUZ Supervision OHS OS Ou OHUN Overall OHS OS O U O HU

6.2 Borrowerperformance Rating

Z Preparation OHS OS O U O HU• Government implementation performance O HS O S 0 U 0 HU• Implementation agency performance OHS OS O u O HU

Z Overall OHS OS 0 u O HU

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Annex 7. List of Supporting Documents

Audit OperationnelStaff Appraisal Report (SAR)Prograrmme des Travaux d'Utilite Publiques (August 1995)Projet de Coopration avec la Banque Mondiale - Document de ProjetSocial Safety Net Program in Algeria - Mid-term Evaluation (Octobre 1995)Bilan du Filet Social (Avril 1995)Rapport sur les Programmes de Politique Sociale geree par l'ADS ( Situation a fin 1999 et perspectives2000-2003)Rapport d'Activite 4eme Trimestre 1999Rapport d'Activite pour le 3eme Trimestre 2000Programme Travaux d'Utilite Publique a Haute Intensite de Main-d'Oeuvre (Tup-Himo)Programme de Cr6ation d'Emplois Temporaires (Fevrier 2000)Programme de Traitement des Poches de PauvreteBilan Filet Social (Fevrier 1998)

Documents received during the ICR mission:

1. Rapport final d'evaluation de la phase pilote du projet d'appui au filet social finanace par l'accord depret BIRD 4006-AL (version avril 2001)2. Note de Synthese programmes sociaux geres par 1'ADS - janvier 20013. Annexes I Bilan decaissement su pret BIRD 4006-AL - version preliminaire avril 20014. Bilan financier programme TUP-HIMO - situation arret6e au 31/12/20005. Annexes II Programme TUP-HIMO - version preliminaire avril 20016. Annexes m Programme developpement communautaire et CDP7. Annexes IV Programme institutionnel filet social (AFS/L4IG) -version preliminaire avril 20018. Documents types pour le suivi des projets (TUP-HIMO) - janvier 20019. Programme d'action pour l'exercice 2001 - fWvrier 200110. Projet de budget exercice 2001 - fevrier 200111 Budget annuel de l'agence de developpement social au titre de 1'exercice 2001 Annexes - fevrier 200112. Carte de la pauvrete en Algerie - Synthese

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