Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: {PP1918}

PROJECT PAPER

ON A

PROPOSED GRANT
FROM THE STRATEGIC CLIMATE FUND

IN THE AMOUNT OF US$1.50 MILLION

TO THE

FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA

FOR A

MULTI-SECTOR INVESTMENT PLANNING FOR CLIMATE RESILIENCE PROJECT

September 22, 2016

This document is being made publicly available prior to approval. This does not imply a
presumed outcome. This document may be updated following management consideration and
the updated document will be made publicly available in accordance with the Bank’s policy
on Access to Information.
 CURRENCY EQUIVALENTS

(Exchange Rate Effective – September 22, 2016)

Currency Unit = Ethiopian Birr (ETB)
ETB 22.21 = 1 US$
1 ETB = 0.045 US$

FISCAL YEAR
July 8 – July 7

ABBREVIATIONS AND ACRONYMS

AfDB African Development Bank

AGP Agricultural Growth Program
CBA Cost Benefit Analysis
CIF Climate Investment Funds
CPF Country Partnership Framework
CRGE Climate Resilient Green Economy
CSRP Civil Service Reform Program
DA Designated Account
DP Development Partner
EMCP Expenditure Management and Control sub-program
ESSF Environmental and Social Safeguards Framework
FM Financial Management
FPPA Federal Public Property and Administration Agency
FPD Finance and Procurement Directorate
GCF Green Climate Fund
GDP Gross Domestic Product
GIS Geographic Information System
GoE Government of Ethiopia
GPN General Procurement Notice
GRM Grievance Redress Mechanism
GRS Grievance Redress Service
GTP Growth and Transformation Plan
IBEX Integrated Budget and Expenditure System (IBEX)
IBRD International Bank of Reconstruction and Development
ICB International Competitive Bidding
IDA International Development Association
IFR Interim Financial Report
M&E Monitoring and Evaluation
MEFCC Ministry of Environment, Forest and Climate Change
MIS Management Information System
MoANR Ministry of Agriculture and Natural Resources
MoFEC Ministry of Finance and Economic Cooperation

i
MoLF Ministry of Livestock and Fisheries
MoWIE Ministry of Water, Irrigation and Electricity
MSIP Multi-Sector Investment Plan
NBE National Bank of Ethiopia
NCB National Competitive Bidding
NGO Non-Governmental Organization
ODI Overseas Development Institute
OP Operational Policy
PDO Project Development Objective
PEFA Public Expenditure and Financial Accountability
PFM Public Finance Management
PPCR Pilot Program for Climate Resilience
PPPs Public Private Partnerships
PSNP Productive Safety Net Program
REDD Reducing Emissions from Deforestation and Forest Degradation
RFP Request for Proposal
RRT Rapid Response Team
SNNP Southern Nations, Nationalities, and People
SRFP Standard Requests for Proposals
SBD Standard Bidding Document
SCD Systematic Country Diagnostic
SCF Strategic Climate Fund (one of the CIFs)
SLMP Sustainable Land Management Program
SLMP-2 Sustainable Land Management Project Phase 2
TA Technical Assistance
ToR Terms of reference
QCBS Quality and Cost Based Selection
UNDB United Nations Development Business
UNFCCC United Nations Framework Convention on Climate Change
YR (Project) Year

Regional Vice President: Makhtar Diop

Country Director: Carolyn Turk
Acting Senior Global Practice Director: Julia Bucknall
Practice Manager: Magda Lovei
Task Team Leader: Stephen Danyo / Timothy Brown

ii
 Ethiopia
Multi-sector Investment Planning for Climate Resilience (P158987)

TABLE OF CONTENTS

Page

I. STRATEGIC CONTEXT .................................................................................................1

A. Country Context ............................................................................................................ 1
B. Sectoral and Institutional Context................................................................................. 1
C. Higher Level Objectives to which the Project Contributes .......................................... 3

II. PROJECT DEVELOPMENT OBJECTIVES ................................................................4

A. Proposed Development Objective(s) ............................................................................ 4
B. Project Beneficiaries ..................................................................................................... 4
C. PDO-Level Results Indicators ...................................................................................... 4

III. PROJECT DESCRIPTION ..............................................................................................4

A. Project Components ...................................................................................................... 5
B. Project Cost and Financing ........................................................................................... 6

IV. IMPLEMENTATION .......................................................................................................7

A. Institutional and Implementation Arrangements .......................................................... 7
B. Results Monitoring and Evaluation .............................................................................. 8
C. Sustainability................................................................................................................. 8

V. KEY RISKS AND MITIGATION MEASURES ............................................................9

VI. APPRAISAL SUMMARY ..............................................................................................10

A. Technical ..................................................................................................................... 10
B. Financial Management ................................................................................................ 10
C. Procurement ................................................................................................................ 11
D. Social and Environment .............................................................................................. 12
E. Safeguards ................................................................................................................... 12
F. World Bank Grievance Redress Service ..................................................................... 12

Annex 1: Results Framework and Monitoring .........................................................................13

iii
Annex 2: Detailed Project Description .......................................................................................22

Annex 3: Implementation Arrangements ..................................................................................29

Annex 3A: Institutional and Implementation Arrangements ............................................ 29
Annex 3B: Financial Management ................................................................................... 31
Annex 3C: Procurement Management .............................................................................. 38

iv
.

APPRAISAL DATA SHEET

Ethiopia
Multi-sector Investment Planning for Climate Resilience (P158987)
PROJECT PAPER
.

AFRICA
0000009270

Report No.: PP1918

.

Basic Information
Project ID EA Category Team Leader(s)
P158987 C - Not Required Stephen Danyo, Timothy H.
Brown
Lending Instrument Fragile and/or Capacity Constraints [ ]
Investment Project Financing Financial Intermediaries [ ]
Series of Projects [ ]
Project Implementation Start Date Project Implementation End Date
31-Oct-2016 31-May-2018
Expected Effectiveness Date Expected Closing Date
30-Nov-2016 31-May-2018
Joint IFC
No
Practice Senior Global Practice
Country Director Regional Vice President
Manager/Manager Director
Magda Lovei Julia Bucknall Carolyn Turk Makhtar Diop
.

Approval Authority
Approval Authority
CD Decision
.

Borrower: Ministry of Finance and Economic Cooperation

Responsible Agency: Ministry of Finance and Economic Cooperation
Contact: Admasu Nebebe Title: Director, UN Agencies and Regional
Economic Cooperation
Telephone No.: 251-11-1116751 Email:
.

Project Financing Data(in USD Million)

Total Project Cost: 1.50 Total Bank Financing: 0.00

v
Financing Gap: 0.00
.

Financing Source Amount

Climate Investment Funds 1.50
Total 1.50
.

Expected Disbursements (in USD Million)

Fiscal 2017 2018 0000 0000 0000 0000 0000 0000 0000 0000
Year
Annual 0.90 0.60 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Cumulati 0.90 1.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
ve
.

Institutional Data
Practice Area (Lead)
Environment & Natural Resources
Contributing Practice Areas
Agriculture, Climate Change
Proposed Development Objective(s)
To support Ethiopia’s effort to develop a programmatic multi-sector investment plan for climate
resilience in key sectors, including agriculture and forestry.
.

Components
Component Name Cost (USD Millions)
Analytical Support 0.83
Institutional Support for MSIP and CRGE Implementation 0.67
.

Compliance
Policy
Does the project depart from the CAS in content or in other significant Yes [ ] No [ X ]
respects?
.

Does the project require any waivers of Bank policies? Yes [ ] No [ X ]

Have these been approved by Bank management? Yes [ ] No [ ]
Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ]
.

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment OP/BP 4.01 X
Natural Habitats OP/BP 4.04 X
Forests OP/BP 4.36 X

vi
Pest Management OP 4.09 X
Physical Cultural Resources OP/BP 4.11 X
Indigenous Peoples OP/BP 4.10 X
Involuntary Resettlement OP/BP 4.12 X
Safety of Dams OP/BP 4.37 X
Projects on International Waterways OP/BP 7.50 X
Projects in Disputed Areas OP/BP 7.60 X
.

Legal Covenants
Name Recurrent Due Date Frequency

Description of Covenant

Conditions
Source Of Fund Name Type

Description of Condition

Team Composition
Bank Staff
Name Role Title Specialization Unit
Stephen Danyo Team Leader Senior Natural Natural resources GEN01
(ADM Resources
Responsible) Management
Specialist
Timothy H. Brown Team Leader Senior Natural Environmental GEN01
Resources economics
Management
Specialist
Tesfaye Ayele Procurement Senior Procurement Procurement GGO01
Specialist (ADM Specialist
Responsible)
Meron Tadesse Techane Financial Senior Financial Financial GGO25
Management Management management
Specialist (ADM Specialist
Responsible)
Ahmed Alkadir Team Member Consultant Private Sector GEN01
Mohammed Development
Operations

vii
Asferachew Abate Safeguards Senior Environmental GEN01
Abebe Environmental planning and risk
Specialist management
Aurore Simbananiye Team Member Program Assistant Assistant GEN01
Chukwudi H. Okafor Safeguards Senior Social Social development GSU07
Development and risk
Specialist management
Dereje Agonafir Environmental Environmental Environmental GEN01
Habtewold Specialist planning
Hailu Tefera Ayele Team Member Consultant Forest operations GEN01
Million Alemayehu Team Member Senior Natural Soil and water GEN01
Gizaw Resources conservation
Management
Specialist
Mistre Hailemariam Team Member Team Assistant Assistance AFCE3
Mekuria
Pablo Cesar Benitez Team Member Senior Economist Climate policy GCCPT
Ponce
Raffaello Cervigni Team Member Lead Economics GEN07
Environmental
Economist
Shimeles Sima Erketa Team Member Consultant Forest GEN01
Susan Tambi Matambo Team Member Environmental Climate Investment GCCPT
Specialist planning
Tesfahiwot Dillnessa Team Member Program Assistant Assistance AFCE3
Yasmina Oodally Team Member Consultant Operations, soils GEN01
Extended Team
Name Title Office Phone Location

Locations
Country First Location Planned Actual Comments
Administrative
Division
Ethiopia Addis Ababa Addis Ababa X Technical activities
with national scope
.

viii
I. STRATEGIC CONTEXT

A. Country Context

1. Ethiopia has achieved substantial progress in economic, social and human

development over the past decade, with rapid and inclusive economic growth averaging 10.9
percent per year over the previous decade. At this rate, the economy is doubling every seven
years in real terms, accompanied by significant reduction in extreme poverty rates from 55 percent
in 2000 (one of the highest levels recorded internationally) to 33 percent in 2011. Low levels of
inequality have largely been maintained. Non-monetary dimensions of well-being show strong
improvement and, with a few exceptions, Ethiopia attained the Millennium Development Goals.
Life expectancy, for instance, increased by one year every year over this period, from 52 to 63
years. Meanwhile, the 2014 population of 95 million people will grow to at least 120 million by
2030.1

2. Ethiopia is a large, land-locked and diverse country vulnerable to climate variability

and change. It is the 11th poorest country in the world in terms of income per capita and home to
Sub-Saharan Africa’s second largest population, the vast majority of whom are rural, dependent
on the natural resource base for livelihoods and as buffers against floods and droughts. Most
productive sectors depend on functional landscapes that are vulnerable to considerable climate risk
now and in the near future. For example, the on-going drought has increased the rural poverty rate
by 3.3 percent, but has more than doubled the proportion of people living in poverty in zones that
have been particularly affected. The drought is compounded by forest loss and land degradation
that undermine climate resilience.2

B. Sectoral and Institutional Context

3. In response to these risks, Ethiopia’s Ministry of Finance and Economic Cooperation

(MoFEC) developed the Climate Resilient Green Economy (CRGE) Strategy and the Second
Growth and Transformation Plan (GTP-2), which incorporates many of the elements of the
CRGE Strategy. Together, these national development documents aim to bring Ethiopia to middle-
income status by 2025, with a reliance on resilient “green growth” pathways. Both strategies
emphasize agriculture, forest, and improved land use, recognizing that unless steps are taken to
build resilience, climate variability and change could reduce GDP growth by up to 10 percent per
year, with agricultural growth at particular risk. The worst-case scenario is that in 25 years,
Ethiopia could face the risk of achieving only half of its total GDP potential.3 Current and future
challenges are summarized below.

4. Climate impacts. Ethiopia’s biophysical characteristics are highly varied, with wet
highlands containing 80 percent of the population and all of the country’s broader water towers,4
1
World Bank. 2016. FDRE Priorities for Ending Extreme Poverty and Promoting Shared Prosperity: Systematic Country
Diagnostic. Washington D.C., USA.
2
Ibid.
3
FDRE. 2015. Climate Resilient Strategy for Agriculture and Forestry. Addis Ababa, Ethiopia.
4
Much of Ethiopia’s rainfall endowment flows through transboundary rivers to neighboring countries. For example, the forested
Bale Mountains in Oromia Regional State provide most of the surface water for Ethiopia’s eastern dry lands in Oromia and the
Somali region as well as the country of Somalia. Ethiopia’s highlands are also a source of the Nile.

1
to highly vulnerable arid lowlands featuring mobile pastoralism and important trade routes. The
extremely diverse landscapes reflect the variation in climate, soil type and production systems
across the country. At the national level, temperatures have increased by approximately one degree
Celsius since the 1960s. This increase has been felt across all regions. Rainfall across the country
is subject to high variability between years, seasons and regions. Yearly variation around mean
rainfall levels of 25 percent is normal and can increase to 50 percent in some regions. Despite this
complexity, there is evidence of a 20 percent decrease in rainfall in the south central region of the
country. Weather variability leads to extreme weather events and hazards. Extreme weather events
are common, especially droughts and floods. The incidence of droughts and floods may have
increased in the last ten years relative to the decade before.5

5. Floods and droughts have resulted in food insecurity and deepen extreme poverty.
The economic impact depends on the extent of the variability and extreme events but droughts
alone can reduce total GDP by one to four percent. Climate models project that current rainfall
variability will continue (-25 percent to +30 percent by the 2050s), along with potential changes
in the intensity and frequency of extreme events.6 The driest scenarios project a 20 percent increase
in Ethiopia’s dry lands by mid-century, and this would bring more people into environments where
the range of resilience options is limited; some zones would become incapable of sustaining
livestock production and intensive agriculture.7

6. Land degradation and forest loss increase water stress. Soil erosion has been estimated
to reduce agricultural GDP from two to three percent (around one percent of total GDP). Soil
erosion is a key hazard for agriculture with up to six percent of the country at risk. Vulnerability
to water stress due to insufficient and increasingly variable rainfall and poor natural resource
management is a binding constraint to increasing income from natural resource based sectors such
as agriculture, livestock, and forest. Ethiopian farmers rely almost entirely on rain-fed agriculture
and seasonal rainfall is very volatile in large parts of the country. Ethiopia experienced more
droughts than its structural peers implying that rain-fed agriculture and pastoralism are relatively
risky businesses. Climate change is increasing this volatility, negatively affecting rural incomes
and poverty. Volatility also discourages rural land users to invest in profitable enterprises and
technologies. While the country has made great strides in landscape restoration that has
rehabilitated watershed function via structural and vegetative land management actions, there
remains a large gap to be filled by investment in resilient landscapes.

7. Ethiopia’s MoFEC requested the World Bank to lead on developing a multi-sector

investment plan (MSIP) to scale up achievement of goals related to resilient low carbon green
growth. The Bank has been providing initial support through on-going advisory services to the
country’s CRGE Facility at MoFEC. In 2015, MoFEC requested funds from the Climate
Investment Funds’ (CIF) Pilot Program for Climate Resilience (PPCR) to support investment
planning for forest and agriculture – two sectors where the Bank is currently providing and
convening large-scale financing and is taking measures to boost sustainability and resilience. In
addition to the Bank’s large-scale financing, there is significant public expenditure as well as
financing from other development partners (DPs). A comprehensive approach is therefore required
5
FDRE. 2015. Climate Resilient Strategy for Agriculture and Forestry. Addis Ababa, Ethiopia.
6
Ibid.
7
World Bank. 2016. Confronting Drought in Africa’s Drylands: Opportunities for Enhancing Resilience. Washington D.C.,
USA.

2
to coordinate investment planning across sectors and stakeholders in order to boost efficiency and
effectiveness. As a result, the World Bank, African Development Bank (AfDB), International
Finance Corporation (IFC), and other partners have been engaging with MoFEC and four line
ministries and other Ethiopian institutions to prepare the MSIP for climate resilience in key sectors,
including agriculture and forestry. The MSIP preparation process is Government-owned, led by
MoFEC along with the Ministry of Agriculture and Natural Resources (MoANR), the Ministry of
Environment and Climate Change (MEFCC), the Ministry of Water, Irrigation and Electricity
(MoWIE), and the Ministry of Livestock and Fisheries (MoLF).

8. The Multi-sector Investment Planning for Climate Resilience Project will help convene
institutions, information, investment and incentives to scale-up financing for climate action on
resilient landscapes, supported by a variety of sources and stakeholders. This includes the
agriculture, forest, livestock, fisheries, water, and power sectors. The Project will seek to
capacitate the Ethiopian government institutions and experts engaged in the MSIP process by
providing opportunities to identify, prioritize and address some of the key challenges and barriers
for greater resilience. Ethiopia’s policy makers will benefit from analytical inputs for sector
planning, access to global best practice in climate resilience planning and finance, as well as a
stronger position in convening and leveraging international climate finance for enhancing existing
investments and mobilizing new and additional financing.

C. Higher Level Objectives to which the Project Contributes

9. Contribution to national plans and strategies. The Project will contribute to key national
strategies, including the GTP-2 (2015-2020); CRGE Strategy (2011-2030); Climate Resilience
Strategy for Agriculture and Forestry (2015-2030); and other sector strategies for forest,
agriculture, sustainable land management, livestock, energy, water, and disaster risk management.
It will facilitate Ethiopia’s progress towards its climate resilience objectives and help mobilize
both new and additional finance from multiple sources to implement priority investments at scale
that can reduce vulnerability to climate risk. It will also help reduce transaction costs to Ethiopia
and her partners from overlaps and duplications.

10. Relationship to the Bank’s corporate goals, Systematic Country Diagnostic (SCD)
and Country Partnership Framework (CPF). The objective of the Project aligns closely to the
Bank’s corporate goals of ending extreme poverty and boosting shared prosperity by 2030, the
SCD, the emerging FY17–20 CPF for Ethiopia, the new Forest Action Plan, and Africa Climate
Business Plan launched at UN Climate Change Conference in Paris in December 2015. The
rationale for convening resources programmatically for resilient landscapes in Ethiopia is to
harness the potential of natural resource-based sectors to help reduce poverty equitably. The
Project will therefore contribute to the Bank’s goals and the CPF objective of fostering economic
growth and improved governance while reducing vulnerability.

3
II. PROJECT DEVELOPMENT OBJECTIVES

A. Proposed Development Objective(s)

11. The PDO is to support Ethiopia’s effort to develop a programmatic multi-sector investment
plan for climate resilience in key sectors, including agriculture and forestry.

12. In line with MoFEC’s request to the CIF, the Project will focus on the forest and agriculture
sectors (including livestock), while taking into account relevant activities on water resources,
irrigation, and energy, in the context of resilient landscapes.

B. Project Beneficiaries

13. The Project will directly benefit five currently participating ministries, namely, MoFEC,
MEFCC, MoANR, MoLF, and MoWIE, which includes their respective regional bureaus and
experts engaged in the MSIP process. The number of direct beneficiaries is at least 280 people
(where ten percent are female), mostly government officials.

C. PDO-Level Results Indicators

14. The PDO indicators for the Project will be as follows:

(a) Multi-sector investment plan prepared (Y/N).

(b) Government institutions provided with capacity building support to improve climate
resilience (number).
(c) Direct project beneficiaries (number), of which female (percentage).

III. PROJECT DESCRIPTION

15. The Project will be financed by an 18-month small grant for MoFEC and its partner
ministries (MoANR, MEFCC, MoLF, and MoWIE) to support the development of a strategic,
inclusive programmatic multi-sector investment plan for climate resilience in key sectors,
including agriculture and forestry. The Project will complement on-going Bank-financed
investment operations and advisory services supporting the same ministries and counterparts on
advancing toward CRGE objectives. The Project will be an extension of this work, bringing greater
visibility, accountability, credibility, inclusivity and coordination to the existing process,
enhancing the potential of the sectors involved to deliver transformational impact and mobilize
new and additional financing.

16. The Project’s objective will be accomplished through analysis of key development plans,
policies, strategies, and existing or planned large-scale investment operations; targeting and
leveraging financing opportunities, and broad consultation with key stakeholders and partners.
This process will also examine the potential, merits and mechanisms for Ethiopia to access,
combine and leverage climate finance opportunities to support a long term series of
transformational investments, including potential CIF and other climate financing, greater use of
International Development Association (IDA) funds and other multi- or bi-lateral funds,

4
performance-based financing, as well as private financing in the form of Public Private
Partnerships (PPPs) or other modes.

17. The MSIP supported by the Project will be expected to consist of a pipeline of large scale,
programmatic investments that serve to further the aims of the GTP-2, the CRGE Strategy and
other relevant national strategies and policies. The MSIP will be informed by: (i) key analytical
inputs for sector planning, (ii) increased awareness and support of stakeholders and DPs, and (iii)
a plan of action for leveraging and channeling international climate financing and “conventional”
financing. The MSIP will build on and incorporate: (i) all major FDRE strategies [GTP-2, CRGE
Strategy, Forest/Agriculture Climate Resilience Strategy, Agriculture Sector Policy and
Investment Framework, Sustainable Land Management Investment Framework, Reducing
Emissions from Deforestation and Forest Degradation (REDD+) Strategy], (ii) investment
planning processes or opportunities [such as IDA, Green Climate Fund (GCF), CIFs, etc.], and
(iii) existing large-scale operations (such as the large-scale Bank-financed Sustainable Land
Management Program, Agricultural Growth Program, Productive Safety Nets Program, and the
emerging Oromia Forested Landscape Program), while also incorporating lessons from other
projects such as the first generation of small projects funded by the CRGE Facility. As such, the
MSIP process will build credibility for scaled up financing and action by centering on an inclusive
and consultative process with numerous DPs and other stakeholders.

A. Project Components

18. The Project will have two components: (1) Analytical support, and (2) Institutional support
for MSIP and CRGE implementation. These funds will be channeled to the GoE as a Recipient
Executed grant. Technical consultants recruited under “Activity 2.1: Rapid Response Team
(RRT)” will be a resource that contributes to the delivery of both components and adds value to
the quality and delivery of key MSIP activities and the broader CRGE Strategy.

Component 1. Analytical Support (US$0.83 million)

19. The component will finance the preparation, and dissemination of key analytics and
facilitate dialogues around these and other existing analytics and information related to climate
resilience, as well as training and capacity building activities. The activities under this component
are further detailed in Annex 2.

Component 2. Institutional Support for MSIP and CRGE Implementation (US$0.67 million)

20. The component will finance a RRT to engage in technical activities and work with sectoral
ministries, resource mobilization outreach, and portfolio tracking system management. This will
include the costs of consultants, workshops, travel, goods, and services, as well as operational
costs associated with management, administration, auditing and reporting. The activities under this
component are further detailed in Annex 2.

5
 B. Project Cost and Financing

Table 1. Project Costs by Component (US$, million)

Grant Percentage
Project cost Financing Financing
Project Components (US$, million) (US$, million) (%)

Component 1. Analytical Support

1.1 Cost benefit analyses (CBA) of key climate
change interventions 0.14 0.14 100%
1.2 Climate policy and legal implementation gap
analysis 0.10 0.10 100%
1.3 Assessment of cross-sector trade-offs and
opportunities 0.15 0.15 100%
1.4 Climate Vulnerability Assessment of Households
and Development of Climate Change Tracking Tool 0.10 0.10 100%
1.5 Earth Observation Support 0.10 0.10 100%
1.6 Climate Risk Insurance Options Study 0.10 0.10 100%
1.7 Capacity Building/Training 0.14 0.14 100%
Subtotal 0.83 0.83 100%
Component 2: Institutional Support for MSIP and CRGE Implementation
2.1 Rapid Response Project Support Team 0.36 0.36 100%
2.2 Resource Mobilization Outreach 0.10 0.10 100%
2.3 Portfolio Tracking System 0.10 0.10 100%
2.4 Project Management 0.11 0.11 100%
Subtotal 0.67 0.67 100%
Total Cost 1.5 1.5 100%

6
IV. IMPLEMENTATION

A. Institutional and Implementation Arrangements

21. Project implementation is based on the GoE’s current implementation structures for the
CRGE Facility, with core teams of government officials and support staff already in place to act.
The principle is to help the Government put in place a strong multi-sector approach in line with
GTP-2 clusters that identify groupings of sectors to deliver durable development outcomes.

22. MoFEC, through its Directorate of UN Agency and Regional Economic Cooperation &
CRGE Facility, will lead on coordinating and directing the investment planning process. MoFEC
is the lead implementing agency and main liaison to the CIF and GCF. MoFEC prepared and
delivered the Expression of Interest to the CIF Secretariat, which forms the basis for the design of
this grant support. The Directorate of UN Agency and Regional Economic Cooperation & CRGE
Facility is responsible for: (i) leading the strategic MSIP process; (ii) coordinating the participation
of the key line ministries; (iii) ensuring inclusive engagement of DPs and other concerned
stakeholders; (iv) recruiting the RRT (see Component 2) with specialized technical and sectoral
skills; (v) coordinating the procurement of goods and services; (vi) coordinating and managing the
financial management; and (vii) monitoring and reporting the performance of the Project to the
World Bank and other concerned DPs and stakeholders.

23. MEFCC is responsible for: (i) engaging in the strategic MSIP preparation process; (ii)
collaborating with MoFEC and the other key line ministries to implement the Project; (iii) leading
implementation of three project activities (Earth observation support, Climate policy and legal
implementation gap analysis, and Climate vulnerability assessment of households and
development of a climate change tracking tool) as detailed in Annex 2; and (iv) participating in
capacity building activities.

24. MoANR is responsible for: (i) engaging in the strategic MSIP preparation process; (ii)
collaborating with MoFEC and the other key line ministries to implement the Project; (iii) leading
implementation of two project activities (Climate risk insurance options study, and Assessment of
cross sector trade-offs and opportunities) as detailed in Annex 2; (iv) providing working facilities
for a team of consultants to be assigned to the Ministry; and (iv) participating in the capacity
building activities.

25. MoLF is responsible for promoting livestock and fisheries development including
rangeland development. MoWIE is responsible for promoting the development of water resources,
basin management, medium- and large-scale irrigation, electricity, and expansion of potable water
supply coverage as well as ensuring proper execution of functions of the National Meteorological
Agency. In line with their mandates, MoLF and MoWIE are responsible for: (i) engaging in the
strategic MSIP preparation process; (ii) collaborating with MoFEC and other key line ministries
to implement the Project; (iii) providing working facilities for a team of consultants to be assigned
to their respective ministries; and (iv) participating in capacity building activities.

26. Because the MSIP process is based on an inclusive engagement, stakeholders (including
civil society organizations, academia and partners) need to sustain their engagement to advance
the MSIP development through: (i) providing information on current portfolios, priorities, and

7
pipelines so as to conduct portfolio review against MSIP priority activity packages; and (ii)
actively participating in preparing and reviewing the draft MSIP document, among others.

B. Results Monitoring and Evaluation

27. Monitoring and evaluation (M&E) of the Project will require close coordination between
the GoE’s line ministries and the World Bank. As presented in Annex 1, the proposed results
framework for the Project includes monitoring indicators and corresponding expected results,
which can be considered strategic milestones in assessing progress in the implementation of the
Project. As the lead institution for the development of the MSIP, MoFEC will be primarily
responsible for monitoring and reporting the performance of the Project as per the agreed
indicators. Simple M&E reports will be provided every six months and Project Completion Report
at closing. The World Bank and AfDB teams will maintain close dialogue with GoE counterparts,
especially MoFEC.

28. Periodic joint implementation support missions with an M&E focus over the lifetime of
the Project will be organized with the World Bank and partners. A Grant Completion Report will
be prepared by the Bank at the end of the Project as per World Bank procedures, based partly on
MoFEC’s Project Completion Report.

C. Sustainability

29. The Project supports the development, implementation and institutionalization of the
MSIP, which helps build sustainability into national planning and investment activities. The MSIP
development process is based on an inclusive engagement to build ownership and support for the
planning and investment selection process; consolidate and harmonize information sharing; foster
collaboration across sectoral, institutional and disciplinary boundaries; and reduce costly
fragmentation. Because the process itself is a product, the sustainability of resilience interventions
can be enhanced through this Project.

30. Furthermore, the Project will support preparation of credible climate financing proposals
by: (i) centering on an inclusive and consultative process with numerous DPs and other
stakeholders; and (ii) largely building on and incorporating all major strategies, programs, projects
and analytics for Ethiopia. Using these climate finance proposals, the MSIP process aims to
leverage and create a multiplier effect in scaling up investment and action through 2030 using new
and additional financing from multiple sources to support Ethiopia to achieve its climate resilience
objectives. By doing so, the MSIP process will boost GoE’s capacity for cost-effective and
efficient scaled-up action on the ground.

31. With regard to manpower and institutional capacity, after 18 months, the Directorate of
UN Agency and Regional Economic Cooperation & CRGE Facility at MoFEC, and existing
human resources in the four line ministries will have enhanced capacity as a result of the RRT. In
line with this, manpower and institutional capacity developed at MoFEC and four line ministries
(MEFCC, MoANR, MoLF, and MoWIE) are expected to be broadened and strengthened further
in order to continue functioning as main: (i) climate resilience planning and coordination units in
each sector, and (ii) cross-sectoral coordination platforms. As the Project is expected to mobilize
new and additional financing from multiple sources, strong institutions staffed with technically

8
advanced manpower have to do the coordination and oversee the efficient use of such resources.
Hence, the technical teams assembled during this Project will form the basis in establishing
stronger climate resilience units in key sectors capable in leading resilience programs/projects of
considerable sizes.

V. KEY RISKS AND MITIGATION MEASURES

32. The overall risk of the Project is rated Low for the following reasons: (i) the Project is
purely of a technical assistance nature, (ii) the development and implementation of Ethiopia’s
CRGE Strategy enjoys a high level of political leadership and buy-in, and is sufficiently integrated
into the GTP-2, which is the country’s five year national development plan that will cover 2016-
2020; (iii) the institutional arrangements for implementing this Project are built on existing CRGE
structures and led operationally and strategically by MoFEC which has been successfully hosting
its operational CRGE Unit for a number of years.

33. While the Project is in line with Ethiopia’s CRGE Strategy, it faces some challenges to
achieving the PDO. The risks are related to capacity constraints, weak cross-sectoral coordination,
and a multitude of planning processes in play. In particular, the Project faces low financial
management (FM) risk but high procurement management risk. Measures to address these risks
are being taken and are planned, as part of the on-going CRGE capacity building being delivered
by the Bank and DPs – many of whom are donors to IDA and the CIF. In particular, MoFEC leads
and coordinates the CRGE initiative in the country and PPCR, working closely with four line
ministries (MEFCC, MoANR, MoLF, and MoWIE). This existing institutional set-up headed by
MoFEC’s existing CRGE Unit provides a reasonably strong basis for this grant to the GoE to help
institutionalize and sustain coordinated investment planning for resilient landscapes and help
ensure that various analytics, tools, and teams are moving toward the same existing CRGE vision.
The MSIP process is being further facilitated by the existing designated focal points within
MoFEC, MoANR, MEFCC, MoLF, and MoWIE as well. It is also based on an inclusive
engagement of key DPs and stakeholders to build ownership and support for the planning and
investment selection process; consolidate and harmonize information sharing; foster collaboration
across sectoral, institutional and disciplinary boundaries; and reduce costly fragmentation. The
Project will also address the identified risks by recruiting a team of consultants with specialized
technical and sectoral skills. Lastly, the Bank’s task team will provide regular implementation
support to ensure the identified procurement management risks are well managed (See Annex 3).

9
VI. APPRAISAL SUMMARY

A. Technical

34. The MSIP process will help Ethiopia to systematically convene, coordinate and
complement financing for resilience objectives in forest, agriculture, livestock, water and energy
from a variety of existing and future sources. It will help to channel and blend multiple resources,
including climate and non-climate financing, private investment, government budget, direct
financing to CRGE, bilateral support, pooled and stand-alone financing, among others. It will also
enhance and expand the GoE’s existing large scale resilience programs [such as the Sustainable
Land Management Program (SLMP)]; help fill gaps in resilience responses (i.e., insurance,
performance-based payments, etc.); strengthen the credibility of investment proposals, plans,
programs, projects, and policies; and reduce transaction costs to Ethiopia and her partners from
overlaps and duplications. By doing so, the MSIP process will boost the country’s capacity for
cost-effective and efficient scaled-up action on the ground as well.

35. Through the MSIP process, the GoE seeks to address some of the key challenges and
barriers facing its climate-vulnerable natural resource-based sectors and support a transition to a
more green and resilient development path. The Project will support Ethiopia’s CRGE initiative
and provide additional focus on the resilience aspects of programming, including cross-sector
opportunities and trade-offs, for example managing biomass and water resources. In this regard,
the Project can contribute to the overall MSIP process by providing technical/analytical skills,
resources for consultations and some operating costs for a core government team to guide the
process within five ministries allied with numerous domestic and international partners. This
approach will also support and fill gaps facing existing initiatives, help mobilize new and
additional financing, and help leverage larger investments.

B. Financial Management

36. An FM Assessment was conducted in accordance with the Financial Management Practices
Manual for the Bank-financed investment operations issued by the Financial Management Sector
Board on March 1, 2010 and reissued in February 2015 as well as the small grant recipient-
executed trust fund grants guidance note issued in 2015. The objective of the assessment was to
determine whether the participating institutions have adequate financial management systems and
related capacity in place which satisfies the Bank’s Operation Policy/Bank Procedure (OP/BP)
10.00. The assessment also included the identification of key perceived financial management
risks that may affect program implementation and proceeded to develop mitigation measures
against such risks. The assessment was conducted for the implementing agency of the Project,
MoFEC and its unit specifically tasked to handle this Project which is the Directorate of UN
Agency and Regional Economic Cooperation & CRGE Facility. This unit will coordinate and
manage the FM aspects of the Project.

37. MoFEC has experience in Bank-financed projects. The Project will largely follow the
GoE’s accounting policies and procedures which are robust. In addition, a brief FM Guideline
highlighting basic FM arrangements for the Project will be prepared by MoFEC. Adequate staff
are in place within the Directorate of UN Agency and Regional Economic Cooperation & CRGE
Facility. Internal audit oversight over the Project is deemed weak and will be given attention

10
during implementation. Based on the FM assessment conducted, the FM residual risk for the
Project is rated as Low. Actions are agreed as mitigation measures to address the risks and
weaknesses noted (see the Financial Management Action Plan in Annex 3B).

38. Funds flow. Two accounts will be opened for the Project (i.e., a segregated designated
account in US$ currency and a local currency account) to be opened by MoFEC at the National
Bank of Ethiopia (NBE). The grant funds will flow from the Bank into a US$ designated account
(DA), and funds from this account will then be transferred to the local currency (Ethiopian birr)
account to be held by MoFEC.

39. MoFEC will submit Interim Financial Reports (IFRs) within 45 days after the end of each
quarter. In addition, MoFEC will have the Project’s financial statement audited by an auditor
acceptable to the Bank. The audit will cover the entire life of the Project and will be conducted
after closure. The audit will be submitted within six months after the end of the closing date of the
Project. With regard to disbursement, all disbursement methods are available to the Project. The
Report (IFR) based disbursement method using statements of expenditure will be used when
disbursing project funds to the DAs and for reimbursements. Further details about disbursements
to the Project are included in the Disbursement Letter.

40. Based on the assessment conducted, the proposed FM arrangements meet the World Bank’s
requirements as per OP/BP 10.00. It is adequate to provide, with reasonable assurance, accurate
and timely information on the status of the Project. Detailed FM arrangements are documented in
the FM Assessment report and the key aspects are described in Annex 3B.

C. Procurement

41. The grant financing for the Project will not involve any high value, complex or significant
procurement and will be straight forward in terms of procurement. The procurement implementing
unit of the grant will be the Finance and Procurement Directorate (FPD) of MoFEC. Since the
Directorate has no prior experience working on Bank-financed project procurement, the project
procurement risk is assessed as High and risk mitigation measures have been identified and
agreed upon (see Annex 3C for details).

42. Procurement under the Project will be carried out in accordance with: (a) "Guidelines:
Procurement of Goods, Works, and non-Consulting Services Under International Bank of
Reconstruction and Development (IBRD) Loans and IDA Credits & Grants by World Bank
Borrowers" dated January 2011 and revised in July 2014; (b) "Guidelines: Selection and
Employment of Consultants Under IBRD Loans and IDA Credits & Grants by World Bank
Borrowers" dated January 2011 and revised in July 2014; (c) “Guidelines on Preventing and
Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and
Grants” dated October 15, 2006 and revised in January 2011; (d) introduction of Exceptions to
National Competitive Bidding Procedures; and (e) the provisions stipulated in the Grant
Agreements. Bank standard documents shall be used for procurement of goods and works through
International Competitive Bidding (ICB) and for all consultants exceeding US$200,000. National
competitive bidding will use government standard bidding documents and procedures subject to
the exceptions as agreed with the Bank (see Annex 3C for details).

11
 D. Social and Environment

43. The Project only finances supportive technical assistance activities. The Project will
finance only consultancy services, non-consulting services, workshops, travel, and operating costs.
No investment on the ground is financed. The Project aims to assist GoE to identify, prioritize, and
mainstream risks to development faced by current and future vulnerability to climate change risks,
and provide a tool for mobilizing and coordinating financing to help build the resilience of the
rural economy. Discrete investment proposals and enhancements arising from this grant will each
include their own risk management and sustainability strategies as per the relevant institutions and
DPs involved.

44. Even though the formulation of the MSIP, supported by the Project, is expected to have
significant positive environmental and social impacts, the MSIP itself may have future
consequences when implemented. To mitigate this risk, the GoE has put in place a safeguards
instrument entitled “Environmental and Social Safeguards Framework (ESSF) for the CRGE
initiative.” Risks resulting from implementation of the MSIP will be addressed as per the country’s
ESSF for the CRGE, existing safeguards instruments in place for existing investment programs,
as well as safeguards policies of DPs that may become engaged in financing MSIP implementation.

E. Safeguards

45. For the reasons in Section D immediately above, the Project does not trigger any World
Bank social and environment safeguards policies. Category C is confirmed for the Project.

F. World Bank Grievance Redress Service

46. Communities and individuals who believe that they are adversely affected by a World Bank
supported project may submit complaints to existing project-level grievance redress mechanisms
or the World Bank’s Grievance Redress Service (GRS). The GRS ensures that complaints received
are promptly reviewed in order to address project-related concerns. Project affected communities
and individuals may submit their complaint to the World Bank’s independent Inspection Panel
which determines whether harm occurred, or could occur, as a result of World Bank non-
compliance with its policies and procedures. Complaints may be submitted at any time after
concerns have been brought directly to the World Bank's attention, and Bank Management has
been given an opportunity to respond. For information on how to submit complaints to the World
Bank’s corporate GRS, please visit http://www.worldbank.org/GRS. For information on how to
submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org.

12
 ANNEX 1: RESULTS FRAMEWORK AND MONITORING
.

Country: Ethiopia
Project Name: Multi-sector Investment Planning for Climate Resilience (P158987)
.

Results Framework
.

Project Development Objectives

PDO Statement
The PDO is to support Ethiopia’s effort to develop a programmatic multi-sector investment plan for climate resilience in key sectors, including
agriculture and forestry.
These results are at Project Level
.

Project Development Objective Indicators

Cumulative Target Values
Indicator Name Baseline YR1 YR2 End Target
1. Multi-sector
investment plan
No Yes Yes Yes
prepared
(Yes/No)
2. Government
institutions
provided with
capacity
building support 0.00 5.00 5.00 5.00
to improve
climate
resilience
(Number)

13
3. Direct
project
beneficiaries 0.00 280.00 280.00 280.00
(Number) -
(Core)
A. Female
beneficiaries
(Percentage -
0.00 10.00 10.00 10.00
Sub-Type:
Supplemental) -
(Core)

14
.

Intermediate Results Indicators

Cumulative Target Values
Indicator Name Baseline YR1 YR2 End Target
4. Key
analytics and
dialogues 0.00 4.00 6.00 6.00
supported
(Number)
5. Experts
trained on topics
related to
0.00 100.00 150.00 150.00
climate
resilience
(Number)
A. Female
experts
(Percentage - 0.00 10.00 10.00 10.00
Sub-Type:
Supplemental)
6. Technical
consultants
recruited and
successfully 0.00 10.00 10.00 10.00
delivered their
ToR
(Number)

15
7. Resource
mobilization
outreach events 0.00 2.00 4.00 4.00
held
(Number)
8. Portfolio
tracking system
improved and No Yes Yes Yes
maintained
(Yes/No)
.

16
 Indicator Description
.

Project Development Objective Indicators

Responsibility for Data
Indicator Name Description (indicator definition etc.) Frequency Data Source / Methodology
Collection
1. Multi-sector investment The Project will result in the formulation Annual Project records MoFEC with MEFCC,
plan prepared of one comprehensive multi-sector MoANR, MoLF and
investment plan for climate resilience in MoWIE
key sectors, including agriculture and
forestry (See detailed indicator definition).
2. Government institutions Five line ministries and regional bureaus Annual Project records MoFEC with MEFCC,
provided with capacity engaged in the MSIP process will be MoANR, MoLF and
building support to improve provided with capacity building support to MoWIE
climate resilience improve climate resilience (See detailed
indicator definition).
3. Direct project Direct beneficiaries are people or groups MoFEC with Project records MOFEC
beneficiaries who directly derive benefits from an MEFCC,
intervention (i.e., children who benefit MoANR,
from an immunization program; families MoLF and
that have a new piped water connection). MoWIE
Please note that this indicator requires
supplemental information. Supplemental
Value: Female beneficiaries (percentage)
Based on the assessment and definition of
direct project beneficiaries, specify what
proportion of the direct project
beneficiaries are female. This indicator is
calculated as a percentage.
A. Female beneficiaries Based on the assessment and definition of Annual Project records MoFEC with MEFCC,
direct project beneficiaries, specify what MoANR, MoLF and
percentage of the beneficiaries are female. MoWIE
(Sub-indicator for indicator 3)
.

17
Intermediate Results Indicators
Responsibility for Data
Indicator Name Description (indicator definition etc.) Frequency Data Source / Methodology
Collection
4. Key analytics and The key analytics will include the Annual Project records MoFEC with MEFCC,
dialogues supported preparation and dissemination of six MoANR, MoLF and
products and facilitate dialogues around MoWIE
these products. See detailed indicator
definition and also Annex 2.
5. Experts trained on 150 experts will be trained on five climate Biannual Project records MoFEC with MEFCC,
topics related to climate resilient related topics (See detailed MoANR, MoLF and
resilience indicator definition). MoWIE
A. Female experts Sub-indicator for indicator 5. Biannual Project records MoFEC with MEFCC,
MoANR, MoLF and
MoWIE
6. Technical consultants Ten local consultants will be deployed to Annual Project records MoFEC with MEFCC,
recruited and successfully establish and maintain a RRT. The MoANR, MoLF and
delivered their ToR effectiveness of the technical consultants MoWIE
will be measured through the successful
delivery of their terms of reference. See
detailed indicator definition and also
Annex 2 (Component 2).
7. Resource mobilization Four climate finance proposals; one Biannual Project records MoFEC with MEFCC,
outreach events held strategic action plan for private sector; and MoANR, MoLF and
a self-managed community revolving MoWIE
funds project proposal will be developed.
Also four events (two international and
two national) will be held (see detailed
indicator definition and also Annex 2).
8. Portfolio tracking See detailed indicator definition and also Biannual Project records MoFEC with MEFCC,
system improved and Annex 2 (Component 2). MoANR, MoLF and
maintained MoWIE

18
Detailed Indicator Definitions

1. Each indicator for measuring progress of the Multi-Sector Investment Planning for Climate
Resilience Project achievements is defined below.

Indicator 1. Multi-sector investment plan prepared

2. This indicator will measure the formulation of a comprehensive, unified, realistic, costed
multi-sector investment plan that can harness synergies and ensure an integrated approach for
scaling up and coordinating financing for climate resilience. The MSIP formulation will focus on
the forest and agriculture sectors, and will incorporate activities in the water, energy and livestock
sectors. The MSIP will consist of a pipeline of large scale, programmatic investments that serve to
contribute to GoE’s priorities and the achievement of the goals under the Government’s GTP-2
and CRGE Strategy.

Indicator 2. Government institutions provided with capacity building support to improve

climate resilience

3. This indicator will measure the extent to which the capacity of the five line ministries
(MoFEC, MEFCC, MoANR, MoLF, and MoWIE) and regional bureaus engaged in the MSIP
process has improved. This will be effected by: (i) providing capacity development/training on
climate resilience related topics, (ii) engaging them in the MSIP and prioritization tool
development, selection and prioritization of MSIP activity packages, analytical dialogues, resource
mobilization outreach, climate resilience portfolio tracking system, investment proposals
preparation, and (iii) providing goods. It will also consider coordination practices carried out
during the Project life. In addition, Ethiopia’s policy makers will benefit from analytical inputs for
sector planning, access to global best practice in climate resilience planning and finance, as well
as a stronger position in convening and leveraging international climate finance for enhancing
existing investments and scaling-up new financing.

Indicator 3. Direct project beneficiaries (number), of which female (percentage) – Bank core
indicator

4. A ‘beneficiary’ in the broadest sense is anyone who is benefiting from a project/program.

In particular, in the context of Bank-financed operations, direct beneficiaries are people or groups
who directly derive benefits from an intervention (that is, children who benefit from an
immunization program or families that have a new piped water connection). Based on the
assessment and definition of direct project beneficiaries, the percentage of female beneficiaries is
specified.

5. This indicator defines the direct beneficiaries from the Project. Accordingly, the Project
will benefit 280 experts (10 percent female) of the five ministries and regional bureaus engaged in
the MSIP process. This will be effected though providing capacity development/training on
climate resilience related topics for 150 beneficiaries. Further, 130 beneficiaries will benefit
through: (i) engagement in the MSIP and prioritization tool development, selection and
prioritization of MSIP activity packages, analytical dialogues, resource mobilization outreach,
climate resilience portfolio tracking system, investment proposals preparation, and (ii) providing
19
goods. During implementation, data will be provided on the estimated actual number of project
direct beneficiaries, including percentage female beneficiaries.

Indicator 4. Key analytics and dialogues supported

6. This indicator will measure the preparation and dissemination of six key analytical
products and the dialogues held around these products. The six key analytics include (i) Cost
benefit analyses of key climate change interventions; (ii) Climate policy and legal implementation
gap analysis; (iii) Assessment of cross-sector trade-offs and opportunities; (iv) Climate
Vulnerability Assessment of Households and Development of Climate Change Tracking Tool; (v)
Earth Observation Support; and (vi) Climate Risk Insurance Options Study. Two workshops
(launching and validation) on each key analytical product will be held to facilitate dialogues among
government organizations, DPs, NGOs, Academia and think tanks. See Annex 2 for further
information.

Indicator 5. Experts trained on topics related to climate resilience

7. This indicator will capture the number of experts (150, of which 10 percent female)) of line
ministries and regional bureaus to be trained on five topics related to climate resilience. The
training topics include: (i) Economics of climate resilience development and policy instruments
for green growth and climate resilience; (ii) Climate screening tools; (iii) Climate change
vulnerability assessment; (iv) Climate smart planning; and (v) Disaster risk management.

Indicator 6. Technical consultants recruited and successfully delivered their ToR

8. This indicator will capture the recruitment of ten local technical consultants to establish
and maintain a RRT that can be deployed within GoE across the five relevant ministries to develop
and enhance projects and programs that deliver on climate risk management objectives. This
indicator will also measure the effectiveness of the technical consultants using the successful
delivery of their terms of reference. See Annex 2 (component 2) for main areas of responsibilities
and expertise of the RRT.

Indicator 7. Resource mobilization outreach events held

9. This indicator will capture the preparation of: (i) four climate finance proposals, (ii) one
strategic action plan for private sector investment in sustainable natural resources and forest based
business, and (iii) a self-managed community revolving funds project proposal. It will also capture
the events to be held to mobilize resources. In this regard four events (two international and two
national) will be held. The GoE will use various forms of outreach events, including “fund-raising
roadshows as well as strategic action plan for private sector investment. See Annex 2 for further
information.

Indicator 8. Portfolio tracking system improved and maintained

10. This indicator will measure the improvement and functionality of the Portfolio Tracking
System that will capitalize on the existing CRGE registry system and allow MoFEC and the four
line ministries to track investment and other actions to improve climate resilience. More

20
specifically, the indicator will capture: (a) improvements in information and data management that
are critical to inform and gauge progress towards scaled-up resilience financing and GTP-2 targets;
(b) increasing access to and sharing of information and other data with stakeholders; (c)
enhancement in coordination, stakeholder participation and convening financing, and (d) spatial
data services and assessments. See Annex 2 for further information.

21
 ANNEX 2: DETAILED PROJECT DESCRIPTION

1. The grant will finance TA for 18 months under two components: (1) Analytical Support,
and (2) Institutional Support for MSIP and CRGE Strategy Implementation.

Component 1: Analytical Support (US$0.83 million)

2. Component 1 will finance the preparation and dissemination of key analytics and facilitate
dialogues around these products and other existing information related to climate resilience, as
well as training and capacity building activities. This component covers the costs of consultants,
workshops, travel, goods, and services. Technical consultants recruited under “Activity 2.1: Rapid
Response Team (RRT)” will be a resource that contributes to the organization and delivery of
workshops, policy dialogue within line ministries, and data collection and adds value to the quality
and delivery of key MSIP activities and the broader CRGE Strategy. Activities to be financed are
as follows:

Activity 1.1: Cost benefit analyses (CBA) of key climate change interventions (US$0.14
million)

3. This activity will finance proven consultancies that have delivered international standard
work to undertake CBA(s) for specific on the ground selected packages of prioritized
interventions1 in the rural landscape that the GoE aims to scale-up to enhance climate resilience.
Interventions could include both investments and policies. It will also finance workshops and
dissemination of technical reports related to the task. The aim of the CBAs will be to assist GoE
decision makers to understand the medium term implications of proposed investment alternatives.
The CBAs will take into account climate projections and uncertainties, since a positive cost-benefit
ratio now may not necessarily hold true under likely climate scenarios within the CRGE planning
horizon. CBAs that help quantify trade-offs and opportunities across sectors may bring much
added value to multi-sector investment planning for a climate resilient, green economy future in
Ethiopia. Topics for analysis will be prioritized during implementation, given the limited budget
and time.

4. CBAs will be deployed to better understand the relative merits of project-level technology
options. For example, “low tillage” could be a priority intervention at the higher level of the MSIP
but more resolution will be needed when preparing or enhancing a discrete investment operation
given that low tillage technologies come in all shapes and sizes (with and without pesticides,
different rippers, different soil profiles, etc.).

5. Outputs. CBA reports that include pragmatic analysis of the cost effectiveness of various
investment options for CRGE and GTP-2 implementation. CBA reports and outputs of other
activities under analytical support that will be used to inform and update the MSIP prioritization
framework, as the delivery of the investment plan rests on this prioritization framework to identify

1
With existing support from the Bank-executed CRGE Advisory Services and Analytics (ASA) and supported by
two PPCR joint missions held in February and June 2016, a draft MSIP Prioritization Framework/Tool was prepared
to prioritize interventions, and this tool will be applied by the government to help prepare the multi-sector
investment plan.

22
those investment activities that are deemed most critical in advancing towards Ethiopia's climate
resilience objectives.

6. Timing. This work will commence early in Project Year (YR) 1. Individual CBAs for
specific sets of interventions or specific sectors could be delivered on a rolling basis
programmatically.

7. Implementation arrangements. MoFEC will take the lead on this activity, working with
the four line ministries and other actors as relevant. MoFEC will develop a costed annual work
plan and budget for this activity, thus contributing to the overall project budget and procurement
plan, which will be consolidated by the Directorate of UN Agency and Regional Economic
Cooperation & CRGE Facility at MoFEC.

Activity 1.2: Climate policy and legal implementation gap analysis (US$0.1 million)

8. Good public policy, laws, and regulations can unlock climate action and complement
international and domestic investment in public and private sectors substantially. This activity will
finance an analysis of the existing policy and regulatory for climate resilience and institutional
mandates for implementation, focusing on policy gaps, implementation gaps, incompatible
incentives that may now be hindering progress and investment toward a climate resilient, green
economy future. Furthermore, this activity will build up on an existing recent study on public
climate resilience expenditures carried out by the Overseas Development Institute (ODI) and
Addis Ababa University’s climate group as well as on the on-going portfolio review focused on
thematic, financial, and spatial gaps.

9. Outputs. A report with pragmatic options for policy, regulatory, incentive and institutional
changes that may be effected through CRGE and GTP-2 implementation, including through future
investments. The report will be disseminated and validated through workshops with key
policymakers to strengthen the cross-sectoral climate policy dialogue.

10. Timing. This work will commence early in YR1.

11. Implementation arrangements. MEFCC will take the lead on this activity, working with
MoFEC and the three line ministries and other actors as relevant. MoFEC in collaboration with
MEFCC will develop a costed annual work plan and budget for this activity, thus contributing to
the overall project budget and procurement plan, which will be consolidated by the Directorate of
UN Agency and Regional Economic Cooperation & CRGE Facility at MoFEC.

Activity 1.3: Assessment of cross-sector trade-offs and opportunities (US$0.15 million)

12. This activity will finance an assessment of investment opportunities, synergies, and trade-
offs across the key sectors being examined in the MSIP. For example, an assessment could be
carried out to determine the return on investment in strategic reservoirs from on-going watershed
restoration efforts in strategic basins. A biophysical assessment has been carried out by the
Ethiopian Land and Water Resource Center as part of the on-going SLMP-2, and presented to
Parliament. Furthermore, the outputs of the CBAs will be used as inputs to carry out assessment
of cross-sector trade-offs.

23
13. Outputs. A report with pragmatic options for CRGE and GTP-2 implementation and future
investment projects. The report will be disseminated and validated through workshops with key
policymakers to strengthen the cross-sectoral climate policy dialogue.

14. Timing. This work will commence early in YR1.

15. Implementation arrangements. MoANR will take the lead on this activity, working with
MoWIE, MoLF and MEFCC. MoANR will develop a costed annual work plan and budget for this
activity, thus contributing to the overall project budget and procurement plan, which will be
consolidated by the Directorate of UN Agency and Regional Economic Cooperation & CRGE
Facility at MoFEC.

Activity 1.4: Climate Vulnerability Assessment of Households and Development of Climate

Change Tracking Tool (US$0.1 million)

16. This activity will finance climate vulnerability assessment at households’ level (based on
agreed criteria to be set) and development of climate change vulnerability tracking system. The
work will be based on a synthesis of existing work on this topic, supplemented by assessments for
a selected sample of households, as needed. The findings of the assessment will be used as inputs
for forward planning of CRGE investments and for awareness-raising events on climate change
impacts, vulnerabilities and resilience/adaptation for government organizations, including policy
makers, and other stakeholders, among others.

17. Outputs. A report with pragmatic options for CRGE and GTP-2 implementation, including
recommendations for design or geographic targeting of scaled-up interventions to address
vulnerability gaps or concerns.

18. Timing. This work will commence early in YR1.

19. Implementation arrangements. MEFCC will take the lead on this activity, working with
MoFEC, MoLF, MoANR, MoWIE, and other actors as relevant. MEFCC will develop a costed
annual work plan and budget for this activity, thus contributing to the overall project budget and
procurement plan, which will be consolidated by the Directorate of UN Agency and Regional
Economic Cooperation & CRGE Facility at MoFEC.

Activity 1.5: Earth Observation Support (US$0.1 million)

20. This activity will finance the access to and application of earth observation systems, and
support the GoE to put in place or strengthen existing geospatial decision support services to better
manage climate risk in existing programs and projects in the four key ministries. The initial step
will be to assess existing capabilities and gaps and to contact the European Space Agency, SERVIR
in Kenya (www.rcmrd.org) and other sources of geospatial data to determine availability of
programs or parallel financing to supplement this work, provide analytical services and to provide
hands-on training for Ethiopian experts and institutions. In this regard, the European Space
Agency, through Hatfield Consultants, is being engaged very recently to provide support on this
activity.

24
21. Outputs. A report with pragmatic options for CRGE and GTP-2 implementation, including
possible follow on activities (project concepts) that can be financed in the future.

22. Timing. This work will commence early in YR1.

23. Implementation arrangements. MEFCC will take the lead on this activity, working with
the National Meteorological Agency, MoWIE, MoANR, MoLF, and other actors as relevant.
MEFCC will develop a costed annual work plan and budget for this activity, thus contributing to
the overall project budget and procurement plan, which will be consolidated by the Directorate of
UN Agency and Regional Economic Cooperation & CRGE Facility at MoFEC.

Activity 1.6: Climate Risk Insurance Options Study (US$0.1 million)

24. This activity will finance analysis of on-going initiatives and development of
comprehensive insurance model/framework and workshop on climate insurance options that could
be relevant in the Ethiopian context and could be further considered by GoE decision-makers.
During the workshop, insurance options will be summarized and presented, building upon existing
analytical work and initiatives on climate and disaster risk insurance, including, for instance, crop
and livestock insurance. The workshop will seek to identify areas where insurance could enable
greater financial protection against climate-related risks such as droughts or floods.

25. Outputs. A workshop report with pragmatic options for CRGE and GTP-2 implementation

26. Timing. This work will commence early in YR1.

27. Implementation arrangements. MoANR will take the lead on this activity, working with
MoLF, MoWIE. MoFEC, and MEFCC, and will develop a costed annual work plan and budget
for this activity, thus contributing to the overall project budget and procurement plan, which will
be consolidated by the Directorate of UN Agency and Regional Economic Cooperation & CRGE
Facility at MoFEC.

Activity 1.7: Capacity Building/Training (US$0.14 million)

28. This activity will build on the on-going programmatic Bank-executed advisory services
that have delivered extensive training on sources of climate finance and preparing financing
proposals, among others. The outputs of the analytical studies will be also used to support this
activity with concrete evidence. This activity will finance capacity building and training on topics
related to climate resilience. Specifically tailored and customized trainings on the Economics of
Climate Resilience Development and policy instruments, climate change vulnerability assessment,
climate smart planning, disaster risk management, and M&E. Capacity building on Climate
screening tools will also be an important activity to enable the GoE to screen their investments
under the MSIP for climate resilience. Therefore, this activity will help institutionalize a multi-
sectoral learning culture via extensive training. This activity will finance GoE participants,
logistics and training delivery costs. The cost of development of training programs and associated
expertise will be partially covered under the existing World Bank - Programmatic Advisory
Services to the CRGE Facility.

25
29. Outputs. Five training workshops on: (i) Economics of climate resilience development
and policy instruments for green growth and climate resilience; (ii) Climate screening tools; (iii)
Climate change vulnerability assessment; (iv) Climate smart planning; and (v) Disaster risk
management.

30. Timing. This work will commence early in YR1.

31. Implementation arrangements. MoFEC will take the lead on this activity, working with
the four line ministries and other actors as relevant. MoFEC will develop a costed annual work
plan and budget for this activity, thus contributing to the overall project budget and procurement
plan, which will be consolidated by the Directorate of UN Agency and Regional Economic
Cooperation & CRGE Facility at MoFEC.

Component 2: Institutional Support for MSIP and CRGE Strategy Implementation

(US$0.67 million)

32. Component 2 will finance the deployment of a RRT comprising of local consultants,
resource mobilization outreach, portfolio tracking system, and project management. This TA will
include the costs of consultants, workshops, travel, goods, and services. Key activities to be
financed are as follows.

Activity 2.1: Rapid Response Project Support Team (US$0.36 million)

33. This activity will finance consultancies to establish and maintain a RRT that can be
deployed within GoE across the four relevant ministries to develop and enhance projects and
programs that deliver on climate risk management objectives. The consultants will assist GoE
counterparts to: (a) design individual projects and financing proposals, (b) enhance existing
projects and programs to deliver on climate resilience objectives in GTP-2 and the CRGE Strategy,
(c) troubleshoot and provide advice to existing relevant projects and programs, (d) carry out
feasibility studies for new projects, (e) support operationalization of cross-sectoral coordination to
better implement climate risk management across existing projects and programs that could benefit
from mutual cooperation to achieve joint sectoral objectives (e.g., reforestation on agricultural
lands and watershed rehabilitation), (f) carry out strategic and tactical communications work, (g)
advise on areas where social and environmental risk may need to be managed and mitigated, or
where more technical and expert assessments will be expected/needed, and (h) contribute to
analysis, data collection, workshops and dissemination activities being conducted under
Component 1 above. In addition, the consultants will support MoFEC and line ministries to
implement the Project, under the direction of MoFEC’s CRGE Coordinator and sectoral CRGE
Coordinators in the line ministries.

34. Parallel financing under Bank-executed CRGE Facility advisory services will secure
additional advisory expertise from the World Bank task team to work closely with the full team of
consultants under the client’s supervision.

35. After 18 months, the Directorate of UN Agency and Regional Economic Cooperation &
CRGE Facility and existing human resources in the four line ministries will have enhanced
capacity as a result of the RRT. The RRT will be engaged by the GoE through other sources.

26
36. The consultancies are listed in the table below:

S.N. Title Unit Quantity Unit cost Budget US$ (000)

US$ (000)
YR1 YR2 Total
1 Agronomist Expert-month 18 2 24.0.0 12.0 36.0
2 Forest specialist Expert-month 18 2 24.0.0 12.0 36.0
3 Livestock specialist Expert-month 18 2 24.0 12.0 36.0
4 Social safeguards specialist Expert-month 18 2 24.0 12.0 36.0
5 Rural energy specialist Expert-month 18 2 24.0 12.0 36.0
6 GIS Specialist Expert-month 18 2 24.0 12.0 36.0
7 Irrigation engineer Expert-month 18 2 24.0 12.0 36.0
8 Environmental lawyer Expert-month 18 2 24.0 12.0 36.0
9 Economist Expert-month 18 2 24.0 12.0 36.0
10 Hydro-geologist Expert-month 18 2.15 25.9 12.9 38.7
Sub-total for local consultants 362.7

37. Outputs. The outputs include technical and institutional strengthening of the CRGE teams
at MoFEC and relevant line ministries and contributions to specific analytical studies, feasibility
studies, workshops and proceedings, and project proposals.

38. Timing. This work will commence in early YR1.

39. Implementation arrangements. MoFEC will take the lead on this activity, working with
the four line ministries and other actors as relevant. MoFEC will develop a costed annual work
plan and budget for this activity, thus contributing to the development of the joint Project annual
work plan, budget and procurement plan (PP), which will be consolidated by the Directorate of
UN Agency and Regional Economic Cooperation & CRGE Facility at MoFEC. ToRs will be
developed for the individual experts to include the items above and a general scope of duties related
to cross sectoral coordination and integrated forward planning for climate resilient investment.

Activity 2.2: Resource Mobilization Outreach (US$0.10 million)

40. This activity will finance the GoE and key consultancies as needed to raise interest among
international partners, domestic and international investors, foundations, and donors; and get their
support for MSIP implementation.

41. Outputs. The outputs include: (a) fundraising for MSIP, such as through holding “fund-
raising roadshows” or other forms of outreach at relevant international public and private sector
events or among targeted companies, foundations, or donors; (b) design climate finance proposals
for resources mobilization, (c) strategic action plan for private sector investment in sustainable
natural resources and forest based businesses; ; and (d) design (not implementation) of community
revolving funds modelled after the successful community self-managed revolving funds developed
by SLMP-2, funded by SLMP-2 communities themselves.

42. Timing. This work will commence in mid YR1.

43. Implementation arrangements. MoFEC will take the lead on this activity, working with
the four line ministries and other actors as relevant. MoFEC will develop a costed annual work
plan and budget for this activity, thus contributing to the overall project budget and procurement

27
plan, which will be consolidated by the Directorate of UN Agency and Regional Economic
Cooperation & CRGE Facility at MoFEC.

Activity 2.3: Portfolio Tracking System (US$0.10 million)

44. This activity will capitalize on the existing CRGE registry system and finance the
establishment of a portfolio tracking system to track investment and other actions to improve
climate resilience. It will also help reduce fragmentation and enhance reporting on CRGE and
MSIP objectives. The scope of the portfolio includes large scale World Bank-financed operations
such as the Sustainable Land Management Project, Agricultural Growth Project, Productive Safety
Net Program, new livestock program, and the new Oromia Forested Landscape Program, as well
as many others. A portfolio review is underway.

45. Outputs. The outputs include: (a) improvements in information and data management
which are critical to inform and gauge progress towards scaled-up resilience financing and GTP-
2 targets; (b) increasing access to and sharing information and other data with concerned and wider
stakeholders; (c) enhancement in coordination, stakeholders participation and convening
financing, and (d) spatial data services and assessments.

46. Timing. This work will commence in mid YR1.

47. Implementation arrangements. MoFEC will take the lead on this activity, working with
the four line ministries and other actors as relevant. MoFEC will develop a costed annual work
plan and budget for this activity, thus contributing to the overall project budget and procurement
plan, which will be consolidated by the Directorate of UN Agency and Regional Economic
Cooperation & CRGE Facility at MoFEC.

Activity 2.4. Project Management (US$0.11 million)

48. This activity will finance the necessary fiduciary reporting by consultants working under
MoFEC CRGE Coordinator supervision. This amount includes a five percent contingency to be
re-allocated to activities based on needs that arise due to physical or price variations.

49. Outputs. The outputs of this activity include financial audit report, procurement audit
report and project completion report.

50. Timing. As this is a small grant, all the audit works and preparation of project completion
report will be started within six months of the closing of the Project.

51. Implementation arrangements. As MoFEC is managing the Project, it will take the lead
on these activities. However, it will execute the activities in cooperation with the four line
ministries which will access resources from the grant and implementation activities that they are
delegated to execute or implement.

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 ANNEX 3: IMPLEMENTATION ARRANGEMENTS

Annex 3A: Institutional and Implementation Arrangements

1. Project implementation is based on the GoE’s current implementation structures for the
CRGE Facility, with core teams of government officials and support staff already in place to act.

2. MoFEC, through its Directorate of UN Agency and Regional Economic Cooperation &
CRGE Facility, will lead on coordinating and directing the investment planning process. MoFEC
is the lead implementing agency and main liaison to the CIF and GCF. MoFEC prepared and
delivered the Expression of Interest to the CIF Secretariat, which forms the basis for the design of
this grant support. The Directorate of UN Agency and Regional Economic Cooperation & CRGE
Facility is responsible for: (i) leading the strategic MSIP process; (ii) coordinating the participation
of the key line ministries; (iii) ensuring inclusive engagement of DPs and other concerned
stakeholders; (iv) recruiting the RRT (see Component 2) with specialized technical and sectoral
skills; (v) coordinating the procurement of goods and services; (vi) coordinating and managing the
financial management; and (vii) monitoring and reporting the performance of the Project to the
World Bank and other concerned DPs and stakeholders.

3. MEFCC is responsible for: (i) engaging in the strategic MSIP preparation process; (ii)
collaborating with MoFEC and the other key line ministries to implement the Project; (iii) leading
implementation of three project activities (Earth observation support, Climate policy and legal
implementation gap analysis, and Climate vulnerability assessment of households and
development of a climate change tracking tool) as detailed in Annex 2; and (iv) participating in
capacity building activities.

4. MoANR is responsible for: (i) engaging in the strategic MSIP preparation process; (ii)
collaborating with MoFEC and the other key line ministries to implement the Project; (iii) leading
implementation of two project activities (Climate risk insurance options study, and Assessment of
cross sector trade-offs and opportunities) as detailed in Annex 2; (iv) providing working facilities
for a team of consultants to be assigned to the Ministry; and (iv) participating in the capacity
building activities.

5. MoLF is responsible for promoting livestock and fisheries development including

rangeland development. MoWIE is responsible for promoting the development of water resources,
basin management, medium- and large-scale irrigation, electricity, and expansion of potable water
supply coverage as well as ensuring proper execution of functions of the National Meteorological
Agency. In line with their mandates, MoLF and MoWIE are responsible for: (i) engaging in the
strategic MSIP preparation process; (ii) collaborating with MoFEC and other key line ministries
to implement the Project; (iii) providing working facilities for a team of consultants to be assigned
to their respective ministries; and (iv) participating in capacity building activities.

6. As the MSIP process is based on an inclusive engagement, stakeholders (including civil

society organizations, academia and partners) need to sustain their engagement to advance the
MSIP development through: (i) providing information on current portfolios, priorities, and
pipelines so as to conduct portfolio review against MSIP priority activity packages; and (ii)
actively participating in preparing and reviewing the draft MSIP document, among others.

29
7. Periodic joint implementation support missions with an M&E focus over the lifetime of
the Project will be organized with the World Bank and partners. A Grant Completion Report will
be prepared by the Bank at the end of the Project as per World Bank procedures, based partly on
MoFEC’s Project Completion Report.

30
Annex 3B: Financial Management

8. A Financial Management assessment of MoFEC was conducted in accordance with the

Financial Management Practices Manual for the Bank-financed investment operations issued by
the Financial Management Sector Board on March 1, 2010 and reissued in February 2015 as well
as the small grant recipient-executed trust fund grants guidance note issued in 2015. In conducting
the assessment, the Bank’s team visited MoFEC with the department that is specifically dealing
with the CRGE (Directorate of UN Agency and Regional Economic Cooperation & CRGE
Facility).

Country Context

9. GoE has been implementing a comprehensive Public Finance Management (PFM) reform
with support from DPs, including the Bank, for the last twelve years through the Expenditure
Management and Control sub-program (EMCP) of the GoE’s civil service reform program
(CSRP). This is being supported by the closed IDA financed Public Sector Capacity building
Support Program, the ongoing Promoting Basic Services program and other donor financing as
well as Government own financing. These programs have focused on strengthening the basics of
PFM systems: budget preparation, revenue administration, budget execution, internal controls,
cash management, accounting, reporting, and auditing.

10. The 2014 Ethiopia Public Expenditure and Financial Accountability (PEFA) PFM
performance measurement framework assessment is underway and draft reports issued for the
federal as well as Addis Ababa city administration, Oromia, Amhara, Tigray, Somali and Southern
Nations, Nationalities, and People (SNNP) regions. The 2010 PEFA PFM performance
measurement framework assessment covered the federal government in the form of ministries and
agencies as well as five regions. It found that Ethiopia has made significant progress in
strengthening PFM at both federal and regional levels, especially in budgeting and accounting
reform. The budget is reasonably realistic and is reasonably implemented as intended. Other areas
of improvement are: increased budgetary documentation submitted to House of Peoples’
Representatives, strengthened reporting on donor projects and programs, improved transparency
in inter-governmental fiscal relations through greater timeliness in the provision of information to
regional governments on the size of the budget subsidies that they will receive, and improved
access by the public to key fiscal information through audit reports. Overall performance of
external audit has improved due to increased coverage and a lessening of the time needed to audit
annual financial statements. Audits conducted by Office of the Federal Auditor General generally
adhere to International Organization for Supreme Audit Institutions auditing standards and focus
on significant issues. The GoE needs to make public more detailed information on the incomes
and expenditures of extra-budgetary operations.

11. Areas for improvement were noted in internal auditing, which necessitate increased focus
on systems audit and increasing management response to audit findings. Further strengthening of
the internal audit function is a key challenge. The full roll-out of Integrated Budget and
Expenditure System has helped to strengthen the quality of in-year budget execution reports by
including information on revenue and expenditures, financial assets and liabilities, but excluding
information on donor-financed projects and programs.

31
Financial Management Arrangements

Budgeting

12. Budget preparation and proclamation. Budget preparation for the Project grant will
follow the GoE’s budget system1 recorded in the GoE’s budget manual. The budget for the grant
will be determined each year based on the annual work plan, PP, and budget to be prepared by all
implementers. The overall annual budget for the Project will prepared by MoFEC and will be
approved by the steering committee or the highest level overseeing the Project. The budget will
also be submitted to the Bank for ‘no objection’. The budget for the grant will be proclaimed at
the federal level under the MoFEC.

13. Budget control. Detailed program work plans, projected costs, and PPs will be finalized
and agreed upon. These will form the basis for the Project costs noted in the project paper.
Activities and costs noted in the work plans and budgets will be ‘eligible expenditures’ under the
Project.

14. Budget dissemination. The approved budget should be disseminated to all Project
implementers in a timely manner. There is a need to compare actual expenditures with that of the
approved budget to monitor progress and identify any impediments. Significant variations should
be explained and the analysis should be used as a management tool to make important decisions.
To facilitate this, the IFR of the Project will have a format for the analysis.

Accounting

15. Policies and procedures. The GoE’s accounting policies and procedures2 will be largely
used for the accounting of the Project. The Directorate of UN Agency and Regional Economic
Cooperation & CRGE Facility has developed a financial management manual in line with the GoE
manual.

16. FM Manual. The GoE’s FM manual will be used for the Project. In addition, a brief FM
Guideline defining basic FM arrangements for the Project will be prepared by the client. It is
important to note that although the CRGE Operations Manual includes financial provisions and
procedures, there are differences with the implementation arrangements of this Project and for this
reason a brief FM Guideline will be prepared as noted above. The Directorate of UN Agency and
Regional Economic Cooperation & CRGE Facility uses the Chart of Accounts of the GoE. Hence
for this Project, the Chart of Accounts will be modified to accommodate the reporting requirements
for the Project. Monthly, quarterly, and annual reports will be produced directly from the FM
system and thus a well-developed Chart of Accounts is crucial.

1
The budgets are reviewed at first by MoFEC and then by the Council of Ministers. The final recommended draft
budget is sent to parliament around early June and is expected to be cleared at the latest by the end of the fiscal year.
2
GoE follows a double entry book keeping system and modified cash basis of accounting. This is documented in the
GoE’s Accounting Manual. This has been implemented at the federal level and in many regions. The GoE’s
Accounting Manual provides detailed information on the major accounting procedures.

32
17. Accounting system. The Directorate of UN Agency and Regional Economic Cooperation
& CRGE Facility is currently using Peachtree accounting software for donor-financed operations.
Peachtree accounting software will also be used for this Project.

18. Staffing. At the MoFEC, the Directorate of UN Agency and Regional Economic
Cooperation & CRGE Facility is staffed with one senior finance officer, a senior accountant, two
accountants and one cashier/secretary. Two of the accountants mostly have the task of spot
checking the donor resources that were released to line ministries and provide the reports required.
Based on the draft budget submitted for the Project, most of the expenditure items are consultancy
payments, workshops and trainings and operating costs. For these, the existing finance staff is
adequate to manage the Project. However, in times of trainings and workshops, if the workload is
found to be heavy, MoFEC could assign one accountant from its finance unit to assist the Project
during these high peak seasons.

19. Accounting centers. The accounting center for this Project will only be MoFEC. MoFEC
will maintain accounting books and records and prepare financial reports in line with the system
outlined in the FM guidelines. Detailed arrangements for consolidation of the Project financial
information are discussed under the Financial Reporting section below. MoFEC is responsible for
maintaining the Project’s records and documents for all financial transactions that occur in their
offices. These documents and records will be made available to the Bank’s regular implementation
support missions and to the external auditors.

Internal Control and Internal Auditing

20. Internal control comprises the whole system of control, financial or otherwise, established
by the management to: (a) carry out the Project activities in an orderly and efficient manner; (b)
ensure adherence to policies and procedures; (c) ensure maintenance of complete and accurate
accounting records; and (d) safeguard the assets of the Project. Regular GoE systems and
procedures are being followed, including those relating to authorization, recording, and custody
controls at all implementing levels. The Project’s internal controls, including processes for
recording and safeguarding of assets, is captured in the GoE’s FM manual and key ones will be
firmed up in the FM Guidelines to be prepared for this Project.

21. Internal audit. The MoFEC has an internal audit unit. However, this unit only reviews the
treasury accounts due to limitation of staff. Therefore the Project will mostly depend on the reviews
of the external audit firms. However, MoFEC will ensure that the internal audit unit will audit the
Project once per annum.

33
Financial Reporting

22. Reporting requirements. The Project will prepare consolidated unaudited IFRs each
quarter. These will be submitted to the Bank within 45 days of the end of each quarter. The format
and the content, consistent with the Bank’s standards, will be agreed with the GoE before the grant
signing. MoFEC, in the quarterly IFR, will ensure that the advances received and the expenditures
are properly identified and reflected. At a minimum, the report will include a statement of sources
and uses of funds and opening and closing balances for the quarter and cumulative balances; cash
forecast statements; a statement of uses of funds that shows actual expenditures, appropriately
classified by main Project activities (categories, components, and subcomponents); actual versus
budget comparisons for the quarter and cumulative comparisons; a statement on movements
(inflows and outflows) of the Project designated account, including opening and closing balances
and notes and explanations; and other supporting schedules and documents.

23. Reporting timetables and quality. Financial reports will be designed to provide high-
quality, timely information on program performance to the program management, the Bank, and
other relevant stakeholders. The accounting software to be adopted for the program is capable of
producing the required information regarding program resources and expenditures. MoFEC will
prepare the financial report and submit the same to the World Bank. It is the responsibility of the
MoFEC to prepare consolidated quarterly unaudited IFRs, consolidate annual accounts, and
facilitate the external audit of the consolidated accounts.

24. In compliance with International Accounting Standards and the Bank’s requirements,
MoFEC will produce annual financial statements similar to the contents of the quarterly IFRs. The
annual financial statement will be similar to the IFRs with some modifications that will be
indicated in the audit ToR. These financial statements will be submitted for audit at the end of each
year.

External Auditing

25. Usually Annual audited financial statements and audit reports (including the Management
Letter) will be submitted to the Bank within six months from the end of the fiscal year. Given that
this project has a life span of less than two years, only one audit will be conducted at the end of
the project life. It has been noted that the audit reports for the donor-financed operations in MoFEC
are being submitted in a timely manner with clean audit opinions.

26. The Project financial statements will be prepared in accordance with the standards
indicated in the audit ToR agreed before grant signing. The audit will be carried out by the Office
of the Federal Auditor General, or a qualified auditor nominated by the Office of the Federal
Auditor General and acceptable to the Bank. The audit will be carried out in accordance with the
International Standards of Auditing issued by the International Federation of Accountants. Once
the reports are issued, MoFEC has the responsibility to prepare audit action plans within one month
of the receipt of the annual audit report. MoFEC will be responsible for submitting the consolidated
status report within a maximum of two months after the receipt of the audit report.

27. In accordance with its policies, the Bank requires that the client disclose the audited
financial statements in a manner acceptable to the Bank; following the formal receipt of these

34
statements from the client, the Bank makes them available to the public in accordance with its
Policy on Access to Information.

FM-related Costs

28. The Project work plans and budget will include: (a) auditing costs, and (b) related logistics
and supervision costs (for example, transportation, per diem, and accommodation while
travelling).

Financial Management Risk Assessment, Strengths, Weaknesses, Lessons Learned, Action

Plan

29. Risk assessment. The FM risk of the Project is Low. The mitigating measures proposed
in the action plan will help reduce the risk of the Project once implemented and applied during
Project implementation.

30. Strength and weaknesses. The Project will inherit the various strengths of the country’s
PFM system. As discussed earlier, several aspects of the PFM system function well, such as the
budget process, classification system, and compliance with financial regulations. Significant on-
going work is directed at improving country PFM systems through the GoE’s EMCP. The GoE’s
existing arrangements are already being used in a number of Bank-financed projects, including the
Program for Basic Services. The Project will also benefit from the country’s internal control
system, which sufficiently provides for the separation of responsibilities, powers, and duties. The
Directorate of UN Agency and Regional Economic Cooperation & CRGE Facility also has
experience in managing donor financing for investment and TA operations.

31. The main weaknesses in FM arrangements will be the limited focus of internal audit.

Financial Management Action Plan

32. Factoring in the above strengths and weaknesses, the inherent and control risk of the Project
is rated as low. The action plan for the project is depicted below.

Table 1. FM action plan

No. Activity Timing
1 Prepare annual plan and budget and submit for approval At the beginning of the fiscal year
by MoFEC management and proclamation
2 Prepare and submit IFRs Every quarter
3 Submit the audit report for the Project Within six months after the end of
the Project
4 Prepare a brief FM Guideline that summarizes basic FM Within 3 months after Project
arrangements, rules and regulations Effectiveness.
5 Internal auditors of MoFEC will review the Project once a Annually
year
6 Agree on the IFR format and the audit ToR Before grant signing

35
Financial Management Covenants and Other Agreements

33. FM-related covenants include: (a) maintenance of a satisfactory FM system for the Project;
(b) submission of IFRs for each fiscal quarter within 45 days of the end of the quarter by the
MoFEC; and (c) submission of audited financial statements and the audit report within six months
after Project closure.

FM Supervision Plan

34. Since the FM risk for the Project is rated Low, the Project’s FM will be supervised once
every year. After each supervision, the risk will be measured and recalibrated accordingly.
Supervision will be carried out in coordination with other DPs and will include on-site visits,
review of IFRs and audit reports, and follow-up on agreed actions.

Funds Flow and Disbursement Arrangements

35. Funds flow of the Project is depicted below. Two accounts will be opened for the Project
(i.e., a segregated designated account in US$ currency and a local currency account) to be opened
by the MoFEC at the National Bank of Ethiopia (NBE). The grant funds will flow from the Bank
into a US$ designated account (DA), and funds from this account will then be transferred to the
local currency (Ethiopian birr) account to be held by MoFEC.

Chart 1. Fund and Reporting flow

World Bank

Separate US$ designated account at the

NBE managed by the MoFEC

Ethiopian birr account at the MoFEC

Fund Flow
Reporting

Reporting

36
Disbursement mechanism and methods

36. The Project may follow one or a combination of the following disbursement methods:
designated account, direct payment, reimbursement, and special commitment. The Project will use
IFR-based disbursement.

37. The allocation of proceeds will be based on the Project components. This will facilitate the
monitoring of the Project performance indicators as well as financial aspects because expenditures
are directly allocated to components. Requests for replenishment of the DA for expenditures
incurred under each component will be based on expenditures incurred at the implementing
agencies for which justification of utilization has been provided.

37
Annex 3C: Procurement Management

Background
38. Procurement management capacity assessment of the Finance and Procurement Directorate
(FPD) of the MoFEC was conducted to assess for adequacy of procurement institutional capacity
and governance structure to implement Bank financed investment projects. The Bank has been
advised that the procurement implementing unit for the grant will be the FPD of MoFEC.
Therefore, the Bank team assessed the procurement capacity of FPD of MoFEC on July 4, 2016.
The team has also had limited discussions with the unit that is specifically dealing with CRGE
(Directorate of UN Agency and Regional Economic Cooperation & CRGE Facility).

Procurement Implementation Arrangements

39. Procurement under the Project to be financed through IDA will be carried out in accordance
with: (a) "Guidelines: Procurement of Goods, Works, and non-Consulting Services Under IBRD
Loans and IDA Credits & Grants by World Bank Borrowers" dated January 2011 and revised in
July 2014; (b) "Guidelines: Selection and Employment of Consultants Under IBRD Loans and
IDA Credits & Grants by World Bank Borrowers" dated January 2011 and revised in July 2014;
(c) “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD
Loans and IDA Credits and Grants” dated October 15, 2006 and revised in January 2011; (d)
introduction of Exceptions to National Competitive Bidding Procedures; and (e) the provisions
stipulated in the Grant Agreements. Bank standard documents shall be used for procurement of
goods and works through ICB and for all consultants exceeding US$200,000. National competitive
bidding will use government standard bidding documents and procedures subject to the exceptions
included below.

40. A Procurement Plan acceptable to the Bank covering at least the first eighteen months will
be agreed at negotiations. For each contract to be financed by the Grant, the different procurement
methods or consultant selection methods, the need for pre-qualification, estimated costs, prior
review requirements, and time frame for major milestones will be agreed between the Borrower
and IDA World Bank task team in the Procurement Plan. The Procurement Plan will be updated
at least annually or as required to reflect the actual project implementation needs and
improvements in institutional capacity.

41. General Procurement Notice (GPN) will be prepared and published in United Nations
Development Business (UNDB), on the Bank’s external website and in at least one national
newspaper after the Grant is approved by the Bank Board, and/or before Project effectiveness.
Specific Procurement Notices for all goods to be procured under ICB and Expressions of Interest
for all consulting services to cost the equivalent of US$200,000 and above will also be published
in the UNDB, the Bank’s external website, and the national press.

42. National Competitive Bidding Procedures. National Competitive Bidding (NCB) shall
follow the Open and Competitive Bidding procedure set forth in the Ethiopian Federal Government
and Procurement and Property Administration Proclamation No. 649/2009 and Federal Public
Procurement Directive issued by the MoFEC dated June 10, 2010, provided, that such procedure
shall be subject to the provisions of Section I and Paragraphs 3.3 and 3.4 of the “Guidelines for
Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans and IDA Credits

38
& Grants by World Bank Borrowers” (January 2011 and revised in July 2014) (the “Procurement
Guidelines”) and the following additional provisions:

(a) The Recipient’s standard bidding documents for procurement of goods and works
acceptable to the Bank shall be used. At the request of the Borrower, the introduction of
requirements for bidders to sign an Anti-Bribery pledge and/or statement of undertaking to
observe Ethiopian Law against Fraud and Corruption and other forms that ought to be
completed and signed by him/her may be included in bidding documents if the
arrangements governing such undertakings are acceptable to the Bank.
(b) If pre-qualification is used, the IDA’s standard pre-qualification document shall be used;
(c) No margin of preference shall be granted in bid evaluation on the basis of bidder’s
nationality, origin of goods or services, and/or preferential programs such as but not limited
to small and medium enterprises.
(d) Mandatory registration in a Supplier List shall not be used to assess bidders’ qualifications.
A foreign bidder shall not be required to register as a condition for submitting its bid and
if recommended for contract award shall be given a reasonable opportunity to register with
the reasonable cooperation of the Recipient, prior to contract signing. Invitations to bids
shall be advertised in at least one newspaper of national circulation or the official gazette,
or on a widely used website or electronic portal with free national and international access.
(e) Bidders shall be given a minimum of thirty (30) days to submit bids from the date of
availability of the bidding documents;
(f) All bidding for goods and works shall be carried out through a one-envelope procedure.
(g) Evaluation of bids shall be made in strict adherence to the evaluation criteria specified in
the bidding documents. Evaluation criteria other than price shall be quantified in monetary
terms. Merit points shall not be used, and no minimum point or percentage value shall be
assigned to the significance of price, in bid evaluation.
(h) The results of evaluation and award of contract shall be made public. All bids shall not be
rejected and the procurement process shall not be cancelled, a failure of bidding declared,
or new bids shall not be solicited, without the Bank’s prior written concurrence. No bids
shall be rejected on the basis of comparison with the cost estimates without the Bank's prior
written concurrence.
(i) In accordance with para. 1.16(e) of the Procurement Guidelines, each bidding document
and contract financed out of the proceeds of the Financing shall provide that: (1) the
bidders, suppliers, contractors and sub-contractors, agents, personnel, consultants, service
providers, or suppliers shall permit the IDA, at its request, to inspect all accounts, records
and documents relating to the bid submission and performance of the contract, and to have
them audited by auditors appointed by the IDA; and (2) Acts intended to materially impede
the exercise of the Bank’s audit and inspection rights constitutes an obstructive practice as
defined in the para. 1.16 a (v) of the Procurement Guidelines. 72.
(j) Standard Bidding Documents (SBDs) for NCB: The FPPA’s SBD will be revised to
take into account the above exceptions and the revised documents will be agreed with the
Bank. The Project’s procurement manual will include as an annex revised SBDs that will
be applicable for the Project. As an alternative the Bank’s standard bidding documents can
also be used

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Procurement Capacity and Risk Assessment
43. Procurable items under the grant will include consultancy services for TA and other
studies, smaller value goods and non-consultancy services contracts procurements for office
supplies and institutional capacity building, workshops and trainings. The Directorate of UN
Agency and Regional Economic Cooperation & CRGE Facility is the owner and beneficiary of
the Grant while the MoFEC Finance and Procurement Directorate (FPD) will handle the
procurement of the Grant as the beneficiary unit has no procurement unit on its own. Though it
manages all procurement activities of the ministry, the FPD of the MoFEC has no experience
implementing Bank-financed project procurement. At the moment, the Channel One Coordinating
Directorate of MoFEC manages procurement activities for projects financed by the Bank and other
DPs. Therefore FPD is new for Bank-financed project procurement.

44. As part of Project preparation, the Bank undertook a procurement risk assessment of the
project implementation arrangement. Though the beneficiaries of the grant is the Directorate of
UN Agency and Regional Economic Cooperation & CRGE Facility, the Grant procurement
management will be handled by FPD of MoFEC and the assessment covered the procurement
capacity of FPD. The assessment concluded that the procurement risk under the Project is High.

45. Procurement Legal Framework. In Ethiopia, Federal budgetary institutions (like

MoFEC), public procurement is regulated by the Public Procurement and Property Administration
Proclamation No. 649/2009 issued September 9, 2009. The proclamation is further detailed in
subsequent directives (issued June 2010) and secondary procedural procurement documents
(SBDs, Standard Requests for Proposals (SRFPs) and Procurement manual). The Proclamation
establishes the FPPPA as a responsible body for procurement regulatory function at Federal level.
The Nine regional states and two City administrations of the Federal Government do have their
own procurement proclamations and directives, which are basically drafted using the federal
procurement legal documents, as a prototype. The Ethiopian Federal Public Procurement legal
framework is based in the United Nations Commission on International Trade (UNCITRAL)
Model Law for Public Procurement and is generally acceptable.

46. Accountability, Internal Manual of the Procurement Process. Consistent with the FPPA
directives, there are defined responsibilities and delegation of authority within the FPD. In
accordance with the GoE procurement rules, the FPD has its own Bid Endorsing Committee which
is delegated to give final decision on procurement decisions above the stated threshold. The
procurement decision process follows GoE procurement directives. However, as happens across
most government agencies, officials involved in Bid Endorsing Committee members do not have
standard time to make procurement decisions, and the accountability for delay is loose. There is
an operations manual for the Directorate of UN Agency and Regional Economic Cooperation &
CRGE Facility and this manual has limited generic coverage for procurement that needs
substantive qualifications to be used for Bank-financed project procurement.

47. Staffing. FPD mainly undertakes smaller operational procurement for the MoFEC, while
major and bulk procurement of the MoFEC is procured through the Federal Public Procurement
and Assets Disposals Services on framework contracts arrangement. The FPD has seven
procurement staff whose qualifications vary between 2nd degree and diploma levels. All of them
have more than five years’ experience in procurement, but none of them have experience in Bank

40
financed project procurement. Based on the number of contracts the directorate procures annually,
their number is just adequate to deal with current procurement demand from on-going projects. As
none of them have experience in Bank financed procurement, intensive training on Bank’s
procurement documents and assignment of consultants in the form of TA for hands-on support
may be required during early stage of the Grant procurement implementation.

48. Procurement planning. FPD has limited experience of preparing and updating
Procurement Plans to capture changes in need and planned procurement lead-times/milestones.
Past experience shows that FPD has limited practice of consolidating procurement requirements
and procuring through competitive methods, though this is a requirement in the procurement rule
of the GoE. Procurement Plan preparation is not supported with assessment of supply market and
associated risks management. The FPD has no experience of consultant selection involving
international consultants. It is recommended that FPD needs to receive close support and guidance
from technical experts of the end beneficiaries (UN agency and Regional economic cooperation &
CRGE facility) on crafting of ToRs, Shortlisting, Request for Proposal (RFP) drafting, Technical
proposals evaluations and contracts negotiation in selecting consulting firms.

49. Bidding documents, short-listing, and evaluation criteria. The FPD uses the national
SBDs for procurements under NCB procedure. The FPD needs to modify the national SBD for
NCB to accommodate the Bank’s exceptions. Major challenges are foreseen in preparation of
technical aspects of the ToR, RFPs and bidding documents. The end user’s close support and TA
in this regard is very important. The use of Bank’s standard procurement documents for
international suppliers and consultants’ selection should be supported by TA consultants.

50. Evaluation and Award of contract. Given that the Project will involve more consultancy
services selection, successfully dealing with the complete cycle of consultancy service selection
process is expected to be a challenge. Consultants will need to support technical beneficiary
departments, prepare ToRs in a timely manner, and be involved in the evaluation process
(mandatory). The current practice is that evaluations are carried out by ad-hoc technical
committees comprising of members having technical expertise. There is a tender endorsing
committee comprising of five members. The FPD has no experience in using the Bank’s standard
evaluation template to systematically include essential information for decisions. Generic
shortcomings are expected – including technical evaluations being mechanically oriented with
undue emphasis on rigid application of criteria or specifications stated in the bidding documents
without applying professional judgment on level of variances; these could substantially affect the
outcome of the procurement process.

51. Contract Management and Administration. Though the Project will involve small value
contracts, the assessment indicates that contract management is the most challenging aspect in the
FPD’s procurement cycle management. Past experience shows that the FPD has limitations in
dealing with contract management issues. It fully depends on supervision consultants, with no or
limited role being played by the client. Adequate mechanisms are not in place for procurement and
contract monitoring. Use of the procurement plan as a procurement monitoring tool is very
minimal. Contracts were not monitored to ensure timely delivery and payment. The FPD team
needs to be very conversant with the contractual obligations of the parties and contractual issues
need to be resolved timely and properly. To strengthen the FPD’s contract management capacity,
it is recommended to hire a contracts administration officer who will set up a contract monitoring

41
system, follow up contract progresses, and provide advice to deal with contract issues in a timely
and following contractual provisions and remedies.

52. Procurement oversight and complaints-handling systems. The system is in place but
implementation requires significant improvement. The FPD reported that the directorate follows
the procurement complaint resolution procedures set in the FPPA’s directives and reported that
there has been no experience in terms of complaint receipt and handling. This situation may be
related to lack of confidence by the business community that complaints either may not be fairly
addressed or the business community may fear retaliation and this is a concern.

53. Record Management System. FPD maintains adequate procurement records through
assigned staff responsible for handling procurement records. However it is difficult to easily locate
procurement records including accessing approved procurement plans. There is a need to develop
a system that allows one to easily locate and retrieve relevant records. Moreover, the documents
are kept in the same office where day to day procurement activities are conducted with clients and
suppliers, and this makes the records vulnerable for access to unauthorized persons. In particular,
opened bid documents that are ready for evaluation constitutes a risk when exposed to access to
unauthorized persons. Therefore the record management system needs improvements in terms of
having a record retrieving system and ensuring adequate protection from loss and unauthorized
access.

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Procurement Risk Management Plan:

Table 2. Procurement action plan

Issue/Risk Severity Mitigation Measure Responsible and
and time frame
impact on (all actions to be
project taken within three
months after grant
approval)
FPD staff has no High 1. Induction of familiarization training on 1. Bank team
prior experience in Bank procurement procedures and 2. FPD/client
working on Bank documents;
Financed project 2. TA consultant (ICB) be assigned during
procurement early implementation stage;
Less quality of High 1. Provision of training on procurement 1. Bank team
procurement plan plan preparation and its 2. FPD/client
and inadequate implementation.
implementation 2. Extended hands-on support through use
tracking of TA to support the client
Inadequate record Substantial 1. Keep records in safe and secured place FPD/client
management without exposure to unauthorized
system personnel
2. Establish record retrieving system
Delay in TORs, Substantial 1. Develop accountability framework with FPD/client
specifications defined business standard, and
and Inadequately coordinate beneficiary technical
prepared bidding departments (the Directorate of UN
documents /RFPs Agency and Regional Economic
Cooperation & CRGE Facility)
2. Involve qualified technical experts
(Consultants) with similar experience to
prepare of technical specifications and
functional requirements of bidding
documents, and ToRs
Staff of FPD has High 1. Procurement consultant to be recruited; 1. FPD/client
no experience in 2. Training to be provided 2. Bank team
selection of
consultants
Inadequate Moderate 1. Training to be provided on basics of 1. Bank team;
contract contracts administration; 2. FPD/client
management 2. The user department (the Directorate of
practice UN Agency and Regional Economic
Cooperation & CRGE Facility) to
involve fully.

Applicable Procurement Methods and Thresholds:

54. Applicable Procurement Methods. Selection of procurement methods shall be in
accordance to the Bank’s guidelines stated above and shall be indicated and agreed for each of the
procurement packages in the respective procurement plans for the Project.

43
55. In view of the above, procurement of goods and services above the stated thresholds shall
be undertaken through ICB procedure using the Bank’s latest Standard Bidding Document.
Procurement of Goods and Non-Consulting Services which are below the ICB threshold indicated
in table 2, below, can be procured through the National Competitive Bidding Procedure.
Procurement of off-the-shelf goods and commodities of small value contracts of less than
US$100,000 may be procured using Shopping procedures in accordance with paragraph 3.5 of
Bank Guidelines. Procurement of Goods and non-Consulting services under Direct Contracting
shall be procured in accordance with paragraph 3.7 of the Bank’s Guideline.

56. Selection of Consultants shall be carried out using Bank’s latest Standard Request for
Proposal. Consulting firms for services estimated to cost more than US$150,000 equivalents will
be selected through Quality and Cost Based Selection (QCBS) method. Contracts with consulting
firm services estimated to cost less than US$ 150,000 equivalent may be selected using Selection
Based on Consultants’ Qualification method as well as QCBS method. Individual consultants’ will
be selected on the basis of their qualification and in accordance with Section V of the Bank’s
Guideline for Selection and Employment of Consultants. Consulting services for audits and other
services of a standard or routine nature may be procured using the Least Cost Selection Method
while Single Source Selection may be used when justified in accordance with paragraph 3.8 of the
Bank’s Guideline. For consulting services of value less than US$200,000 equivalent, shortlists
may comprise entirely of national consultants in accordance with paragraph 2.7 of the guideline.
However if the consultancy service is for Engineering and Contract Supervision, shortlists may
comprise entirely of national consultants for values up to US$300,000.

57. Use of the consultancy services of Government-owned Universities or research centers.

Government-owned entities are neither legally nor financially autonomous. Thus, under ordinary
circumstances they will not be eligible to participate in World Bank financed projects as
consultants. However, as this Project is a unique approach and may require lots of innovations,
local knowledge and flexibility, some Government-owned universities and research centers may
possess the requisite expertise and accumulated local practices in investment planning area.
Therefore, their participation is considered to be critical due to their unique local research
knowledge and experience in research and planning works. Thus, as an exception to the eligibility
in accordance with paragraph 1.11(c) of the Consultants Guidelines, local universities and research
centers will be allowed to participate as consultants in this initiative on a case-by-case basis
whenever their participation is justified that they can add better value to the achievement of the
program objectives. The selection of appropriate universities and research centers will be done
competitively. On the same basis, university professors or scientists from research institutions will
be contracted individually under this Grant implementation when the need arises.

58. Training and workshops. Training and workshops will be based on capacity-building
needs. Venues for workshops and training as well as purchases of materials for training and
workshops will be done on the basis of at least three quotations. The selection of institutions for
specialized training will be done on the basis of quality and therefore will use the Qualifications
Based Selection method. Annual training plans and budget shall be prepared by the Grant recipient
and approved by the World Bank in advance of the training and workshops implementation.

44
59. Operational Costs. Expenditures made for operational costs such as fuel and stationery,
cost of operation and maintenance of equipment, communication charges, transportation costs and
travel allowances for missions that contribute to achievement of the Grant objectives will follow
the Government established practices and must be acceptable to the World Bank. Government
officials’ salaries may not be paid from Project funds, and this is not considered a Procurement
issue.

60. Prior Review Threshold. The thresholds for Bank’s Prior Review, and for ICB including
the maximum contract value for which the shortlist may comprise exclusively National firms in
the selection of consultants, are presented in the table below for purposes of guiding the preparation
of the initial procurement plan. The procurement capacity of implementing agencies will be
reviewed annually and the threshold will be revised according to the improvements or deterioration
in the procurement capacity. Additionally, each procurement plan will indicate the number of
contracts procured through National Competitive Bidding procedures or selection of consultants
having a shortlist of exclusively Ethiopian firms that will be subject to prior review as part of risk
mitigation irrespective of the below thresholds.

Summary of Risk Assessment

61. The overall risk for procurement for the Project is rated High, and the thresholds for
prior review for ICB, including the maximum contract value for which the shortlist may comprise
exclusively Ethiopian firms in the selection of consultants, are presented in Table 2 for purposes
of the initial procurement plan. The procurement capacity of the FPD of MoFEC (procurement
implementing agencies) will be reviewed annually and the thresholds revised according to the
improvements or deterioration in procurement capacity.

Table 2. Thresholds
National Shortlist
Prior Review ICB
Category Maximum Value
Threshold (US$) Threshold (US$)
(US$)
Works ≥5,000,000 ≥7,000,000 NA
Goods ≥500,000 ≥1 000,000 NA
Consultants (Firms) ≥200,000 NA <200,000
Consultants (Individuals) ≥100,000 NA NA

62. All ICB contracts shall be subject to IDA prior review. All single source and direct
contracts above US$200,000 will require World Bank prior review.

Procurement Plan

63. A Procurement Plan will be developed for the Project which provides the basis for the
procurement methods. This plan will be reviewed and agreed on during grant negotiation and will
be available in the Project’s database and in the World Bank’s external website. The Procurement
Plan will be updated in agreement with the World Bank annually or as required to reflect the actual
program implementation needs and improvements in institutional capacity.

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Frequency of Procurement Supervision

64. In addition to the prior review supervision to be carried out from World Bank offices,
annual supervision missions to visit the Project to carry out post review of procurement actions
will be conducted as well.

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