Mongolia: Additional Financing of Food and Nutrition Social Welfare Project

Sovereign Project | 42322-023

Summary

The original program ($9 million ADF) included the design and implementation of a food stamp program as part of the social welfare system. The original project ($3 million ADF) improved targeting and prepared strategies to reform social welfare. The additional financing will scale up the original project by pursuing the reforms initiated to date in social welfare. Social welfare benefits will be further consolidated to reduce the complexity of the system and increase its effectiveness. The use of proxy means testing to identify poor households will be expanded to apply to other social welfare benefits. The additional financing will also support an expansion in the scope of the original project by improving social insurance services.

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Project Name Additional Financing of Food and Nutrition Social Welfare Project
Project Number 42322-023
Country Mongolia
Project Status Approved
Project Type / Modality of Assistance Loan
Technical Assistance
Source of Funding / Amount
Loan 3086-MON: Food and Nutrition Social Welfare Program and Project - Additional Financing
Asian Development Fund US$ 20.00 million
TA 8544-MON: Supporting Social Protection Reforms
Technical Assistance Special Fund US$ 500,000.00
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector Finance - Insurance and contractual savings
Health - Health insurance and subsidized health programs
Gender Equity and Mainstreaming Effective gender mainstreaming
Description The original program ($9 million ADF) included the design and implementation of a food stamp program as part of the social welfare system. The original project ($3 million ADF) improved targeting and prepared strategies to reform social welfare. The additional financing will scale up the original project by pursuing the reforms initiated to date in social welfare. Social welfare benefits will be further consolidated to reduce the complexity of the system and increase its effectiveness. The use of proxy means testing to identify poor households will be expanded to apply to other social welfare benefits. The additional financing will also support an expansion in the scope of the original project by improving social insurance services. The additional financing meets the three criteria for priority consideration set out in OM H5/BP para.11: (i) the project is performing well; (ii) there is a high degree of project readiness to implement the additional financing; and (iii) developing social welfare and insurance services that are effective, efficient, transparent, and user-centered is highly innovative in the context of Mongolia and could have a demonstration effect for other sectors.
Project Rationale and Linkage to Country/Regional Strategy

The Asian Development Bank (ADB) approved the original program and project grants in 2008, which were designed to improve access to food by vulnerable and poor households through a targeted food stamp program and strengthened social welfare systems. The government has requested ADB's consideration of additional financing to continue reforming social welfare and strengthen social insurance services.

The Food and Nutrition Social Welfare Program and Project (FNSWPP) were designed as an immediate response to the 2008 food and fuel crisis and a step in reforming the social welfare system. The program included the design and implementation of a food stamp program as an integral part of social welfare assistance to address the needs of the most vulnerable population. The project supported the implementation of the food stamp program through the introduction of an innovative poverty targeting method in Mongolia, and prepared a package of reform of social welfare strategies.

Mongolia's promising economic outlook and the prospect of increased labor participation in the formal sector justify the increased focus on social insurance. However in Mongolia, high economic growth coexists with large numbers of vulnerable and poor populations requiring a continuous focus on social welfare. In July 2012, the newly elected government published the Government Action Plan (2012 *2016), which aimed at introducing new and transparent financial services and advanced information technology tools in the social welfare and insurance sector. The intention of the government is to address the dissatisfaction of the users with insurance and social welfare services, and the lack of transparency in the way social insurance and welfare services are provided to beneficiaries.

The Ministry of Population Development and Social Protection (MPDSP) includes two attached agencies, the Social Insurance General Office (SIGO) in charge of managing 5 social insurance funds, and the General Office for Social Welfare Services (GOSWS) in charge of social welfare benefit management. SIGO and GOSWS are fairly decentralized with their 30 branch offices in all 21 aimags (province) and 9 districts of Ulaanbaatar, and services offered in all 352 soums (administrative subdivision of the aimag) of the country. The MPDSP also includes the National Children Authority and the Public Service Office of People with Disabilities. SIGO and GOSWS staff suffer from a lack of automated procedures for reporting, poor connectivity to automate social services at the soum and aimag levels, and a multitude of databases which complicates data management, analysis and reporting.

Social welfare. Social welfare has undergone major reforms over the last 10 years with ADB support, but key issues such as fiscal sustainability and impact of welfare benefits still need to be addressed through the consolidation of social welfare benefits. Social welfare includes an excessive number of benefits (more than 60), which lack proper targeting and are overlapping. The absence of an effective centrally operated management information system in GOSWS leads to duplication of benefits, limited analysis, and other inefficiencies. Progress made in reforming social welfare since 2009 include the introduction of proxy means testing (PMT) to target the poor, cancellation of several universal benefits, the introduction of the food stamp program as the first poverty-targeted benefit in Mongolia, and passage of an amended Social Welfare Law in January 2012 that legalized the reforms. Advocacy, effective public communication, and capacity development will be needed to overcome the inherent resistance to rationalizing social entitlements.

Social insurance. SIGO manages five social insurance funds, namely the (i) pension fund; (ii) unemployment fund; (ii) health insurance fund; (iv) benefits fund (sickness, maternal, and funeral grants); and (v) IAOD insurance fund (industrial accidents, occupational diseases). Population coverage of each fund varies. All funds are subsidized by the government, and the pension and health insurance funds are contributory funds. The MPDSP has initiated pension reform, which covered about 850,000 people at the end of 2012, to shift from a single layer contributory system to a multilayer pension system encouraging private sector involvement. The health insurance system, covering up to 98% of the population, is undergoing reforms including better governance, more managerial autonomy, and increased health services purchasing capacity. As social insurance will become more important in the future due to increased employment and to address inequalities, it is timely to update the social security sector strategy to develop a consensus on the way forward to 2020.

GOSWS and SIGO information technology systems. These systems show a contrasting picture in terms of information technology (IT) processes, software, hardware, and networks. The current approach to strictly separate IT systems for GOSWS and SIGO is inefficient. These IT environments can complement each other and IT solutions could be implemented in a coordinated way to increase efficiency and cross support, including maintenance. SIGO is using an outdated system, which cannot support current international accounting standards requirements for the public sector. The social welfare IT system requires upgrading, which is planned under a World Bank technical assistance. The processes for both GOSWS and SIGO need to become transparent and stakeholder-centric. Current client-server software applications need to be upgraded to web-based interfaces to increase the transparency of IT processes.

Reporting and data analytics (business intelligence) lack automated processes in SIGO, GOSWS, and at the ministry level resulting in considerable manual efforts to produce regular reports and answering to ad hoc requests from higher authorities about social welfare and insurance performances. The current security and backup processes in SIGO and GOSWS are deficient. Almost none of the offices use proper licenses for the software in use. Open source free software need to be used whenever possible. Both SIGO and GOSWS seem adequately staffed but given the planned IT improvements, the human resources capacity needs to be reassessed. There is a need to acquire additional IT hardware (computer, server, digital storage) at central level, aimags, districts, and soum level but this needs to be supported by proper IT budget allocation to implement effective maintenance, depreciation, and replacement policies. Currently about 50% of the soums are connected through an internet network. Government together with private parties are working on extending network connectivity to remote soums. Bandwidth, which seems sufficient for SIGO at present, will need to be reassessed in light of the planned requirements of the IT system in the future.

The additional financing is considered to meet the four eligibility criteria for additional financing set out in OM H5/BP para. 4: (i) ADB reviewed the original project in February 2013 and confirmed the satisfactory performance of the original project and no significant changes in approaches and methodologies are envisioned. Accordingly the original project remains technically feasible, economically viable, and financially sound; (ii) the government accords high priority to the original project as proposed to be expanded through the additional financing. Additional financing will be crucial in meeting a key reform included in the Government Action Plan (2012- 2016) to deliver social protection services to citizens efficiently and without any red tape, as acknowledged by the government's request for additional financing; (iii) the revised project outcome will continue improving social welfare services started under the original project and extend to social insurance services while the output

Impact Improved social equity, less poverty, better social risks mitigation and prevention, and improved food security
Project Outcome
Description of Outcome More efficient and transparent delivery of social welfare and insurance services (including support to food consumption), through strengthened policy, systems, and information technology
Progress Toward Outcome Output 3.2 and 3.3 below pertain to the additional financing. Activities related to these outputs have barely started to be implemented.
Implementation Progress
Description of Project Outputs

Component 1: Design and implementation of a targeted food stamp program

1.1 Innovative targeting approaches for food stamps pilot tested by December 2009

1.2. A mechanism for delivering food stamps is established by June 2009

Component 2: Capacity development and communication strategy for the food stamp program

2.1. Capacity development tools for national and local stakeholders and institutional strengthening designed and implemented by January 2010

2.2. A communication strategy to ensure transparent implementation of the food stamp program developed and implemented by December 2009

Component 3: Strengthening social welfare strategies and systems

3.1. Effective food crisis response by 2010

3.2. IT processes and systems are upgraded to deliver more efficient and transparent social welfare and social insurance services.

3.3. Social welfare reformed and social protection strengthened by 2017

3.4 An early warning and response system to respond to social shocks by October 2011

Status of Implementation Progress (Outputs, Activities, and Issues)

The loan became effective on 21 July 2014. As of March 2015, cumulative contract awards and disbursements are $ 0.276 million and $2.0 million, respectively. The progress was slow in 2014 due to delay in engagement of consultants but will soon improve in 2015 as consultant recruitment were already initiated during Quarter 1 2015.

Component 1: Achieved.

1.1 and 1.2 Achieved

Component 2: Achieved

2.1 and 2.2 Achieved.

Component 3: Achieved

3.1 Achieved.

3.2 Recruitment for the IT Firm Local Consultant ongoing. Recruitment for the consultant firm for the design and implementation of enhanced social welfare program/services management system for social welfare agency and consultant firm for the design and implementation of IT system to support SIGO core operation ongoing.

3.3 Not yet due.

3.4 Achieved. Early warning and response system developed and approved by Steering Committee by 2011.

Geographical Location
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects No safeguard issues are anticipated.
Involuntary Resettlement No safeguard issues are anticipated.
Indigenous Peoples No safeguard issues are anticipated.
Stakeholder Communication, Participation, and Consultation
During Project Design Consultations with key stakeholders have been held and will continue during project processing. These include focus group discussions with SIGO and GOSWS staff, MPDSP staff and management, current project staff and others such as the World Bank who are supporting IT development in the GOSWS. More extensive consultation, including with staff is anticipated during processing.
During Project Implementation Stakeholder communication, participation, and consultation during project implementation will be included in the communication program, which will be implemented on a yearly basis, to ensure social welfare and insurance services meet stakeholders' (including direct beneficiaries') expectations in terms of timeliness, effectiveness, and transparency.
Responsible ADB Officer Claude Bodart
Responsible ADB Department East Asia Department
Responsible ADB Division Mongolia Resident Mission
Executing Agencies
Ministry of Population Dev't & Social ProtectionNARANBAATAR@MSWL.GOV.MNGovernment Building-2, United_Nations
Street-5 Ulaanbaatar-15160,_Mongolia
Timetable
Concept Clearance 21 Jun 2013
Fact Finding 24 Jun 2013 to 06 Jul 2013
MRM 11 Sep 2013
Approval 10 Dec 2013
Last Review Mission -
Last PDS Update 31 Mar 2015

Loan 3086-MON

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
10 Dec 2013 06 Feb 2014 21 Jul 2014 30 Nov 2017 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 23.00 Cumulative Contract Awards
ADB 20.00 10 Dec 2013 2.64 0.00 15%
Counterpart 3.00 Cumulative Disbursements
Cofinancing 0.00 10 Dec 2013 2.00 0.00 11%

TA 8544-MON

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
10 Dec 2013 02 Jan 2014 02 Jan 2014 30 May 2017 - -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
500,000.00 0.00 270,000.00 0.00 0.00 0.00 770,000.00 10 Dec 2013 63,750.00

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