PROJECT INFORMATION DOCUMENT (PID)
APPRAISAL STAGE
Project Name
Region
Sector
Project ID
Borrower(s)
Implementing Agency
Report No.: AB5040
Social Safety Nets & Employment Support Project
EUROPE AND CENTRAL ASIA
Other social services (100%)
P116774
BOSNIA AND HERZEGOVINA
FBH Ministry of Labor and Social Policy
Sarajevo
Bosnia and Herzegovina
Tel: (387-33) 111-1111
Ministry of Labor and Veterans Affairs of RS
Trg Republike Srpske 1
Banja Luka
Bosnia and Herzegovina
RS Ministry of Health and Social Welfare
Trg Republike Srpske 1
Banja Luka
Republic of Srbska
Bosnia and Herzegovina
Environment Category
Date PID Prepared
Date of Appraisal
Authorization
Date of Board Approval
[ ] A [ ] B [X ] C [ ] FI [ ] TBD (to be determined)
October 23, 2009
November 2, 2009
December 22, 2009
1. Country and Sector Background
1. With 4 percent of GDP allocated to non-insurance cash transfers,1 BH is one of the
highest spenders in the Europe and Central Asia (ECA) region in this sector. By
comparison, the regional countries’ expenditure average is 1.7 percent of GDP, and the
Organization for Economic Co-operation and Development (OECD) nations’ average is
2.5 percent. The level of spending on non-insurance cash transfers in BH has become
fiscally unsustainable, particularly given the impacts of the global financial and
economic crisis on public revenues.
2. For historical reasons, non-insurance cash transfers in BH have been heavily
dominated by “rights-based” programs originally designed to protect war veterans
1
Non-insurance cash transfers refer to non-contributory cash benefits such as social assistance and civilian and veteran disability
benefits which are financed through the general government budget. Health, pension and unemployment insurance programs are
examples of insurance-based schemes in BH. Some of the ostensibly insurance-based benefits (e.g. special pensions) are also
financed through the general government budget.
or their surviving dependents (“veteran-related benefits”). Veteran-related benefits
absorb about three-quarters of total spending on non-insurance cash transfers in BH. The
share is slightly lower in the Federation of Bosnia and Herzegovina (FBH) than in
Republika Srpska (RS) – the two Entities that make up BH. Both Entities also operate a
number of civilian benefits that account for about one-quarter of total spending on noninsurance social protection cash transfers. The “big ticket” item for these civilian
benefits is disability benefits in the FBH (for Non-War Invalids and Civilian Victims of
War), which have increased significantly over time. Civilian benefits also include
means-tested programs such as Social Assistance Benefits and the Child Protection
Allowance.
3. Despite significant fiscal outlays on non-insurance cash transfers, their coverage of
the poor is low; and, in aggregate, they tend to be regressive in nature. In terms of
coverage, about 15 percent of those in the bottom quintile report receiving veteran or
civilian benefits. In terms of targeting accuracy, benefits are generally regressive since
those in the poorest quintile receive only 18 percent of total non-insurance social
protection cash transfers in BH – a smaller proportion than their share of the total
population of BH. A similar share of these benefits goes to those in the richest quintile.
Given those patterns, it is not surprising that poverty-reduction impact is negligible.
Indeed, the poverty headcount rate is estimated in the 2007 Household Budget Survey
(HBS) at about 18 percent of the population with the transfers counted in total
consumption (incomes). Without the transfers, the poverty headcount would increase
only slightly to 19.2 percent of the population (so transfers reduced poverty by only 1.2
percentage points). By way of contrast, the poverty impact of social insurance benefits
(pensions) is much higher: without these transfers poverty would increase to 25.8
percent of the population.
4. The opportunity costs of public spending on generally regressive transfers are high.
Public expenditures on non-insurance cash transfers absorb a huge share of the
Entities’ respective budgets (about 40 percent in FBH and 14 percent in RS). This
level of spending requires buoyant public revenues. However, public revenues will be
under continuing pressure in view of the global economic crisis. Moreover, devoting a
large proportion of public funds to social transfers has the effect of crowding out
resources that could be devoted to public investments – which will be increasingly
needed to stimulate growth as the economy continues to sag under the impact of the
economic crisis.
5. In addition, besides doing little to ameliorate poverty, there is evidence that some
rights-based programs create disincentives for employment. This is partly by virtue
of a design flaw: In BH, applicants for all non-insurance cash transfers (except war
veterans’ benefits) are required to register as unemployed to qualify for benefits (in
addition to their “rights based” categorical qualifications). This requirement has not
helped better “target” benefits to those in need; rather it has had the effect of distorting
labor markets as people register as unemployed simply to qualify for benefits.
2. Objectives
6. The Project Development Objectives are (i) to support non-insurance cash transfers in
reaching the eligible poor and disabled; (ii) to improve the efficiency and transparency
of benefit administration; (iii) to support job brokerage services for those active job
seekers who become ineligible to receive cash transfers or who are vulnerable (e.g.,
poor, disabled but able work, hard-to-serve, demobilized soldiers, etc.).
3. Rationale for Bank Involvement
7. With a more than a decade-long record, the Bank’s involvement in this sector in
BH has been steady with some significant results. It has largely involved a mix of
investment and technical assistance operations in labor and social protection areas,
which mostly achieved the desired results. In addition to operations, a substantial
amount of analytical work has been produced by the Bank in recent years – the latest
piece being the Policy Note on Social Transfers in Bosnia and Herzegovina: Moving
Towards a More Sustainable and Better Targeted Safety Net (April 2009), which
underpins this operation.
8. The Bank has accumulated substantial experience internationally and in ECA in
helping countries develop and apply effective targeting tools to strengthen the
effectiveness of social safety nets. Moreover, in the foregoing two year period 20072009, the Bank team had acquired in-depth knowledge of and access to key BH-related
data in this area. Over the same period, the Bank team has maintained an active and
productive policy dialogue with the Entity Governments. In this respect the chief
interlocutors have been, in FBH: the Ministry of Labor and Social Policy and the
Ministry of Veterans’ Affairs; and, in RS: the Ministry of Labor and Veterans’ Affairs
and the Ministry of Health and Social Welfare. Contacts with the respective Ministries
of Finance and Employment Bureaux have also been maintained. Hence, the Bank has
both practical country-related experience as well as analytical expertise to provide BH
policymakers with advice as ongoing dialogue on a strategy to rationalize the country’s
spending on non-insurance cash transfer programs and, possibly, finance
implementation of such reforms.
9. The authorities in FBH and RS had expressed interest for Bank’s support in this
area even before the country’s macroeconomic problems became glaringly evident.
The Bank team has used a programmatic approach in engaging with the Government
and a broad range of other key stakeholders through viable "entry points" to engage
technically and to promote dialogue, awareness, and press interactions, which led to a
perceptible change in the official discourse in this sector.
10. The outcomes achieved as a result of this approach included: (i) a change in the
nature of the public debate from a rights-based approach to a needs-based benefits; (ii)
transferring knowledge to Government officials on the topic of targeting mechanisms
including proxy means targeting; (iii) creating a common understanding on the linkages
between rights-based benefits and employment; and, (iv) building a level of policy
consensus in key institutions. Thus, the authorities in both Entities have increasingly
begun to realize the importance of undertaking benefit reform measures in a timely
manner, before circumstances cause them to adopt alternative crude cash-saving
measures that could leave behind the most vulnerable members of society and generate
pent up demand for benefits, once the economy picks up. While the total weight of noninsurance benefits in RS has not overwhelmed the public finances as yet, the authorities
in the RS are determined to modernize the benefit administration system and to tighten
controls over expenditures in this area. Therefore the programmatic approach to client
engagement outlined above led BH authorities to call for World Bank support for
reforms and improvements in capacity and effectiveness in this area even before the
country’s deteriorating fiscal situation made it imperative.
4. Description
11. These objectives would be achieved by supporting policy, technical and systems
reforms and investments in the areas of (i) targeting (enhancing safety net design,
Component 1); (ii) benefits administration monitoring and oversight (Component 2);
(iii) job brokerage services (Component 3); and (iv) communications (Component 4).
Ultimately, the project seeks to support a comprehensive and integrated safety net that is
efficient, transparent, and effective in reaching the poor and vulnerable groups. This
implies that the targeting and benefits administration improvements introduced by the
project could apply to all benefits civilian and war veteran benefits - even if the roll-out
of these improvements is carried out in a phased and gradual manner due to political and
administrative feasibility considerations The following five components will be
supported under the project:

Component 1: Enhancing Safety Net Design (Eligibility Processes): This component
would improve the transparency and effectiveness of non-insurance cash transfers to
reach eligible poor, disabled; and vulnerable through introduction of improved targeting
mechanisms.

Component 2: Strengthening Benefits Administration and Oversight: This
Component would improve transparency and efficiency of benefits administration
through development and improvement of functional registries, capacity building,
oversight and controls, and monitoring of benefits.

Component 3: Job Brokerage and Employment Support This component would
support job brokerage services for those active job seekers who become ineligible to
receive cash transfers or who are vulnerable (e.g., poor, disabled but able work, hard-toserve, demobilized soldiers, etc.).

Component 4: Communication: This component would support transparency, public
awareness, and a Government communication strategy to foster understanding of the
need for improved benefits targeting and other safety net reforms.

Component 5: Project Management: Support to Government for management and
implementation oversight of Project.
5. Financing
Source: IDA
Borrower
International Development Association
Total
($15.0 m.)
0
15
15
6. Implementation
12. The proposed Project would be implemented over a four-year period. This four-year
time period is based on: (a) technical considerations for designing, piloting, and
implementing the proposed systems improvements; (b) inevitable time requirements for
procurement processes; and (c) the sensitivity of some aspects of safety net reforms and
the need to phase-in certain improvements as a result of those sensitivities. In the
Federation, the FBiH Ministry of Labor and Social Policy (FBH MoLSP) through its
unit for project implementation (PIU SESER) will be responsible for the implementation
of the proposed Project. In Republika Srpska, the RS Ministry of Labor and Veterans’
Affairs (RS MoLVA)/ and the RS Ministry of Health and Social Welfare (RS MoHSW)
will jointly be responsible for project implementation. Both Ministries will provide
technical staff for the project management team which will be housed in the Ministry of
Health and Social Welfare of the RS.
7. Sustainability
13. The project seeks to reform social benefits so that they are fiscally and
administratively sustainable and ensure that the benefits reach those who need
them the most. Supporting improvements in targeting mechanisms; the benefits
administration system, and job brokerage services for active job seekers in vulnerable
groups ultimately contribute to: (a) improved governance, quality and effectiveness of
public spending in achieving development objectives; (b) stronger fiscal discipline with
respect to the management and containment of non-insurance benefits; and (c) a social
safety net that is better able to protect and improve the living standards of needy groups,
such as the poor, vulnerable and disabled.
14. In practice, project sustainability will largely depend, but not be limited to, the
following: (i) political will and the authorities’ ability and willingness to undertake the
reforms needed to improve transparency and effectiveness of benefit schemes; (ii) the
authorities’ ability to improve the functionality and use of the IT systems/ registries and
accomplish the requisite capacity building, set up effective systems of oversight and
control of benefit schemes that are to be tackled under the Project; (iii) the extent to
which the job brokerage services are effectively implemented in terms of providing the
biggest number of intended beneficiaries with sustainable employment at the most
efficient per capita cost; and, (iv) the extent to which the authorities are able to articulate
and communicate the benefits of the envisaged reforms in an effective manner. Some of
the above shall be subject to factors and circumstances which the project preparation has
aimed to identify and/ or foresee.
8. Lessons Learned from Past Operations in the Country/Sector
15. The design of the SSNESP takes into account the lessons learned from (a)
international experience in reforming and modernizing social safety nets (technical
aspects); (b) experience in BH and other post-conflict countries and (c) experience with
previous social protection-related Projects in BH (SOTAC, SITAP, PELRP, SESP,
SOSAC and SOSAC II) regarding the importance of managing political sensitivities
surrounding the issue of civilian and war veterans benefits.
9. Safeguard Policies (including public consultation)
Safeguard Policies Triggered by the Project
Environmental Assessment (OP/BP 4.01)
Natural Habitats (OP/BP 4.04)
Pest Management (OP 4.09)
Physical Cultural Resources (OP/BP 4.11)
Involuntary Resettlement (OP/BP 4.12)
Indigenous Peoples (OP/BP 4.10)
Forests (OP/BP 4.36)
Safety of Dams (OP/BP 4.37)
Projects in Disputed Areas (OP/BP 7.60)*
Projects on International Waterways (OP/BP 7.50)
Yes
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No
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10. List of Factual Technical Documents

Report No. AAA33 – BA: Bosnia and Herzegovina Social Assistance Transfers in
Bosnia and Herzegovina: Moving Toward a More Sustainable and Better-Targeted Safety Net
Policy Note. Maniza Naqvi, Vedad Ramljak, Anna Gueorguieva, Emil Tesliuc, Erwin
Tiongson, Michele Gragnolati.

Report on Administrative and Institutional Aspects of the Institute of Medical
Examinations of FBH. Vedad Ramljak

Administrative and Institutional Aspects of the Civilian Benefits System in Federation of
Bosnia and Herzegovina (FBH). Vedad Ramljak

Administrative and Institutional Aspects of the Veterans Benefits System in Federation of
Bosnia and Herzegovina (FBH). Vedad Ramljak

Matrix of Benefits in FBH coasted. Vedad Ramljak

Summary of Social Protection Schemes in FBH. Vedad Ramljak
*
By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the
disputed areas

The Implementation completion reports for the Second Employment Support Project.
Zorica Lesic

The Implementation completion report for the Pilot Emergency Labor Redeployment
Project. Ufuk Guven

Mapping, Distribution, Amounts, Category of Rights Based Benefits in FBH
11. Contact point
Contact: Maniza B. Naqvi
Title: Sr Social Protection Specialist
Tel: (202) 458-1938
Fax:
Email: Mnaqvi@worldbank.org
12. For more information contact:
The InfoShop
The World Bank
1818 H Street, NW
Washington, D.C. 20433
Telephone: (202) 458-4500
Fax: (202) 522-1500
Email: pic@worldbank.org
Web: http://www.worldbank.org/infoshop