WORLD BANK COUNTERS STATEMENTS BY CHAMBER OF CONTROL OF ARMENIA
ArmInfo
2008-09-22 16:30:00
ArmInfo. Recently the Chamber of Control (COC) issued statements
regarding the findings of the COC review for the World Bank financed
Urban Heating Project. The World Bank is considering very seriously
the concerns expressed by the COC regarding possible anomalies in the
implementation of the Urban Heating project, as the implementation of
projects supported by the Bank is closely monitored and the supervision
reports are shared on a timely basis with all Government counterparts.
The World Bank reports that it has not yet received the report of
the COC.
‘However, based on the information at our disposal we would like
to make the following clarifications with respect to the two key
issues/irregularities mentioned by the COC: (i) transfer of US$
500,000 to an offshore supplier in Panama; and (ii) slow progress
of implementation of "capital grants to the poor" component of the
project.
(i) US$460,000 has been indeed transferred to a supplier in
Panama. This amount has been transferred by ArdshinInvest Bank,
one of the three participating banks under the on-lending component
of the project. The amount is part of US$500,000 sub-loan that
ArdshinInvest has approved to a private company, Yerfrez OJSC, for
the supply of heat, hot water and power to four buildings. Yerfrez
has instructed ArdshinInvest to transfer US$460,000 of the pr oceeds
of the approved sub-loan for the procurement of 4 combined heat and
power micro turbines to the supplier in Panama.
According to the latest known communication between Yerfrez and
Panama supplier, the latter is supposed to supply the micro turbines
in December 2008.
None of the legal documents governing project implementation has been
breached. The loan is used for the targeted purpose, i.e. provision
of decentralized gas-based heat and hot water supply. The procurement
under the on-lending component of the project is based on commercial
practices, which for a US$500,000 sub-loan, requires that the sub-
borrower obtain price quotation from 3 suppliers, which Yerfrez has
secured and selected the supplier quoting the lowest price.
Regarding financial management issues, according to the design of
the on-lending component ArdshinInvest carries 100% of the risks
for the sub-loans it provides. The implementing agency (R2E2 fund)
has automatically transferred money to ArdshinInvest once the latter
has approved the loan to Yerfrez and registered the collateral.
(ii) The implementation pace of the capital grants to the poor
component is indeed slow, and this has been documented by project
supervision regularly conducted by the World Bank while the Government
has been alerted. The implementation has accelerated lately and as
of September 2008, the heater installation and gas connection works
were completed for over 4,000 urban poor ho useholds’.