annex 1: proposed changes to the pdo and...

Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No: RES13113

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING OF

INTEGRATED URBAN DEVELOPMENT PROJECTGRANT

MAY 25, 2010

TO THE

REPUBLIC OF YEMEN

April 3, 2014

MNSSUMIDDLE EAST AND NORTH AFRICA REGION

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

CURRENCY EQUIVALENTS

(Exchange Rate Effective February 24, 2014)

US$1.543890 = SDR (XDR) 1

ABBREVIATIONS AND ACRONYMS

AFMISIDAIP

Accounting-based Financial Management InformationInternational Development AssociationImplementation Progress

IUDPGIS

Integrated Urban Development ProjectGeography Information System

MPW&H Ministry of Public Works and HighwaysMOPIC Ministry of Planning and Implementation CoordinationPDOPMU

Project Development ObjectiveProject Management Units

Regional Vice President: Inger AndersenCountry Director: Hartwig SchaferSector Manager: Franck Bousquet

Task Team Leader: Brahim Abdelwedoud

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YEMENINTGRATED URBAN DEVELOPMENT PROJECT

TABLE OF CONTENTS

A. SUMMARY...........................................................................................................................................5

B. PROJECT STATUS.............................................................................................................................6

C. PROPOSED CHANGES......................................................................................................................6

ANNEX 1: PROPOSED CHANGES TO THE PDO AND PDO INDICATORS..................................10

ANNEX 2. RESULTS FRAMEWORK......................................................................................................11

ANNEX 3: OPERATIONAL RISK ASSESSMENT FRAMEWORK....................................................14

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DATA SHEETYemen, Republic of

RY-Integrated Urban Development Project (IUDP) (P107050)MIDDLE EAST AND NORTH AFRICA

MNSSU.

Report No: RES13113.

Basic InformationProject ID: P107050 Lending Instrument: Specific Investment Loan

Regional Vice President: Inger Andersen Original EA Category: Partial Assessment (B)Country Director: Hartwig Schafer Current EA Category: Partial Assessment (B)

Sector Director: Junaid Kamal Ahmad Original Approval Date: 25-May-2010Sector Manager: Franck Bousquet Current Closing Date: 30-Sep-2015

Team Leader: Brahim Abdelwedoud.

Borrower: Government of Yemen

Responsible Agency: Ministry of Public Works & Highways.

Restructuring TypeForm Type: Full Restructuring Paper Decision Authority: Board Approval

Restructuring Level:

Level 1

.

Financing ( as of 19-Feb 2014 )Key Dates

Project Ln/Cr/TF Status Approval Date Signing Date Effectiveness

DateOriginal Closing Date

Revised Closing Date

P107050 IDA-H5650 Effective 25-May-2010 28-Jun-2010 18-Aug-2010 30-Sep-2015 31-Mar-2015

Disbursements (in Millions)

Project Ln/Cr/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed

P107050 IDA-H5650 Effective XDR 14.50 11.80 2.70 3.86 7.94 33.

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

Does the project require any policy waiver(s)? Yes [ ] No [ X ]

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.

A. Summary of Proposed ChangesDespite the previous Level II restructuring in December 2012 and the cancellation of US$4.12 million from the original IDA grant of US$22 million equivalent, the implementation pace is not adequate to ensure that the Project would be delivered satisfactorily by the planned closing date of September 30, 2015. For this reason, the PDO, IP and Safeguards are rated as Moderately Unsatisfactory. The implementation delay is related to Yemen’s 2011 crisis, which caused IDA to stop disbursement between July 2011-January 2012, the overall price increase for local goods, works and services after the crisis, and the need to cancel the project’s original round of bidding (for goods, works, services), which had been completed before the crisis, as after the crisis the winning bidders refused to sign contracts based on their original bid prices. In addition, there has been a lack of proactivity by the Taiz-based project implementing unit to speed up project implementation. As a result, the Government has requested through a letter dated February 23, 2014, to: Cancel an amount of US$3.70 million, which had been allocated for (i) Component 2, i.e. the development of a

National Framework for Urban Upgrading, and the support for Accounting-based Financial Management Information (AFMIS) in Taiz, and (ii) Component 1, i.e. the rehabilitation of the Geography Information System (GIS) building, and the social expertise for the ongoing infrastructure investments.

Revert back the cancelled funds into the IDA grant pool for Yemen. Reduce significantly the field-based Project Management Units (PMU) in Taiz. The PMU will be limited to the

Safeguards Specialist with an assistant. It will be hosted by the Taiz Governorate, and will be responsible for on time completion of the three ongoing works contracts in Taiz, with the support of the consultant contracted for works supervision. This arrangement would reduce the number of project implementation staff and lead to a total saving for project management of US$ 1.8 million. Two staff will work under the governor office to support Local Authorities in Taiz, in order to strengthen their capacity, in line with the ongoing decentralization efforts. At the project closing, the Government will mobilize necessary resources to finance operating costs.

Adjust the results framework and move the closing date forward, based on the above changes.

Change in Implementing Agency Yes [ ] No [ X ]

Change in Project's Development Objectives Yes [ X ] No [ ]

Change in Results Framework Yes [ X ] No [ ]

Change in Safeguard Policies Triggered Yes [ ] No [ X ]

Change of EA category Yes [ ] No [ X ]

Other Changes to Safeguards Yes [ ] No [ X ]

Change in Legal Covenants Yes [ ] No [ X ]

Change in Loan Closing Date(s) Yes [ X ] No [ ]

Cancellations Proposed Yes [ X ] No [ ]

Change to Financing Plan Yes [ X ] No [ ]

Change in Disbursement Arrangements Yes [ ] No [ X ]

Reallocation between Disbursement Categories Yes [ ] No [X ]

Change in Disbursement Estimates Yes [ X ] No [ ]

Change to Components and Cost Yes [ X ] No [ ]

Change in Institutional Arrangements Yes [ X ] No [ ]

Change in Financial Management Yes [ ] No [ X ]

Change in Procurement Yes [ ] No [ X ]

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Change in Implementation Schedule Yes [X] No [ ]

Other Change(s) Yes [ ] No [ X ]

Appraisal Summary Change in Economic and Financial Analysis Yes [ ] No [ X ]

Appraisal Summary Change in Technical Analysis Yes [ ] No [ X ]

Appraisal Summary Change in Social Analysis Yes [ ] No [ X ]

Appraisal Summary Change in Environmental Analysis Yes [ ] No [ X ]

Appraisal Summary Change in Risk Analysis Yes [ ] No [ X ].

B. Project StatusThe Project was approved by the Board of Directors on May 25, 2010. It was signed on June 28, 2010 and became effective on August 18, 2010. It underwent a level 2 restructuring in December 2012, as at that time, ~28 months after project effectiveness, disbursement stood at only US$1.47 million, representing 6.68 percent of the total Grant amount of US$22.00 million, and no significant progress had been made on key activities. The main objective of restructuring was to help improve the performance of the Project, and thus the scope of the Project was reduced through cancellation of US$4.12 million and implementation arrangements were consolidated for the three ongoing urban projects Integrated Urban Development, (P107050), the Second Port Cities Development Project, (P88435) and the Flood Protection & Emergency Reconstruction, (P115178) under the Ministry of Public Works and Highways (MPW&H) and the Sana’a-based Project Coordination Unit.

As of March 31, 2014, 15 months after the restructuring and 43 months since the Project became effective, only 32.74 % of the total restructured amount has been disbursed. Implementation progress of three of the main works contracts signed is slow.

Despite the December 2012 restructuring, implementation pace is not adequate to ensure that the Project would be delivered satisfactorily by the planned closing date of September 30, 2015. For this reason, the PDO and IP are rated as Moderately Unsatisfactory (MU). Overall safeguards compliance is currently rated MU due to the lack of adequate safeguards supervision, monitoring, and reporting. Safeguards implementation quality is expected to improve with in-country Bank safeguards staffing support to the dedicated Safeguards Specialist in the Taiz-based PMU as well as the focus on the implementation of the existing contracts post-restructuring. The safeguards instruments for all components have been prepared, approved, and disclosed in compliance with the Bank’s relevant safeguards policies. Procurement is rated Moderately Satisfactory, and Financial Management is rated as Satisfactory. All previous audit reports were received and found acceptable..

.

C. Proposed ChangesDevelopment Objectives/Results

Project Development Objectives

Original PDO

The Project's Development Objectives (PDO) are to: (i) improve access to basic services in select informal settlements in urban areas in Taiz; and (ii) strengthen dialogue on national framework for urban upgrading.

Change in Project's Development Objectives

Explanation

The project PDO is being modified to reflect the project’s reduced scope after the cancellation of investments and technical assistance in Component 1 and 2.The project is simplified focusing only on completion of ongoing urban

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upgrading in three informal settlements in Taiz (Al-Maftash, Al-Haraziya/Al-arous, and Medinat al-Noor.)

Proposed New PDO

The Project's Development Objective (PDO) is to improve access to basic services in informal settlements in three urban areas in Taiz.

Change in Results Framework

Explanation:

The project development objective is being modified, activities are cancelled and therefore, the PDO indicators and intermediate results indicators are being revised..

FinancingChange in Loan Closing Date(s)

Explanation:

The project’s closing date will be advanced to the last completion date of the ongoing three works contracts.

Ln/Cr/TF Status Original Closing Date

Current Closing Date Proposed Closing Date Previous Closing

Date(s)

IDA-H5650 Effective 30-Sep-2015 30-Sep-2015 31-Mar-2015 30-Sep-2015

Cancellations

Explanation:The proposed restructuring comprises the cancellation of (i) in Component 1, the rehabilitation of the GIS building, and the social expertise for the ongoing infrastructure investments; (ii) in Component 2, the development of a National Framework for Urban Upgrading, and the support for AFMIS in Taiz; and (iii) from Component 3, the PMU staff is reduced to the Safeguards Specialist with an assistant.

The cancelled amount of XDR 2,396,544 is based on the conversion of the requested cancellation amount of US$3.70 million from the Borrower, converted as of February 24, 2014, date of receipt of the formal request.

Ln/Cr/TF Status Currency Current Amount (in currency)

Cancelled Amount (in currency)

Proposed Amount (in currency)

IDA-H5650 Effective XDR 11,800,000.00 2,396,544.00 9,403,456.00

Change to Financing Plan

Explanation:Due to the cancellation of activities, the project scope is reduced and the financing plan changes to the below.

Source(s) At Approval Current (from AUS) Proposed

BORR 1,000,000.00 1,000,000.00 0

IDAT 22,000,000.00 17,880,000.00 14,180,000.00

Total 23,000,000.00 18,880,000.00 14,180,000.00

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Disbursement Estimates

Change in Disbursement Estimates

Explanation:Due to the cancellation of activities, and the advancement of the project closing date, the project scope is reduced and thus the disbursement estimates change to the below.

Fiscal Year Current (USD) Proposed (USD)

2011 1,140,986.84 1,140,986.84

2012 253,632.28 287,414.84

2013 2,305,210.39 3,788,778.34

2014 2,500,000.00 4,512,819.98

2015 7,680,170.49 4,450,000.00

2016 4,000,000.00 0.00

Total 17,880,000.00 14,180,000.00.

ComponentsChange to Components and Cost

Explanation:By canceling a total amount of US$3.70 million, Component 2 will only support a GIS Unit in Taiz, and all other activities are being dropped, i.e. the development of a National Framework for Urban Upgrading, the rehabilitation of the GIS Unit building and the support for AFMIS in Taiz. Also, parts of Component 1 are being dropped, i.e. the rehabilitation of the GIS building, and the social expertise for the ongoing infrastructure investments. For component 3, the PMU is reduced to the safeguards specialist with an adviser.

Current Component Name Proposed Component Name

Current Cost (US$M)

Proposed Cost (US$M) Action

Infrastructure in Taiz 13.48 13.08 Revised

Institutional Strengthening and Capacity Building 1.90 0.40 Revised

Project Management 2.50 0.70 Revised

Total: 17.88 14.18.

Other Change(s)Change in Institutional Arrangements

Explanation:

The field-based Project Management Unit (PMU) in Taiz will be reduced to the Safeguards Specialist with an assistant. It will be hosted by the Taiz Governorate, and will be responsible for the in time completion of the three ongoing works contracts in the three informal settlements in Taiz, with the support of the consultant firms contracted for works supervision. This arrangement would reduce the number of project implementation staff and lead to a total saving for project management of US$1.8 million. In line with the ongoing decentralization efforts, the staff will be assigned to support the Local Authorities in Taiz, in order to strengthen their capacity – the modalities of this support will be defined in coordination with the Taiz Governor.

8

Change in Implementation Schedule

Explanation:

Due to the reduced scope of project activities, the implementation schedule changes and the closing date is moved forward from September 30, 2015 to March 31, 2015.

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ANNEX 1: PROPOSED CHANGES TO THE PDO AND PDO INDICATORS

Revisions to the Results Framework Comments/Rationale for Change

PDOCurrent (PAD) Proposed change

The Project's Development Objectives (PDO) are to: (i) improve access to basic services in select informal settlements in urban areas in Taiz; and (ii) strengthen dialogue on national framework for urban upgrading.

The Project's Development Objective (PDO) is to improve access to basic services in informal settlements in three urban areas in Taiz.

The project PDO is being modified to reflect the project’s reduced scope after the cancellation of investments and technical assistance in Component 1 and 2.The project is simplified focusing only on completion of ongoing urban upgrading in three informal settlements inTaiz (Al-Maftash, Al-Haraziya/Al-arous, and Medinat al-Noor.)

PDO indicatorsCurrent (PAD) Proposed changeNumber of people in urban provided with access to all season roads within a 500 meter range

Continued

People in urban areas provided with access to "improved sanitation" under the project (number)

Continued

People in targeted areas provided with access to "improved water supply" (number)

Continued

Assessment of investment needs for urban upgrading at the national level Deleted Activity dropped

Direct project beneficiaries (number), of which female (%) Continued

PDO intermediate indicators

Current (PAD) Proposed change

Establishment of a core Geographic Information System unit in Taiz Continued

New household sewer connections constructed under the project (number) Continued

New piped household water connections that are resulting from the project intervention (number)

Continued

Roads rehabilitated, Non-rural (km) ContinuedReport on the current situation of informal settlements and need for urban upgrading in Yemen

Continued

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ANNEX 2: RESULTS FRAMEWORK

.

Project Development ObjectivesOriginal Project Development Objective:The Project's Development Objectives (PDO) are to: (i) improve access to basic services in select informal settlements in urban areas in Taiz; and (ii) strengthen dialogue on national framework for urban upgrading.

Revised Project Development Objective:The Project's Development Objective (PDO) is to improve access to basic services in informal settlements in three urban areas in Taiz.

ResultsCore sector indicators are considered: Yes Results reporting level: Project Level.

Project Development Objective IndicatorsIndicator Name Core Unit of Measure Baseline Actual(Current) End Target

People in urban areas provided with access to all season roads within a 500 meter range

Number Value 0.00 0.00 19500.00

Date 21-Jun-2010 31-Mar-2014 31-Mar-2015

Comment

Number of people in urban areas provided with access to Improved Sanitation under the project

Number Value 0.00 0.00 19500.00

Date 27-Dec-2012 31-Mar-2014 31-Mar-2015

Comment .

Number of people in urban areas provided with access to Improved Water Sources under the project

Number Value 0.00 0.00 19500.00

Date 27-Dec-2012 31-Mar-2014 31-Mar-2015

Comment

Direct project beneficiaries Number Value 0.00 0.00 19500.00

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Date 27-Dec-2012 31-Mar-2014 31-Mar-2015

Comment

Female beneficiaries Percentage Value 0.00 0.00 47.00

Sub Type

Supplemental

Intermediate Results Indicators

Indicator Name Core Unit of Measure Baseline Actual(Current) End Target

Establishment of a core Geographic Information System unit in Taiz

Yes/No Value No No Yes

Date 21-Jun-2010 31-Mar-2014 31-Mar-2015

Comment An office has been established in the Governor's office. There is a need to hire an individual international/ regional consultant to support this unit.

New household sewer connections constructed under the project

Number Value 0.00 0.00 2100.00

Date 27-Dec-2012 31-Mar-2014 31-Mar-2015

Comment .

New piped household water connections that are resulting from the project intervention

Number Value 0.00 0.00 1600.00

Date 27-Dec-2012 31-Mar-2014 31-Mar-2015

Comment

Roads rehabilitated, Non-rural Kilometers Value 0.00 0.00 20.00

Date 27-Dec-2012 31-Mar-2014 31-Mar-2015

Comment

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Intermediate Results Indicators

Indicator Name Core Unit of Measure Baseline Actual(Current) End Target

Report on the current situation of informal settlements and need for urban upgrading in Yemen

Yes/No Value No No Yes

Date 27-Dec-2012 31-Mar-2014 31-Mar-2015

Comment.

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ANNEX 3: OPERATIONAL RISK ASSESSMENT FRAMEWORK (ORAF)

Yemen, Republic: RY-Integrated Urban Development Project (IUDP) (P107050)

Stage: Restructuring.

.

Project Stakeholder Risks

Stakeholder Risk Rating Moderate

Risk Description: Risk Management:Improvements made to informal settlements through upgrading could increase land values leading to gentrification, or expulsion of the poorest residents.

International experience shows that gentrification, or expulsion of the poorest residents, tends to occur when a limited informal area with a very desirable location is upgraded to ambitious standards which transform it overnight. With a broader approach like the one used in this Project, focusing on several informal areas, with a limited package of basic infrastructure and services that leaves room for gradual improvement over time, the turnover in residents is much lower, and can be mostly ascribed to normal attrition.

Resp: Status: Stage: Recurrent: Due Date: Frequency:

Client In Progress Implementation CONTINUOUS

Implementing Agency (IA) Risks (including Fiduciary Risks)

Capacity Rating Substantial

Risk Description:

The implementation capacity of the PMU managing two Projects in Taiz governorate could be overloaded.

Risk Management:

With the reduction of PMU staff in Taiz to the safeguards specialist and adviser, and the project management by the Sana'a-based PCU, this risk is no longer applicable after restructuring


Client Completed Implementation 30-Apr-2014

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Risk Management:

Taiz-based supervision consultants ensure proper implementation of the three works contracts



Governance Rating Moderate

Risk Description: Risk Management:PCU, based in Sana'a, is unable to manage the Taiz-based works contract implementation

Strict applications of quality and cost control apparatus by the PMU on the construction sites. This will be achieved through spot checks to construction sites by the PMU management

Resp: Status: Stage: Recurrent: Due Date: Frequency:Client In Progress Implementation CONTINUO

US

Project Risks

Design Rating Low

Risk Description: Risk Management:Upgrading of informal settlements in Taiz will require unconventional approaches.

The design of proposed upgrading takes into account in-situ conditions, lessons learned from previous experience in the country and is being done in close consultation with beneficiaries, concerned public sector agencies and local Government authorities.



Social and Environmental Rating Substantial

Risk Description:

Lack of proper integration of social and environmental considerations during Project may affect Project

Risk Management:

The ESMP and RPF, that had been prepared, were included in the bidding documents and works contracts that are now under implementation.


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outcomes.Lack of adequate safeguards supervision, monitoring, and reporting


Risk Management:

The safeguards implementation quality is expected to improve with in-country Bank safeguards staffing support through the dedicated Safeguards Specialist in the Taiz-based PMU as well as the focus on the implementation of the existing contracts post-restructuring. The safeguards instruments for all components have been prepared, approved, and disclosed in compliance with the Bank’s relevant safeguards policies.



Program and Donor Rating Low

Risk Description: Risk Management:


Delivery Monitoring and Sustainability Rating Low

Risk Description: Risk Management:Insufficient operation and maintenance and cost-recovery measures cannot ensure sustainability of infrastructure and facilities provided or rehabilitated.

Local public sector agencies through an existing MOU will take ownership of respective infrastructure for proper operation and maintenance



Overall Implementation Risk: Rating SubstantialRisk Description:

There is a risk that implementation is further delayed despite the new PMU management and monthly progress reporting to allow for closer supervision.

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