Document of

The World Bank

Report No:

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING

OF

DISASTER RISK MITIGATION AND ADAPTATION PROJECT

LOAN NUMBER 7563 AL

CREDIT NUMBER 4460 AL

JUNE 19, 2008

TO

ALBANIA

January 19, 2012

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2

ABBREVIATIONS AND ACRONYMS

DRMAP Disaster Risk Mitigation and Adaptation Project

IBRD International Bank for Reconstruction and Development

IDA International Development Association

IGEWE Institute for Geoscience, Energy, Water and Environment

MOF Ministry of Finance

MOI Ministry of Interior

MOPWTT Ministry of Public Works, Transport and Telecommunication

MOF Ministry of Finance

PDO Project Development Objective

SDR Special Drawing Rights

SEEC CRIF Southeast Europe and Caucasus Catastrophic Risk Insurance Facility

Regional Vice President: Philippe H. Le Houerou

Country Director: Jane Armitage

Country Manager: Kseniya Lvovsky

Acting Sector Manager: Pier Francesco Mantovani

Task Team Leader: Jolanta Kryspin-Watson

3

Restructuring Status: Draft Restructuring Type: Level two Last modified on date : 01/19/2012

1. Basic Information Project ID & Name P110845: DISASTER RISK MITIGATION

Country Albania

Task Team Leader Jolanta Kryspin-Watson

Sector Manager/Director Laszlo Lovei

Country Director Jane Armitage

Original Board Approval Date 06/19/2008

Original Closing Date: 02/28/2012

Current Closing Date 02/28/2012

Proposed Closing Date [if applicable] 02/28/2013

EA Category C-Not Required

Revised EA Category C-Not Required-Not Required

EA Completion Date

Revised EA Completion Date

2. Revised Financing Plan (US$m) Source Original Revised

BORR 1.01 1.01

IBRD 3.00 3.00

IDA 6.16 6.16

Total 10.17 10.17

3. Borrower Organization Department Location

Republic of Albania Albania

4. Implementing Agency Organization Department Location

Ministry of Finance Albania

Ministry of Public Works,

Transportation and

Telecommunications

Albania

Institute of Energy, Water and

Environment

Albania

Ministry of Interior Albania

4

5. Disbursement Estimates (US$m) Actual amount disbursed as of 12/19/2011 3.06

Fiscal Year Annual Cumulative

2012 3.52 6.58

2013 2.58 9.16

Total 9.16

6. Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? N

Does the restructured projects trigger any new safeguard policies? If yes, please select

from the checklist below and update ISDS accordingly before submitting the package.

N

7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes

The objective of the Albania Disaster Risk Mitigation and Adapation Project (AL-DRMAP) is to

strengthen institutional capacities (a) to reduce Albania's vulnerability to natural and man-made hazards;

and (b) to limit human, economic, and financial losses due to these disasters.

7b. Revised Project Development Objectives/Outcomes [if applicable]

5

ALBANIA

DISASTER RISK MITIGATION AND ADAPTATION PROJECT

P110845

CONTENTS

Page

A. SUMMARY ........................................................................................................................... 6

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

C. PROPOSED CHANGES ...................................................................................................... 7

RESULTS/INDICATORS ....................................................................................................... 7

REALLOCATIONS ................................................................................................................ 7

CLOSING DATE ................................................................................................................... 8 ANNEX 1: RESULTS FRAMEWORK AND MONITORING .............................................. 10

6

ALBANIA

DISASTER RISK MITIGATION AND ADAPTATION PROJECT

RESTRUCTURING PAPER

A. SUMMARY

This Restructuring Paper seeks approval of the following proposed changes and

adjustments to the Albania Disaster Risk Mitigation and Adaptation Project (DRMAP):

(i) reallocation between the disbursement categories of the IDA Credit and IBRD

loan proceeds;

(ii) extension of the credit and loan closing dates by 12 months; and

(iii) revisions to the project results and monitoring framework.

The proposed restructuring does not entail revisions to the Project Development

Objective (PDO), total project costs, or the percentage of financed expenditures. There is

no change to the current safeguards category A. The described changes were discussed

with the Government and requested through letters from the Ministry of Finance dated

December 2, 2011, and September 9, 2010.

B. PROJECT STATUS

Project implementation shows continued progress in the last year, i.e., since December

2010 from its mid-term point. Effectiveness of the credit and the loan were delayed by

about a year due to the later than expected establishment of the Project Management

Team, and delays in the registration and establishment of the Catastrophe Risk Insurance

Facility. The project ratings for Implementation Progress (IP) and PDO were upgraded in

the last two ISRs to Moderately Satisfactory. The procurement rating is Satisfactory, and

the financial management rating is Moderately Satisfactory due to delays in the provision

of counterpart funding. There are no outstanding audit reports and all audit reports were

found satisfactory to the Bank.

Currently, almost all project activities are at various stages of procurement or have been

contracted. To date, total disbursements amount to US$ 3.1 million, of which US$ 2.28

million is from IBRD and US$ 0.78 million is from IDA. The value of commitments

under ongoing contracts is about US$2.6 million. Despite the gained momentum in

implementation, disbursements show a lag of about 49 percent (2 months). The delays in

the provision of the counterpart funding negatively affected the disbursements and the

situation was exacerbated by foreign financing ceilings imposed by the Ministry of

Finance in November 2011 due to the adverse impact of the Euro zone crisis on

economic growth, budget revenues and public debt level. Recently, sufficient allocations

were confirmed in the 2012 national budget with regard for both foreign and counterpart

7

financing of project implementation. Therefore, it is expected that disbursement will

show a significant increase in the coming months.

C. PROPOSED CHANGES

1. Results/indicators

The Project Development Objective (PDOs) is to strengthened institutional capacities (a)

to reduce Albania’s vulnerability to natural and man-made hazards; and (b) to limit

human, economic and financial losses due to disasters. No changes to the PDO are

proposed. It should be recognized that this PDO was designed for a longer than one

project timeframe using the Adaptable Program Lending (APL), and the current DRMAP

operation contributes to its achievement by strengthening the institutional capacities,

decreasing the vulnerability to disasters, and limiting financial losses by transferring

catastrophe risk to the international (re)insurance markets. However, the reduction in

human, economic and financial losses cannot be measured within the timeframe of this

project.

The proposed amendments aim at improving the results framework by bringing more

consistency and realism, reflecting the proposed loan and credit closing date extension

and reallocation, and making the results more measurable. The details of the proposed

revisions are included in Annex 1.

2. Reallocations

The proposed changes do not affect the total project cost but include the reallocations

between the disbursement categories of the IBRD loan and IDA Credit. There is no

change to the percentages of the expenditure to be financed under the credit and the loan.

With regard to the reallocations within the IBRD loan, these were necessitated by the

exchange rate fluctuations of US$ vis a vis Euro (the currency of the loan) which resulted

in a lower than agreed equity contribution to the Catastrophe Risk Insurance Facility

(US$1.779 million instead of US$2 million). Therefore, the Government requested Euro

185,000 to be reallocated from Consulting Services to the Membership Contribution

under the project.

8

Table 1: Proposed reallocation of proceeds for IBRD Loan Eligible Expenditures

Category of Expenditure Allocation [Euro] % of Financing

Current Revised Current Revised Difference Current Revised

(1) Goods under Part 1.2

of the Project

No

change 270,000 270,000 0 80%

No

change

(2) Membership

Contribution under Part

4.1 of the Project

No

change 1,330,000 1,515,000 185,000 100%

No

change

(3) Consultants' Services

under Part 4.2 of the

Project

No

change 400,000 215,000 -185,000 80%

No

change

TOTAL AMOUNT 2,000,000 2,000,000 -

Table 2: Proposed reallocation of proceeds for IDA Credit Eligible Expenditures

Category of Expenditure Allocation [SDR] % of Financing

Current Revised Current Revised Difference Current Revised

(1) Goods under Parts 1,2

and 3 of the Project, except

Part 1.2 thereof

No

change 2,320,000 2,819,529 499,529 80%

No

change

(2) Consultants' Services

under Parts 1,2 and 3 of

the Project

No

change 1,100,000 691,294 -408,706 80%

No

change

(3) Operational Costs No

change 380,000 289,177 -90,823 100%

No

change

TOTAL AMOUNT 3,800,000 3,800,000 -

Due to changes in Government priorities, the decrease in Consulting Services will mean

that some of the originally foreseen activities have to be dropped at this stage from the

Procurement Plan. This includes: the review and update of the emergency response

legislation, development of emergency response procedures, and training for first

responders. Also, the needs with regard to the support to Operation Costs are lower than

originally estimated. The IBRD Designated Account was inactive for the last 7 months;

however, once the reallocation of the loan proceeds is effective, the disbursement will be

made to fill the current gap in the membership fee to the SEEC CRIF. About Euro

215,000 is allocated for TA, procurement of which is in progress and planned to be

completed within next two months

3. Closing date

The Loan and Credit Closing Dates are proposed to be extended by 12 months, from the

current closing date of February 28, 2012 to February 28, 2013. This is a first extension

of the project.

9

Most activities for this operation are at various stages of procurement or have been

contracted. However, the completion of all initiated activities span beyond the current

closing date. These include: the development of the National Disaster Risk Management

Strategy and Investment Plan and provision of a variety of emergency response

equipment under Component 1; digitization of climate and weather data and installation

of the hydrometeorological observation network under Component 2; development of

National Plan and Guidelines for Building Eurocode 8 adoption under Component 3; and

establishment of a consumer website for the Catastrophe Regional Insurance Facility in

Albania under Component 4. All contracts are expected to be completed prior to February

2013.

ANNEX 1:

Results Framework and Monitoring

ALBANIA: DISASTER RISK MITIGATION AND ADAPTATION PROJECT

Project Development Objective (PDO): The objective of the Albania Disaster Risk Mitigation and Adaptation Project (AL-DRMAP) is to strengthen institutional capacities (a) to reduce Albania’s

vulnerability to the natural and man-made hazards and (b) to limit human, economic, and financial losses due to these disasters.

Revised Project Development Objective: n/a

PDO Level Results

Indicators* Co

re D=Dropped

C=Continue

N= New

R=Revised

Unit of

Measure Baseline

Cumulative Target Values**

Frequency

Data

Source/

Methodolog

y

Responsibility

for Data

Collection

YR 1

[07/02/08

-

07/01/09]

YR 2

[07/02/09

-

07/01/10]

YR 3

[07/02/10

-

07/01/11]

YR 4

[07/02/11

-

02/28/13]

A Disaster Risk Mitigation

Strategy and prioritized

Investment Program agreed by

Government

D - No Strategy or

Investment Plan - - - - - - -

Newly produced

hydrometeorological products

meet WMO standards

R Yes/No

Severe weather products and

warnings

tailored to users are not

available

None None None

Hydromet data

and alerts (flood and forest fire risk

indexes) are

disseminated to risk managers and

data posted on

IGEWE website

Annual estimates of

demonstrated

economic benefit of public forecasts

Project

Database IGEWE

Revisions to Building Code

bringing them to EU standards

(Eurocode 8) are ready for legal

adoption

R Yes/No Outdated

building codes None None

First round of

consultations

National plan of revisions

developed and

approved by MOPWTT

Bi-annual and

annual project

reports

Project

Database MoPWTT

Catastrophic risk insurance is

available to businesses,

households and government R Yes/No No catastrophic

insurance None None

SEE CRIF is

established

CAT insurance

infrastructure and regulatory

framework in

place

Bi-annual and annual project

reports

Project

Database

MoF

Europa Re

11

INTERMEDIATE RESULTS

Intermediate Result (Component 1 – Disaster Risk Management and Preparedness): Government develops capacity for effective response and disaster risk mitigation planning

Revised Intermediate Result (Component 1): Government develops a disaster risk management plan and has better technical capacity to respond to emergencies

Emergency response equipment

provided to the response units C Yes/No None None None

Rescue boats

and vehicles for emergency

assessment

teams delivered

Emergency

response equipment

delivered to first

responders

Bi-annual

and annual

project reports

Project Database MoI

Disaster risk action plan and

the prioritized investment

program formulated C Yes/No

No Strategy or

Investment Plan None None None

Strategy and Investment

Program developed

Bi-annual and annual

project reports

Project Database MoI

Training and exercise for the

first responders carried out D n/a - - - - - - - -

Intermediate Result (Component 2 – Strengthening of Hydrometeorological Services): Disaster risk managers (including households, farmers, and forest managers) receive more-

timely, more-accurate hydrometeorological forecasts and services

Revised Intermediate Result (Component 2): Disaster risk managers receive tailored hydromet forecasts and warnings hence, are better prepared to respond to weather-induced

hazards

Increased availability of

weather alerts (for floods and

wild fires), real time data and

historical data to multiple users

C Yes/No

Users do not

receive tailored weather products

None None

System for

fire and flood

weather products

established

Fire weather and

flood forecasts

distributed to users and historical data

digitized

Bi-annual and annual

project

reports

Project Database IEWE

Institutional capacity of

hydromet service strengthened

through training

N Yes/No

Limited access to international

practices and

knowledge

None None None

Training to

hydromet services staff provided

Bi-annual and annual

project

reports

Project Database IEWE

Hydromet monitoring network

modernized N Yes/No

Antiquated manual

monitoring

network

None None None

New monitoring stations installed

and the old ones

refurbished.

Bi-annual and annual

project

reports

Project Database IEWE

Public Survey of households,

farmers, forest fire managers

used to assess value of

information

D n/a - - - - - - - -

12

Intermediate Result (Component 3 – Development of Building Codes): Improved legal framework for building construction

Revised Intermediate Result (Component 3): A roadmap for adoption of Eurocode 8 developed and approved

EU-compatible building codes,

including seismic compliance

developed

C Yes/No Outdated building

codes

None None None

Revisions to

building codes developed to

comply with

Eurocode 8

Annual progress

reports

Project database MoPWTT

Mechanism for licensing of

engineers developed D n/a - - - - - - -

Training for engineers program

developed R Yes/No None None None None Training materials

developed

Annual

progress reports

Project database MoPWTT

Intermediate Result (Component 4 – Catastrophe Insurance): Mechanisms for participating in catastrophic risk insurance is in place. Revised Intermediate Result (Component 4): n/a

All systems (products,

distribution system,

infrastructure, regulatory

framework and public

awareness mechanism) ready

for the launch of the

catastrophe insurance

R Yes/No No

Catastrophe

Insurance

None None SEEC CRIF

is established

Albania becomes a

member of SEEC CRIF; cat products

developed;

regulations and website ready to

support cat

insurance

Bi-annual

and annual

project reports

Project Database MoF

Europa Re

*Please indicate whether the indicator is a Core Sector Indicator (see further http://coreindicators)

**Target values should be entered for the years data will be available, not necessarily annually