Proposed Project for Accelerating Inclusive Jobs Growth for Youth in Nepal Pre-Appraisal Consultations (January 24 -February 7, 2019) Aide Memoire 1. During January 24-February 7, 2019, a World Bank Team' led by Jasmine Rajbhandary (Task Team Leader), and Ruchita Manghnani (Co-Task Team Leader) carried out Pre-Appraisal Consultations of the proposed Project for Accelerating Inclusive Jobs Growth for Youth in Nepal. This Aide Memoire (AM) summarizes the design of the Project as well as other critical agreements discussed during the consultations. The AM was discussed at the wrap-up meeting chaired by the Joint Secretary Mr. Shreekrishna Nepal, Ministry ofFinance (MOF) on February 7, 2019. A list of persons consulted is included in Annex 1. It was agreed during the wrap-up meeting that the final AM will be a public document as per the World Bank's Access to Information Policy. I. Proposed Project Scope 2. During consultations, the Bank and the government team agreed on project financing, component costs, disbursement arrangements and next steps. The Government requested the World Bank team to consider redesigning component 3 (Job Creation in the private sector), by replacing the grants with the subsidies to private sector with soft loans through commercial banks. Given that the other components are agreed, and re-designing component 3 may take some time, it was agreed that the component would be dropped for now, and the project processing will proceed. It was agreed that modalities for engaging private sector in job creation would continue to be explored during the project period. 3. Ministry of Labor, Employment and Social Security (MOLESS) disclosed the draft Environmental and Social Management Framework (ESMF) on their website on January13, 2019 and held a consultation on it on January 24, 2019. I. Proposed Project Development Objective 4. Given the removal of one component, the previously agreed Project Development Objective (PDO) "To create quality jobs and enhance labor market outcomes, especially for youth", will be revised accordingly. 1II. Proposed Project Components 5. Similarly, the project components will now be revised as follows: a. Strengthening of Employment Promotion Systems and Services b. Improving labor market out comes for vulnerable youth c. Capacity building, Monitoring and Evaluation (M&E) and Project Management. IV. Proposed Institutional and Implementation Arrangements 6. During this consultation, a few additional minor revisions were discussed and agreed which include (i) aligning the Project Management Unit (PMU) structure to the Prime Minister's Employment Program (PMEP) structure with two Under Secretaries; (ii) adding Memorandum of Understandings between MOLESS and the Local Government's (LGs), and MOLESS and the Provinces, as part of the implementation arrangements; (iii) ensuring one of the Employment Service Centre consultants in each LG has some project management responsibilities; and (iv) agreeing on amount of fund flow to LGs and the need to have established reporting mechanism for these funds. The proposed institutional and implementation arrangements remain as discussed in earlier AMs, except for agreements mentioned above. 1 Pre-Appraisal Team includes: Annu Rajbhandari (Environment Specialist), Anupama Shakya (Consultant), Dhruba Raj Pant (Safeguards Consultant), Jasmine Rajbhandary (TTL), Jaya Sharma (Sr. Social Development Specialist), Jyoti Maya Pandey (Social Protection Specialist). Kiran Baral (Procurement Consultant), Karishma Wasti (Agriculture Specialist), , Shambhu Uprety (Snr Procurement Specialist). Timila Shrestha (FM Specialist) and Tara Shrestha (Program Assistant) 1 V. Project Cost and Financing 7. Tentatively, the proposed International Development Association (IDA) financing for the Investment Project Financing (IPF) through credit will now be approximately be USD100 million for the period of five years, starting from FY2019/20. The detailed costing of the components has been prepared with the estimated component allocations as follows: a. Strengthening of Employment Promotion Systems and Services: USD54 million b. Improving labor market out comes for vulnerable youth: USD43 million c. Capacity building, Monitoring and Evaluation (M&E) and Project Management; USD13 million 8. IDA financing will complement government financing for PMEP. The government has allocated about USD30 million for PMEP in the current fiscal year. It is expected that the government will continue to allocate similar budget annually for PMEP over the project period. V. Project Preparation Work 9. The WB team will revise the project documents to reflect the agreed changes by mid March. MOLESS will revise the ESMF and draft Procurement Strategy for Development to align to the agreements. This will be completed by appraisal. The Bank team will continue working with MOLESS, National Nature Resources and Fiscal Commission, Budget Division/MOF and Financial Comptroller General Office to ensure that appropriate fund flow arrangements and reporting mechanisms from the LGs are established. VII. Partnerships 10. The World Bank team met with International Labor Organization, DFID and Oxford Policy Management (TA to PMEP under DFID support) during the consultations to discuss development partner coordination on WB support to MOLESS. VIII Next steps i. The Bank team and the official of MOF team agreed in principle to be ready to negotiate by April 22, 2019. 12. Proposed Revised Timeline. Table 1: Summary of Agreed Actions S. No Actions Responsibility Agreed Timeline 1. Revised ESMF MOLESS March 13, 2019 2. Revised Project Procurement Strategy for MOLESS/WB March 13, 2019 Development (PPSD) prepared 3. Appraisal WB March 15 - 18, 2019 4. 18-month procurement plan submitted to WB MOLESS March 22, 2019 5. Negotiations MOLESS/WB April 22, 2019 6. Board WB May 30, 2019 2 Annex 1 List of People Met Ministry of Finance * Mr. Shreekrishna Nepal, Joint Secretary, IECCD * Mr. Harishchandra Dhakal, Under Secretary, IECCD * Dr. Narayan Dhakal, Under Secretary, IECCD * Mr. Than Prasad Pangyani, Under Secretary, Budget Division * Mr. Gauri Shankar Upadhyay, Under Secretary, Budget Division * Mr. Ashish Shrestha, Section Officer, IECCD Ministry of Labor, Employment and Social Security * Mr. Prakash Dahal, Joint Secretary, PMEP * Dr. Lok Nath Bhusal, Under Secretary, PMEP * Mr. Mohan Niraula, Under Secretary, PMEP * Mr. Diwakar Ghimire, Under Secretary, Accounts * Ms. Bipana Gyawali, Section Officer, PMEP * Mr. Janardan Gautam, Section Officer, PMEP Financial Comptroller General's Office * Mr. Baburam Subedi. Deputy Financial Comptroller General * Mr. Anil Shrestha, Under Secretary, Statistical Analysis and Publication Section * Mr. Rudra Prasad Bhatta, Deputy Financial Controller, Budget Implementation Section 3