The World Bank Emergency Operation for Development (P155732) REPORT NO.: RES26715 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF EMERGENCY OPERATION FOR DEVELOPMENT APPROVED ON JULY 7, 2015 TO MINISTRY OF FINANCE SOCIAL, URBAN, RURAL AND RESILIENCE GLOBAL PRACTICE MIDDLE EAST AND NORTH AFRICA Regional Vice President: Ferid Belhaj Country Director: Saroj Kumar Jha Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager/Manager: Ayat Soliman Task Team Leader: Ibrahim Khalil Dajani The World Bank Emergency Operation for Development (P155732) ABBREVIATIONS AND ACRONYMS The World Bank Emergency Operation for Development (P155732) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P155732 Investment Project Financing Original EA Category Current EA Category Approval Date Current Closing Date 07-Jul-2015 30-Jun-2020 Organizations Borrower Responsible Agency Ministry of Health,Ministry of Electricity,Ministry of Construction, Housing, Municipalities and Public Works,Reconstruction Fund for Areas Affected by Terroristic Operations, C/O Dr. Mustafa Hiti,Ministry of Agriculture - C/O Dr. Hamid Ali Hadwan, Director General of Plant Protection Department,Ministry of Education, Ministry of Finance - C/O Dr. Maher Johan, Acting Deputy C/O Mr. Sabah Khalaf Jebur, Director General,Ministry of Minister Water Resources,Anbar Governorate,Diyala Governorate, C/O Muthanna Ali Mahdi al-Tamimi, Governor,Nineveh Governorate, C/O Ameen Ibrahim Fanash, Deputy Governor for Planning,Salah Ad-Din Governorate,Ministry of Construction, Housing, Municipalities and Public Works - Public Buildings Directorate Project Development Objective (PDO) Original PDO The Project is to support the Republic of Iraq in the reconstruction of damaged infrastructure and the restoration of public services delivery in Targeted Municipal Areas. OPS_TABLE_PDO_CURRENTPDO The World Bank Emergency Operation for Development (P155732) Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-87930 31-Oct-2017 31-Dec-2022 400.00 0 400.00 IBRD-85200 07-Jul-2015 12-Jul-2015 18-Sep-2015 30-Jun-2020 350.00 185.25 164.75 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. The project is progressing towards achieving its development objectives. Over the past 2.5 years of implementation, substantial improvement has been witnessed with both commitment and disbursement rates almost doubling from one year to another. Already US$ 253 million (72% of the loan proceeds) has been committed and US$ 180 million (51.4% of the overall loan proceeds) has been disbursed towards key project activities. i.e. restoring electricity infrastructure and connectivity; restoring municipal water and sanitation services; restoring transport infrastructure (roads and bridges); restoring health services; and technical assistance towards rebuilding trust between the Iraqi citizens and the elected government. 2. The key results indicators for EODP have already been overachieved i.e. the number of beneficiaries has reached 3.5 million in over 30 cities in five governorates (Diyala, Salah Ad-Din, Anbar, Baghdad and Ninawa) compared to 860,000 in seven cities in two governorates (Diyala and Salah Ad-Din) at project appraisal. The higher results were achieved by expanding the project geographic coverage during implementation and as more areas were liberated from ISIS and the urgent need to reconstruct the damaged infrastructure and to reinstate the services. This achievement is also measured in terms of restored access to: electricity, water and sanitation services, markets, active health and educational centers. Temporary employment to skilled and unskilled laborers (including Internally Displaced People (IDPs)), indirect support to women start-up businesses such as plantations and transport of agriculture products and construction materials have also been important benefits. 3. Specific achievements can be summarized as follows: a) 186 special municipal public works machinery and equipment (backhoes, dumper trucks, street sweepers, water tankers and garbage compactors) and 3,120 garbage containers for solid waste management system) have been supplied; b) 23 bridges have been reconstructed and 300km of roads have been rehabilitated to reconnect communities with each other and facilitate access to services; key electricity equipment such as transformers and substations have been supplied and installed; and the first lot of The World Bank Emergency Operation for Development (P155732) ambulances have been delivered and now operational (the second lot has arrived at Um Qasr Seaport) while the remaining lots and mobile clinics are expected over the next 6 months (also delivered in lots). 4. Social and Environmental Safeguards: The project remains classified as Category B for safeguards purposes. The ESMF which has been prepared for the parent EODP and the EODP-AF, consulted and disclosed, will remain to be the main safeguard instrument, and continue to be adequate for the new activities being introduced under the MoWR related to the repair of the damaged water and irrigation infrastructure explained below. The ESMF will be used to determine a) non-eligible subprojects and b) types of safeguard instruments to be prepared, consulted, Bank reviewed and cleared and disclosed for each eligible subproject to be undertaken under each component. The safeguard operational policies triggered for EODP and EODP-AF remain unchanged (OP4.01, OP4.11, OP4.12, OP 7.50 and OP4.09 are triggered). Due to the limited technical capacity in Iraq and in MoWR, the project will rely on external consultants to prepare the necessary safeguard instruments for the activities under the different subprojects, including those under MoWR, in accordance with the ESMF requirements updated under the Additional Financing dated September 20 2017. In addition, the Bank safeguards task team will support all PMTs by providing close support and capacity building events. 5. Procurement: The performance of the PMTs, with the exception of the MOH-PMT, has been satisfactory. No deviation from the World Bank procurement guidelines has been recorded. To mitigate the shortcomings at the MOH- PMT, the Ministry of Health has acquired the services of UNOPS to supply the mobile clinics and ambulances. The procurement arrangements currently in place for the project in light of the new component are adequate; no changes to procurement arrangements are needed and the procurement plan will be updated to include the new activities. 6. Financial Management: Under the proposed restructuring, (Ministry of Electricity (MoE), Ministry of Municipalities and Public Works (MoMPW), Ministry of Construction and Housing (MoCH), Ministry of Health (MoH) and Reconstruction Fund for Areas Affected by Terroristic Operations (REFAATO)) will continue using the same FM and disbursement arrangements, including staffing, Internal controls, accounting and reporting, auditing and budgeting. There are no overdue IFRs or outstanding audit reports. The project audit report of the year ended December 31, 2017, was submitted with slight delay. The auditor issued unqualified “clean” opinion on the consolidated financial statements and management letter did not report any significant issues. 7. Under this restructuring, two Implementation agencies (MoCHMPW)/Public Building Directorate (PBD) and Ministry of Water Resources (MoWR)) were added to the project. A FM assessment was already conducted to (MoWR) during the preparation of the EODP Additional Financing while a new FM assessment was conducted for MoCHMPW/PBD to determine whether it maintains acceptable FM arrangements. Owning to the fact that this is an emergency Project, a simplified FM approach was adopted. The assessment concluded that, with the implementation of agreed-upon actions, the proposed FM arrangements will satisfy the minimum requirements under OP/BP 10.00 for Projects in situations of urgent need of assistance or capacity constraints. Based on the assessment of MoCHMPW/PBD, the following FM risks were identified; i. Limited capacity to meet the Project’s financial management requirements; ii. Security conditions do not allow regular visits by the Bank team to perform physical verification; iii. Mobile clinics and ambulances are delivered to the intended areas or subject to theft; iv. Overall weaknesses and shortcomings in the control environment; v. Limited accounting and reporting systems in providing timely and comprehensive information; vi. geographically wide-scope components that could hinder maintaining proper communication and coordination with the different stakeholders; The World Bank Emergency Operation for Development (P155732) vii. Delays in making payments due to the shortfalls in the Iraqi banking sector; The following FM measures are implemented to mitigate FM-related risks related to the two newly added agencies: i. Centralized FM function within the PMT, with an FM team consisting of a Financial Officer, Accountant, and an internal auditor seconded from the ministry’s own staff; training on FM and disbursement will be provided to the new FM team; ii. A supervision firm will be hired to monitor the physical progress of each construction contract; iii. Ministry will work with governorates to provide the necessary protection to mobile clinics and ambulances; iv. Simplified accounting and reporting arrangements to give timely information on the Project financial performance and status; excel spread sheets will be used to record project financial transactions and generate simplified Interim Unaudited Financial Reports (IFRs); v. The two agencies will be added to the ongoing annual financial and technical audits; vi. The existing FM manuals will be updated for this Project documenting the procedures, inter alia, on internal controls, financial reporting and auditing, responsibilities’ and duties, flow of information, and other based on the MIM; vii. Opening Designated Account(s) (DAs) with sufficient advance in an acceptable bank. 8. Designated Account (DA): To ensure that funds are readily available for project implementation, two new DAs will be opened for the new Project Management Teams (PMTs) in U.S Dollar within an acceptable bank namely the Trade Bank of Iraq. Authorized signatories, names and corresponding specimens of signatures should be submitted to the Bank prior to the receipt of the first Withdrawal Application. The PMT will be responsible for submitting monthly replenishment applications with appropriate supporting documentation. The disbursement letter will be amended accordingly. 9. The proceeds of the Loan will be disbursed in accordance with the World Bank's disbursements guidelines that will be outlined in the Disbursement Letter and in accordance with the World Bank Disbursement Guidelines for Projects. Transaction-based disbursement will be used under this project. Accordingly, requests for payments from the Loan will be initiated through the use of Withdrawal Applications (WAs) either for direct payments, reimbursements and replenishments to the DAs. All WAs will include appropriate supporting documentation, including detailed Statement of Expenditures (SOEs) for reimbursements and replenishments to the DA 10. Third Party Monitoring Agent: Given the circumstances of Iraq, and due to the limited areas where the Bank team can travel to for project supervision purposes, a Third-Party Monitoring Agent (TPMA) was hired by the Bank with the objective to report on ground implementation and to ensure that funds executed by implementing agencies are utilized for the purposes specified in the loan agreement. This has worked effectively and reports from the field have been quite helpful to monitoring implementation and compliance. Due to Bank Budget constraint, the TPMA contract could not be renewed and the task team is currently relying on information provided by the PMTs and the Technical Auditor hired by the Client. II. DESCRIPTION OF PROPOSED CHANGES 11. Given the Government of Iraq’s requests dated September 6, 2017 and July 2, 2018, and in an effort to respond more effectively to emerging needs under EODP and to expedite the implementation of the project activities and reinstate the key services to the population in the cities liberated from ISIS, the task team recommends the following amendments to the Loan Agreement: The World Bank Emergency Operation for Development (P155732) a) revise Schedule 1 Part 1 related to “Restoring Electricity Infrastructure and Connectivity” to include procurement activities for “works activities” to support the supplied electricity related equipment. This would enable rapid reinstatement of services in the electricity especially in light of the limited government financing available to install the procured equipment under this loan. The Table in Paragraph 2 of Section IV.A would need to be amended accordingly (including “works” in the title of Category 1). b) revise Schedule 1 Part 4 related to “Restoring Health Services” to have two sub-parts, Part 4 (a) and Part 4 (b) as follows: Part 4 (a) Acquisition of mobile clinics, medical equipment, health services furniture and ambulances in selected areas; and Part 4 (b) provision of repair of damaged primary and secondary health services centers in Iraqi cities liberated from ISIS [to be carried out by a new PMT at the Public Building Directorate at Ministry of Construction]. Furthermore, Table in Paragraph 2 of Section IV.A will be amended by including “works” and creating a new Category 4 (A) for activities under Part 4 (b) with an allocation of USD 12.1 million from the overall allocation of Category 4. c) revise Paragraph 3.01 to reflect Parts 5(d).(i) and (iii) and 6(e) of the Project through the Reconstruction Fund. To this effect, revise Part 3 (b) of Schedule 1 “Provision of technical assistance for the design of a scheme for the provision of housing reconstruction subsidies (the “Housing Reconstruction Subsidy Scheme”)” to become under Part 5 (d) (iii). d) Revise Schedule 1 as follows: Introduce a Part 7 Emergency Repair of Water Control, Infrastructure and Irrigation Schemes: this component would support, in Selected Areas, (a) the emergency repair and maintenance of water control hydraulic infrastructure barrages, regulators and irrigation schemes including emergency repair (civil, electrical and mechanical) of headworks, raw water pumping stations, main canal water control structures, regulators, gates, groundwater wells, small canal bridges and culverts (including machinery such as excavators to clean rivers and canals, and shovels, trucks and other equipment for operation and maintenance of rehabilitated works; and engineering support to the ministry staff for supervision of the rehabilitation works in the targeted sites, quality control, and training and workshops); and (b) rebuilding of damaged regional Ministry of Water Resources (MoWR) offices and O&M offices. e) revise Schedule 2 paragraph I.A.2(a) to include establishing a new PMT under MoWR; f) revise Schedule 2 paragraph I.B.2 to include MoWR; revise the table under Section IV.A to include a new disbursement category for Ministry of Water Resources (MoWR) with an allocation of US$ 30 million from Category 6 “Unallocated” with eligible expenditures towards: Goods, works, non-consulting services, consultants’ services, and Operating Costs; and g) revise Section I of the Appendix to include a definition of the “Ministry of Water Resources” or “MoWR” means the Borrower’s Ministry of Water Resources, or any successor thereto. h) Revise Definition to include Public Buildings Directorate (PBD) of the Ministry of Construction, Housing, Municipalities and Public Works; 12. Note that the new part 7 of EODP (Loan #8520-IQ) will finance the same activities as those covered under part 8 of the EODP Additional Financing (Loan #8793-IQ), “Emergency Repair of Water Control Infrastructure and Irrigation Schemes”. The exact irrigation schemes and water control infrastructure to be financed under EODP part 7 are not The World Bank Emergency Operation for Development (P155732) identified yet but will be very similar to those selected under part 8 of the Additional Financing (extending the schemes and water control infrastructures already included in the AF or building new ones). These activities will therefore be financed from two different loans. This is justified by the fact that the reconstruction demand exceeds AF financing, due amongst other aspects to the additional reconstruction and maintenance needs caused by infrastructure damage resulting from the earthquake that hit Iraq in November 2017. 13. It is also worth noting that the government has discussed with the Bank additional revisions to the loan agreement. The Bank is awaiting the official request from to process those revisions as part of a later loan restructuring. III. SUMMARY OF CHANGES Changed Not Changed Change in Implementing Agency ✔ Change in Components and Cost ✔ Reallocation between Disbursement Categories ✔ Change in Disbursements Arrangements ✔ Change in Disbursement Estimates ✔ Change in Institutional Arrangements ✔ Change in DDO Status ✔ Change in Project's Development Objectives ✔ Change in Results Framework ✔ Change in Loan Closing Date(s) ✔ Cancellations Proposed ✔ Change in Overall Risk Rating ✔ Change in Safeguard Policies Triggered ✔ Change of EA category ✔ Change in Legal Covenants ✔ Change in Financial Management ✔ Change in Procurement ✔ Change in Implementation Schedule ✔ Other Change(s) ✔ Change in Economic and Financial Analysis ✔ Change in Technical Analysis ✔ Change in Social Analysis ✔ The World Bank Emergency Operation for Development (P155732) Change in Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_IA_TABLE IMPLEMENTING AGENCY Implementing Agency Name Type Action Ministry of Health Implementing No Change Agency Ministry of Electricity Implementing No Change Agency Ministry of Construction, Housing, Implementing No Change Municipalities and Public Works Agency Reconstruction Fund for Areas Affected by Implementing No Change Terroristic Operations, C/O Dr. Mustafa Hiti Agency Ministry of Agriculture - C/O Dr. Hamid Ali No Change Implementing Hadwan, Director General of Plant Agency Protection Department Ministry of Education, C/O Mr. Sabah Khalaf Implementing No Change Jebur, Director General Agency Ministry of Water Resources Implementing No Change Agency Anbar Governorate Implementing No Change Agency Diyala Governorate, C/O Muthanna Ali Implementing No Change Mahdi al-Tamimi, Governor Agency Nineveh Governorate, C/O Ameen Ibrahim Implementing No Change Fanash, Deputy Governor for Planning Agency Salah Ad-Din Governorate Implementing No Change Agency Ministry of Construction, Housing, New Implementing Municipalities and Public Works - Public Agency Buildings Directorate OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Restoring Electricity Restoring Electricity 120.00 120.00 Infrastructure and Connectivity Infrastructure and Connectivity The World Bank Emergency Operation for Development (P155732) Restoring Municipal Waste, Restoring Municipal Waste, 100.00 100.00 Water and Sanitation Services Water and Sanitation Services Restoring Transport Restoring Transport 250.00 250.00 Infrastructure and Services Infrastructure and Services Restoring Health Services 42.00 No Change Restoring Health Services 42.00 Technical Assistance 25.00 Technical Assistance 25.00 Project Management, Project Management, Sensitization, Communications 8.00 Sensitization, Communications 8.00 and Monitoring and Evaluation and Monitoring and Evaluation Restoring Agriculture Restoring Agriculture 30.00 30.00 Productivity Productivity Restoring Education Services 35.00 Restoring Education Services 35.00 Restoring Basic Municipal Restoring Basic Municipal Infrastructure and Services and Infrastructure and Services and 60.00 60.00 Preserving Cultural Heritage Preserving Cultural Heritage Assets Assets Emergency Repair of Water Emergency Repair of Water Control, Infrastructure and 30.00 No Change Control, Infrastructure and 30.00 Irrigation Schemes Irrigation Schemes Unallocated 50.00 No Change Unallocated 50.00 TOTAL 750.00 750.00 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IBRD-85200-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: GD;works;NCS;CS;IOC Parts1&6a of Project 70,000,000.00 59,497,958.84 70,000,000.00 100.00 100 iLap Category Sequence No: 2 Current Expenditure Category: GD;works;NCS;CS;IOC Parts2;5a,d&6b Project 62,000,000.00 25,900,761.24 62,000,000.00 100.00 100 The World Bank Emergency Operation for Development (P155732) iLap Category Sequence No: 3 Current Expenditure Category: GD;works;NCS;CS;IOC Parts3;5b,c&6c Projct 137,000,000.00 69,485,821.80 137,000,000.00 100.00 100 iLap Category Sequence No: 4 Current Expenditure Category: GD;NCS;CS;IOC Parts 4;5e & 5f & 6d Project 40,100,000.00 10,078,886.92 18,000,000.00 100.00 100 iLap Category Sequence No: 5 Current Expenditure Category: GD;NCS;CS;IOC;TRG;WSH 5d,i& 6e Project 9,200,000.00 1,245,006.06 9,200,000.00 100 iLap Category Sequence No: 6 Current Expenditure Category: UNALLOCATED 30,825,000.00 0.00 825,000.00 Current Expenditure Category: GD;works;NCS;CS;IOC for Parts 4(b)(i) of the iLap Category Sequence No: 4(B) Project 0.00 0.00 12,100,000.00 100 iLap Category Sequence No: 7 Current Expenditure Category: GD;works;NCS;CS;IOC Parts 7 Project 0.00 0.00 30,000,000.00 100 Current Expenditure Category: GD;works;NCS;CS;IOC for Parts 4(b)(ii) of the iLap Category Sequence No: 4(C) Project 0.00 0.00 10,000,000.00 100 Total 349,125,000.00 166,208,434.86 349,125,000.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2016 36,875,000.00 36,875,000.00 2017 90,000,000.00 90,000,000.00 The World Bank Emergency Operation for Development (P155732) 2018 120,000,000.00 120,000,000.00 2019 103,125,000.00 80,000,000.00 2020 0.00 23,125,000.00 2021 0.00 0.00 2022 0.00 0.00 2023 0.00 0.00 Note to Task Teams: End of system generated content, document is editable from here.