Document of The World Bank Report No: 65654 v1 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE NATIONAL DISASTER VULNERABILITY REDUCTION PROJECT FIRST PHASE APL LOAN IBRD-7293 MAY 10, 2005 TO THE REPUBLIC OF COLOMBIA DECEMBER 13, 2011 Sustainable Development Department Colombia and Mexico Country Management Unit Latin America and the Caribbean Region 1 ABBREVIATIONS AND ACRONYMS APL Adaptable Program Loan DGR Directorate for Risk Management DPAD National Directorate of Disaster Prevention and Response DNP National Planning Department DRIS Disaster Risk Information System EA Environmental Assessment EBI Basic Investment Statistics EMP Environmental Management Plan FINDETER Municipal Finance Agency FM Financial Management FMR Financial Monitoring Reports FNC National Calamity Fund FY Fiscal Year GIS Geographic Information System GoC Government of Colombia GPC Risk Management Group IDEAM Institute for Hydrology, Meteorology and Environment Studies INGEOMINAS National Geological and Mining Institute INVIAS National Roads Institute ISR Implementation Status Report IP Implementation Progress MEN Ministry of Education MHCP Ministry of Public Finance and Public Credit MAVDT Ministry of Environment, Housing and Territorial Development MVCT Ministry of Housing, Cities and Territories MOPT Ministry of Transport and Public Works MPS Ministry of Social Protection PDMs Municipal Development Plans PDO Project Development Objective PNPAD National Disaster Prevention and Attention Plan POTs Land Use Plans SA Special Account SNPAD National System for Disaster Prevention and Emergency Response TA Technical Assistance VMA Vice Ministry for Environment VMVDT Vice Ministry for Housing and Urban Development Vice President: Pamela Cox Country Director: Gloria M. Grandolini Sector Manager: Guang Zhe Chen Task Team Leader: Niels B. Holm-Nielsen 2 COLOMBIA National Disaster Vulnerability Reduction Project First Phase APL P082429 CONTENTS Page A. SUMMARY ................................................................................................................ 1 B. PROJECT STATUS.................................................................................................... 1 C. PROPOSED CHANGES ............................................................................................ 3 D. APPRAISAL SUMMARY ......................................................................................... 5 ANNEX 1: RESULTS FRAMEWORK AND MONITORING ......................................... 6 ANNEX 2: REALLOCATION OF PROCEEDS ............................................................... 8 ANNEX 3: EXTENSION OF CLOSING DATE ............................................................. 12 3 COLOMBIA NATIONAL DISASTER VULNERABILITY REDUCTION PROJECT FIRST PHASE APL Restructuring Paper A. SUMMARY This Restructuring Paper summarizes the request from the Government of Colombia (GoC), dated August 19, 2011, to introduce changes in the Colombia National Disaster Vulnerability Reduction Project First Phase APL. This is a Level 2 Restructuring, and there is no change in the Project Development Objective (PDO). The three proposed changes are: a) reallocation of US$16.13 million from disbursement Category 2 (Recognizing Costs) to disbursement Category 1 (Investments), b) extension of closing date from December 31, 2011 to August 31, 2013, and c) increase in the Special Account (SA) quota for Category 1 from US$2 million to US$4.5 million. The Project was approved on May 10, 2005 and declared effective on November 29, 2005 for US$260 million. The first restructuring was approved in May 2009, in which US$150 million was cancelled and applied to the first Disaster Risk Management DPL with a CAT DDO, for a revised loan total of US$110 million with an undisbursed balance of $US59.5 million. The Project was subsequently restructured in March 2010 and May 2011 for the reallocation of resources from Category 2 to Category 1. The undisbursed balance as of November 23, 2011 was US$21.55 million (19.6% of loan proceeds). The Government of Colombia (GoC) is pleased with the investments made in vulnerability reduction (Category 1) by the executing agencies and has therefore requested the redistribution of funds to continue and boost these investments. Accordingly, the Borrower has proposed changes in the 2011-2013 outcome indicator targets that do not change the scope of activities but expand the reach of activities under Category 1. The Borrower has therefore requested the accompanying extension of the closing date and the increase in the SA quota to help the implementing agencies achieve the investment objectives planned for Category 1. B. PROJECT STATUS The project has made significant progress towards achieving its Project Development Objective. To date the GoC has complied with the attainment of the Project’s Outcome Indicator, and as a result 434 municipalities have hazard risk management programs which corresponds to 92% of the agreed target of 472 municipalities. Similarly, there has been significant progress in the Intermediate Outcome Indicators of the project components (see Annex 1). Component A (Disaster Risk Identification) shows 42% of the National System for Disaster Prevention and Emergency Response (SNPAD) integrated into the Disaster Risk Information System (DRIS), due to the establishment of information sharing agreements for several entities of SNPAD. Under Component B (Disaster Risk Reduction), 795 municipalities have received technical assistance on hazard risk reduction, corresponding to 111% of the target agreed, and equivalent to 714 municipalities. Progress is also evident in Component C (Institutional Development), with 80% of the draft of "Policy Guidelines for Settlements in High Risk Zones� 1 completed, and for Component D (enhanced capacity to promote risk awareness and emergency preparedness), under which 46 municipalities have been covered by the environmental education for risk management activities administered by Ministry of Housing, Cities and Territories (MVCT)1. Component E (Risk Financing) shows that 60% of the draft "Policy Guidelines for Risk Financing Protection Mechanisms� has been completed. The Bank team finds that the GoC’s request for reallocating funds to Category 1 is a clear indication of the success of the project given that the GoC seeks to increase the Bank’s financing for Technical Assistance. The current Implementation Summary Report (ISR) Rating (June 15, 2011) is ‘Satisfactory’ for both the Progress towards achievement of the PDO and the Overall Implementation Progress (IP). Progress in project implementation can be summarized through the following points: (i) expansion of budget available to fund Category 1 from US$10 million to US$21.5 million based on the first reallocation issued in March 25, 2010, and the second reallocation issued in May 11, 2011, (ii) satisfactory implementation of development objectives of the Project on agreed targets for 2010 and 2011, and (iii) satisfactory financial performance and budget execution of Category 1. Of the total loan amount of US$110 million, there is an undisbursed balance of US$21.55 million (19.6% of loan proceeds) as of November 23, 2011. Table 1 summarizes the project’s ISR ratings since January 2010. Table 1: Summary of ISR Ratings for the Project (last 3 ISRs) Date PDO IP FM Project Counterpart Procurement M&E Management Funding 06-15-11 S S MU S S S S 09-22-10 S S MU S S MS S 01- 21-10 S S MS S S S S Note: PDO stands for Project Development Objective (the indicator is measuring progress towards achievement of the PDO). IP is the Overall Implementation Progress, FM is financial management, and M&E is monitoring and evaluation. S means Satisfactory, MS Moderately Satisfactory, and MU Moderately Unsatisfactory. Financial Management (FM) for the Project is currently rated Moderately Unsatisfactory, as per the FM supervision of May 19, 2011, due to identified expenditures exceeding the defined procurement thresholds for Category 2. The Bank completed a review of these expenditures in November 2011, and found them to be eligible for Bank financing. In addition, it is not anticipated that the Government will fully execute loan proceeds associated with Category 2 based on low disbursement in 2010 (US$0.6 million) and in 2011 (US$0.3 million). Therefore, the Borrower’s request to allocate all remaining funds from Category 2 to Category 1 is in accordance with disbursement progress. Since the 1 The Ministry of Housing, Cities and Territories retains the technical and administrative functions of its predecessor, the former Ministry of Environment, Housing and Territorial Development (MAVDT). 2 reallocation is moving remaining resources from the category that has had low disbursement and caused low FM ratings, the Bank team expects that the rating will be upgraded during the next FM mission scheduled for December 6-7, 2011.There are no outstanding Audit Reports. C. PROPOSED CHANGES The proposed restructuring does not change the Project Development Objective (PDO), and the PDO continues to be achievable. The proposed changes are the following:  Closing date The Borrower has requested an extension of the closing date for the Project from December 31, 2011 to November 30, 2013. The proposed extension is necessary to fulfill the goals specified in the Project Appraisal Document. The Bank team believes that the Project could be completed in a period of 18 months based on an analysis of the implementation schedule, and to provide for contingencies, is therefore seeking approval of a 20 month extension. The GoC has been informed of this 20 month extension and has concurred. Thus, the revised closing date would be August 31, 2013. This will be the first extension of the project’s closing date. The Bank team believes that the extension is warranted, as Category 1 (Investments) activities have a longer implementation time frame than Category 2 (Recognizing Costs) activities, from where funds are being reallocated. This implies the reallocation of funds from small scale civil works for disaster risk reduction, towards upstream activities including disaster risk identification, municipal risk analysis, institutional development, awareness and preparedness, and risk financing  Financing Reallocation The Borrower has requested a reallocation from Category 2 (Recognizing Costs) to Category 1 (Investments). This implies the recategorization of funds away from small scale civil works for disaster risk reduction, towards upstream activities including disaster risk identification, municipal risk analysis, institutional development, awareness and preparedness, and risk financing. The proposed reallocation of US$16.13 million from Category 2 to Category 1 will have a positive impact on the Project's development indicators. The Project objectives financed with Category 2 funds have already been achieved. With additional funds under Category 1, the client is able to expand the coverage of the Project and raise the targets for the Project outcome indicators for 2011-2013. Therefore, the request is likely to have a positive effect on the Project's development impact. 3 Proceeds for the Loan will be reallocated as follows: Category of Allocation (US$) % of % of Loan Expenditure* Expenditures Financing to be Financed Current Current Revised Current Revised Category 1: 21,500,000.00 37,634,384.80 100% 14% 36.13% Goods, works, services, training, and Operating costs under Parts A, B.1, B.3, C, D and E.1 of the Project Category 2: 88,500,000.00 72,365,615.20 100% 86% 63.87% Goods, works, and services with respect to Risk Reduction Investments under Part B.2 of the Project * Note that Category 3, Critical Imports for disaster emergency assistance under Part E.2 of the Project, for US$150,000,000.00, 50% of expenditures to be financed, was cancelled as per the Project Restructuring of May, 2009. A DPL with CAT DDO was processed in its place.  Results/indicators The Borrower has requested a 23 month extension and proposed changes in the 2011-2013 outcome indicator targets that do not change the scope of activities but expand the reach (number of beneficiary municipalities and number of risk monitoring networks) of the capacity building activities in the original project design. With this restructuring, including the extension of the closing date by a period of 20 months, the project development objectives continue to be achievable. The updated targets include having 632 municipalities with action plans for incorporating Risk in Land Use Plans and/or Municipal Risk Management Plans (Baseline: 472). In addition, the Borrower proposes to have 1098 municipalities with technical assistance on hazard risk reduction, which corresponds to 100% of the municipalities in the country (Baseline: 714). Note also that this is 154% of the target agreed for 2010. Similarly, the updated target for the environmental 4 education for risk management component is to have 112 municipalities covered (Baseline: 88).  Special Account (Increase of threshold) The GoC has requested an increase on the threshold of the Special Account from US$2 million to US$4.5 million (a 125% of increase). This would help the implementing agencies to make progress on the commitments already established and achieve the investment objectives planned for Category 1 within the proposed period of time under the project extension. The estimated flow of funds for Category 1 is the following: Category 1: Estimated Disbursements (US$ million per Bank Fiscal Year (FY)) FY 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total First 0.05 0.35 2.0 2.0 1.1 3.2 3.4 4.0 2.0 18.1 semester Second 0.05 0.35 2.2 2.5 2.0 3.3 4.4 4.0 0.7 19.5 semester Cumulative 0.1 0.7 4.2 4.5 3.1 6.5 7.8 8.0 2.7 37.6 *Note that of the US$110 million Loan total, US$88.5 million has been disbursed. A total of US$21.5 million remains undisbursed, which would all now be under Category 1. At project completion, total disbursement for Category 1 should be US$37.6 million. D. APPRAISAL SUMMARY The only change in impact from the original project appraisal summary is technical (there is an increase in the targets for the project), as detailed below.  Technical The proposed changes do not change the scope of activities but expand the reach (e.g. number of beneficiary municipalities) of the capacity building activities in the original project design, as detailed in Annex 1. A revised implementation schedule and procurement plan (dated October 19, 2011) has been approved and is on file. 5 ANNEX 1: Results Framework and Monitoring COLOMBIA: National Disaster Vulnerability Reduction Project First Phase APL PDO Project Outcome Indicators Use of Project Outcome Indicators Current Proposed Current Proposed Current Proposed PDO is to strengthen Same 43% (472) of municipalities 58% (632) of YR 1: Program Methodology is Based on the positive national and local have hazard risk management municipalities designed, data collected and feedback obtained disaster risk program have hazard risk baselines are created previously, the GoC management capacity management YR 2-3: Follow up data upon discussion with program collection will allow to monitor the Bank team decided objectives to increase the YR 4-7: Adjust the program percentage of based on feedback from municipalities with previous years hazard risk management YR 8: Mainstream strategy and program. Monitoring undertake program evaluation will continue to ensure that the new target is reached. Intermediate Outcomes Intermediate Outcome Indicators Use of Intermediate Outcome Monitoring Current Proposed Current Proposed Current Proposed COMPONENT A: Same 100% of the SNPAD integrated Same Information obtained thus far Same to DRIS. 100% = 7 information through various supervision Increased capacity for sharing agreements with missions has confirmed the Monitoring will identifying and SNPAD entities legalized need to maintain the initial continue to ensure that monitoring risk (IDEAM, INGEOMINAS and target of 100%. the target is reached. IGAC)/7 convention scheduled Information sharing agreements including 3 entities have already been completed (June 2011 ISR) COMPONENT B: Same At least 65% (714) of At least 100% The high level of satisfactory Same municipalities are educated, (1098) of evaluations resulting from Local and sector trained and aware of hazard risk municipalities close and intense monitoring Close follow up is capacity for risk reduction are educated, from GoC motivated the planned to guarantee reduction improved trained and Government to increase the achievement of the new aware of hazard number of municipalities target. risk reduction receiving guidelines and/or workshop for risk reduction. Already, these activities have 6 been completed 111% (795 municipalities, June 2011 ISR). COMPONENT C: Same National policy defining Same Progress is satisfactory thus far Same government responsibility in with more than 80% of the Institutional capacity for disaster management and "Policy The team will continue disaster risk reconstruction Guidelines for Settlements in to monitor progress. management High Risk Zones" already strengthened “Resettlement Policy Guidelines completed (June 2011 ISR). for Settlements in High Risk Zones� will be issued Preparation of two policy proposals by DGR, to update Law 46 of 1988 and Decree Law 919 of 1989. COMPONENT D: Same 88 municipalities have received 112 The indicator was revised as Same in depth environmental municipalities the program of work associated Enhanced capacity to education for risk awareness have received in with Component D was defined The Bank team will promote risk awareness depth in 2009 with a more in-depth continue to monitor and emergency environmental training than originally progress. preparedness education for envisioned. Implementation Monitoring will risk awareness began in 2010 and the continue to ensure that associated targets were reduced the target is reached. then to reflect a more comprehensive program. According to the June 2011 ISR, this activity has been completed in 46 municipalities. COMPONENT E: Same Policy recommendations to Same Serious consultations between Same reduce government risk implementing agencies Strategy developed to exposure development (“Policy (MHCP-DNP) on the strategy Monitoring will cover the “residual risk� Guidelines for Financial to cover the “residual risk� of continue to guarantee of the State Protection Mechanisms against the state are taking place. the successful Disasters� ) and final action plan Progress is satisfactory thus far implementation of this adopted by MHCP by the end of with more than 60% of the component the project proposed document already completed (June ISR). 7 ANNEX 2: Reallocation of Proceeds COLOMBIA – National Disaster Vulnerability Reduction Project First Phase APL P082429 Loan No. 7293-CO Restructuring Paper 1. Proceeds for the Colombia, National Disaster Vulnerability Reduction Project First Phase APL, Loan No. 7293-CO, P082429 will be reallocated as follows: Category of Allocation (US$) % of % of Loan Expenditure* Expenditures Financing to be Financed Current Current Revised Current Revised Category 1: 21,500,000.00 37,634,384.80 100% 14% 36.13% Goods, works, services, training, and Operating costs under Parts A, B.1, B.3, C, D and E.1 of the Project Category 2: 88,500,000.00 72,365,615.20 100% 86% 63.87% Goods, works, and services with respect to Risk Reduction Investments under Part B.2 of the Project * note that Category 3, Critical Imports for disaster emergency assistance under Part E.2 of the Project, for US$150,000,000.00, 50% of expenditures to be financed, was cancelled as per the Project Restructuring of May, 2009. A DPL with CAT DDO was processed instead. 2. The project has made significant progress towards achieving its development objectives, as explained in the Project Status section of the Restructuring Paper. Progress in project implementation is Satisfactory. With this restructuring, the project development objectives continue to be achievable. A revised implementation schedule and procurement plan (dated October 19, 2011) has been approved and is on file. 3. The proposed reallocation is necessary to fulfill the goals of the Project. Category 1 has disbursed to date a total of US$15.2 million, leaving only US$0.3 million from the first reallocation as of June 30, 2011, and disbursement projections for 2011 and 8 2012 equal the total budget for this category as of the second reallocation, or US$21.5 million. It is not anticipated that the Government will fully execute loan proceeds associated with Category 2 based on low disbursement in 2010 (US$0.6 million) and in 2011 (US$0.3 million). Therefore, the Borrower’s request to allocate all remaining funds from Category 2 to Category 1 is in accordance with disbursement progress. 4. In addition, the GoC has requested approval to increase the threshold of the Special Account (used for Category 1) from US$2 million to US$4.5 million (a 125% increase). The GOC is making this request to allow the implementing agency to achieve the investment objectives planned for this category by the new closing date, including making progress on the commitments already established. As can be seen by the disbursements to date, the average amount of each Withdrawal Application is approximately US$0.8 million. For this reason, a ceiling of US$2 million could affect project implementation, which now falls entirely under Category 1. As per the arrangements for the Flow of Funds currently in place, component implementation for Category 1 requires an advance from the loan into a Special Account (SA), which is used to finance expenditures carried out by the implementing agency directly or by other agencies as per subsidiary agreements. The Bank team finds this request well grounded, since Category 1 will now total US$38 million, and Sas usually amount to roughly 10% of the amount. Category 1: Estimated Disbursements (US$ million per Bank Fiscal Year (FY)) FY 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total First 0.05 0.35 2.0 2.0 1.1 3.2 3.4 4.0 2.0 18.1 semester Second 0.05 0.35 2.2 2.5 2.0 3.3 4.4 4.0 0.7 19.5 semester Cumulative 0.1 0.7 4.2 4.5 3.1 6.5 7.8 8.0 2.7 37.6 *Note that of the US$110 million Loan total, US$88.5 million has been disbursed. A total of US$21.5 million remains undisbursed, which would all now be under Category 1. At project completion, total disbursement for Category 1 should be US$37.6 million. 5. Reallocated loan proceeds will be allocated on goods, works, services and training and operating costs under Components A (Disaster Risk Identification), B1 (Risk Analysis for Regional and Municipal Development Plans), B3 (Improving Effectiveness of Local Risk Reduction Measures), C (Institutional Development), D (Awareness and Preparedness), and E1 (Development of a Risk Financing Strategy) of the program which will include (Table 1): i. Further development and refinement of the integrated risk management information system to consolidate proper measurement and monitoring of local risk management activities, and to strengthen articulation with existing sectoral information systems (Component A1). ii. Continuation of equipment upgrading of national monitoring networks for seismology, accelerometers, and volcanology as defined in the 2010-2014 National Development Plan (Component A2). 9 iii. Enlarged geographical coverage of technical assistance to municipalities nationwide (from 65% to 100%) which includes an increase in the number of municipalities that have incorporated risk management in land use and territorial planning and that have developed Municipal Action Plans for Risk Management (Component B1 and B3). iv. Continuation of policy development through the establishment of regulatory norms to support updating of the regulatory framework defined under the National Plan for Prevention and Attention of Disasters through the formulation of a National Plan for Disaster Risk Management (Component C1). v. Continuation of the technical and administrative activities that facilitate coordination and articulation of the executing agencies involved with the implementation of the Project, with emphasis on the synergy of strategies for risk management and prevention at the municipal and regional levels (Component C2). vi. Continuation of strengthening capacity to promote risk awareness and emergency preparedness covering a total of 112 municipalities (Component D). vii. Further development of a national strategy for government disaster risk financial protection. The GoC already has included this commitment in the National Development Plan 2010-2014, under the Ministry of Finance and Public Credit (MHCP) (Component E). 10 Table 1: Resource Allocation of Recategorized Resources Total Appropriation 2011 Implementing Project Component Activity Agency (US $)* Equipment upgrading for INGEOMINAS A2 national seismic monitoring 5,340,464 network Implementation of integrated information system for the 920,111 A1 disaster prevention and relief. Technical assistance in local B1/B3 risk management at the 3,198,518 DGR municipal and departmental levels Support for strengthening policies and financial C1 instruments of Colombia 1,621,604 National Plan for Prevention and Attention of Disasters Improving the identification, A2 tracing and monitoring for IDEAM 2,129,164 early warning of hydro- meteorological hazards Implementation of a comprehensive risk INVIAS A1 management system of 927,580 transport networks for roads, rivers, railways and ports National environmental risk 319,213 D management training Prevention and mitigation of B1/B3 risks in land use plans in 744,831 territorial planning MAVDT Implementation of a technical coordination unit for the C2 reduction of fiscal 638,427 vulnerability to national disasters Design, training and 274,524 dissemination of the tools for E1 the management and transfer of natural disaster risk at the MHCP national level TOTAL USD $ 16,134,384.80 * Note: The total for these activities is US$16,114,436, the difference being due to the exchange rate projections for 2012-2013. 11 ANNEX 3: Extension of Closing Date COLOMBIA – National Disaster Vulnerability Reduction Project First Phase APL P082429 Loan No. 7293-CO Restructuring Paper 1. The closing date for the Colombia, National Disaster Vulnerability Reduction Project First Phase APL, Loan No. 7293-CO, P082429 will be extended from December 31, 2011 until August 31, 2013. 2. As discussed in the Project Status section of the Restructuring Paper, progress in project implementation is Satisfactory, and the project objectives continue to be achievable. 3. The proposed extension is necessary to fulfill the goals specified in the Project Appraisal Document. Furthermore, the Borrower is increasing the targets for 2011- 2013, as noted in the Proposed Changes section of the Restructuring Paper. As per the documents requesting restructuring and extension of the closing date, the new target is to have 58% of municipalities with action plans for incorporating Risk in Land Use Plans and/or Municipal Risk Management Plans; 100% of municipalities with technical assistance on hazard risk reduction; and 112 municipalities covered by the environmental education for risk management component administered by MVCDT. The Bank team considers that the GoC’s request for extending the project closing date and the increase in targets for Category 1 is evidence of the GoC’s engagement on the project. 4. The Borrower has in place an action plan to complete the project by the new closing date. This plan reflects the new targets for Category 1. A revised procurement plan (dated October 19, 2011) has been approved and is on file. 5. This will be the first extension of the project closing date. 12