The World Bank Lao PDR Financial Sector Safety Net Strengthening (P169194) Appraisal Environmental and Social Review Summary Appraisal Stage (ESRS Appraisal Stage) Public Disclosure Date Prepared/Updated: 01/31/2020 | Report No: ESRSA00210 Jan 31, 2020 Page 1 of 8 The World Bank Lao PDR Financial Sector Safety Net Strengthening (P169194) BASIC INFORMATION A. Basic Project Data Country Region Project ID Parent Project ID (if any) Lao People's Democratic EAST ASIA AND PACIFIC P169194 Republic Project Name Lao PDR Financial Sector Safety Net Strengthening Practice Area (Lead) Financing Instrument Estimated Appraisal Date Estimated Board Date Finance, Competitiveness Investment Project 1/24/2020 3/31/2020 and Innovation Financing Borrower(s) Implementing Agency(ies) Lao People’s Democratic Deposit Protection Office Republic Proposed Development Objective(s) Public Disclosure to strengthen the financial and institutional capacity of the Deposit Protection Office to fulfill its deposit insurance mandate. Financing (in USD Million) Amount Total Project Cost 35.00 B. Is the project being prepared in a Situation of Urgent Need of Assistance or Capacity Constraints, as per Bank IPF Policy, para. 12? No C. Summary Description of Proposed Project [including overview of Country, Sectoral & Institutional Contexts and Relationship to CPF] The proposed operation is in response to the Government’s August 2018 request for financing to increase DPO’s capitalization and strengthen its institutional capacity. The project is part of a broader strategy to strengthen the financial safety net, through strengthening the monitoring, supervision and resolution of deposit-making financial institutions, including mechanisms for timely payouts of depositors in the case of bank failures. The setting up of a credible Deposit Insurance System is important for financial sector stability, including maintaining public confidence, and protecting less sophisticated or small depositors. Jan 31, 2020 Page 2 of 8 The World Bank Lao PDR Financial Sector Safety Net Strengthening (P169194) D. Environmental and Social Overview D.1. Project location(s) and salient characteristics relevant to the ES assessment [geographic, environmental, social] The project in national in scope. There is no physical footprint. In the event of a bank failure, the project will help ensure that insured depositors, the overwhelming majority of whom are households, will not lose their savings. D. 2. Borrower’s Institutional Capacity The Depositor Protection Office (DPO) will serve as the implementing agency, with a subsidiary agreement with the Borrower (the Ministry of Finance). The DPO does not have prior experience with implementing World Bank projects. II. SUMMARY OF ENVIRONMENTAL AND SOCIAL (ES) RISKS AND IMPACTS A. Environmental and Social Risk Classification (ESRC) Low Environmental Risk Rating Low Environmental risk / impact is rated Low. The project will benefit nationwide by ensuring the depositors in the event of a bank failure through its two components, 1) The Capitalization of Deposit Protection Reserve Fund; and, 2) Institutional capacity building for Depositor Protection Office (DPO) and other members of financial safety net. The project will not finance any infrastucture and / or technical assistance that could conceivably result in any adverse environmental impacts. Physical environmental impacts or implications for future effects on the environment are highly unlikely. As the Public Disclosure project will not pose any negative impact on environment, the Borrower’s capacity to manage environmental risks and impacts is of very minor relevance. However, as part of World Bank’s Investment Project Financing, the DPO assigned staff will receive trainings on Environmental and Social Framework (ESF) to ensure adequate capacity to implement in future applicable Environmental and Social Standards (ESSs). No other relevant environmental risks were identified. Social Risk Rating Low The social risk is classified as low. The project will have no adverse impacts on people. The project will ensure that insured depositors, the majority of whom are households, will not lose their savings in the event of a bank failure. A public campaign, informed by a Public Awareness Strategy, is planned as part of the project to promote awareness of deposit insurance. Built into the campaign will be the necessary requirements for informing ethnic minority groups of project benefits. B. Environment and Social Standards (ESSs) that Apply to the Activities Being Considered B.1. General Assessment ESS1 Assessment and Management of Environmental and Social Risks and Impacts Overview of the relevance of the Standard for the Project: The project consists of two components: 1) The Capitalization of Deposit Protection Reserve Fund; and, 2) Institutional capacity building for DPO and other members of financial safety net. Jan 31, 2020 Page 3 of 8 The World Bank Lao PDR Financial Sector Safety Net Strengthening (P169194) Overall the project will have positive social impacts to insured depositors in the event of a bank failure. The project, as part of the second component, will promote public awareness and literacy on deposit insurance. An inclusive approach, that considers the language and cultural needs of different groups of people of Lao PDR, has informed the draft public awareness strategy. The project is nationwide in scope but will not finance any infrastructure and/or technical assistance that could conceivably result in any adverse environmental impacts. The Bank loan proceeds will only be invested in risk-free Government Bonds, which will not pose any physical footprint. ESS10 Stakeholder Engagement and Information Disclosure The main project stakeholder group is the banking industry including workers and depositors. As part of the institutional capacity building, public awareness and literacy on deposit insurance will be promoted. A draft Public Awareness Strategy is being finalised and which will cover requirements for member institutions to provide standard information on deposit insurance coverage to their clients and survey on public awareness about deposit insurance scheme. This Draft Strategy provides guiding principles in accordance with ESS10 principles for consistent, comprehensive, coordinated and a culturally appropriate approach to meaningful engagement. The Draft Strategy also makes clear the requirements for a feedback and complaint mechanism. Central to communicating to the public will be ensuring both that the strategy is implemented and a mechanism is in place to both take feedback Public Disclosure and receive complaints. B.2. Specific Risks and Impacts A brief description of the potential environmental and social risks and impacts relevant to the Project. ESS2 Labor and Working Conditions Workers likely to be relevant include direct workers (DPO staff) and contracted workers (consultants) providing technical assistance on systems strengthening and potentially interns. Policies and procedures are in place for staff in line with Government of Laos requirements. For consultants and interns a review will need be undertaken to identify gaps between what exists for contracting and ESS2 requirements. Any gaps will need to be addressed through the changes to contract conditions or existing policies and procedures. A Worker Grievance Procedure which covers all workers will also need to be developed, communicated and operationalised. ESS3 Resource Efficiency and Pollution Prevention and Management No activity associated with air emission, noise generation, and procurement of chemical container will be financed by the project. Energy and water use, and solid waste will be managed through BOL's office management regulations. ESS4 Community Health and Safety Jan 31, 2020 Page 4 of 8 The World Bank Lao PDR Financial Sector Safety Net Strengthening (P169194) No adverse community health and safety impacts are anticipated as a result of project activities. ESS5 Land Acquisition, Restrictions on Land Use and Involuntary Resettlement The activities for this project will not require the acquisition or conversion of any land nor will the activities restrict access to resources. ESS6 Biodiversity Conservation and Sustainable Management of Living Natural Resources The project will finance institutional and capacity building, none of the activities will be relevant for biodiversity or natural resources. ESS7 Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Local Communities The project is national in scope. The activities do not have a physical footprint. As part of the project, a public awareness strategy will be put in place. Requirements for ensuring meaningful consultation from all groups, including ethnic groups, has been mainstreamed as part of the approach to developing the strategy. There will be a need to ensure that what is proposed is indeed implemented. As part of the Strategy a survey is also planned on public awareness about deposit insurance scheme, any further information needed for inclusion will be incorporated into the survey design. Public Disclosure ESS8 Cultural Heritage The activities from this project will not result in impacts or risks to tangible or intangible cultural heritage. ESS9 Financial Intermediaries The project is not expected to make use of a Financial Intermediary. B.3 Other Relevant Project Risks All risks and impacts have been presented against the standards. C. Legal Operational Policies that Apply OP 7.50 Projects on International Waterways No This policy is not relevant to the project as it will not use or impact on any water resources. OP 7.60 Projects in Disputed Areas No The project will not be located in an area under legal or international dispute nor competing territorial claims. III. BORROWER’S ENVIRONMENTAL AND SOCIAL COMMITMENT PLAN (ESCP) Jan 31, 2020 Page 5 of 8 The World Bank Lao PDR Financial Sector Safety Net Strengthening (P169194) DELIVERABLES against MEASURES AND ACTIONs IDENTIFIED TIMELINE ESS 1 Assessment and Management of Environmental and Social Risks and Impacts ORGANIZATIONAL STRUCTURE: The DPO will establish and maintain an organizational structure with qualified staff (at least one 08/2020 specialist) and resources to support management of E&S risks. MANAGEMENT TOOLS AND INSTRUMENTS: The DPO will establish the Regulation on Project Workers Management related to labour and working 09/2020 standards in relation for contracted and volunteer workers to ensure alignment with the standards of the ESCP. CAPACITY SUPPORT: Training to commercial banks and Deposit-taking Microfinance Institutions on public awareness and 10/2020 handling customer inquiries/feedback. REGULAR REPORTING: The DPO will prepare and submit to the Association regular monitoring reports on the environmental, social, health and safety (ESHS) performance of the Project, including the implementation of the ESCP, 12/2020 status of preparation and implementation of E&S documents required under the ESCP, stakeholder engagement activities, functioning of the grievance mechanism(s). Public Disclosure INCIDENTS AND ACCIDENTS: The DPO will promptly notify the Association, through WB, of any incident or accident related to the Project which has, or is likely to have, a significant adverse effect on the environment, the public or 08/2020 workers. The DPO will provide sufficient detail regarding the incident or accident, indicating immediate measures taken or that are planned to be taken to address it. ESS 10 Stakeholder Engagement and Information Disclosure STAKEHOLDER ENGAGEMENT: The Public Awareness Strategy will be disclosed and implemented to ensure benefits of the project are 08/2020 effectively communicated to all groups. PROJECT GRIEVANCE MECHANISM: A feedback and grievance mechanism, as described in the public awareness strategy, will be prepare, 08/2020 adopted, communicated, and operationalised. ESS 2 Labor and Working Conditions LABOUR MANAGEMENT: The DPO will establish the policies related to the labor and working conditions for project workers, 09/2020 subcontractors and volunteers to ensure alignment with the ESF and implement these policies. Jan 31, 2020 Page 6 of 8 The World Bank Lao PDR Financial Sector Safety Net Strengthening (P169194) GRIEVANCE MECHANISM FOR PROJECT WORKERS: The DPO establish, communicate, maintain, and operate a grievance mechanism for all Project 09/2020 workers. ESS 3 Resource Efficiency and Pollution Prevention and Management An office management rule reflects resource efficiency and pollution prevention will be developed 07/2020 based on current BOL’s notice on energy efficiency. ESS 4 Community Health and Safety ESS 5 Land Acquisition, Restrictions on Land Use and Involuntary Resettlement ESS 6 Biodiversity Conservation and Sustainable Management of Living Natural Resources ESS 7 Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Local Communities ENGAGEMENT WITH INDIGENOUS PEOPLES: The DPO will implement the Public Awareness Strategy and Feedback and Grievance Mechanism, to 08/2020 ensure inclusion and benefits communicated appropriately to ethnic groups. ESS 8 Cultural Heritage ESS 9 Financial Intermediaries Public Disclosure B.3. Reliance on Borrower’s policy, legal and institutional framework, relevant to the Project risks and impacts Is this project being prepared for use of Borrower Framework? No Areas where “Use of Borrower Framework” is being considered: There are no specific areas where the Borrower's framework will be relied on for social and environmental risk. IV. CONTACT POINTS World Bank Contact: Michael Corlett Title: Senior Financial Sector Specialist Telephone No: 473-0678 Email: mcorlett@worldbank.org Borrower/Client/Recipient Borrower: Lao People’s Democratic Republic Implementing Agency(ies) Jan 31, 2020 Page 7 of 8 The World Bank Lao PDR Financial Sector Safety Net Strengthening (P169194) Implementing Agency: Deposit Protection Office V. FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects VI. APPROVAL Task Team Leader(s): Michael Corlett Practice Manager (ENR/Social) Susan S. Shen Cleared on 24-Jan-2020 at 10:49:25 EST Public Disclosure Jan 31, 2020 Page 8 of 8