The World Bank Statistical Innovation and Capacity Building in Tonga (P171377) REPORT NO.: RES58971 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF STATISTICAL INNOVATION AND CAPACITY BUILDING IN TONGA APPROVED ON FEBRUARY 11, 2020 TO KINGDOM OF TONGA POVERTY AND EQUITY GLOBAL PRACTICE EAST ASIA AND PACIFIC REGION Regional Vice President: Manuela V. Ferro Country Director: Stephen N. Ndegwa Regional Director: Lalita M. Moorty Practice Manager: Rinku Murgai Task Team Leaders: William Hutchins Seitz, Taufik Ramadhan Indrakesuma The World Bank Statistical Innovation and Capacity Building in Tonga (P171377) ABBREVIATIONS AND ACRONYMS CPI Consumer Price Index CSU Central Services Unit E&S Environmental and Social FA Financing Agreement HIES Household Income and Expenditure Survey IFR Interim Unaudited Financial Reports ISR Interim Status and Results Report MTR Mid-term Review PC Project Coordinator PDO Project Development Objective RA Resident Advisor STEP Systematic Tracking of Exchanges in Procurement TOR Terms of Reference TSD Tonga Statistics Department The World Bank Statistical Innovation and Capacity Building in Tonga (P171377) BASIC DATA Product Information Project ID Financing Instrument P171377 Investment Project Financing Environmental and Social Risk Classification (ESRC) Low Approval Date Current Closing Date 11-Feb-2020 31-Dec-2026 Organizations Borrower Responsible Agency Kingdom of Tonga Project Development Objective (PDO) Original PDO To improve the quality and efficiency of welfare data collection, and accessibility to comparable welfare data in Tonga. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-D5430 11-Feb-2020 24-Mar-2020 07-May-2020 31-Dec-2026 2.00 .72 1.31 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Statistical Innovation and Capacity Building in Tonga (P171377) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. PROJECT STATUS 1. This Restructuring Paper seeks approval for a Level 2 restructuring of the Statistical Innovation and Capacity Building in Tonga Project (P171377). The proposed restructuring will revise the Legal Covenant in the Financing Agreement that requires a Resident Advisor (RA) to be hired for the duration of the project and serve on-location in Tonga. The restructuring is in response to the Government of Tonga’s letter to the World Bank, dated November 24, 2023, to revise the Legal Covenant regarding the RA. 2. The proposed restructuring does not change the Project Development Objective (PDO). No additional safeguard policies will be triggered. There will be no changes in the fiduciary arrangements and the financial management have been implemented with no outstanding Interim Unaudited Financial Reports (IFRs). 3. The Statistical Innovation and Capacity Building in Tonga Project was approved by the Board on February 11, 2020. The project became effective three months later, on May 7, 2020. Since effectiveness, the project has disbursed US$0.69 Million (34.29 percent), primarily in providing support on the Household Income and Expenditure Survey (HIES) 2020/21. Disbursements have remained low since the completion of HIES 2020/21, primarily due to the concentration of remaining planned survey activities in 2025. Several activities related to price survey data collection and analysis, report preparation, were delayed due to the underperformance of the Resident Advisor. 4. The project underwent a mid-term review (MTR) in May 2023. The review downgraded the project’s implementation progress and progress towards achievement of the development objective to Moderately Unsatisfactory. The downgrade was due to project activities preceding to MTR were progressing minimally or had not yet begun. After significant delays, the HIES poverty report was published, and the microdata was made open access. The data user feedback survey had not been conducted. The production of risk exposure maps had also not progressed, though the recruitment for a consultant has progressed. The rebasing of the consumer price index (CPI) and the development of the food and building materials price indices were also not completed. Corrective measures were discussed to bring the project activities back on track, including the hiring of short-term consultants to deliver project outputs and more proactive management from the implementing agency. 5. There has been progress on all stalled activities since the mid-term review. The microdata for the HIES 2015/2016 has been made open access, which will surpass the target for a PDO indicator at this stage of the project. The data user feedback survey is now being implemented, and a summary report is under preparation. The risk exposure maps and the work on price indices is expected to start in early 2024 following the onboarding of expert consultants selected at the end of 2023. A new project coordinator (PC) was onboarded in November 2023 and is expected to play a key role in continuing the progress made so far. In the most recent Interim Status and Results Report (ISR), progress towards achiving the PDO was assessed as moderately satisfactory while overal implementation progress was rated moderately unsatisfactory. 6. Both the Procurement and FM rating for the project is moderately satisfactory in the most recent ISR. The procurement of consultants has progressed, though behind schedule due to low capacity in procurement management while a new PC was being recruited. Both Systematic Tracking of Exchanges in Procurement (STEP) The World Bank Statistical Innovation and Capacity Building in Tonga (P171377) and the contract register were also out of date. The IFRs for December 2022 and July 2023 were returned for revisions but was not actioned until January 2024. The assets register is up to date, but the Tonga Statistics Department (TSD) will need to decide on the action for missing assets (either to replace or conduct another asset check for missing items). The FY23 audit was accepted by the World Bank and there are no outstanding project audits. The next audit for FY24 is due on 31 December 2024. In the last ISR, both project procurement and financial management were rated moderately satisfactory, and With the PC onboarded in November 2023, the updating of STEP and the contract register is more frequent and outstanding FM actions have also been completed. While the PC has been performing well since they started, the Central Services Unit (CSU) have been requested to continue providing hands-on support while the PC becomes more familiar with the project and Bank procedures. 7. The project was assessed as having low environmental and social (E&S) risks during preparation. The project is proceeding as planned and the E&S risk remains low, with all of the related documents (Environmental and Social Commitment Plan, Stakeholder Engagement Plan, Labor Management Procedures) and structures (Grievance Regress Mechanism) in place. No unanticipated risks have been identified during implementation and the Environmental and Social Standards are rated Satisfactory. B. RATIONALE FOR RESTRUCTURING 8. Based on the findings of the MTR, a Level 2 restructuring is proposed to revise project implementation requirements made during project preparation to better suit current project needs. The proposed Financing Agreement (FA) revision will be to revise the need for an RA position to be maintained for the duration of project implementation. The MTR found significant delays in areas under the RA’s responsibility. The RA was expected to supervise the rebasing of the consumer price index (CPI), the development of the Food Price Index, the Building Materials Price Index, and Producer Price Index, and the analytical training of Tonga Statistics Department (TSD) staff. The RA did not commence these activities prior to the contract end date (March 2023) and three months of pay was withheld and amended into an output-based contract instead. After an additional month of delays, the first deliverable on the CPI rebasing report was received in early May 2023 but did not pass technical scrutiny for publication, while the price indices were never delivered. Corrective measures were discussed during the MTR, and given the extended delays affecting multiple outputs, a replacement RA was rejected as a solution. This was due to TSD’s preference to reduce the risk of one long-term consultant’s performance affecting several outputs. Instead, it was agreed that the RA’s expected outputs can be completed by several short-term expert consultants instead, each covering different sections of the RA’s TOR. Each activity will integrate training and capacity building activities with TSD staff. A price indices consultant would be recruited to conduct the CPI rebasing, develop the price indices, and travel to Tonga to conduct training for TSD staff, which can be covered within the existing budget. No analytical training was delivered by the RA and TSD will update their list of training priorities with suggestions for organizations to conduct the training either virtually or in-person. Since an RA will no longer be required for successful completion of these activities, the legal covenant can be amended to stipulate that staff or resources are maintained for the duration of the project in place of an RA. 9. The recruitment for consultants to complete the outputs formerly assigned to the RA has been progressing well. A price indices consultant is in contract negotiations and is expected to start in late-January 2024. The rebasing of the CPI is to be completed remotely before the consultant will travel to Tonga to conduct training and review the price collection procedures ahead of development the price indices. A Terms of Reference (TOR) for a new statistics advisor is also being drafted to provide technical advice and to conduct training at TSD. Additional consultants will also be recruited in 2024 to fulfil the training and advisory tasks identified by TSD. The World Bank Statistical Innovation and Capacity Building in Tonga (P171377) II. DESCRIPTION OF PROPOSED CHANGES A. SUBSTANTIVE CHANGES PROPOSED 10. Financing Agreement Amendment: Amend Schedule 2, Section I.A.2., which stipulates maintaining a Resident Advisor position for the duration of the project implementation. III. SUMMARY OF CHANGES Changed Not Changed Legal Covenants ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ The World Bank Statistical Innovation and Capacity Building in Tonga (P171377) Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LEGCOV_TABLE LEGAL COVENANTS Loan/Credit/TF Description Status Action The Recipient shall vest the overall Project implementation and management responsibilities in its IDA-D5430 Complied with No Change TSD. (Section I.A.1 of Schedule 2 to the Financing Agreement) The Recipient shall: (a) by not later than three months after the Effective Date, recruit or appoint a resident advisor within TSD, with terms of reference, qualifications and experience satisfactory to the Association, who shall be responsible for, inter alia, After delay complied IDA-D5430 Revised carrying out technical aspects of Project with implementation; and (b) thereafter maintain such position throughout the Project implementation period. (Section I.A.2 of Schedule 2 to the Financing Agreement) To facilitate the carrying out of the Project, the Recipient shall maintain at all times during Project implementation, staff and resources satisfactory to the Proposed Bank, for the purpose of inter alia, carrying out CD technical aspects of the Project implementation in accordance with the provisions of this Agreement and the Project Operations Manual. The World Bank Statistical Innovation and Capacity Building in Tonga (P171377) The Recipient shall: (a) by not later than three months after the Effective Date, recruit or appoint a Project coordinator (and any other consultants and/or staff as may be necessary), with terms of reference, qualifications and experience satisfactory to the Association, to form a Project Implementation Team within TSD, and such team shall be: (i) led by the Recipient’s Government Statistician; and (ii) responsible for, inter alia, carrying out fiduciary aspects of Project After delay complied IDA-D5430 No Change management and implementation, including with procurement, financial management, accounting, disbursement, monitoring and evaluation, implementation of ESS measures, stakeholder coordination, and compliance with reporting requirements, with support from the Central Services Unit; and (b) thereafter maintain such arrangements throughout the Project implementation period (Section I.A.3 of Schedule 2 to the Financing Agreement) The Recipient shall provide TSD and the Central Services Unit at all times with adequate funds and other resources, mandate/functions, and with qualified and IDA-D5430 experienced personnel in adequate numbers, as shall be Complied with No Change necessary to accomplish Project objectives as further detailed in the Project Operations Manual. (Section I.A.4 of Schedule 2 to the Financing Agreement) The Recipient shall: (a) by not later than three months after the Effective Date, prepare and adopt a Project Operations Manual; and (b) thereafter ensure that the After delay complied IDA-D5430 No Change Project is carried out in accordance with the Project with Operations Manual. (Sections I.B.1 and I.B.2 of Schedule 2 to the Financing Agreement) The Recipient shall prepare and furnish to the Association, by not later than March 1 of each year during the implementation of the Project, for the Association’s review and approval, an Annual Work Plan IDA-D5430 and Budget for the Project. The Recipient shall ensure Complied with No Change that the Project is implemented in accordance with the Annual Work Plan and Budget approved by the Association for the respective fiscal year. (Sections I.C.1 and I.C.2 of Schedule 2 to the Financing Agreement) The World Bank Statistical Innovation and Capacity Building in Tonga (P171377) By not later than twelve (12) months after the date the last interview has been conducted under the HIES for the year 2020/2021, the Recipient shall make the HIES report and the anonymized household level unit record IDA-D5430 Expected soon No Change data for the year 2020/2021, in form and substance satisfactory to the Association, publicly available in a manner acceptable to the Association. (Section IV.1 of Schedule 2 to the Financing Agreement) The Recipient shall carry out, jointly with the Association, by not later than three years after the IDA-D5430 Effective Date, or such other period as may be agreed Complied with No Change with the Association, a mid-term review of the Project. . (Section II.2 of Schedule 2 to the Financing Agreement)