The World Bank Horticulture Development Project (P133703) REPORT NO.: RES54785 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF HORTICULTURE DEVELOPMENT PROJECT APPROVED ON JUNE 12, 2014 TO REPUBLIC OF UZBEKISTAN AGRICULTURE AND FOOD EUROPE AND CENTRAL ASIA Regional Vice President: Anna M. Bjerde Country Director: Tatiana A. Proskuryakova Regional Director: Sameh Naguib Wahba Tadros Practice Manager/Manager: Frauke Jungbluth Task Team Leader(s): Dilshod Khidirov The World Bank Horticulture Development Project (P133703) I. BASIC DATA Product Information Project ID Financing Instrument P133703 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 12-Jun-2014 30-Jun-2023 Organizations Borrower Responsible Agency International Strategic Center for Agri-Food Republic of Uzbekistan Development (ISCAD, former UZAIFSA) Project Development Objective (PDO) Original PDO The project development objective is to enhance the productivity and profitability of horticulture sector in the project area. Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-88240 30-Jan-2018 17-May-2018 25-Jun-2018 30-Jun-2023 500.00 476.37 23.63 IBRD-83930 12-Jun-2014 08-Apr-2015 05-Oct-2015 30-Jun-2023 150.00 146.36 3.64 TF-A7910 07-Sep-2018 07-Sep-2018 10-Nov-2018 28-Feb-2023 19.28 20.06 2.16 The World Bank Horticulture Development Project (P133703) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No II. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES 1. The proposed restructuring seeks a project closing date extension of the Horticulture Development Project's Additional Financing (AF) (Loan #8824) from June 30, 2023 to June 30, 2024 (12 months) and an extension of the closing date of the Recipient-executed EU Trust Fund (RETF) from February 28, 2023 to June 30, 2024 (15 months). The restructuring is sought to allow to make use of the accumulated savings in the amount of US$ 11,233,923.18 million under the IBRD AF and to complete the ongoing contracts/activities under the EU RETF. No extension of the parent/original IBRD loan (#8393) is being sought and the loan will close on June 30, 2023. The cumulative extension of the EU Grant Agreement now totals 36 months. 2. The Addendum to the Parent TF (072780) Administration Agreement to extend the RETF closing date to June 30, 2024 (with the end disbursement date extended to June 30, 2025) was approved by the RVP on November 8, 2022, and the Administration Agreement signed between the Bank and the EU on February 25, 2023. 3. The Borrower (Ministry of Finance), in its letter dated December 27, 2022, requested the Bank to extend the closing dates of the Loan Agreement (#8393), AF Loan Agreement (#8824) and EU Grant Agreement (#TF0A7910) to allow implementing agency to complete the remaining activities. Following the clarifications from the Ministry of Finance and Project Implementation Unit, the reallocation amount would be US$11,233,923.18 million savings under IBRD AF from Component 1 (Agriculture Support Services) to Component 2 (Access to Finance). 4. The project has been performing well throughout its implementation period, as evidenced by the long-sustained satisfactory DO and IP ratings. To-date, the original IBRD loan (#8393) has disbursed 98%, the AF Loan (#8824) - 95% and the EU RETF grant – 90%. Overall, the project is on track towards meeting its development objectives. Two out of three PDO-level indicators, on horticulture productivity and profitability, have exceeded their target values, and the remaining PDO indicator on ‘the Change in aggregate portfolio lending by participating financial institutions to horticulture sector’ is expected to be fully achieved by the proposed extended closing date. The intermediate results indicators (18) are mostly on track with four already overachieving the targets. There are no pending audit reports and IFRs for the project as of the time of this restructuring. 5. Component 1 - Agriculture Support Services: This component is strengthening the capacity of participating research institutes and plant protection services to provide demand driven, participative technology transfer that will help the farmers to respond to the emerging market opportunities. Most of the planned activities are completed. Though not originally planned, based on the recommendation and agreement with the EU, savings under the EU RETF were used to initiate two covid-response contracts (EU/DC/04 and EU/DC/05) implemented by the participating research institutes to support household land plot owners, small-scale farmers and cooperatives on agro-technology and horticulture marketing development. 6. Also, implementation of other two technical assistance contracts (EU/QCBS/01 and for EU/QCBS/02) was delayed due to COVID-19 pandemic impact leading to the protracted contract signing. These contracts commenced in August 2020, but will not be completed until the current closing date of June 30, 2023 due to the seasonal nature of The World Bank Horticulture Development Project (P133703) the activities. The activities to be completed under these contracts remains of high relevance and would add value and support to the targeted farmers in the current situation, as well as further boost the achievement of the PDO and support to smallholder farmers. 7. Component 2 - Access to Finance: The component is enhancing the access to financial services for farmers and agribusinesses operating in the horticulture sector, to enable them to undertake the investments to strengthen their productivity and competitiveness. The implementation of the component is progressing well. To date, 98 percent of the credit line allocation (or US$ 609 million of the total of US$ 621 million) have been disbursed, and the Participating Financial Institutions (PFI) training has provided good results leading to timely review and appraisal of sub-loan application. 8. Most PFIs have disbursed their allocated project credit resources to the final beneficiaries (Table 1). Undisbursed Subsidiary Loan balances only remain in Asaka Bank, the National Bank of Uzbekistan, and Asia Alliance Bank. The disbursement details and remaining balances per PFIs are provided in Table 1. The undisbursed subsidiary loan balance totaling US$ 11.6 million remain with three PFIs and expected to be disbursed by the end of extended closing date. Table 1: Signed Loan Agreement (SLA) Allocations and Disbursements by PFIs Regions Number of Total amount Average loan sub-loans (US$ million) size (US$ million) Karakalpakstan 16 12.5 0.78 Andijon 28 15.4 0.55 Bukhara 141 84.7 0.60 Jizzah 49 28.4 0.58 Kashkadaryo 60 33.4 0.56 Navoiy 22 18.4 0.83 Namangan 35 14.5 0.41 Samarkand 166 120.6 0.72 Syrdaryo 213 20.6 0.97 Surkhondaryo 44 36.2 0.82 Tashkent 119 102.4 0.86 Fargona 65 35.9 0.55 Khorezm 153 87.3 0.56 Total 1,111 610.3   9. Characteristics of the sub-loan portfolio. The component facilitated the following: (i) 241 sub-loans (US$ 89.1 million, the total capacity of 231,316 tons) for the establishment of cold storages; 666 sub-loans (US$ 383.1 million, the total capacity of 908 ha) for greenhouses and vegetable production; 69 sub-loans (US$ 49.4 million, the total capacity of 7,763 ha) for orchards and vineyards; 80 sub-loans (US$ 64 million, the total capacity of 232,630 tons) for the processing of agricultural produce; 36 sub-loans (US$ 19.2 million) for packing horticultural products; 7 sub- loans (US$ 1.5 million, the total capacity of 55 units) for agricultural machinery; 12 sub-loans (US$ 1.7 million, the total capacity of 40 units) for refrigerator truck; 1 sub-loan (US$ 0.9 million) for laboratory equipment; (ii) HDP and HDP AF The World Bank Horticulture Development Project (P133703) credit line facilities supported 185 sub-loans for female-owned agricultural businesses and 513 smallholder beneficiaries in the amounts of US$ 99 million and US$ 61.6 million, respectively; (iii) In terms of regional distribution (Table 2), most of the sub-loans were provided in Syrdaryo (213 sub-loans), Samarkand (166), Khorezm (153), Bukhara (141), and Tashkent (119). Table 2. Breakdown of sub-loans by regions Regions Number of sub-loans Total amount (US$ million) Average loan size (US$ million) Karakalpakstan 16 12.5 0.78 Andijon 28 15.4 0.55 Bukhara 141 84.7 0.60 Jizzah 49 28.4 0.58 Kashkadaryo 60 33.4 0.56 Navoiy 22 18.4 0.83 Namangan 35 14.5 0.41 Samarkand 166 120.6 0.72 Syrdaryo 213 20.6 0.97 Surkhondaryo 44 36.2 0.82 Tashkent 119 102.4 0.86 Fargona 65 35.9 0.55 Khorezm 153 87.3 0.56 Total 1,111 610.3   10. Following discussions with the Implementing Agency, it was agreed that pending contracts to be financed from the EU grant can be completed by September 30, 2023 for EU/QCBS/01 and EU/QCBS/02 contracts, and by May 30, 2024 for EU/DC/04 and EU/DC/05 contracts. It was also agreed with the Implementing Agency that the balance remaining under original IBRD loan (#8393) in the amount of US$ 3.64 million will be utilized for the planned activities until the current loan closing date of June 30, 2023. III. DETAILED CHANGES 11. This is the third restructuring of the project. The first restructuring was processed on September 13, 2017 to reallocate funds between the disbursement categories. The second restructuring included the extension of the EU Grant Agreement closing date to align with the closing dates of the IBRD Loans (#8393 and #8824). In response to the aforementioned requests from the Ministry of Finance/Borrower, the following changes ar e proposed under this Level II restructuring: • Changes to Components and Costs: With regards to IBRD Loan (#8824) - re-assignment of US$11,233,923.18 million savings from Component 1 Agriculture Support Services to Component 2 Access to Finance. • Reallocation between Disbursement Categories: With regards to IBRD Loan (#8 824) - reallocation of the amount of US$11,233,923.18 million from Category (1) Goods, works, non-consulting services, consulting services and Training under Part 1.1 (b) of the Project to Category (3) Investment and Working Capital Sub-loans and Lease Financings under Part 2(a) of the Project. The World Bank Horticulture Development Project (P133703) • Extension of Closing Date: (1) Loan Agreement (IBRD Loan #8824) to be extended by 12 months - from June 30, 2023, to June 30, 2024 (1st extension), and (2) Grant Agreement (EU Grant #TF0A7910) to be extended by 15 months from February 28, 2023 to June 30, 2024 (2nd extension; the cumulative extension is 36 months from the original closing date). The extension will not trigger changes to the Results Framework. • Change in Disbursement Estimates: With regards to IBRD Loan (#8824) - to reflect the updated disbursement projections given the extended implementation period. • Change in Implementation Schedule to reflect the extended implementation period. III. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IBRD-83930 Effective 30-Jun-2021 30-Jun-2023 30-Jun-2023 30-Oct-2023 IBRD-88240 Effective 30-Jun-2023 30-Jun-2024 31-Oct-2024 TF-A7910 31-Dec-2020 28-Feb-2023 30-Jun-2024 31-Oct-2024 REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Current Current Actuals + Proposed Disbursement % Ln/Cr/TF Expenditure Allocation Committed Allocation (Type Total) Category Current Proposed IBRD- G,W,non- 88240-001 CS,CS,TR, Part 20,361,400.00 8,462,218.00 9,127,476.82 100.00 100.00 Currency: 1.1. (b) USD Non- CS,CS,TR,IOC, 2,110,870.00 454,584.86 2,110,870.00 100.00 100.00 Parts 2(b) and 3 The World Bank Horticulture Development Project (P133703) Inv.and Work.Cap.SLs,Le 476,277,730.00 465,359,763.80 487,511,653.18 100.00 100.00 ase Fin.,P2a FRONT END FEE 1,250,000.00 1,250,000.00 1,250,000.00 Total 500,000,000.00 475,526,566.66 500,000,000.00