The World Bank Lao National Road 13 Improvement and Maintenance (P163730) REPORT NO.: RES52702 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF LAO NATIONAL ROAD 13 IMPROVEMENT AND MAINTENANCE APPROVED ON MAY 18, 2018 TO LAO PEOPLE'S DEMOCRATIC REPUBLIC TRANSPORT EAST ASIA AND PACIFIC Regional Vice President: Manuela V. Ferro Country Director: Mariam J. Sherman Regional Director: Ranjit J. Lamech Practice Manager/Manager: Benedictus Eijbergen Task Team Leader: Sombath Southivong The World Bank Lao National Road 13 Improvement and Maintenance (P163730) ABBREVIATIONS AND ACRONYMS AADT Annual Average Daily Traffic ADB Asian Development Bank AIIB Asian Infrastructure Investment Bank ASEAN Association of South East Asian Nations CBA Cost Benefit Analysis CPF Country Partnership Framework CQS Selection Based on Consultants’ Qualifications DA Designated Account DoF Department of Finance, Ministry of Public Works and Transport DoI Department of Inspection, Ministry of Public Works and Transport DoR Department of Roads, Ministry of Public Works and Transport DOT Department of Transport, Ministry of Public Works and Transport DPC Department of Planning and Cooperation, Ministry of Public Works and Transport DPWT Provincial Department of Public Works and Transport EGEP Ethnic Group Engagement Plan EGPF Ethnic Groups Policy Framework EIRR Economic Internal Rate of Return ESD/PTRI Environment and Social Division, PTRI, Ministry of Public Works and Transport ESHS Environmental, Social, Health and Safety ESIA Environmental and Social Impact Assessment ESMP Environmental and Social Management Plan GDP Gross Domestic Product GHG Green House Gas GoL Government of the Lao People’s Democratic Republic GRM Grievance Redress Mechanism GRS Grievance Redress Service ICB International Competitive Bidding ICR Implementation Completion and Results Report ICT Information and Communication Technology IDA International Development Association iRAP International Road Assessment Program IUFR Interim Unaudited Financial Report JICA Japan International Cooperation Agency KfW German KfW Development Bank (KfW Entwicklungsbank) LRSP/LRSP2 Lao Road Sector Project/ Lao Road Sector Project 2 M&E Monitoring and Evaluation MPI Ministry of Planning and Investment MPWT Ministry of Public Works and Transport NDF Nordic Development Fund NPV Net Present Value NR13 National Road 13 NSEDP National Socio-Economic Development Plan O&M Operation and Maintenance The World Bank Lao National Road 13 Improvement and Maintenance (P163730) ODA Official Development Assistance OP/BP Operational Policy/Bank Procedures OPBRC Output and Performance-based Road Contract PDO Project Development Objective POM Project Operations Manual QCBS Quality-Cost Based Selection RAP Resettlement Action Plan RFB Request for Bids RPF Resettlement Policy Framework RSA Road Safety Audit SDG Sustainable Development Goal SDR Special Drawing Rights STEP Systematic Tracking of Exchanges in Procurement TA Technical Assistance VOC Vehicle Operating Cost WBG World Bank Group The World Bank Lao National Road 13 Improvement and Maintenance (P163730) BASIC DATA Product Information Project ID Financing Instrument P163730 Investment Project Financing Original EA Category Current EA Category Full Assessment (A) Full Assessment (A) Approval Date Current Closing Date 18-May-2018 31-May-2023 Organizations Borrower Responsible Agency Lao People's Democratic Republic Project Development Objective (PDO) Original PDO To improve the road condition, safety and climate resilience on critical sections of National Road 13. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed COFN-C1610 04-Apr-2019 06-Jun-2019 31-Jul-2019 31-May-2023 40.00 18.79 21.21 IDA-62260 18-May-2018 23-Jul-2018 22-Jan-2019 31-May-2023 40.00 21.60 15.78 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Lao National Road 13 Improvement and Maintenance (P163730) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. This Project Restructuring Paper seeks approval of a Level 2 restructuring of the Lao National Road 13 Improvement and Maintenance Project. The Restructuring aims to: (i) utilize the remaining funds to improve and maintain an additional six-kilometer road section along the National Road 13 (NR13) North under Component 1.1 of the Project; (ii) reallocate project funds from Category 1 to Category 2; (iii) make changes to the Results Framework to reflect the proposed additional road section in the Project scope; (iv) amend the Environmental and Social Impact Assessment (ESIA) and Resettlement Action Plan (RAP) to account for additional impacts related to the extension of the road section along NR 13; (v) extend the closing date by 22 months (from the original May 31, 2023 to March 31, 2025) to carry out the works; and (vi) revise the disbursement schedule to align with the new closing date. The proposed changes are in response to the Ministry of Finance’s (MOF) letter to the World Bank, dated February 12, 2023, and constitute the second restructuring of the project. The first restructuring extended the co-financing effectiveness deadline of the Asian Infrastructure Investment Bank (AIIB) co-financing loan to July 31, 2019 and the date for submission of the project’s first technical audit report to September 30, 2020. A. Project Background 2. The NR13 Improvement and Maintenance Project, with financing of SDR 27.7 million SDR (US$40 million equivalent) from IDA Credit (IDA 6226-LA), was approved on May 23, 2018, and became effective on January 22, 2019. The project's current closing date is May 31, 2023. AIIB provided co-financing of US$40 million and Nordic Development Fund (NDF) provided parallel financing of EUR 8 million. The project supports implementation of road improvement, operation, and maintenance of the following road sections along NR13: (i) the Section Sikeut-Songpeuay Market (km 12 to km 31, a total of 19 kms), which is upgraded from a 2-lane to a 4-lane road; and (ii) the Section Songpeuay Market-Phonhong (km 31 to km 70, a total of 39 kms), which is improved along the existing 2-lane road; technical assistance and supervision, and project management activities. The Project’s Road improvement and maintenance activities are carried out through the implementation of an Output and Performance-Based Road Contract (OPBRC) using a design, build, maintain, operate, and transfer approach. 3. As of January 30, 2023, the Project has disbursed US$21.6 million from the IDA Credit (58.02 percent). According to current estimates, the project savings are, approximately, US$17.5 million, which includes US$ 6 million IDA, US$9 million AIIB, and US$3.2 million NDF. The physical progress on road works is 90 percent completed. The project has experienced some delays due to the impact of the COVID-19 pandemic and the lag in performance of civil works contractors caused by increasing fuel prices and the depreciation of the LAK currency. To date, most of these issues have been resolved, and the Ministry of Public Works and Transport (MWPT) is committed to completing the remaining civil works by the current closing date of May 2023. 4. The progress toward achieving the Project Development Objective (PDO) is Satisfactory per the recent Implementation Status and Results Report (ISR) archived in February 2023. The PDO is to improve the road condition, safety, and climate resilience on critical sections of National Road 13. The PDO remains relevant, and all original PDO level indicators remain achievable and relevant. Though the COVID pandemic caused some intermediate indicators to fall short of their targets, the project is getting back on track and the final target values of original intermediate indicators are expected to be met on time. 5. The Implementation Progress is Satisfactory. The project is in compliance with all legal covenants and financial audit requirements. Pursuant to paragraph 24 of the Investment Project Financing (IPF) policy, there are no The World Bank Lao National Road 13 Improvement and Maintenance (P163730) suspensions or audit issues (including an outstanding audit report), and there are no major issues related to fiduciary, safeguards, and procurement. Procurement, monitoring and evaluation, and counterpart funding are remains Satisfactory, and financial and project management are Moderately Satisfactory. The overall risk is Substantial. Environmental and Social Safeguard remain Moderately Satisfactory. B. Rationale for project restructuring 6. On February 24, 2023, MoF sent a request to the World Bank, AIIB, and NDF to utilize the project's remaining funds, totaling approximately US$17.5 million among the three institutions (of which US$6 million from the IDA credit), for the improvement and maintenance of an additional six-kilometer road section from Sikeut to Sikhai along NR13 North. This section is a bottleneck for the traffic flow from the northern part of the country through NR13 North to Vientiane, and is often subject to flooding, leading to poor road conditions and safety. With increasing traffic flow and the impact of climate change, this northern section of NR13 is becoming more vulnerable to flooding and road accidents. The remaining fund from IDA credit is proposed to co-finance the road improvement with AIIB and the counterpart funds (i.e., the MPWT’s Road Fund). The MoF’s request also includes the reallocation of funds from category 1 to 2 to cover the necessary consultant services for supervision, environmental and social monitoring, project management, and road safety campaigns and enforcement for the additional road section proposed to be financed by the project proceeds. 7. Through its request, MoF also confirm that costs of operation and maintenance of additional 6km road section in the period after the extended Closing Date will be covered by the Road Fund managed by MPWT until the end of the OPBRCs. For that purpose, MPWT has agreed to update the OPBRC Sustainability Plan to reflect the same. II. DESCRIPTION OF PROPOSED CHANGES 8. The proposed restructuring include: (i) adding the improvement and maintenance of an additional six- kilometer road section along NR13 into the scope of works under Component 1.1, (ii) reallocating financing in the amount of SDR 0.92 million from Category 1 to Category 2 to cover necessary consultant services for supervision, environmental and social monitoring, project management, and road safety for the additional road section; (iii) changing the Result Framework by adding an additional six kilometers into the length of (a) road upgraded from 2 to 4 lanes, with climate resilience measures (b) roads rehabilitated, and (c) roads transferred to performance based O&M phase under OPBRC ; (iv) amending the ESIA and RAP to capture additional impact related to the additional road section; (v) extending the closing date by 22 months (from the original May 31, 2023 to March 31, 2025), and (vi) revising the disbursement schedule to align with the new closing date. The MPWT has taken advance action for the procurement of the improvement of a six- kilometer road section, including launching the bidding processes on December 9th, 2022. 9. The project ESIA and RAP with the additional six - kilometer road maintenance and improvement scope have been prepared, cleared, and publicly disclosed on the Ministry of Public Works and Transport website on September 15, 2022, and November 15, 2022, as well as the Bank’s external website on November 4, 2022, and November 22, 2022, respectively. Extensive consultations with the project-affected persons have been conducted during the preparation of the RAP. The proposed additional road section is located in a densely populated area, and parts of house structures from 860 households and businesses extend to the right of way (RoW) on both sides of the road section. This poses social and environmental risks, such as insignificant and temporary land acquisition from households and businesses and risks of road accidents. All appropriate The World Bank Lao National Road 13 Improvement and Maintenance (P163730) impact and risk mitigation measures have been incorporated into the amended ESIA and RAP. This includes Grievance Redress Mechanism (GRM) within the MPWT, and implementing measures to mitigate and manage risks such as dust, noise, road safety, and resettlement through (i) mobilizing sufficient qualified consultants by the supervision team and the PMU, ii) clearly specifying technical specification for road safety activities in the bidding document and contract, and iii) allocating more resources for the road safety campaign and enforcement. 10. The revised results framework will be incorporated in an updated Project Operations Manual, expected to be adopted by MPWT by no later than April 30, 2023. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Loan Closing Date(s) ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Implementation Schedule ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Components and Cost ✔ Cancellations Proposed ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ The World Bank Lao National Road 13 Improvement and Maintenance (P163730) Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications COFN-C1610 Effective 31-May-2023 31-Mar-2025 31-Jul-2025 IDA-62260 Effective 31-May-2023 31-Mar-2025 31-Jul-2025 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-62260-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: ROAD IMPRVMNT WO (EXCL MW) PT. 1.1 25,300,000.00 14,035,223.76 24,380,000.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: GDS, CS, NON-CS, TR&OC PTS. 2.1&3 2,400,000.00 1,325,131.13 3,320,000.00 100.00 100.00 Total 27,700,000.00 15,360,354.89 27,700,000.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes The World Bank Lao National Road 13 Improvement and Maintenance (P163730) Year Current Proposed 2018 0.00 0.00 2019 0.00 300,000.00 2020 3,540,475.10 3,240,475.00 2021 10,000,000.00 2,231,646.00 2022 13,400,000.00 15,831,884.00 2023 15,000,000.00 10,630,000.00 2024 7,084,885.00 5,000,000.00 . The World Bank Lao National Road 13 Improvement and Maintenance (P163730) . Results framework COUNTRY: Lao People's Democratic Republic Lao National Road 13 Improvement and Maintenance Project Development Objectives(s) To improve the road condition, safety and climate resilience on critical sections of National Road 13. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Objective 1: Road Condition Road condition: Reduction in vehicle operating costs 0.00 0.00 0.00 0.00 20.00 20.00 20.00 on the project road (Percentage) Objective 2: Road Safety Road safety: Increase in average iRAP star rating of 1.00 1.00 1.00 1.00 3.00 3.00 3.00 the project road (Number) Objective 3: Climate Resilience Climate resilience: Project road upgraded and No No No No Yes Yes Yes improved, with climate resilient measures (Yes/No) PDO Table SPACE The World Bank Lao National Road 13 Improvement and Maintenance (P163730) Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Road Improvement and Maintenance Reduction in average IRI 7.00 7.00 7.00 7.00 3.00 3.00 3.00 (Number) Kilometers of road upgraded from 2 to 4 lanes, 0.00 0.00 5.00 7.00 19.00 19.00 25.00 with climate resilience measures (Kilometers) Action: This indicator has been Revised Kilometers of road improved on 2 lanes, with 0.00 0.00 10.00 26.00 39.00 39.00 39.00 climate resilience measures (Kilometers) Roads rehablitated (CRI, 0.00 0.00 15.00 32.00 58.00 58.00 64.00 Kilometers) Action: This indicator has been Revised Roads rehabilitated - non-rural (CRI, 0.00 0.00 15.00 32.00 58.00 58.00 64.00 Kilometers) Action: This indicator has been Revised Kilometers of roads transferred to performance 0.00 0.00 0.00 30.00 58.00 58.00 64.00 based O&M phase under OPBRC (Kilometers) The World Bank Lao National Road 13 Improvement and Maintenance (P163730) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Action: This indicator has been Revised Percentage of adjacent markets with improved pedestrian facilities, with 0.00 0.00 0.00 50.00 90.00 90.00 90.00 focus on safety of women traders and school children (Percentage) Share of women employed in paid jobs in 0.00 5.00 10.00 15.00 15.00 15.00 15.00 implementation of OPBRC (Percentage) Contractor’s workforce trained on ESHS, OHS and 0.00 100.00 100.00 100.00 100.00 100.00 100.00 GBV Code of Conduct (Percentage) Project beneficiaries (number), of which female 0.00 0.00 150,000.00 300,000.00 500,000.00 500,000.00 500,000.00 (percentage) (Number) Female project beneficiaries 0.00 0.00 47.00 47.00 47.00 47.00 47.00 (Percentage) Technical Assistance and Supervision Grievances registered related to delivery of the project addressed, with 0.00 90.00 90.00 90.00 90.00 90.00 90.00 disagrigated data by gender (Percentage) The World Bank Lao National Road 13 Improvement and Maintenance (P163730) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Total Number of MPWT staff received training on 0.00 0.00 10.00 25.00 40.00 40.00 40.00 OPBRC and related topics (Number) Number of MPWT female staff received training on 0.00 0.00 5.00 10.00 15.00 15.00 15.00 OPBRC and related topics (Number) IO Table SPACE The World Bank Lao National Road 13 Improvement and Maintenance (P163730)