The World Bank OECS Regional Tourism Competitiveness (P152117) REPORT NO.: XXXXXX RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF OECS REGIONAL TOURISM COMPETITIVENESS APPROVED ON APRIL 6, 2017 TO GRENADA SAINT LUCIA ST. VINCENT AND THE GRENADINES May 30, 2024 FINANCE, COMPETITIVENESS AND INNOVATION LATIN AMERICA AND CARIBBEAN Regional Vice President: Carlos Felipe Jaramillo Country Director: Lilia Burunciuc Regional Director: Oscar Calvo Gonzalez Practice Manager/Manager: Yira J. Mascaro Task Team Leader(s): Monica L. Parra Torrado Maria del Camino Hurtado The World Bank OECS Regional Tourism Competitiveness (P152117) ABBREVIATIONS AND ACRONYMS DO Development Objective FM Financial Management GRE Grenada GDP Gross Domestic Product IP Implementation Progress LC3 Caribbean Country Management Unit’s MEDTCA Ministry of Economic Development, Transportation and Civil Aviation MTICCI Ministry of Tourism, Investment, Creative Industries, Culture, and Information PCU Project Coordination Unit PDO Project Development Objective PIU Project Implementation Unit SLU Saint Lucia SVG Saint Vincent and the Grenadines UNESCO United Nations Educational, Scientific and Cultural Organization The World Bank OECS Regional Tourism Competitiveness (P152117) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P152117 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 06-Apr-2017 31-May-2024 Organizations Borrower Responsible Agency Grenada - Ministry of Finance,Saint Lucia - Department of Finance, Ministry of Finance Economic Development and Youth Economy,St. Vincent and the Grenadines - Ministry of Finance, Economic Planning and Information Project Development Objective (PDO) Original PDO The project development objectives are to (i) facilitate the movement of tourists within the participating countries using ferries;(ii) improve selected touristic sites; and (iii) strengthen implementation capacity for regional tourism market development. Current PDO The project development objective is to increase income at and around improved tourism sites, and strengthen institutional capacity to support the regional recovery from COVID-19. OPS_TABLE_PDO_CURRENTPDO The World Bank OECS Regional Tourism Competitiveness (P152117) Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-87340 06-Apr-2017 20-Apr-2017 31-Aug-2017 31-May-2024 6.00 4.84 1.16 IDA-60000 06-Apr-2017 20-Apr-2017 31-Aug-2017 31-May-2024 10.00 9.06 .94 IDA-60010 06-Apr-2017 16-May-2017 31-Aug-2017 31-May-2024 5.00 2.39 2.61 TF-A0988 17-Dec-2015 23-Dec-2015 23-Dec-2015 31-May-2018 .34 .34 0 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. PROJECT BACKGROUND AND RATIONALE FOR RESTRUCTURING 1. This Restructuring Paper seeks the approval of the Caribbean Country Management Unit’s (LC3) Country Director for a Level 2 Restructuring of the OECS Regional Tourism Competitiveness Project. The Project, with total financing of US$26 million, includes Grenada (GRE), Saint Lucia (SLU), and Saint Vincent and the Grenadines (SVG), and is financed by a US$6 million IBRD loan for Grenada, a US$15 million IDA credit for Saint Lucia (US$ 5M of which was cancelled), and a US$5 million IDA credit for SVG. The Project was approved on April 6, 2017, became effective on August 31, 2017, and has a closing date of May 31, 2024. The Government of SVG submitted their letter requesting the restructuring on May 27, 2024. 2. The restructuring responds to the Government of SVG’s requests for a cancellation of US$ 2,609,536.21 that will not be spent before the Project’s closing date. The undisbursed amount of US$ 2,609,466.21 (USD 70.00 short of the amount requested) under Category 1 will not be spent before the closing date of the Project due to delays in Project implementation of Component 2. This will be the third restructuring of the Project, which was previously restructured in June 2023, as further explained below. 3. The original PDO of the Project was to (i) facilitate the movement of tourists within the participating countries using ferries; (ii) improve selected tourist sites; and (iii) strengthen implementation capacity for regional tourism market development. The Project has four components:  Component 1: Facilitation of the Movement of People (initially US$2.5 million, US$1.24 million after 2022 restructuring) – This component was designed to strengthen regional integration and facilitate the movement The World Bank OECS Regional Tourism Competitiveness (P152117) of people in the region by supporting the development of a single regional space for immigration and customs entry of international tourists, the development of a pilot ferry system and small infrastructure investments.  Component 2: Pilot Tourism Infrastructure Investments (initially US$18.5 million, US$20.4 million after 2022 restructuring, US$15.4 million after 2023 restructuring) – This component supports the improvements of selected sites in each participating country with the aim of strengthening and diversifying the tourism product and increasing tourism spend and sales at and around the improved sites.  Component 3: Market Development and Promotion Capacity Building (initially US$2.8 million, US$2.33 million after 2022 restructuring) – This component supports the refinement and operationalization of tourism plans for each of the participating countries and develops a regional market development effort to position the participating countries as one travel destination.  Component 4: Project Implementation Support (initially US$2.1 million, US$2.02 after 2022 restructuring). 4. The Project’s midterm review was conducted in October 2020 and found that overall project implementation had been slow, resulting in low levels of disbursement. The overall project rating was Moderately Unsatisfactory (MU), for both Development Objectives (DO) and Implementation Progress (IP), with a Moderately Unsatisfactory (MU) rating for Procurement and Project Management, Moderately Satisfactory for Safeguards, and a Satisfactory rating for Financial Management (FM). IN SVG, the difficulty of finding a replacement for the project manager in SVG (resolved in 2020); the onset of the COVID-19 pandemic in 2020; and La Soufriere volcanic eruption in April 2021, as well as capacity constraints in the PIU all contributed to slow progress. 5. In June 2022, the Project was finally restructured to align it to the new country contexts and sectoral priorities. The restructuring entailed the following changes to the Project: a. To reflect new priorities amid COVID-19 challenges, the PDO was revised: “to increase tourism income at and around improved tourism sites and strengthen institutional capacity to support the regional recovery from COVID-19”. The revision of the PDO entailed an adjustment to PDO indicators. b. The pilot regional ferry under Component 1 was discontinued, and funds were reallocated to Component 2 (Pilot Tourism Investments). c. Technical assistance activities in support of private sector development in Saint Lucia from Component 2 (Pilot Tourism Investments) were reclassified to Component 3 (Market Development and Promotion of Capacity Building). d. Implementation arrangements were further strengthened in Saint Lucia. 6. In June 2023, the Project was again restructured to allow for additional implementation time, and to cancel a portion of the undisbursed funds. The restructuring entailed the following changes to the Project: a. A nine (9) month extension of the closing date of the Project for all countries and, b. For St. Lucia, a cancellation of US$5.0 million of the undisbursed amount under Category 1.a. of the Financing Agreement. B. PROJECT STATUS 7. Project activities have significantly advanced in St. Lucia and Grenada since the Project’s restructuring in June 2023, however the pace of implementation has continued to be slow in SVG. Since the Project’s restructuring in 2023, both Grenada and Saint Lucia’s PIU ramped up the pace of implementation and completed all envisioned activities in their procurement plans, committing virtually all funding available. In SVG, civil works in Fort Charlotte started in October of 2023 due to delays in the procurement process related to negotiations with the bidder. While the works are ongoing, it will not be possible to finalize them in time for the Project’s closing. The World Bank OECS Regional Tourism Competitiveness (P152117) 8. The following provides additional details of the Project’s status in SVG: i. As of today, total disbursement for SVG stands at USD 2.39 million (47.8%). ii. Civil works at Fort Charlotte started at the end of October 2023 and are advancing at a slow pace, which will make completion impossible by the Project’s closing date. The SVG team estimates that at least an additional six to eight months would be needed to complete civil works considering that, at the time of the latest mission, works had reached at most 10 percent of mostly preparatory work. iii. The Business, Commercialization and Management Plan for Fort Charlotte was delivered, and the contract ended on December 15, 2023. The design and supervision for the upgrade of moorings was completed in October 2023, with final payments being processed. iv. The National Sustainable Tourism Development Plan was completed, and all outstanding payments were made. This was expected to be a key input for the National Economic Development Plan 2025-2035, but the Ministry of Tourism was not satisfied with the final deliverable. Nevertheless, some sections of the deliverable will be used as inputs (PDO indicator). v. The development of the tourism website will not be completed before project closing given delays in procurement. 9. The Project is currently rated Moderately Unsatisfactory for Achievement of PDO, and Moderately Satisfactory for Overall Implementation Progress, and Project Management, and it is currently flagged as a Problem Project. Considering the improved performance observed since the last restructuring in May 2023, reflecting increased disbursement and progress in Project results, the Project Implementation Progress and Project Management ratings were upgraded to MS in the last Implementation and Supervision Report dated May 29, 2024. 10. Environmental and Social Safeguards (S): All Safeguards ratings are Satisfactory. The safeguards rating, category and applicable policies remain the same. As the civil works have not been completed, the E&S measures in place would have to continue post project closure. A Post Closure Action Plan (PCAP) was discussed with the relevant governments during the February 2024 Mission and the draft included in the Aide Memoire. Discussions have continued as part of the Project closure meetings. The team will monitor the implementation of the PCAP and review the final reports once works are completed. Works include conservative restoration of historical walls; improving accessibility to the facility; upgrading of fort chambers, hallway, and external areas; new ticket booth and display room; cafeteria upgrade; washroom renovation; and installation of furniture, displays items, signage. 11. Financial Management (MS): The FM rating remains "Moderately Satisfactory". The PIU has established adequate FM arrangements for the project including FM staff, accounting system, budget and flow of funds, internal controls, financial reporting, and external audit. Project audit is conducted by private audit firms. The audit of the project financial statements covering the fiscal years 2018, 2019, 2020, 2022, were submitted to the Bank with delay, while the report for 2021 was submitted on time. All audit reports have been reviewed and found acceptable. The next audit report for the period ended December 31, 2023, is due by June 30, 2024. 12. Procurement (U). The Procurement rating was downgraded to Unsatisfactory in the last ISR. The Project has been performing unsatisfactorily due to several reasons: inadequate procurement arrangements, a lack of coordination with the technical team, and poor technical input. In particular, the major works contracts of Fort Charlotte experienced high bid prices, which demonstrated weak planning and costing. Furthermore, unreliable STEP updates have hindered the monitoring and supervision from the Bank side despite several written and verbal requests to the clients. The World Bank OECS Regional Tourism Competitiveness (P152117) 13. Project Management (MS): Project management was upgraded to Moderately Satisfactory in the last ISR for the Project, due to the progress in St. Lucia and Grenada, whose activities represent the majority of project funds. 14. The overall operational risk to development outcome is Substantial. Macroeconomic, Sector Strategies and Policies, Technical Design of the Project, Institutional Capacity for Implementation and Sustainability, and Fiduciary risks have been assessed as Substantial during project implementation. Political and Governance, Environmental and Social, and Stakeholders' risks have been assessed as Moderate. II. DESCRIPTION OF PROPOSED CHANGES 15. The proposed change to the Project is a partial cancellation of US$ 2,609,466.21 in undisbursed funds, from Category 1 of the financing agreement with St. Vincent and the Grenadines. US$ 1,966,948.00, which was the undisbursed amount when the client request was received, will be cancelled with value date May 27, 2024; and US$ 642,518.21 will be cancelled with value date of May 30, 2024, which is when the recipient refunded to the Bank some of the disbursed amount they wanted to cancel. The total amount to be cancelled is USD 70.00 short of what was requested by the client due to bank fees deducted from the refund made on May 30, 2024. 16. The total Project amount for St. Vincent and the Grenadines (Credit Number 60010-VC) was originally US$5 million, of which US$ 2,609,466.21 are currently undisbursed and will be cancelled. The cancellation follows the Government’s written request. The reduction will be applied to Category 1 of Eligible Expenditures, as described in Section IV.A.2 of the financing agreement. The World Bank OECS Regional Tourism Competitiveness (P152117) Table 1. Revised Categories of Eligible Expenditures under Loan Agreement 6001-VC (in US$) Amount of the Credit Allocated Percentage of Expenditures to be Financed Category (expressed in USD) (inclusive of taxes) Original Revised Original Revised (1) Goods, works, non-consulting services, consultants’ services, 5,000,000 2,390,533.79 100% 100% Training, and Incremental operating Costs for the Project. (2) Intentionally left blank 0 0 100% 100% Total Amount 5,000,000 2,390,533.79 Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. III. SUMMARY OF CHANGES Changed Not Changed Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ The World Bank OECS Regional Tourism Competitiveness (P152117) Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE CANCELLATIONS Value Reason Current Cancellation New Ln/Cr/Tf Status Currency Date of for Amount Amount Amount Cancellation Cancellation IBRD- Disburs USD 6,000,000.00 0.00 6,000,000.00 87340-001 ing IDA-60000- Disburs USD 10,000,000.00 0.00 10,000,000.00 001 ing UNDISBURSE IDA-60010- Disburs USD 5,000,000.00 2,609,466.21 30-May-2024 2,390,533.79 D BALANCE 001 ing AT CLOSING Fully TF-A0988- Disburs USD 336,669.89 0.00 336,669.89 001 ed OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-60010-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: GO, CW, NCS ,CS, TR & OP 5,000,000.00 1,887,536.38 2,390,533.79 100.00 100.00 The World Bank OECS Regional Tourism Competitiveness (P152117) iLap Category Sequence No: 2 Current Expenditure Category: Intentionally Left Blank 0.00 0.00 0.00 100.00 100.00 Total 5,000,000.00 1,887,536.38 2,390,533.79 . 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