The World Bank Serbia Emergency COVID-19 Response Project (P173892) REPORT NO.: RES56560 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SERBIA EMERGENCY COVID-19 RESPONSE PROJECT APPROVED ON MAY 26, 2020 TO REPUBLIC OF SERBIA HEALTH, NUTRITION & POPULATION EUROPE AND CENTRAL ASIA Regional Vice President: Antonella Bassani Country Director: Xiaoqing Yu Regional Director: Fadia M. Saadah Practice Manager/Manager: Tania Dmytraczenko Task Team Leader(s): Ha Thi Hong Nguyen, Predrag Djukic The World Bank Serbia Emergency COVID-19 Response Project (P173892) ABBREVIATIONS AND ACRONYMS BSL-3 Biosafety Level 3 CT Computerized Tomography ESIA Environmental and Social Impact Assessment GRM Grievance Redress Mechanism MOH Ministry of Health MPA Multiphase Programmatic Approach PDO Project Development Objective The World Bank Serbia Emergency COVID-19 Response Project (P173892) BASIC DATA Product Information Project ID Financing Instrument P173892 Investment Project Financing Environmental and Social Risk Classification (ESRC) Substantial Approval Date Current Closing Date 26-May-2020 31-Aug-2023 Organizations Borrower Responsible Agency Republic of Serbia Multiphase Programmatic Approach (MPA) Program Development Objective The Program Development Objective is to prevent, detect and respond to the threat posed by COVID-19 and strengthen national systems for public health preparedness Multiphase Programmatic Approach (MPA) Status (Public Disclosure) Status and Key Decisions (Public Disclosure) COVID-19 MPA - ISR Write-up as of May 15, 2023 Sustained efforts continue to be made to advance the implementation of the 87 MPA operations. As of May 15, 2023, 88 MPA-projects have been approved with a total commitment of US$4.3 billion. One operation (Guatemala) was cancelled in mid-September 2021, at the request of the Government. Total disbursements as of May 15, 2023, amount to US$3.87 billion or 90% of overall commitments. This amount does not include disbursements under MPA-V operations which are reported together with AF-V operations. A large refund from the UN to the project account of the Myanmar operation was processed in late March due to the inability to implement the project. This transaction affected total disbursements. Also, (i) Loans and Credits denominated in SDRs and Euros are being affected because of fluctuations between the SDRs and Euros against the US dollar, and (ii) at this late stage of project implementation, several operations are processing refunds to the special/project accounts, which have an impact on total disbursements. Thirteen operations closed by the end of CY22. Thirty-three operations have closing dates by the end of The World Bank Serbia Emergency COVID-19 Response Project (P173892) CY23. However, at the request of governments, teams continue to process extensions, therefore, closing dates change frequently. As with the Mid Term Review (issued on March 25, 2023), no individual COVID-19 MPA operation will have to complete an ICR. Instead, one ICR will be prepared for the entire COVID-19 MPA Program based on final ISRs prepared by country operations’ teams. A template for the final ISR was issued by OPCS on March 25, 2022. The overall conclusion of the MTR was that the COVID-19 MPA Program embodied a rapid, innovative approach to new lending for human health response. The MTR concluded that the COVID-19 MPA has been successful, notwithstanding considerable uncertainty and multiple constraints in the early stages of the pandemic. The Bank’s emergency response was remarkably swift in the most vulnerable countries facing human capital losses and development setbacks. Further, the MTR concluded that notwithstanding the challenges, the COVID-19 MPA is on track to achieve its PrDO, which is to prevent, detect and respond to the threat posed by COVID-19 and strengthen national systems for public health preparedness. Seventy (70) country projects or 80 percent of projects approved have reached 70-100+ percent disbursement (reasons for >100% disbursements relate to fluctuations between the Euro and the SDR against the US$). Out of the 70 operations, 58 operations or 83 percent have disbursed over 90+% of commitments. Out of the 70 operations, 38 operations are fully disbursed, and 16 operations have disbursed 95-99 percent of commitments. As reported in mid-April, there are six operations with disbursements of 50 percent or less. Out of these six operations, one has not disbursed (AFW), and one operation has disbursed 30 percent (AFW). The projects are benefitting around 3.7 billion people or 50% of the global population. When countries with AF-V operations are counted, the projects are benefitting 4.1 billion of 51 percent of the global population. This is because some countries that do not have a parent project have AF-V operations. Eighty-six (86) or 99% of projects approved are disbursing. ECA has the highest percentage of disbursements (97%), followed by MNA (96%), SAR (94%), LAC (92%), EAP (85%), AFW (78%), and AFE (77%). AFE lower disbursements compared to other regions are a result of low disbursements under two operations. In the case of AFW low disbursements are a result of no disbursements under one operation and only 30 percent under another. Retroactive Financing (RF) continues to represent 20 percent of commitments. SAR has the highest percentage of RF at 37 percent, followed by ECA at 18 percent. IDA continues to represent 39 percent and IBRD 41 percent of disbursements. Streamlined procedures, delegated approvals, coupled with flexible project design and intensified efforts across the Bank have contributed to the progress. Implementation is being guided by Bank teams working in parallel with other health related projects, including Additional Financing operations supporting vaccine procurement and deployment efforts. OPS_TABLE_PDO_CURRENTPDO Project Development Objective (PDO) Original PDO The Project Development Objective is to respond to the threat posed by COVID-19 and to strengthen the national health system for public health preparedness in Serbia. OPS_TABLE_PDO_CURRENTPDO The World Bank Serbia Emergency COVID-19 Response Project (P173892) Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-91200 26-May-2020 29-May-2020 10-Dec-2020 31-Aug-2023 100.00 81.79 16.04 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING Background 1. The Serbia Emergency COVID-19 Response Project (the Project) is providing support for emergency response to the Republic of Serbia under the COVID-19 Strategic Preparedness and Response Program using the Multiphase Programmatic Approach (MPA), approved by the World Bank’s Board of Executive Directors on April 2, 2020 (PBASIC0219761). The total Project financing is EUR 92 million (US$ 100 million equivalent). The Project was approved on May 26, 2020 and became effective on December 10, 2020.1 2. The Project Development Objective (PDO) is to respond to the threat posed by COVID-19 and to strengthen the national health system for public health preparedness in Serbia. The Project has two componnents, outlined below.2  Component 1: Emergency COVID-19 Response, which includes three sub-components o Sub-component 1.1. Case Detection, Confirmation, Contact Tracing, Recording, Reporting o Sub-component 1.2. Physical Distancing Measures and Communication Preparedness o Sub-component 1.3. Health System Strengthening  Component 2: Implementation Management and Monitoring and Evaluation Project Status 3. The Project has been restructured three times. The first restructuring (August 2021) revised Component 1 activities to ensure relevance in the context of the changing context of COVID-19 in Serbia. Specifically, a number of originally planned activities that were no longer relevant or no longer in need of Project financing were dropped, such as developing testing points at airports and border crossings and procuring protective personal equipment and SARS-CoV-2 test kits. Funding was relocated to procure medical equipment and vehicles to strengthen the health system’s capacity for performing clinical diagnosis, treatment, monitoring, and transporting of patients, as well as timely deployment of public health teams. In addition, and most importantly, activities were included to strengthen laboratory capacity at the Institute 1 Ratification of the Loan Agreement was delayed due to the June 2020 election and the subsequent delay in the appointment of the new Government. 2 Although not specified in the Legal Agreement, the original estimate of the component cost as reflected in the Project Paper is EUR 90.85 million equivalent for Component 1 and EUR 0.92 million equivalent for Component 2, with the remaining amount of the Project financing covering the front-end fee. The World Bank Serbia Emergency COVID-19 Response Project (P173892) of Virology, Vaccines and Sera “Torlak” (Torlak Institute) for Bio Safety Level 3 (BSL-3) certification.3 When completed, it will be the first BSL-3 lab in Serbia. The second restructuring (February 2022) extended the closing date by 15 months, from May 31, 2022 to August 31, 2023, to allow for the successful completion of all Project activities, particularly the construction and equipment of the BSL-3 lab at the Torlak Institute and procurement of other major diagnostic equipment (X-ray and CT scanners). The third restructuring (October 2022) amended the Results Framework to better reflect the Project’s specific contributions to the PDO by including two additional indicators and removing one intermediate-level indicator. Specifically, a PDO-level indicator was added to reflect Project support for the BSL-3 laboratory. 4. Progress toward achievement of the PDO as well as implementation progress are rated Satisfactory. Four of the five PDO indicators have reached their end-of-project target values. Apart from the BSL-3 laboratory at the Torlak Institute, all large procurement packages and other project activities are being implemented as planned and will be completed before the current closing date of August 31, 2023. These include: (i) procurement and installation of CT scanners (contracted for EUR 30.34 million, of which EUR 25.70 million already paid); (ii) procurement and installation of X-ray machines (contracted for EUR 18.6 million, of which EUR 13.58 million already paid); and (iii) procurement and delivery of ultrasound machines (contracted for EUR 2 million and on track to be fully paid by June 30, 2023). Another EUR 1.36 million will be paid for the CT scanners and X-ray machines contracts by June 30, 2023, which will be settled in full by August 31, 2023. The final PDO indicator, ‘National laboratory capacity strengthened for surveillance, detection and research related to pathogens requiring BSL-3, such as West Nile virus, SARS-CoV-2 and MERS-CoV (Yes/No))’ is achievable with the proposed extension (see below under Rational for Restructuring). 5. The construction of a BSL-3 laboratory involves complex activities and is an area in which the World Bank has limited experience, and in which the client has no prior experience. As part of the process, the required environmental and social safeguards activities, including completion of the Environmental and Social Impact Assessment (ESIA), have taken longer than initially planned. Specifically, finding a qualified firm with the requisite expertise to conduct the ESIA and prepare the Environmental and Social Management Plan was challenging and resulted in a delay of seven months. A contract was signed in October 2022, and the ESIA Scoping Report was completed and cleared by the Bank for public consultation in April 2023. The ESIA is expected to be completed and approved by the Bank by June 30, 2023, consulted, finalized and disclosed by the end of July 2023. Currently, the technical specifications for the construction and equipment of the BSL-3 lab are being prepared. However, these specifications will be finalized only after the completion of the ESIA, which must meet satisfactory quality standards and receive approval from the World Bank. 6. The overall Environmental and Social risk of the Projects remains Substantial, as this restructuring will not affect Project design in any way. The Environmental and Social Commitment Plan and Environmental and Social Management Framework have been finalized and published on the Ministry of Health (MOH) website4 (in both English and Serbian) and on the Bank website, as part of the Project preparation. For the first restructuring, these documents were updated to reflect changes in Project design, namely, to reflect risks, and consequently requirements, resulting from the newly introduced activity to strengthen laboratory capacity at the Torlak Institute through construction of the BSL-3 laboratory. The Stakeholder Engagement Plan and Grievance Redress Mechanism (GRM) have not been adapted at the same time as other instruments to reflect the BSL-3. However, this was later rectified – the specific Stakeholder Engagement Plan for the Torlak BSL-3 laboratory has been drafted, approved and publicly discussed, and the GRM has been adjusted to receive Torlak-related complaints. Thus, the Environmental and Social Framework provisions and these documents continue to apply for restructuring, as there are no changes to the activities. The sub-project-specific Environmental and Social Management Plan Checklists have been approved by the Bank and have been included in relevant biding documents for equipment packages. Furthermore, where relevant, for all ongoing subprojects, Infection Control and Medical Waste 3 In line with Component 3 of the MPA, ‘Supporting National and Sub-national, Prevention and Preparedness.’ 4 https://www.zdravlje.gov.rs/tekst/en/228/covid-19.php The World Bank Serbia Emergency COVID-19 Response Project (P173892) Management Plans were developed prior to commencement of the planned activities. The Project level GRM has been established and is functional. No Project related grievances have been received in previous period. 7. During the last reporting period, compliance with relevant Environment and Social Standards was rated as Moderately Satisfactory. This rating was primarily influenced by the misalignment and delayed implementation of measures required under Environment and Social Standard 10 (Stakeholder Engagement and Information Disclosure) for the Torlak BSL-3 laboratory construction. Detailed explanations of these misalignments were provided during the previous reporting period. Furthermore, it was found that the quality of the ESIA Scoping Report fell short of expectations, requiring several iterations before achieving the desired finalization. 8. As of June 2, 2023, EUR 77.02 million (83.61%) of the loan amount has been disbursed. Cost estimates for the BSL-3 laboratory (~EUR 10 million) are being revised and, in the meantime, the ambulance procurement package has been put on hold to ensure adequate funding is retained for the BSL-3 laboratory construction and equipment. Project Management is rated Moderately Satisfactory. The financial management arrangements at the Project Coordination Unit, including planning and budgeting, accounting, financial reporting, internal controls and disbursement are adequate and acceptable to the Bank. There are no overdue audit reports under the Project. Procurement arrangements are overall Satisfactory, however at the last Procurement Risk Assessment (February 2023) was rated Moderately Satisfactory due to the delay in the procurement of works for the construction of BSL-3 laboratory. Rationale for Restructuring 9. The proposed restructuring seeks to extend the closing dates of the loan by 22 months to complete the establishment of the BSL-3 laboratory at the Torlak Institute. The Government formally requested the restructuring on May 17, 2023. Developing BSL-3 capacity for Torlak Institute is critical to strengthening the national health system for public health preparedness in Serbia. Its contribution is consistent with, but goes far beyond, supporting the COVID-19 response that the Project was initially designed for. It will build the foundation of Serbia’s pandemic preparedness for the future. 10. The completion of the construction of the BSL-3 laboratory at the Torlak Institute is expected by November 2024. As noted above, the ESIA is expected to be finalized by the end of July 2023. In the meantime, the technical specifications for the construction and equipment of the BSL-3 lab are being prepared and will be finalized once the ESIA is completed. Completion of the bidding process is expected to take four months, with expected contract signature by December 2023. Construction is expected to begin in early 2024, with completion projected by November 2024. Procurement of laboratory equipment (EUR 1.5 million) will be done in parallel and in coordination with the execution of the construction works. Following the completion of construction works, additional time will be required for the installation of equipment and certification of laboratory systems. Following the completion of construction works, additional time will be required for the installation of equipment. 11. To mitigate any risks, the Project Coordination Unit will hire a bioengineering firm to ensure timely implementation of civil works and installation of equipment that are specific for the BSL-3 laboratory. The firm will also work with the Torlak Institute to strengthen organizational aspects of the BSL-3 lab that include developing standard operating procedures and training of personnel. In addition, in the event that the BSL-3 activities supported by the Project are unable to be completed by the proposed closing date, Government resources will be mobilized to finance remaining activities. II. DESCRIPTION OF PROPOSED CHANGES The World Bank Serbia Emergency COVID-19 Response Project (P173892) 12. This paper seeks the approval of the Europe and Central Asia Regional Vice President to restructure the Project to extend the closing date of the loan (IBRD 9120-YF) from August 31, 2023 to June 30, 2025, in order to allow sufficient implementation time for the completion of the construction of the BSL-3 laboratory at the Torlak Institute and to allow the Government to disburse the loan’s remaining balance. No other changes to Project’s scope or scale, PDO, cost, results framework, or other elements are being sought. III. SUMMARY OF CHANGES Changed Not Changed Loan Closing Date(s) ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ MPA Program Development Objective ✔ MPA Expected Results and Indicators ✔ Results Framework ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ The World Bank Serbia Emergency COVID-19 Response Project (P173892) IV. DETAILED CHANGE(S) MPA PROGRAM DEVELOPMENT OBJECTIVE Current MPA Program Development Objective The Program Development Objective is to prevent, detect and respond to the threat posed by COVID-19 and strengthen national systems for public health preparedness EXPECTED MPA PROGRAM RESULTS Current Expected MPA Results and their Indicators for the MPA Program Progress towards the achievement of the PDO would be measured by outcome indicators. Individual country-specific projects (or phases) under the MPA Program will identify relevant indicators, including among others: • Country has activated their public health Emergency Operations Centre or a coordination mechanism for COVID-19; • Number of designated laboratories with COVID-19 diagnostic equipment, test kits, and reagents; • Number of acute healthcare facilities with isolation capacity; • Number of suspected cases of COVID-19 reported and investigated per approved protocol; • Number of diagnosed cases treated per approved protocol; • Personal and community non-pharmaceutical interventions adopted by the country (e.g., installation of handwashing facilities, provision of supplies and behavior change campaigns, continuity of water and sanitation service provision in public facilities and households, schools closures, telework and remote meetings, reduce/cancel mass gatherings); • Policies, regulations, guidelines, or other relevant government strategic documents incorporating a multi- sectoral health approach developed/or revised and adopted; • Multi-sectoral operational mechanism for coordinated response to outbreaks by human, animal and wildlife sectors in place; • Coordinated surveillance systems in place in the animal health and public health sectors for zoonotic diseases/pathogens identified as joint priorities; and • Mechanisms for responding to infectious and potential zoonotic diseases established and functional; and • Outbreak/pandemic emergency risk communication plan and activities developed and tested OPS_DETAILEDCHANGES_LOANCLOSING_TABLE The World Bank Serbia Emergency COVID-19 Response Project (P173892) LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IBRD-91200 Effective 31-May-2022 31-Aug-2023 30-Jun-2025 30-Oct-2025 .