Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00006357 IMPLEMENTATION COMPLETION AND RESULTS REPORT < TF0A6796> ON A SMALL GRANT IN THE AMOUNT OF US$1.25 MILLION TO THE The Kingdom of Bhutan FOR Bhutan Community-Based Rural Entrepreneurship Project (P143795) {06/26/2023} Agriculture And Food Global Practice South Asia Region Regional Vice President: Martin Raiser Country Director: Abdoulaye Seck Regional Director: John A. Roome Practice Manager: Gayatri Acharya Task Team Leader(s): Tenzin Lhaden, David Tuchschneider ICR Main Contributor: Joachim Vandercasteelen ABBREVIATIONS AND ACRONYMS ATOs Assistant Training Officer ESMF Environment and Social Management Framework FYP Five-Year Plan ICT Information and Communication Technologies ICR Implementation and Completion Report IRI Intermediate Results Indicator JSDF Japan Social Development Fund MoAL Ministry of Agriculture and Livestock MTMTs Mobile Training and Mentoring Teams M&E Monitoring & Evaluation OVOP One Village-One Product PAN Project Advisory Network PDO Project Development Objective RRCDP Remote Rural Communities Development Project RGoB Royal Government of Bhutan SME small and medium enterprises STEP Systematic Tracking of Exchanges in Procurement ToC theory of change YERE Youth Employment and Rural Entrepreneurship YLE Youth-Led Enterprise TABLE OF CONTENTS DATA SHEET ....................................................................... ERROR! BOOKMARK NOT DEFINED. I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ....................................................... 4 II. OUTCOME .................................................................................................................... 10 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 16 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 19 V. LESSONS LEARNED AND RECOMMENDATIONS .............................................................. 23 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 25 ANNEX 2. PROJECT COST BY COMPONENT ........................................................................... 37 ANNEX 3. RECIPIENT, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ...... 38 ANNEX 4. SUPPORTING DOCUMENTS (IF ANY) ..................................................................... 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name Bhutan Community-Based Rural Entrepreneurship P143795 Project Country Financing Instrument Bhutan Investment Project Financing Original EA Category Revised EA Category Organizations Borrower Implementing Agency Ministry of Agriculture and Forests, Ministry of The Kingdom of Bhutan Agriculture and Livestock Project Development Objective (PDO) Original PDO The project development objective is to generate new and more productive employment for the poor and vulnerable youth in selected dzongkhags in southwestern Bhutan Page 1 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) FINANCING FINANCE_TBL Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) Donor Financing TF-A6795 1,250,000 1,250,000 1,241,507 Total 1,250,000 1,250,000 1,241,507 Total Project Cost 1,250,000 1,250,000 1,241,507 KEY DATES Approval Effectiveness Original Closing Actual Closing 11-May-2017 29-Sep-2019 25-Feb-2021 31-Dec-2022 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 24-Feb-2021 0.39 Change in Results Framework Change in Components and Cost Change in Loan Closing Date(s) Reallocation between Disbursement Categories Change in Disbursements Arrangements Change in Implementation Schedule 31-Aug-2022 1.20 Change in Loan Closing Date(s) Change in Implementation Schedule KEY RATINGS Outcome Bank Performance M&E Quality Moderately Satisfactory Moderately Satisfactory Modest Page 2 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) Moderately 01 04-Jan-2021 Moderately Unsatisfactory 0.39 Unsatisfactory Moderately 02 02-Sep-2021 Moderately Unsatisfactory 0.39 Unsatisfactory 03 29-Mar-2022 Moderately Satisfactory Moderately Satisfactory 1.05 04 07-Jan-2023 Satisfactory Satisfactory 1.24 ADM STAFF Role At Approval At ICR Regional Vice President: Annette Dixon Martin Raiser Country Director: Qimiao Fan Abdoulaye Seck Director: Juergen Voegele John A. Roome Practice Manager: Shobha Shetty Gayatri Acharya Tenzin Lhaden, David Task Team Leader(s): Winston Dawes Tuchschneider ICR Contributing Author: Joachim Vandercasteelen Page 3 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES Context 1. Despite Bhutan’s economic growth and a significant reduction in poverty during the past decade, poverty remains concentrated in rural areas and among agrarian societies. Between 2000 and 2019, Bhutan’s GDP per capita increased by 88 percent, while the per capita poverty rate reduced steadily from 23 percent in 2007 to 12 percent in 2012 and 8 percent in 2017. Despite this progress, poverty continues to be predominantly observed in rural regions, particularly in remote and isolated mountainous areas. Half of Bhutan’s population lives in rural are as, where their livelihoods heavily depend on the renewable natural resources sector. The primary mode of agricultural production is subsistence farming, practiced by smallholder farmers who, on average, possess one hectare of land. These farmers low levels of agronomic knowledge, update of modern inputs, or market connection. Forests cover most of Bhutan's land, only about 8 percent of arable land is under cultivation, and the country’s topography and ecology make agricultural production prone to natural disasters and the impacts of climate change. As such, the agricultural sector is stagnant, dependent on food imports, contributing only limited to GDP, and failing to provide quality employment opportunities for the most vulnerable groups in rural areas. 2. Bhutan’s labor market faces significant structural challenges, particularly when it comes to the provision of quality jobs to young, educated, and female individuals. At project appraisal (2017), the national unemployment rate was relatively low (2.1 percent) but masked the high unemployment rate (12.7 percent) among individuals aged 15 to 24. By the time the project became effective in 2019, this rate persisted at 12.7 percent but with a notable gender disparity, as females faced a higher unemployment rate of 15.4 percent.1 These high unemployment rates reflect the mismatch between employment opportunities and youth’s education, skills, expectations, and market needs. Employment opportunities in Bhutan are limited due to the low absorption capacity of the public sector and the slowly growing private sector. Young people have little incentive to engage in agriculture because they do not own land, the existing agricultural land has low productivity, services (including credit) are lacking due to poor rural infrastructure, and modern entrepreneurial and farm management skills are absent. With limited off-farm opportunities, rural youths are migrating to and seeking employment in urban, peri-urban, or other countries. At these destinations, young people struggle to find quality jobs because their academic education and the lack of private training or counseling services do not equip them with the required knowledge, skills, and attitudes. 3. The Youth Employment and Rural Entrepreneurship (YERE) project sought to address the high rates of youth unemployment by creating the right skills, entrepreneurial spirit, and incentives for unemployed youth to find or create employment in rural areas. The project’s strategy focused on developing the skills that enable youth to engage in productive employment, as well as promoting the establishment and upgrading of youth-led, managed, and operated business enterprises with the potential to generate employment for themselves or other youths in rural areas. The project promoted youth participation in value chains and sectors identified through economic and technical studies conducted by the Ministry of Agriculture and Livestock (MoAL).2 These sectors were selected 1 Labor force participation rates are generally lower for Bhutanese women who tend to work in agriculture and lower quality jobs compared to men and have a less secure employment. 2At the time of project appraisal and effectiveness, the MoAL was labeled the Ministry of Agriculture and Forestry. For consistency, we refer to the MoAL throughout the report. Page 4 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) based on their high demand, such as livestock rearing and mushroom production, the potential for value addition through food processing and handicrafts, and the ability to capitalize on Bhutan’s cultural and natural heritage through eco-tourism services. Identification of new employment opportunities would follow the community- based business development strategy known as “One Village-One Product� (OVOP). This approach entailed villages specializing in the production of quality goods or services where they have a comparative advantage, community wisdom, and tradition.3 4. The YERE project targeted young people who were out of school, unemployed, or underemployed and located in 6 districts ('dzongkhags') of Southwestern Bhutan where poverty rates are among the highest. The project directly targeted ‘500 out-of-school, unemployed, and underemployed young people of age up to 35’ through capacity building and financial support activities that would allow them to find jobs or start their own Youth-Led Enterprise (YLE). Emphasis was placed on ensuring that 30 percent of the beneficiaries were women, promoting gender inclusivity and empowerment. The project encompassed both existing YLEs as well as potential YLEs to be developed with financial support. In addition to creating direct employment, the project envisioned that these newly developed or existing YLEs would create job and income opportunities for community residents. The project implemented activities in 35 Gewogs (Bhutan’s lowest level administrative division) spread across 6 Dzongkhags (Chukha, Dagana, Samtse, Haa, Trongsa, and Wangdue Phodrang) located in Southwestern Bhutan. The selection of these specific Dzongkhags was based on several factors, including their high poverty rates, the limited employment opportunities for young people, and their demonstrated readiness and commitment to participate in the program. In addition, the YERE project was implemented alongside the Remote Rural Communities Development Project (RRCDP) in the same Dzongkhags. This strategic decision aimed to capture the synergies between the two World Bank projects, fostering a holistic and integrated approach to rural employment while focusing on rural development opportunities. 5. At appraisal, the YERE project was fully aligned with the Royal Government of Bhutan (RGoB)’s development priorities and the World Bank’s strategic vision of country engagement. The 12th Five-Year Plan (FYP) (2018-2023) considered youth unemployment as a significant development concern and aimed at reducing youth unemployment by creating productive and gainful employment for youth entering the labor market while providing them with the necessary skills to do so.4 The YERE project also adhered to Bhutan's National Youth Policy (2011), which aimed to promote employment opportunities for young people, including in eco-tourism, small and medium enterprises (SMEs), and education. The project was aligned with the World Bank's Country Partnership Strategy between FY 2015 – 2020, which prioritized employment creation and diversification as well as expanding infrastructure and quality services in urban and rural areas. Both the Country Partnership Strategy and the 12 th FYP emphasize the importance of promoting private sector development and leveraging Bhutan’s cultural heritage to yield economic and social benefits, mainly through the growth of SMEs. The project also complemented the ongoing RRCDP project by reaping the benefits of rural infrastructure and community services already developed and build market opportunities from horticulture and non-timber forest product supported through RRCDP. 3The project adapted the OVOP to the ongoing Royal Initiative “One Gewog One Product� to ensure a consistent supply of quality goods and collective branding and marketing approach. 4The 12th FYP (just as the 11th FYP) had youth unemployment rate as one of the key performance indicator under the National Key Results Area ‘Productive and gainful employment’. Page 5 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) Project Development Objectives (PDOs) 6. The project’s development objective is to generate new and more productive employment for poor and vulnerable youth in selected Dzongkhags in Southwestern Bhutan. Key Expected Outcomes and Outcome Indicators 7. Theory of change and pathway of impacts. A theory of change (ToC) – describing the logical flow of how project outputs were expected to translate into outcomes and objectives – was not required at project appraisal and was developed retroactively. The ToC in Figure 1 considers three pathways of project support, corresponding to the project components: creating an enabling environment through institutional capacity building (component 1), developing skills through training and technical assistance (component 2), and offering financial support through small business grants (component 3). To fully understand how YERE project activities expected to improve the employment status of beneficiaries (‘pathway of impacts’), it is crucial to differentiate the expected impact between categories of beneficiaries and the objectives pursued by the YERE project. 8. The PDO itself is split into two sub-objectives: (i) generating new employment and (ii) fostering more productive employment for poor and vulnerable youth in selected Dzongkhags in Southwestern Bhutan. The first sub- objective focuses on creating jobs for unemployed or underemployed youth, while the second sub-objective focuses on ensuring that the (new) employment is of high quality and supported through productive investments to generate a sustainable source of income.5 a. ‘Trainees’: through receiving training only (no additional financial support), the YERE project aimed to improve trainees’ capacity to find new and more productive employment locally. b. ‘New YLEs’: through training and financial support (seed capital), the YERE project aimed to build the technical and financial capacities of trainees to develop new YLEs and create new self-employment. c. ‘Existing YLEs’: through training, institutional capacity building, and small business grants, the project expected existing YLEs to improve their governance, expand their business, and become more productive. 5While it is important to conceptually separate these two objectives, they are interconnected, and activities across components can contribute to both objectives simultaneously. Page 6 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) FIGURE 1: THE PROJECT'S THEORY OF CHANGE OF HOW IT EXPECTED TO CHANGE THE EMPLOYMENT OUTCOMES FOR THE THREE BENEFICIARY CATEGORIES 9. PDO indicators. The following key results indicators were proposed to measure progress in achieving the PDO by the end of the project period. These indicators were designed to capture some degree of endurance in the created jobs (underlined below for illustration) in the achievement of the PDO: a. Number of youth who are employed or are self-employed after at least six months of receiving grants and/or trainings (baseline: 0, target: 400, of which female 120) b. Percentage of pre-existing YLEs supported by JSDF grants that are operating with a 20 percent increase in net profit (baseline: 0, target: 60 percent, of which half female). The definition of the second PDO indicator is derived from the results framework in Annex 1 ‘Results Framework and Monitoring’ of the project paper. The label of second PDO indicator in the main text of the project paper is the ‘Percentage of pre-existing 100 YLEs supported by JSDF grants that are operating with a 20 percent increase in net profit, at least six months after receiving grants/support’. Since the project paper does not mention elsewhere that the project would target 100 pre-existing YLEs, the definition of the second PDO indicator in Annex 1 is consistently used in the results framework.6 c. Number of new YLEs supported by JSDF still in business, at least six months after receiving grants/support (baseline: 0, target: 100, of which female 30). Components 10. Component 1: Support Structures to Facilitate Youth-Led Enterprise (YLE) Development (Estimated cost at appraisal: US$138,500; Actual end-of-project cost: US$43,100). Component 1 aimed to create an enabling environment for establishing, developing, and growing YLEs in targeted communities. It aimed to develop Page 7 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) specialized technical support to help youth in identifying, developing, and leading sustainable businesses. The first sub-component involved the establishment of a Project Advisory Network (PAN), comprising public and private sector representatives. The PAN would play a crucial role in selecting and offering independent technical support and guidance to young entrepreneurs throughout the entire process of enterprise development and operation. The second sub-component focused on the formation of Mobile Training and Mentoring Teams (MTMTs) responsible for creating awareness and identifying capable and motivated youth interested in participating in the project, delivering the customized trainings, providing technical advice and guidance to YLE to prepare their business plan, supporting the establishment of YLEs, and implementing a mentoring and coaching program. 11. Component 2: Youth Development and Empowerment (Estimated cost at appraisal: US$240,000; Actual end-of- project cost: US$291,000). The second component aimed to empower youth by facilitating the establishment of community-based enterprises and equipping them with the necessary entrepreneurial, organizational, business, and technical skills. It comprised three core training activities: (i) capacity building for youth empowerment and decision making, commonly known as ‘life skills’ training, (ii) training on business skills, financial literacy, record keeping and other technical aspects, (iii) training on Information and Communication Technologies (ICT) and its application for marketing, accounting, and knowledge sharing. MTMTs were made responsible for delivering these trainings. A mentoring system was also to be established to provide ongoing support to youth entrepreneurs. 12. Component 3: Operationalization of YLEs (Estimated cost at appraisal: US$634,000; Actual end-of-project cost: US$688,200). This component focused on operationalizing YLEs by building capacity for establishing internal governance arrangements and providing seed capital to operationalize the YLEs. The first sub-component involved capacity building for established YLEs, covering business accounting, transparency, and marketing arrangements. The second sub-component entailed awarding small business grants (up to a maximum of US$10,000) to eligible YLEs for start-up enterprises or additional resources to expand existing businesses. To qualify, YLEs were expected to compete for grants after completion of the youth development and empowerment program and contribute cash or in-kind contributions of at least 20 percent of the investment cost.7 The third sub-component focused on strengthening market linkages to facilitate the marketing of new products outside the project area. 13. Component 4: Project Management & Administration, Monitoring & Evaluation, and Knowledge Dissemination (Estimated cost at appraisal: US$237,500; Actual end-of-project cost: US$227,700). Component 4 covered all project management activities, including project coordination, procurement, financial management, grant administration, project monitoring and evaluation (M&E), and knowledge dissemination. The project would establish an independent project management unit (PMU) within the MoAL responsible for the day-to-day administration, coordination, and management of project activities. The PMU would provide oversight, technical support, and guidance to grantees and youth enterprises. Key Expected Outcomes and Outcome Indicators 6 While the omission of 100 pre-existing YLEs is subtle, it is important: the definition in the main text combines both a delivery (100 pre-existing YLEs reached) and an outcome (20 percent increase in income). 7Eligibility criteria included completion of mandatory trainings, submission of acceptable business plans, generation of at least one new job, record keeping and reporting on use of grant funds, and environmental and cultural sustainability. Page 8 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) 14. The project's ambition was significantly reduced between the World Bank's approval in May 2017 and the time when the JSDF and the Country Director approved the Grant Fund Request. This reduction occurred without any restructuring of the project. The ambition of the project (in terms of number of beneficiaries, geographical coverage, and funding in the project paper) was significantly reduced between the initial design, the World Bank’s approval, and the client’s signing of the legal agreement. At the time of the concept note review (March 21, 2014), the PDO referred to generating new and more productive sources of income (instead of employment), targeting 6,000 beneficiaries in 10 Dzongkhags, and requesting a budget of US$2.75 million.8 The project paper that got approved by World Bank management on May 11, 2017, had a less ambitious objective by reducing the number of beneficiaries (2,000 in 6 Dzongkhags) and budget (US$1.25 million). The approved project package was sent to the JSDF for their review. At the start of FY17-18, the new project Task Team Leader revised the PDO statement and indicators further to more realistic and measurable objectives (employment generation) and reduced the project’s scope (500 beneficiaries with 400 jobs created). These revisions ensured that the project goals would be achieved on time, through a smooth implementation, and without diluting the limited resources. These changes were the outcome of detailed discussions with the client, the PMU, and other stakeholders. The JSDF approved the revised project paper in January 2018 and the Country Director approved the Grant Fund Request in February 2018. The reduction in ambition between May 2017 and January 2018 is not officially documented in a project restructuring and no disbursement had been made at that time.9 15. The first project restructuring extended the project closing date by 18 months (from February 25, 2021 to August 31, 2022). On November 3, 2020, the MoAL requested a project extension to make up for implementation delays caused by the COVID-19 pandemic (and mobility restrictions imposed by RGoB) and to use project activities as an effective recovery mechanism to support entrepreneurship and create employment opportunities for rural youth. To do so, the project increased the coverage of subgrants (from 100 to 200 beneficiaries) by reducing the size of individual subgrants (from US$10,000 to US$5,000) and by reallocating budget through adjusting some implementation modalities.10 Most importantly, the implementation modality of the training delivery under Component 2 was decentralized by hiring 18 Assistant Training Officers (ATOs), 3 per district, instead of 4 MTMTs to provide the trainings. The project hired the Institute of Management Studies to develop a training curriculum and provide 15 days of ‘Training of Trainers’ to the 18 ATOs. 16. This first restructuring also made changes to the results framework to reflect the expansion of the number of beneficiaries covered by grants. The end target of Intermediate Results Indicator (IRI) 1 ‘Number of specialized technical support teams established’ was increased from 4 to 18 to capture the change in implementation modality. The end target of IRI8 ‘Number of YLEs established with support from project’s grant’ was also increased from 100 to 200 YLEs (and from 30 to 60 females) to capture the increased coverage of the subgrants. The project paper for the first restructuring explains that the target (100) of the third PDO indicator was not increased due to the ongoing uncertainties caused by COVID-19. Finally, the end target dates of all PDO and intermediate results indicator was updated to align with the project’s revised closing date. 8The PDO in the approved project paper of May 2017 reads ‘The project’s development objective is to generate new and more productive sources of income for poor and vulnerable youth in selected dzongkhags in southwestern Bhutan.’ 9 Because there was zero disbursement in January 2018, we do not apply a split rating in the efficacy section. 10 In particular, by using the ATOs (instead of MTMTs) and existing analytical work (instead of implementing market linkage strengthening), the project saved US$152,200 to be reallocated to the sub-grants sub-component. Page 9 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) 17. A second project restructuring extended the closing date by another 4 months (from August 31, 2022 to December 31, 2022) to measure project impacts. On August 29, 2022, the MoAL requested a second project restructuring in response to the continuing impact of COVID-19 restrictions on the project’s implementation and to use undisbursed balance to complete planned project activities. The closing date extension was to allow the project to finalize training activities, fund the remaining YLEs to meet the project targets, and carry out a solid impact assessment of YLEs 6 months after they received financial support. The results framework was not changed. II. OUTCOME Assessment of Achievement of Each Objective/Outcome 18. YERE’s PDO remained highly relevant to addressing Bhutan’s rural youth employment and the World Bank’s strategy of social and economic inclusion through project implementation.11 At closing, the project remained aligned with the World Bank Group’s strategy for engagement in Bhutan as well as national development priorities. The 2020 Systematic Country Diagnostic identified the lack of job opportunities, especially for educated youth, as a significant development challenge and worsening over time in Bhutan. In response, the Country Partnership Framework for FY2021–24 proposed strategic focus areas to invest in human capital and economic resilience, aiming to create more (remunerative) jobs and increase the skill base of its young workforce, with attention to unemployed youth. Similarly, the project remained relevant to the RGoB’s development priorities. In particular, at project closure, the RGoB was in the process of developing the 2023–2034 long-term perspective plan and the 13th FYP, which considered the high youth unemployment rate and oversea outmigration of young people – (partly) related to the lack of remunerative job opportunities – as a structural constraint to Bhutan’s labor market. In addition, the COVID-19 pandemic underscored the need for projects such as YERE to tackle youth unemployment. The pandemic increased youth unemployment to 22 percent and contributed to an increase in outward migration. 19. Information sources for the assessment. The assessment of the YERE outcome indicators relied on three main information sources: a. The project management information system served as the source of information for intermediate results indicators related to the delivery of services (such as the number of trainings delivered). b. An independent Beneficiary Assessment Survey measured the project’s overall impact on the PDO indicators by collecting information from 472 respondents, including all 150 grant recipients and a sample of 322 trainees. The survey was organized using face-to-face interviews between November and December 2022. This timing allowed capturing at least 6 months after which the last YLE received the grant support (respondents reported to have received the grant between March and August 2022). c. Field Visit and Qualitive Interviews organized by the ICR team to visit YERE beneficiaries in the districts of Samste, Chukha, Haa, Trongsa, and Wangdue and conduct semi-structured interviews and focus group 11While the relevance of the PDO is not considered in the rating, it is described here for a better understanding of the country context when the YERE project closed. Page 10 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) discussions.12 The field visit also allowed to understand the context of YERE beneficiaries, collect qualitative information on documented project impacts, and solicit feedback and concerns about the project. 20. The efficacy assessment is based on achievements of the two sub-objectives of generating: (i) new employment; and (ii) more productive employment. 21. Sub-objective 1: to generate new employment for poor and vulnerable youth in selected Dzongkhags in Southwestern Bhutan. Activities across all three project components were expected to contribute to the first sub- objective. Achievement is assessed by measuring the number of new trainees employed and the establishment of new YLEs with project support (PDO indicator 1). Also the new employment generated by both the new YLEs and the existing YLEs supported by the project is included in the assessment. Additionally, for the new YLEs to be considered successful, they need to be operational at least six months after receiving the grant (PDO indicator 3). 22. Creation of new employment for trainees, new YLEs established, and new employment created by new and existing YLEs. The beneficiary assessment information is used to measure the total number of new employment that can be attributed to the project. The project generated new employment for 368 youth receiving training which is 91.3 percent of the project’s target of 400. Of these 368 youth, 206 were females, achieving 172 percent of the gender- disaggregated target (120). This achievement of new employment is the sum of new employment for the following categories of direct (and indirect) YERE beneficiaries (visualized in Figure 2): a. New employment by trainees. In the beneficiary survey sample, 31 percent of the trainees were unemployed before the training and found employment 6 months after project training.13 Based on this employment rate, we extrapolate that 228 of the 727 trainees gained new employment through project support activities. b. Self-employment in new, operational YLE. Based on the information from PDO indicator 3, 127 grant recipients established a new YLE of which 107 were operational at 6 months after YERE support.14 All self- employment in the new and operational YLEs is considered new employment and 60 of these 107 were unemployed before receiving the grant. c. Paid employment in new or existing, operational YLEs. New YLEs hired a total of 30 employees while existing YLEs employed 3 additional paid employees. This brings the total of paid employees to 33.15 12The ICR author sampled YERE beneficiaries from the list of grant beneficiaries stratified by district and operationality at the time of beneficiary survey. 13Of the 727 youths trained under the project, 322 trainees were interviewed. Of the surveyed trainees, 278 (86 percent) reported that they were employed or self-employed during the survey. Of the 278 employed youth, 101 (36 percent) indicated being unemployed before, while the majority of trainees reported being engaged in farming (56 percent) and a minority in the hospitality and service industry (5 percent). Hence, the only amount of new employment that can be attributed to the YERE trainings is 101, or 31 percent of the surveyed trainees. Assuming that the survey sample is representative of the underlying population of trainees, we can extrapolate this employment rate in the sample to the population of 727 trainees or 228 new employment. 14Of the 127 new YLEs, 76 (60 percent) are fully operational, 31 (24 percent) partly operational, and 20 (16 percent) are not yet operational. 15In addition, YLEs also employed family members that were unpaid. In the beneficiary assessment, 84 percent of the 150 YLE reported to having more than one person involved in the business and 87 percent stated that family members helped. These Page 11 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) d. The 23 existing YLEs are excluded from the measurement since these were already employed prior to project intervention. Only the incremental new employment generated by them (under iii) is included. FIGURE 2: VISUALIZATION OF PROJECT CONTRIBUTION TO THE CREATION OF NEW EMPLOYMENT 23. Skills development for new employment. The ATOs trained 877 youths between August and September 2021, overachieving the target of 500 by 175 percent (IRI4). 445 trained youths were female, surpassing the target of 150 by 297 percent. According to the beneficiary assessment, all the surveyed youth utilized their ICT skills in businesses or employment (IRI6) by using social media and smartphone applications for marketing and promotion. Of the 472 survey respondents, 265 were females, surpassing the target of 300 (157 percent) and 90 (294 percent), respectively. Over 9 out of 10 surveyed trainees responded to apply the knowledge and skills from the training in their current business employment and that the knowledge and skills gained increased their confidence. 24. Creation of an enabling environment for training YLEs. The project achieved the target of training and stationing 18 specialized ATOs in the field intended to provide technical support and mentoring servicing (IRI1) and establishing one PAN (IRI 3). Trainees in the beneficiary assessment survey reported high levels of satisfaction with the training arrangements and convenience (87 percent), the training content (90 percent), and the trainers being resourceful in building their business plan development capacities. In addition, 31 YLEs were established with the OVOP strategy (IRI2), overachieving the target of 20 YLEs by 55 percent.16 are not included in the employment created indicator. 16However, given that the OVOP strategy was a guiding principle of identifying new niche markets and achieve local economies of scale, the ambition of this indicator (20) is relatively low compared to the number of YLEs expect to be established by YERE Page 12 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) 25. Financial support for new employment. From the 877 youths trained (IRI4) on business plan preparation, 300 youth developed and submitted a business plan (IRI5), achieving the project’s target of 300. Of those 300, 144 (48 percent) were female, overachieving the target of 90 by 160 percent. After the PAN reviewed the 300 business proposals on established eligibility criteria, the project provided 150 grants for YLE development. The total grant amount distributed was BTN 51.301 million (or US$615,612) and was mainly used to buy machinery, equipment, or construction materials.17 The project awarded 127 grants to establish new YLEs and 23 grants to upgrade existing YLEs. Thus, the project could not achieve the revised target number of 200 YLEs established with support from project’s grants (IRI7). Two-thirds of the 127 grant recipients reported in the beneficiary survey that the grant was the key driver in establishing their business and that the grant was the only financing source for the YLE. 75 percent of the YLEs responded that the grant helped them to venture into innovative ventures. 26. Operationality of YLEs. Of the 150 YLEs supported, the beneficiary assessment revealed that 94 were fully operational 6 months after project support, while another 34 YLEs were partly operational. In addition, 55 percent of the grant recipients stated that their business is seasonal, while only 45 percent could operate it year-round at full capacity. 6 percent of the youth works less than 14 days a week, 29 percent between 14 and 19 days, and 75 percent between 20 and 30 days. The lion’s share of YLEs (96 percent) are established in the form of a sole proprietorship, indicating a strong entrepreneurial mindset. 45 out of the 150 YLEs (30 percent) have obtained a formal license for operation, while the remaining operate in home-based enterprises (piggery poultry, mushrooms, and horticulture) that do not require a formal license. 27. Sub-objective 2: to generate more productive employment for poor and vulnerable youth in selected dzongkhags in southwestern Bhutan. This objective is assessed using achievement to PDO indicator 2 which was expected to be achieved through improved skills, improved YLE governance, and financial capacity of existing YLEs. 28. More productive employment for existing YLEs. From the 23 existing YLEs, 22 submitted data on their profitability before and after project support. 13 YLEs (or 57 percent of the supported existing YLEs) were operating with a 20 percent increase in net profit, almost achieving the 60 percent target for the second PDO. The remaining 9 YLEs could not generate profits for various reasons, including limited sales recorded, higher input costs, and/or delays in the operationalization of equipment. 29. The project’s results framework does not provide information to assess whether the new employment created (sub-objective 1) for other beneficiaries (trainees and new YLEs) was also more productive (sub-objective 2). Moreover, of the 727 trainees, 400 are extrapolated to have the same employment before and after the training. Hence, it is unclear whether and by how much their existing employment became more productive from project training. For example, 85 percent of trainees who were farmers before the training remained farmers after the training. So, unless these farmers could produce more output, improve their product quality, or sell at a higher price; it would be difficult to conclude that their employment is more productive – especially since most farming in Bhutan is subsistence oriented. grants (IRI 8 with target of 200). 17 1 BTN = 0.012 US$ at the time of project closure (Dec 31, 2022). Page 13 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) 30. Skills development for more productive employment of existing YLEs. The project expected to strengthen the skills of existing YLEs to generate more productive employment in YLEs. According to the IRI under Component 3, the ATOs supported 100 existing YLEs for capacity building (IRI7), achieving the project target of 100. However, the project did not implement subcomponent 3.1 ‘Capacity Building for Established YLEs’, and IRI7 counts the 100 existing YLEs that received the training under component 2. Thus, existing YLEs did not receive a dedicated training session to build their capacity beyond the generic 5-day training. 31. Financial support for more productive employment of existing YLEs. Similar to the generation of new employment, the YERE grant was the primary source of finance to make existing YLEs more productive. The project grant was fundamental in providing financial support for productive investments to expand the YLEs (IRI5-7). For both new and existing YLEs, the results framework provides insights on some of the building blocks that are needed for a YLE to become more productive. For example, the project achieved the share of YLEs that submitted a 6-monthly progress report to the PMU (IRI9). Moreover, 87 YLEs reported to have sold products outside their gewogs (IRI10) to markets in regional towns, Paro or Thimphu, surpassing the target of 30. Overall Outcome Rating 32. The project (nearly) achieved the sub-objective of generating new employment for youth in selected Dzongkhags in Southwestern Bhutan. The project generated employment for youth (PDO1: 364 against the target of 400 or 92 percent achievement) and surpassed the target relating to YLEs still in business (PDO3: 107 against the target of 100 or 107 percent achievement) six months after project closing. The new employment generated with project support was a result of various factors, including trainees finding employment after training, self-employment in new YLEs, and paid employment in new or existing YLEs. The project also achieved gender diversity by employing 206 females, surpassing the gender-disaggregated target. In addition, existing YLEs increased their profitability after receiving project support (57 percent against the target of 60 percent). More qualitatively, the project beneficiaries report high levels of satisfaction with how the project training and grants provided them with an improved entrepreneurial mindset and necessary financial means (for grant recipients) to launch or upgrade their YLE. 33. However, it is uncertain whether the new employment created for trainees and new YLEs also led to more productive employment (second sub-objective). Most importantly, under the pathway of financial support, the project could support only 150 of the envisioned 200 YLEs with grants (75 percent of the target) having exhausted the entire funding allocated for grants and not providing institutional capacity support to YLEs. The PDO indicators also make it difficult to measure the creation of more productive jobs beyond existing YLEs. For example, for trainees, most of whom were farmers before the training, it is uncertain whether their employment became more productive unless they were able to increase output, improve product quality, or sell at higher prices. Additionally, while all project beneficiaries received a generic 5-day training session, it was not specifically tailored to improve their productivity, and the project did not provide dedicated capacity-building for established YLEs, limiting their potential for more productive employment. 34. Hence, the overall outcome is rated as Moderately Satisfactory. Page 14 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) Other Outcomes and Impacts 35. Project support led to an increase in entrepreneurial mindset. One of the project’s main achievements but difficult to measure is the change in entrepreneurial mindset introduced by the YERE project (especially its grants). Trainees in the beneficiary assessment agreed that the training provided them with a new network (92 percent), ideas to develop business ideas (90 percent), and the confidence to start a business (93 percent). Similarly, the beneficiaries interviewed during the field visit were clearly proud to be self-employed, independent from their parents or domestic partner, and empowered to serve the needs of their community. Many of them were proactive and devised good business plans to exploit the potential to serve local or regional markets. And despite some of the initial hiccups, many YERE beneficiaries continue to aspire and have big ideas to expand their YLEs. Such a change in mindset is the prerequisite for rural youth the be motivated and interested in seeking more training and guidance on technical topics, business and entrepreneurial skills, and other soft skills needed to run a profitable business. 36. However, the increased entrepreneurial mindset translated only minimally into more entrepreneurial action beyond project requirements. While the grant required an in-kind contribution of 20 percent (mostly for covering labor and transportation costs when installing the purchased machines or constructing a shed), only 42 YLEs (28 percent) applied for additional financing from financial institutions to obtain additional working capital to cover the operational expenses. However, 73 percent of the YLEs stated that the grant was inadequate to establish the current business and 53 percent of the grant recipients indicated that they were not willing to take out (additional) loans from financial institutions for business improvement. The field visit also revealed that most YERE beneficiaries did not seek nor receive additional support or resources beyond the project. Among the 22 enterprises that could not generate any income during the time of the beneficiary assessment, the primary reason was the late establishment of these enterprises and a shortage of working capital. Thus, to really ensure operationality and more productive enterprise, access to additional working capital and productive investments are required. Page 15 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME Key factors during preparation 37. The YERE project had a simple, sequenced, and demand-driven design to promote rural entrepreneurship. The YERE project had a simple design with well-defined components, clear operational logic, and appropriate sequencing: first creating the enabling environment for rural youth employment, then developing entrepreneurship skills, and finally providing financial assistance. The YERE project ensured that the types of enterprises and value-addition activities promoted would be identified in a participatory manner, building upon MoAL’s rapid economic and technical studies, and validated by a baseline assessment and stakeholder consultations. By promoting those value chains and commodities identified by the youth themselves and for which demand is locally present, the project was able to crowd-in committed youth and create strong ownership in their enterprises. 38. The project design incorporated valuable lessons learned from previous World Bank projects in Bhutan’s rural sector to ensure a realistic project design and by piloting project implementation through an independent PMU. The Task Team Leader that took over the project in the FY17-18 build upon the experiences of the ongoing RRCDP in Bhutan to make the project design more realistic and improve the implementation arrangements of the project. The project design was revised to make the project targets more realistic and achievable. In addition, the RRCDP provided an important lesson regarding the difficulties faced when locating the project implementation unit within the line ministry due to the frequent staff turnover and wide range of responsibilities. Therefore, the YERE project piloted an independent PMU staffed with project dedicated manager, subgrant manager, and M&E specialist on a contractual basis. The beneficiary assessment revealed high satisfaction of YERE beneficiaries with the call for proposal, clarifications to questions posed, communication of the selection results, and the support provided during the implementation of the business plan. The PMU was housed in the Policy and Planning Division of the MoAL to ensure collaboration and communication on a regular basis. When three-year contracts of its staff ended, the PMU dissolved in August 2022, and the Policy and Planning Division took the project management responsibility in the last 6 months of the project extension. 39. Yet, the project’s implementation arrangements remained ambitious and complex, given the rural context, restricted budget, and limited capacity for entrepreneurship development in Bhutan. The PAN, to be established under Component 1, would consist of a diversified set of members responsible for selecting successful business proposals and provide independent technical support and overall guidance to youth entrepreneurs (e.g., advise on branding, standards, and creating an association of YLEs). However, the PAN was comprised of public officials only (although from different ministries) who were solely responsible for reviewing business plans and recommending a selection for endorsement by the Project Steering Committee. The PAN also missed the opportunity to learn from experiences from projects under the Department of Employment and Entrepreneurship of the Ministry of Labour and Human Resources to finetune the YERE training curriculum and business plan template. Under the same component, the project planned to hire MTMTs with expertise in business and entrepreneurship skill development, who would undergo a 15-day training by a local or international consultancy firm. The MTMTs would have a wide range of responsibilities, including selecting beneficiaries, providing capacity building, and assisting with business plans. Moreover, under component 2, the MTMTs were expected to train youth in three key areas: life skills, business and technical skills, and ICT skills. The project design to deliver a comprehensive set of capacity building activities through a single implementation arrangement proved an overly ambitious approach, and some adjustments had to be made during implementation. Page 16 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) 40. The YERE project lacked a strategy to identify vulnerable and poor youth. While the project’s objectives reference poor and vulnerable youth, the project had no strategy to identify and target vulnerable youth. The project developed a Vulnerable Youth Development Framework in the ESMF (approved in 2015) that would organize a baseline survey and an inventory of vulnerable groups at the project start to identify vulnerable youths and assess their specific needs and impacts.18 However, the MTMTs were responsible for identifying interested youth through social media.19 When ATOs replace MTMTs, beneficiary selection did not receive the attention that was expected at appraisal. The focus group discussions revealed that most YERE beneficiaries were informed about the project through a message from the local government official through social media (WhatsApp or WeChat) with all youth in the gewog. As a result, there was no clear targeting strategy and participation in trainings was open to anyone and guided through local social structures. 41. The unclear targeting of beneficiaries resulted in a considerable variation in project impacts and sustainability. The field visit observed a large heterogeneity in the capacity of project beneficiaries, contributing significantly to the observed variation in project impacts. Because some of the YERE (grant) beneficiaries had a pre-existing YLE, they were experienced in bookkeeping, accounting, and running an SME, and they used the grant to upgrade their full- time business. These youths had a clear business plan and could obtain additional training and resources from other projects or through Dzongkhag officials. In most villages, however, the beneficiaries were school dropouts, working on their parents’ farm (the majority according to the beneficiary survey), or working as a constructor. T his subgroup often used the grant for a seasonal activity to serve local demand. However, their YLEs were often not fully operational and unable to generate sizeable income. While the existing YLEs showed more promising results, their eligibility under the definition of project beneficiaries (‘Out of school, unemployed and underemployed young people’), and whether they could get financial/technical support outside the YERE project is unclear. 42. The YERE project missed an opportunity to enhance financial literacy and connect grant recipients with microfinance institutions or other agencies for technical support. The baseline report revealed that 89 percent of the targeted youth were aware of existing loan programs but had never taken advantage of them due to the requirements of collateral, lengthy procedures, and complex paperwork. In addition, the high interest rates make loans from formal banks unaffordable for most young entrepreneurs. However, the YERE project did not incorporate any measures in its design to enhance financial literacy or facilitate connections between grant recipients and microfinance institutions or other agencies that could provide additional support. Including such activities could have bolstered the sustainability of the YERE subprojects by attracting additional financial resources to supplement the small business grant for productive investments. Key factors during implementation 43. Significant delay in project effectiveness and implementation. The project suffered from a series of delays in project implementation caused by the initial delay in fulfillment of the project’s effectiveness conditions and the impacts of the COVID-19 pandemic. After the JSDF approved the project in January 2018, it took a full year for the client to develop the Project Operations Manual, the ESMF, Integrated Safeguards Data Sheet, and Procurement Plan. Moreover, the project approval coincided with the transition of the World bank’s procurement system into the Systematic Tracking of Exchanges in Procurement (STEP) system and the MoAL lacked in-house capacity to adhere to the new World Bank procedure (see paragraph 58). The project also had no initial preparatory grant to prepare the requested documents, which added in further delays to project implementation. In addition, the RGoB organized two government elections in March and July 2018, each taking three months, so that the legal agreement could be signed only on January 23, 2019, when the new government took office. However, the project was declared effective only Page 17 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) on September 29, 2019, due to the delay in recruiting three officials for the PMU because of a dispute on their salary package.20 44. The COVID-19 pandemic, changes in project management, and changes in project supervision further delayed the project's implementation. As of March 2020, the RGoB had imposed three nation-wide lockdowns and various restrictions to travel and social gatherings to contain the spread of COVID-19. This initially delayed the implementation of the MTMTs formation under Component 1 and the related training activities under Component 2, thereby delaying the implementation of the subgrants activity. In addition, the previous Project Director was selected for a position in the Bhutan Embassy in Bangladesh in July 2020, and a new Project Director had to be appointed, leading to new project dynamics. On top of that, the frequent change in Task Team Leaders (TTL) to supervise the project increased transactions costs between the PMU, MoAL and the World Bank. 45. Instead of providing the dedicated, tailored, and technical trainings, ATOs delivered a 5-day training focused solely on preparing business plan proposals. While the original training modality of the MTMT required skilled and experienced trainers, the revised approach hired 18 ATOs with the only qualification that they ‘must possess a minimum Bachelors degree in any field of study.’ Moreover, instead of having three core trainings, the project implemented a short training module of just 5 days. This truncated training briefly covered the core content (such as accounting, bookkeeping, and other business skills) and mainly focused on preparing the youth to submit their business proposal. This narrow focus deprived the youth of the life skills, business, marketing, or technical skills that could have been gained from such training. In addition, the ATOs could not provide much of the envisioned mentorship because of COVID-19 related travel restrictions, and PAN members were not engaged in mentoring and follow-on hand-holding YLE guidance. As such, much of the mentoring and coaching services did not materialize, affecting the quality of subproject implementation.21 46. To buffer the COVID-19 impacts, the project proactively revised the modality to deliver the training and grants but it contributed to a dilution of the quality and quantity of intended project support. In addition to changing the training modality, the first restructuring reduced the individual grant ceiling from US$10,000 to US$5,000 to double the amount of YLEs that could be financially supported to 200. While intended to cover more beneficiaries during the challenging COVID-19 times, this spread financial resources thinly, and resulted in beneficiaries resorting to investments that were below their expectations (see below). Moreover, the revised target of 200 beneficiaries was unrealistic, as the budget allocated to the grants could not cover all potential beneficiaries if they would request the grant ceiling. In addition, grant recipients required additional, dedicated technical training to execute the business model and operate the machines acquired under the grant support. Similarly, beneficiaries expressed that the 18The ESMF (p31) states ‘The comprehensive baseline survey in the six dzongkhags would help determine the skills an d income levels of the targeted beneficiaries by gender and age. The baseline survey will be used to develop a list of vulnerable youths based on which an inventory of vulnerability will be developed.’ 19The project paper (p20) mentions that ‘The MTMTs will identify young men and women from the targeted project area who are capable, motivated, and interested in developing their own small-scale enterprise through broad campaigns, using Facebook and other social networks, Hackathons, mass media at the national level, local village meetings, and information dissemination at the community level.’ 20 The World Bank and MoAL initially agreed on a relatively high salary package to avoid the high staff turnover, but the project eventually reduced the salary package and yet remained competitive enough to attract the necessary competent personnel 21 However, YERE beneficiaries did acknowledge that they were informed that they could contact the ATOs after training but did not request additional support from them. Page 18 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) training, while helpful, was too short and trainees required regular refreshers on the core content of the training. 22 47. Access to markets and complementary services were important factors determining the operationality of YLEs. First, the empowerment of local officials and linkages to ongoing public programs was fundamental in creating an enabling environment at the local level. In Chukha, the Dzongkhag Administrative Officer received training from a public entrepreneur ecosystem development program. In other Dzongkhags, the Dzongkhag Agricultural Officer proactively linked YERE beneficiaries with other support programs. For example, some YERE beneficiaries received a 21-day training on entrepreneurial skills prior to the YERE training, and their business proposals were of significantly better quality. However, in most Dzongkhags, local government officials mentioned the weak link between the central and local government, resulting in a lack of ownership, awareness, and additional support at the personal initiative of government officials. Second, beneficiaries in closer proximity to local consumers or regional markets were able to develop a more commercial and full-time business to cater to those demands (e.g., bakery, meat shop). Third, very few, and especially the more remote, beneficiaries had no access to additional financial resources – but those that did were able to expand and diversify their business. IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME Bank Performance is rated as Moderately Satisfactory. Quality at entry 48.The project identified activities tailored to the Bhutan’s rural context through a participatory and demand- driven approach. The YERE project ensured that the types of enterprises and value-addition activities promoted would be identified in a participatory manner, responding to local demand, and being adapted to the geographical context. The design built on MoAL’s rapid economic and technical studies that assessed the project intervention areas and their natural resources’ potential for community-based enterprises, ecotourism, and the production of value-added niche products through simple value-addition activities. The project organized a baseline assessment and stakeholder consultations, which identified, for each dzongkhag, a list of potential niche products and services that could be developed with a modest investment and improvement in existing skills and accounting for the interests and abilities common to male and female youth. By involving local stakeholders in the identification of enterprises and value-addition activities, the project promoted ownership and ensured alignment with the interests and capabilities of rural youth. 49.Considering the country context and learning from previous World Bank projects, the YERE project team took proactive action to simplify the project design and make implementation arrangements more efficient. Before effectiveness, the project underwent significant revisions, including revision of the PDO statement and indicators, reduction of targets, geographical coverage, and budget. These changes enhanced realism and measurability of project targets and indicators, and facilitated better allocation of resources and improved the overall feasibility of the project. To ensure effective implementation, an independent PMU was established, which received high satisfaction rating from project beneficiaries. 50. One key factor that improved the design of the YERE project was the emphasis on maximizing synergies with another complementary project funded by the World Bank. The project design benefited from the capacity, infrastructure, 22 There is also anecdotal evidence that some youth paid Nu 10,000 for local counseling services to prepare the business plan. Page 19 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) and structures already built by the ongoing RRCDP in Bhutan. First, the geographical scope of YERE and RRCDP was aligned to provide complementary and integrated support. While the RRCDP focused on on-farm (irrigation, technology) and community-based (farm roads, marketing infrastructure) investments to improve agricultural productivity, the YERE project sought to diversify rural incomes from value-addition activities within and outside the agricultural sector. Moreover, the marketing infrastructure and services, training and skills development, and market outreach supported through the RRCDP would benefit YERE participants interested in developing the value addition of the RRCDP-supported commodities (e.g., horticulture). Second, the lessons learned from RRCDP informed the YERE project design, and the two PMUs and M&E specialists were in continuous contact for guidance. For example, the M&E systems for YERE were integrated in the already developed and adequately functioning M&E system established for the ongoing RRCDP by the MoAL. Similarly, the environmental and social management procedures set under RRCDP informed the list of negative activities and environmental codes of practices in YERE’s Environment and Social Management Framework (ESMF). 51. The lack of well-defined implementation arrangements, a mechanism to identify beneficiaries, and clear definition of objectives and results is likely to affect the effectiveness and sustainability of the YERE project. The project was implemented in the challenging context of rigid social structures and a lack of business, financial, and entrepreneurial skills in Bhutan’s rural areas. Unfortunately, the implementation arrangements established during the design phase, such as the MTMT and the PAN, proved not adequately robust to address these challenges. A major shortcoming of the project was the absence of a clear strategy to identify and target vulnerable youth. The responsibility for identifying potential beneficiaries was delegated to the MTMTs, which were not trained on beneficiary identification. Moreover, the project did not plan to adequately assess or support the financial literacy of the youth or facilitate their connection with microfinance institutions or other relevant agencies for additional financial and technical assistance. This lack of clarity in beneficiary targeting and the absence of linkages to complementary services contributed to significant variations in the capacity and outcomes of the project's beneficiaries. 52. The definition of the PDO and results framework had significant shortcomings. First, the project did not clearly define the concept of unemployment or underemployment in the Bhutanese context – and how the project considered to generate employment. As most beneficiaries were informally employed as unpaid family workers, the generation of new employment could be from informal to formal, from unpaid to paid, from low-value, primary production to value addition in agriculture, or from low-value agricultural to a more productive sector. Second, the PDO indicators were not specific enough to measure the attribution of the project to the employment generation process. Instead, they measured the employment status six months after the delivery of project activities, not accounting for the beneficiaries’ prior employment. Third, the results framework does not allow to demonstrate how the project contributed to new/more productive employment because it lacked appropriate intermediate indicators to measure and enabling environment or improved skills (e.g., proper accounting or record keeping). Finally, the definition, measurement, and label of several IRIs was unclear and ambiguous. For example, measurement for IRI8 includes both new and existing YLEs, and, therefore, the indicator cannot refer to ‘establishment of YLE’. Quality of supervision 53. Despite the significant challenges the COVID-19 pandemic created for project implementation, the World Bank was proactive in supervision, adjusting implementation modalities, and extending the project implementation period. The independent PMU was staffed with capable staff and regular (virtual) supervision missions were held. In response to COVID-19 pandemic, the project decided to leverage its activities as a recovery mechanism to support entrepreneurship and generate employment opportunities for rural youth. The restructuring also decentralized the Page 20 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) delivery of training to 18 Assistant Training Officers ATOs to have more field presence of trainers. The project’s closing date got extended twice for a cumulative period of 22 months to complete project activities and allow for a proper assessment of the project outcomes and YLE sustainability. 54. However, World Bank supervision did not use the opportunity of the project restructuring to address some of the design flaws. By approving the project’s request to reduce the size of the subgrants, the World Bank agreed to shift the project’s focus shifted more towards social objectives rather than productive ones. The number of beneficiaries reached was (unrealistically) expected to double, but the resulting grant amount was too small to make significant productive investments. . Similarly, when adjusting the MTMT training modality to involve 18 ATOs, the emphasis on hiring qualified and experienced service providers was lost. Moreover, the 5-day training package provided to YERE beneficiaries was too generic, too short, and mainly focused on business plan submission. Additionally, the project did not organize the institutional capacity building activity for established YLEs or strengthen market linkages, which were both important subcomponents of component 3. During the restructuring phase, the World Bank team missed an opportunity to highlight the need for a comprehensive training module that covered all three core modules. Furthermore, they did not take advantage of the restructuring to address the design issues in the results framework. Quality of Monitoring and Evaluation 55. Despite issues in the M&E design, the project’s M&E performance was rated as Moderately Satisfactory throughout the implementation period. During the project's appraisal, the YERE project was expected to establish a robust M&E system to be managed by an experienced M&E specialist. The M&E system was to leverage the use of ICT to track project performance (input and output) and measure its results (outcomes). The M&E activities were designed to be participatory, involving the engagement of youth and target communities in assessing the functioning YLEs. The M&E activities encompassed various components. Firstly, a baseline survey was conducted in August 2020 to determine the socio-economic conditions, attitudes, knowledge, and skills of unemployed youth. This survey also aimed to identify their specific capacity-building needs for self-employment and entrepreneurship. Secondly, an Excel-based M&E system was established to monitor the project's progress in terms of outputs and outcomes. This system facilitated the ongoing tracking and reporting of project activities. Furthermore, an independent evaluation took place at the end of the project period to assess the project's outcomes and provide valuable insights for future projects. 56. However, despite these arrangements, a significant drawback was the absence of a dedicated M&E strategy. This strategy could have clearly defined indicators, specified the methodology for measurement, and identified the data sources to be used. This omission created a gap in the project's M&E framework, hindering the clarity and effectiveness of indicator definition and measurement. Such a strategy would also allow to use the M&E system to effectively manage the project or even make mid-course corrections. The beneficiary assessment survey at the end of the project was post-facto with no opportunity for project improvement. Environmental, Social, and Fiduciary Compliance 57. The project’s environmental and social safeguards performance was rated as Moderately Satisfactory throughout the implementation period. The YERE project was classified as a “Category B� with a partial assessment because the impacts on the environment, human health, and safety were likely to be minor, site-specific with no irreversible consequences, and mitigation measures could be readily designed. The project triggered the following safeguard policies: (i) Environmental Assessment (OP/BP 4.1); (ii) Natural Habitats (OP/BP 4.04); and (iii) Forestry Policies (OP/BP Page 21 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) 4.36). The latter two policies were triggered because the proposed project areas have National Parks, and some economic activities will include processing non-timber forest products or community-based tourism. The ESMF ensured that investment project proposals would undergo proper screening to identify and address potential environmental and social impacts. Although the project does not involve adverse social impacts such as physical relocation or indigenous safeguard policies, the ESMF included measures to ensure that vulnerable youths targeted by the project benefit the most. These measures consisted of the Vulnerable Youth Development Framework, a Gender Framework for mainstreaming gender issues, and a Consultation, Information Dissemination, and Participation Framework to enhance governance and social accountability, which were converted into plans after environmental and social screening. The ESMF emphasizes the inclusion of poor and vulnerable youths while prioritizing gender equity, participation, and empowerment of women, and the project intends to support a significant percentage of women-owned initiatives. Additionally, a participatory approach was adopted in the implementation of the ESMF, involving youth groups and target communities in monitoring and decision-making processes. Reporting on the ESMF, screening and ES management was done periodically where no significant issues were noted. A grievance redress mechanism was established to allow affected communities to raise concerns and submit complaints, but no grievances were reported. 58. The project’s procurement arrangements were rated Moderately Satisfactory at the beginning and end of the implementation period but rated Moderately Unsatisfactory between July 2021 and February 2022. Given the PMU’s limited capacity, the project hired a team of individual consultants to assist with implementing the project. Although a Procurement Specialist was assigned to the team, due to the specialist’s unavailability, most of the procurement functions were handled by other team members, mainly the non-procurement consultants. The World Bank provided training to the Project Team on procurement arrangements and the use of the STEP system. All procurements were successfully completed, but the procurement processes experienced some delays due to differing opinions among the Project Team regarding the TOR requirements. There was no civil works contract during the project life and only a few procurements mostly for individual consultancy contracts (mainly to deliver training). However, the temporary downgrading to Moderately Unsatisfactory in July 2021 was motivated by the submission of signed contracts for activities that were not approved by the Bank in the STEP Procurement Plan. At project closure, the STEP system is 70 percent updated – with a couple of contracts to be canceled and a couple more waiting to complete. 59. The project’s Financial Management performance was rated as Moderately Satisfactory throughout the implementation period. The original grant allocation for the Bhutan YERE project was US$1,250,000. At the project closure, US$1,244,975 was disbursed, resulting in a disbursement percentage of 99.6 percent. However, BTN 7.83 million was still available in the Designated Account Advance at closure. In most cases, the Interim Unaudited Financial Reports (IUFRs) were submitted on time using client connection access. Despite agreement at project appraisal, the internal audit of the project did not take place as intended, and an internal audit report was submitted to the Bank only for FY21/22. The external audit of the YERE project by the Royal Audit Authority (the supreme audit institution) was submitted regularly, and arrangements were found satisfactory. The external audit report for FY21/22 was received recently but was found incomplete; therefore, a complete set has been requested. Similarly, clarifications have been requested on the observations of internal audit reports regarding receipt of funds by the beneficiaries. Any ineligible expenditure identified in the audit reports will be disallowed under the Grant. Even though there was scope for improvement, overall, the use of country financial management systems in Bhutan has worked well since the country’s Public Financial Management systems have been strengthened over the years. Given the above, the project FM arrangement is rated as “Moderately Satisfactory�. Page 22 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) Risk to Development Outcome 60. Several higher-level risks in Bhutan are likely to undermine the development outcome and sustainability of the YLEs that could not operationalize under the project. The current macroeconomic situation poses a significant risk that is likely to materialize for non-operational YLEs. Because of the high rate of youth migration from rural areas to urban areas or abroad, there is a non-negligible risk that youth with non-operational YLEs or trainees that kept their employment (55 percent) or remained unemployed (14 percent) may decide to leave their business, job, or hometown. This is already apparent in the large number of ATOs who have left the country after the project’s completion, who sought employment abroad rather than being absorbed in public institutions. A similar issue is the contraction of the hospitality and tourism service sector after the increase in Bhutan’s Sustainable Development Tax on tourists. Thus, the project’s priority to support YLEs providing rural tourism services might not be sustainable. 61. The small grant, short training, and seasonality of rural activities pose a modest risk for the sustainability and long- term operationality of YLEs that were ‘in business’ six months after project support. The short training and limited grant size might have changed the entrepreneurial mindset of youth but are unlikely to have created the skillset and generated significant productive investment for a sustainable long-term business. As the project did not establish linkages to other types of capacity or financial support beyond the project, it is uncertain whether the YERE beneficiaries have the skills required to apply for formal loans (which require more skills than preparing the simplified YERE business plan). If the YERE beneficiaries cannot attract more financial support, it is unclear how they will cover operational costs to maintain or expand their business. Moreover, as many of the activities supported are seasonal in nature and serving local demand, the YLEs offer some additional income but do not have the scale to replace prior occupation. Most YLEs are not formalized with the Gewog or the Dzongkhag administration so that appropriate monitoring and supervision activities could be carried out post-project. The limited income diversification and lack of certification are other barriers for long-term viability of YLEs. V. LESSONS LEARNED AND RECOMMENDATIONS 62. Rural projects aimed at promoting rural employment should clearly define the intended type of employment, the target beneficiaries, and develop a suitable targeting mechanism. The YERE project intended to create rural employment by supporting rural entrepreneurship. The project set expectations by mentioning "poor and vulnerable" youth in its objectives, indicating a focus on the most disadvantaged youth in rural areas. However, despite having a Vulnerable Youth Development Framework in place, the project did not implement a mechanism to specifically target the poor and vulnerable youth. Furthermore, the project did not provide a clear definition of the type of entrepreneurs it intended to support when referring to the creation of new and more productive employment opportunities. It remained unclear whether the project aimed to target unemployed youth and develop their basic skills to start a new business or target existing entrepreneurs who required advanced support to upgrade their YLEs. This lack of clarity in defining the target beneficiaries resulted in significant heterogeneity among project beneficiaries and varying impacts on these beneficiaries. Different types of entrepreneurs require distinct approaches to skill development (basic skills vs advanced skills) and financial support (seed grant vs matching grant). By establishing a clear definition of the type of entrepreneur, the project could have achieved more consistent outcomes. Moreover, such a definition would have helped determine whether the YERE project had a social objective of addressing rural unemployment through supporting new YLEs or a productive objective of upgrading existing YLEs. For future projects supporting rural employment, it is crucial to develop a clear objective regarding the type of employment to be generated, establish a coherent theory of how project activities will contribute to employment generation, and Page 23 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) implement an effective targeting mechanism aligned with either a social or productive purpose. 63. Small grants can have a significant impact on fostering an entrepreneurial mindset, but it is essential to align them with the expectations of the beneficiaries and establish linkages to additional support. YERE project grant recipients were proud to establish their own businesses, separate from their families or partners, and aspired to expand their business ideas. However, their primary concern was that the size of the grant was insufficient to make substantial productive investments. Consequently, they had to settle for smaller-scale equipment that did not meet their expectations, making them reliant on further support to grow their businesses. Even though the grant amount was modest, it could still make a meaningful difference when targeted towards capable youth and supplemented with additional support. This combination can effectively translate an entrepreneurial mindset into more productive investments in rural Bhutan. However, once this foundation is established, these beneficiaries require ongoing capacity building and mentoring. Particularly, they need support in developing technical skills to operate the acquired equipment and guidance in navigating the process of applying for formal financial resources. The financial plan included in the YERE business proposal was too basic for official bank applications, underscoring the need for hands- on assistance in this aspect as well. 64. In countries where entrepreneurship is still developing, it is crucial for rural youth employment projects to offer a comprehensive skill development program that covers all aspects of starting and running a business. The YERE project specifically aimed to create employment opportunities for rural youth in agricultural value addition and other rural sectors. For the majority of beneficiaries, this project was their first attempt at formalizing a business plan and embarking on self-employment. As a result, they required support and training across various skill sets including technical, business, management, and marketing skills necessary for running a profitable business. However, instead of providing beneficiaries with these essential skills that extend beyond simply submitting a business proposal, the YERE project training focused solely on that aspect. The project offered a one-time training event without follow-up or refresher courses. Additionally, the mentoring and guidance functions were compromised due to travel restrictions imposed by the COVID-19 pandemic. Considering the early stage of entrepreneurship in Bhutan, particularly in rural areas, projects aiming to support rural entrepreneurship should prioritize the provision of a comprehensive and dedicated skill development program. This program should cover all aspects of entrepreneurship and provide continued guidance and mentorship to beneficiaries. . Page 24 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS A. RESULTS INDICATORS A.1 PDO Indicators Objective/Outcome: Sub-objective 1: to generate new employment for poor and vulnerable youth in selected Dzongkhags in Southwestern Bhutan Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Number of youth who are Number 0.00 400.00 368.00 employed or are self-employed after at least six months of 01-Jul-2017 01-Jul-2017 23-Dec-2022 receiving grants and/or trainings of which female Number 0.00 120.00 206.00 01-Jul-2017 01-Jul-2017 23-Dec-2022 Comments (achievements against targets): The project paper defined the PDO indicator as the number of ‘youth from project areas employed by existing and new YLEs, and those that got jobs due to project-related training’. The beneficiary assessment collected information, at the time of the assessment, on the self-employment (and hiring) status of youth in the supported YLE and the employment status of those youth that received training (only). The achievement of YERE to the number of youths employed after project support and that can be attributed to the project is measured as follows using the information in the beneficiary assessment survey: I. Self-employment in newly-established, operational YLEs supported by grants. We exclude the 23 pre-existing YLEs from the measurement as we assume they can operate without project support. In addition, we do not consider the 20 grant recipients that were not operational at the time of the survey (see below). The total of youth self-employed in newly-established, operational YLEs is thus 107. Of this, 60 YLEs self-reported were unemployed, while 47 were previously unemployed before receiving the grant. II. Paid employment in newly-established, operational YLEs supported by grants. The beneficiary Page 25 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) assessment asked about the number of paid employees active in the YLEs. 9 newly-established YLEs employed one additional paid employee, while another 10 and two newly-established YLEs hired 2 and 3 additional paid employees. The total of paid employees is thus 30. In addition, the pre-existing YLEs employ 3 paid employees, but the survey data does not allow to conclude that these are new jobs. III. Employment by beneficiaries receiving training only. Of the 727 youth trained under the project, 322 trainees were interviewed. Of the surveyed trainees, 278 (86%) reported that they were employed or self- employed during the survey. Of the 278 employed youth, 101 (36%) indicated being unemployed before, while the majority of trainees reported being engaged in farming (56%) and a minority in the hospitality and service industry (5%). Hence, the only amount of new employment that can be attributed to the YERE trainings is 101, or 31% of the surveyed trainees. Assuming that the survey sample is representative of the underlying population of trainees, we can extrapolate the employment rate in the sample to the population. Thus, of the 727 youth that received training only, we can extrapolate that about 31% or 228 of them would have been employed in a new job after they received training. IV. On a conservative basis, the total number of new employment generated, which could be attributed to the project activities, is 365 (137 in self and paid employment in new YLEs, and 228 trainees). This is slightly below the 91.3% of the project’s target of 400 (91.3%). V. Unfortunately, the information in the beneficiary assessment does not do a similar aggregation using the gender-disaggregated data. Therefore, we assume the female participation rate of 56% in the beneficiary assessment report (238 out of 428) and apply it to the 368 youth employed. Note that the achievement of 368 is different from the achievement of 428 reported in the beneficiary assessment survey, including 278 training recipients and 150 grant recipients, overachieving the PDO indicator target of 400 by 107%. 238 employed individuals were female, overachieving the target of 120 by 198%. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Percentage of pre-existing YLEs Percentage 0.00 60.00 59.00 supported by JSDF grants that are operating with a 20% 01-Jul-2017 01-Jul-2017 23-Dec-2022 increase in net profit. disaggregrated by gender Percentage 0.00 50.00 29.00 01-Jul-2017 01-Jul-2017 23-Dec-2022 Comments (achievements against targets): The achievement of 59% (97% achievement of target) is based the beneficiary assessment survey data: 14 out of the 23 pre-existing YLEs were found to Page 26 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) have an increase of at least 20% in current net profits (total revenue minus cost of goods sold and total of operating expenses) compared with a baseline set 6 months before project support (recall data). 4 out of the 14 pre-existing YLEs with an increase of at least 20% in current net profits were female, resulting in an achievement of 29%, which is below the target of 50%. Note that the achievement of 59% is different from the achievement of 61% reported in the beneficiary assessment survey. The beneficiary assessment calculated profits using a template collecting information on total revenue, costs of goods sold, and operational expenses. The assessment measured the change in net profit as the difference between the current profit (6 months after receipt of the grant) and the profit 6 months before receipt of the grant. However, a baseline profit was not available for one YLE. Objective/Outcome: Sub-objective 2: to generate more productive employment for poor and vulnerable youth in selected dzongkhags in southwestern Bhutan Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Number of new youth-led Percentage 0.00 100.00 107.00 enterprises supported by JSDF still in business, at least six 01-Jul-2017 01-Jul-2017 24-Dec-2022 months after receiving grants/supports of which female Percentage 0.00 30.00 0.00 52.00 01-Jul-2017 01-Jul-2017 24-Dec-2022 Comments (achievements against targets): Of the 127 grant recipients that established a new YLE, 76 (60%) YLEs were fully commercially operational and generating business income, 31 (24%) YLEs partially operational, and 20 (16%) YLEs not operating. The project measured the number of YLEs ‘still in business’ as the 107 YLEs either fully or partially operational at the time of the beneficiary assessment. The project thus achieved the target of 100. Of these 107 YLEs, 52 YLEs (48%) were female-led, representing an achievement of 160% over the target of 30. This achievement is different from the one reported (127) in the beneficiary assessment survey report Page 27 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) A.2 Intermediate Results Indicators Component: Component 1: Support Structures to Facilitate Youth-Led Enterprise (YLE) Development Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Number of specialized Number 0.00 4.00 18.00 18.00 technical support teams established 01-Jul-2017 01-Jul-2017 24-Feb-2021 24-Dec-2022 Comments (achievements against targets): The achievement of 18 (100% achievement of target) is based on the Project Monitoring Information System reported in the latest ISR. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Number of enterprises Number 0.00 20.00 31.00 established with the strategy of ‘One Village One Product� 01-Jul-2017 01-Jul-2017 24-Dec-2022 Comments (achievements against targets): The achievement of 31 (155% achievement of target) is based on the beneficiary assessment survey data. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion PAN established Number 0.00 1.00 1.00 Page 28 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) 01-Jul-2017 01-Jul-2017 24-Dec-2022 Comments (achievements against targets): The achievement reported of 1 (100% achievement of target) is based on the Project Monitoring Information System reported in the latest ISR Component: Component 2: Youth Capacity Building and Empowerment Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Number of youths trained in Number 0.00 500.00 877.00 youth development and empowerment training 01-Jul-2017 01-Jul-2017 24-Dec-2022 package of which female Number 0.00 150.00 445.00 01-Jul-2017 01-Jul-2017 24-Dec-2022 Comments (achievements against targets): Based on the data in the Project Monitoring Information System, 877 youths were trained between August and September 2021 (175% achievement of target). This number includes 150 youths receiving grants to establish or expand their YLE and 727 youths received training only . The project paper defined this indicator as ‘the number of young people that attended training (life skills, technical and business, development planning, and ICT skills training) and received certificates. Existing YLEs and Potential YLEs are also included.’ 445 of the 877 youths were female, representing an achievement of 297% over the target. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Page 29 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) Number of trained youths who Number 0.00 300.00 300.00 developed business plans 01-Jul-2017 01-Jul-2017 24-Dec-2022 of which female Number 0.00 90.00 144.00 01-Jul-2017 01-Jul-2017 24-Dec-2022 Comments (achievements against targets): The achievement reported of 300 (100% achievement of target) is based on the Project Monitoring Information System reported in the latest ISR. Of the 300 submissions, 144 were submitted by female-led YLE, representing an achievement of 160% over the target. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Number of trained youths Number 0.00 300.00 472.00 using ICT skills in businesses/employment. 01-Jul-2017 01-Jul-2017 24-Dec-2022 of which female Number 0.00 90.00 265.00 01-Jul-2017 01-Jul-2017 24-Dec-2022 Comments (achievements against targets): The achievement reported of 472 (157% achievement of target is based on the Project Monitoring Information System reported in the latest ISR. Of the 472 trainees, 265 were female, representing an achievement of 294% over the target. Component: Component 3: Operationalization of YLEs Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Page 30 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) Number of existing YLEs Number 0.00 100.00 101.00 supported by the MTMT for capacity building 01-Jul-2017 01-Jul-2017 24-Dec-2022 of which female Number 0.00 30.00 30.00 01-Jul-2017 01-Jul-2017 24-Dec-2022 Comments (achievements against targets): The achievement reported of 101 (101% achievement of target) is based on the Project Monitoring Information System. Of the 101 existing YLEs supported, 30 were female-led, representing an achievement of 100% of the target. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Number of YLEs established Number 0.00 100.00 200.00 150.00 with support from project’s grants 01-Jul-2017 01-Jul-2017 24-Feb-2021 24-Dec-2022 of which female Number 0.00 60.00 70.00 70.00 01-Jul-2017 01-Jul-2017 24-Dec-2022 Comments (achievements against targets): The achievement reported of 150 (75% achievement of revised target) is based on the Project Monitoring Information System reported in the latest ISR. Of the 150 YLEs established, 70 were female-led, representing an achievement of 100% of the target. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Page 31 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) Percentage of YLEs submit 6- Percentage 0.00 80.00 100.00 monthly progress reports to the PMU 01-Jul-2017 01-Jul-2017 24-Dec-2022 Disaggregrated by gender Percentage 0.00 50.00 100.00 01-Jul-2017 01-Jul-2017 24-Dec-2022 Comments (achievements against targets): The achievement reported of 100% (125% achievement of revised target) is based on the Project Monitoring Information System reported in the latest ISR. All female-led YLEs submitted progress reports, resulting in an achievement of 200% over the target. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Number of enterprises that Number 0.00 30.00 87.00 sells products outside their Gewogs 01-Jul-2017 01-Jul-2017 24-Dec-2022 Comments (achievements against targets): The achievement reported of 87 (290% achievement of revised target) is based on the beneficiary assessment survey. Products sold outside the YLE’s gewog included markets in the Dzongkhag town, Thimphu, Paro, regional CSI markets, product exhibition in Thimphu, supply to restaurant/shops or supply to schools in nearby gewogs. Component: Component 4: Project Management, Monitoring and Evaluation, and Knowledge Dissemination Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Page 32 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) Independent Project Number 0.00 1.00 1.00 Management Unit (PMU) established with MoAF 01-Jul-2017 01-Jul-2017 24-Dec-2022 Comments (achievements against targets): The achievement reported of 1 (100% achievement of target) is based on the Project Monitoring Information System reported in the latest ISR Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Project Steering Committee Number 0.00 1.00 1.00 established under Secretary, MoAF 01-Jul-2017 01-Jul-2017 24-Dec-2022 Comments (achievements against targets): The achievement reported of 1 (100% achievement of target) is based on the Project Monitoring Information System reported in the latest ISR Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion An independent dynamic M&E Number 0.00 1.00 1.00 system is established and operational by JSDF 01-Jul-2017 01-Jul-2017 24-Dec-2022 Comments (achievements against targets): The achievement reported of 1 (100% achievement of target) is based on the Project Monitoring Information System reported in the latest ISR Indicator Name Unit of Baseline Original Target Formally Revised Actual Achieved at Page 33 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) Measure Target Completion Percent of YLEs maintain Number 0.00 100.00 100.00 progress reports 01-Jul-2017 01-Jul-2017 24-Dec-2022 Comments (achievements against targets): The achievement reported of 100% (100% achievement of target) is based on the Project Monitoring Information System reported in the latest ISR Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Percent of YLEs satisfied with Number 0.00 70.00 97.00 the services receive from MTMT/PMU 01-Jul-2017 01-Jul-2017 24-Dec-2022 Comments (achievements against targets): The achievement reported of 97 (139% achievement of target) is based on the Project Monitoring Information System reported in the latest ISR Page 34 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) B. ORGANIZATION OF THE ASSESSMENT OF THE PDO Objective/Outcome 1: to generate new productive employment for poor and vulnerable youth in selected dzongkhags in southwestern Bhutan. 1. Number of youth who are employed or are self-employed after at least six months of receiving grants and/or trainings (PDO1) Outcome Indicators 2. Number of new youth-led enterprises supported by JSDF still in business, at least six months after receiving grants/supports 1. Number of enterprises established with the strategy of ‘One Village One Product� 2. Number of youths trained in youth development and empowerment training package Intermediate Results Indicators 3. Number of trained youths who developed business plans 4. Number of trained youths using ICT skills in businesses/employment. 5. Number of YLEs established with support from project’s grants 6. Percentage of YLEs submit 6-monthly progress reports to the PMU 7. Number of enterprises that sells products outside their Gewogs 1. Number of specialized technical support teams established 2. PAN established Key Outputs by Component 3. Awareness campaign organized (linked to the achievement of the Objective/Outcome 1) 4. Training delivered 5. Business plan development supported Objective/Outcome 2: to generate more productive employment for poor and vulnerable youth in selected dzongkhags in southwestern Bhutan. 1. Percentage of pre-existing YLEs supported by JSDF grants that are Outcome Indicators operating with a 20% increase in net profit. 1. Number of existing YLEs supported by the MTMT for capacity building 2. Number of enterprises established with the strategy of ‘One Village One Product� Intermediate Results Indicators 3. Number of youths trained in youth development and empowerment training package 4. Number of trained youths who developed business plans Page 35 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) 5. Number of trained youths using ICT skills in businesses/employment. 6. Number of YLEs established with support from project’s grants 7. Percentage of YLEs submit 6-monthly progress reports to the PMU 8. Number of enterprises that sells products outside their Gewogs 1. Number of specialized technical support teams established 2. PAN established Key Outputs by Component 3. Awareness campaign organized (linked to the achievement of the Objective/Outcome 2) 4. Training delivered 5. Business plan development supported 6. institutional capacity development delivered Page 36 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) . ANNEX 2. PROJECT COST BY COMPONENT Amount at Approval Actual at Project Percentage of Approval Components (US$M) Closing (US$M) (US$M) Component 1: Support Structures to Facilitate 150,000 43,100 31.12 Youth-Led Enterprise (YLE) Development Component 2: Youth Capacity 210,000 291,000 121.25 Building and Empowerment Component 3: 640,000 688,200 108,55 Operationalization of YLEs Component 4: Project Management, Monitoring 250,000 227,700 95.87 and Evaluation, and Knowledge Dissemination Total 1,250,000 1,250,000 100 Page 37 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) ANNEX 3. RECIPIENT, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS Comments from the Policy and Planning Division of MoAL received on 06/26/2023 Thanks for sharing the first draft of YERE Implementation and Completion Report. We wish to command your office for coming out with a detailed analysis of the project. In moving forward, we wish to submit the following observations: 1. Extrapolations made to reach 91.8 percent achievement for new employment generation: In the absence of better yardstick, extrapolations made based on the Impact Assessment is considered to be fair, we wish to mention that even the Impact Assessment was done based on the selected samples of 322 out of 727 trained by the project. Moreover, the assessment was carried out by the closure of the project completion date. Considering the time gap between the Impact Assessment and the World Bank's evaluation assessment, there could be a possibility of an increase in the number of employment generation. In addition, the impact assessment by local consultants indicated that the project has been able to achieve the targets set out in the project document, and in some cases the project was able to overachieve the targets as well. 2. Classification of those engaged in farming as employed: While by the global understanding, those engaged in farming are considered to be employed, farming in Bhutan could be viewed in a slightly different perspective. Unlike in other countries where farmers own assets and regular income through their engagement in commercial activities, farming in Bhutan is carried out on a subsistence basis with a very little or no income return. Therefore, being employed in the project level understanding tagging with income generation may not be appropriate in this case. 3. 53 percent of the grant recipients indicated that they were not willing to take out (additional) loans from financial institutions for business improvement: Providing training on assessing financial resources from other avenues apart from project sub-grant was not there in the Project Appraisal Document. Moreover, with credit-supported investment fairly prominent especially in the enterprise sector, such training may not have come in handy for YLEs. More than providing training to explore additional financial sources, the issue could be in affordability where the interest rates for loans are very high. 4. The collaboration between the independent PMU and MoAL, however, was suboptimal: This statement is proposed to be further substantiated with evidential situations in the report, as the current content in the report lacks adequate and convincing explanation on the statement. The completion of contractual tenure for the project staff was based on the World Bank requirement, as they were not granted further extension. Moreover, the PMU was housed in the PPD, MoAL in order to ensure the highest level of collaboration and communication. There was communication between PMU and the Ministry almost on a daily basis. 5. After the JSDF approved the project in January 2018, it took a full year for the client to develop the Project Operations Manual, the ESMF, Integrated Safeguards Data Sheet, and Procurement Plan: While in other projects, the initial preparatory grant is being provided to come up with required documents such as ESMF, operation manual, procurement plan etc, YERE project has no such provisions. Moreover, the project approval coincided with the time when the world bank was switching into online procurement STEP system then from the erstwhile email based approval, and the ministry having no in-office expertise of developing Page 38 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) such documents in adherence to the World Bank requirement took time for this office in formalizing these pre-requisite documents. While these considerations are reflected in the foot note, considering the impact it has had on the project efficacy, we propose this to be reflected in the main report, and also consider this to be reflected in the report recommendation section as well. 6. In reporting project implementation delays, the report should also highlight the frequent change in Task Team Leader (TTL) on the World Bank's side. Frequent change in the TTL has often left both PMU and PPD in the tight situation as the replacement would usually take some and then the new TTL had to get acquainted with the project. There were also cases of PMU staff resigning before the term end. The factor for delay could also be viewed from the covid lockdown perspective. 7. Change in the project activities such as reducing the grant size as well as in aligning the activities to the covid recovery agenda were done in close consultation with the World Bank and approval to that end was also accorded by the World Bank. Thanking you. Page 39 of 40 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) ANNEX 4. SUPPORTING DOCUMENTS (IF ANY) Strategic Documents • Bhutan - Country partnership strategy for the period FY2015-19 (Report No. 88597-BT), August 2014. • Bhutan - Country Partnership Framework for the Period FY2021-24 (Report No. 154927-BT), December 2020 • Bhutan - Systematic Country Diagnostic: Taking Bhutan’s Development Success to the Next Level (Report No. 145069-BT), January 2020. • Bhutan - Performance and learning review of the country partnership strategy for the period FY2015- 2019 (Report No. 110736-BT), May 2017. • Poverty, vulnerability, and welfare in Bhutan: progress and challenges, 2019 • 12th Five-Year Plan for 2018-2023 • Bhutan's National Youth Policy, 2011 Project Documents • Project Paper for small REFT grant, December 17, 2017 • Legal Agreement, January 23, 2019 • Restructuring Papers of August 2021 and August 2022 • Project Operations Manual, August 2018 • Sub-Grant Management Manual, April 2019 • Grant Fund Request (GFR) • Environmental and Social Management Framework, October 2015 Monitoring and Evaluation Reports • Baseline Survey Report, August 2020 • Impact Assessment Survey Report 2022 • Monitoring report august 2022 • Annual Progress Report July 2021 to June 2022 • Annual Progress Report August to December 2022 • Management Appraisal Report, August 2022 Implementation Support Mission Documents (three review missions) • Aide Memoires • Implementation Status Reports Page 40 of 40