Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00006272 IMPLEMENTATION COMPLETION AND RESULTS REPORT LOAN NO. 9175-UA ON A LOAN IN THE AMOUNT OF (US$ 100 MILLION EQUIVALENT) TO THE Ukraine FOR THE Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project Social Sustainability and Inclusion Global Practice Europe and Central Asia Region July 27, 2023 [This ICR replaces the version published in Board Operations System on June 27, 2023. The text has been updated in Parargraph 1 on page 6, and in Paragraph 14 on page 10] Social Sustainability and Inclusion Global Practice Europe and Central Asia Region CURRENCY EQUIVALENTS (Exchange Rate Effective {Jun 20, 2023}) Currency Unit = Ukrainian Hryvnia (UAH) UAH 36.93 = US$1 FISCAL YEAR July 1 - June 30 Regional Vice President: Antonella Bassani Country Director: Arup Banerji Regional Director: Sameh Naguib Wahba Tadros Practice Manager: Varalakshmi Vemuru Task Team Leader(s): Erik Caldwell Johnson, Yevhen Bulakh ICR Main Contributor: Chifundo Patience Chilera ABBREVIATIONS AND ACRONYMS 3R Eastern Ukraine: Reconnect, Recover, Revitalize Project CERC Contingency Emergency Response Component CPF Country Partnership Framework EAP Emergency Action Plan EROM Emergency Response Operating Manual FCV Fragility, Conflict, and Violence GCAs Government-Controlled Areas GoU Government of Ukraine IDPs internally displaced people M&E Monitoring and Evaluation MoF Ministry of Finance MoSP Ministry of Social Policy MPTF Multi-Partner Trust Fund on Peacebuilding and Recovery MRTOT Ministry for Reintegration of Temporarily Occupied Territories of Ukraine NGCAs Non-Government Controlled areas PDO Project Development Objective PEACE Public Expenditures for Administrative Capacity Endurance PIU Project Implementation Unit POM Project Operations Manual PPSD Project Procurement Strategy for Development RDNA Rapid Disaster Needs Assessment RPBA Recovery and Peacebuilding Assessment for Eastern Ukraine TTL Task Team Leader UNHCR United Nations High Commissioner for Refugees TABLE OF CONTENTS DATA SHEET .......................................................................................................................... 1 I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ....................................................... 6 A. CONTEXT AT APPRAISAL .........................................................................................................6 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) .......................................9 II. OUTCOME .................................................................................................................... 12 A. RELEVANCE OF PDOs ............................................................................................................ 12 B. ACHIEVEMENT OF PDOs (EFFICACY) ...................................................................................... 13 C. EFFICIENCY ........................................................................................................................... 15 D. JUSTIFICATION OF OVERALL OUTCOME RATING .................................................................... 17 E. OTHER OUTCOMES AND IMPACTS (IF ANY) ............................................................................ 18 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 19 A. KEY FACTORS DURING PREPARATION ................................................................................... 19 B. KEY FACTORS DURING IMPLEMENTATION ............................................................................. 20 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 21 A. QUALITY OF MONITORING AND EVALUATION (M&E) ............................................................ 21 B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ..................................................... 22 C. BANK PERFORMANCE ........................................................................................................... 23 D. RISK TO DEVELOPMENT OUTCOME ....................................................................................... 24 V. LESSONS AND RECOMMENDATIONS ............................................................................. 25 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 27 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 34 ANNEX 3. PROJECT COST BY COMPONENT ........................................................................... 36 ANNEX 4. SUMMARY OF CHANGES MADE DURING POST-CERC ACTIVATION RESTRUCTURING37 ANNEX 5. BORROWER COMMENTS ...................................................................................... 39 ANNEX 6. SUPPORTING DOCUMENTS (IF ANY) ..................................................................... 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name Eastern Ukraine: Reconnect, Recover, Revitalize (3R) P172348 Project Country Financing Instrument Ukraine Investment Project Financing Original EA Category Revised EA Category Organizations Borrower Implementing Agency Ministry for Reintegration of Temporarily Occupied Ukraine Territories, Ukravtodor Project Development Objective (PDO) Original PDO To improve transport connectivity and promote agricultural sector recovery in project areas with the active engagement of conflict-affected communities. Revised PDO Improve the living conditions of IDPs by providing them with short term financial assistance to respond to urgent, basic needs. Page 1 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 100,000,000 99,571,663 99,571,663 IBRD-91750 Total 100,000,000 99,571,663 99,571,663 Non-World Bank Financing 0 0 0 Total 0 0 0 Total Project Cost 100,000,000 99,571,663 99,571,663 KEY DATES Approval Effectiveness MTR Review Original Closing Actual Closing 06-Nov-2020 25-Mar-2021 30-Nov-2025 31-Dec-2022 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 23-Dec-2022 99.32 Change in Project Development Objectives Change in Results Framework Change in Components and Cost Change in Loan Closing Date(s) Reallocation between Disbursement Categories Change in Legal Covenants Change in Implementation Schedule KEY RATINGS Outcome Bank Performance M&E Quality Satisfactory Satisfactory Substantial Page 2 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 24-Feb-2021 Satisfactory Satisfactory 0 02 21-Sep-2021 Satisfactory Satisfactory .23 Moderately 03 19-Apr-2022 Moderately Unsatisfactory .23 Unsatisfactory Moderately 04 07-Nov-2022 Moderately Unsatisfactory 99.23 Unsatisfactory 05 14-Jan-2023 Satisfactory Satisfactory 99.32 SECTORS AND THEMES Sectors Major Sector/Sector (%) Agriculture, Fishing and Forestry 13 Agricultural Extension, Research, and Other Support 10 Activities Public Administration - Agriculture, Fishing & Forestry 3 Transportation 65 Public Administration - Transportation 2 Rural and Inter-Urban Roads 63 Industry, Trade and Services 22 Agricultural markets, commercialization and agri- 22 business Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Page 3 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) Economic Policy 15 Trade 15 Trade Logistics 15 Finance 68 Finance for Development 68 Infrastructure Finance 68 Human Development and Gender 50 Disease Control 50 Pandemic Response 50 Nutrition and Food Security 13 Food Security 13 Urban and Rural Development 100 Urban Development 68 Public Transport 68 Rural Development 100 Rural Markets 100 Road Safety 5 Disaster Risk Management 30 Disaster Risk Reduction 30 Environment and Natural Resource Management 22 Climate change 22 Mitigation 3 Adaptation 19 ADM STAFF Role At Approval At ICR Regional Vice President: Anna M. Bjerde Antonella Bassani Country Director: Arup Banerji Arup Banerji Director: Steven N. Schonberger Sameh Naguib Wahba Tadros Page 4 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) Practice Manager: Kevin A Tomlinson Varalakshmi Vemuru Holly Welborn Benner, Yevhen Erik Caldwell Johnson, Yevhen Task Team Leader(s): Bulakh Bulakh ICR Contributing Author: Chifundo Patience Chilera Page 5 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A. CONTEXT AT APPRAISAL Context 1. Prior to Russia’s invasion of Ukraine in February 2022, Ukraine was already challenged by the impacts of events in 2014: i) the Maidan revolution, ii) the situation in Crimea, and iii) the armed conflict of 2014 between Ukrainian forces and separatist forces in the east of the country. In the east of Ukraine, over five million Ukrainians had been affected by the conflict in the Donetska and Luhanska oblasts (‘the Donbas’) with estimated 14,300 deaths including nearly 3,500 civilians, in addition to damaged infrastructure, interrupted markets and services, restricted movements and loss of employment as well as psychosocial impacts. Despite a fragile ceasefire agreement of February 2015 (Minsk II), the security situation remained volatile with daily hostilities along the ‘Contact Line’ that separated Ukraine Government-Controlled Areas (GCAs) and Non-Government Controlled areas (NGCAs) in the Donbas. A new flashpoint in tense Ukrainian-Russian relations also emerged in 2018 around incidents in the Sea of Azov. The impacts of the conflict coupled with the COVID-19 Pandemic, compounded the fiscal pressures and traditional factors of vulnerability in the country, where significant regional disparities have characterized its development model for decades and the benefits of economic growth have not been shared evenly among regions.1 2. Agriculture was growing in prominence in the Donbas, particularly in Luhanska oblast, with the decline of the industrial activity. Prior to the armed conflict of 2014, the regional economy of the Donbas accounted for almost a quarter of Ukraine’s industrial activity and an equal share of its exports. Luhanska oblast accounted for 76 percent (or 1.5 million hectares) of the total agricultural land of the Donbas and the sector created 23 percent of new jobs, more than any other sector.2 However, the conflict of 2014 resulted in significant negative impacts on agricultural supply and value chains in the region. 3. Surveys in 2019 showed decreasing levels of trust in local institutions and citizen perceptions of the accountability of government institutions in the Luhanska oblast GCAs.3 For example, only 21 percent of Luhanska oblast GCA citizens thought local authorities were attentive to the needs of ordinary people; only 27 percent of respondents thought central and local authorities represented their concerns and views; and only 25 percent thought central authorities cared equally about all parts of Ukraine. 4. This project The Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project was designed to contribute to the social and economic recovery of the Luhanska oblast following the armed conflict of 2014. It focused on rehabilitating important transport routes and developing the agriculture sector 1 Due to data limitations, it is impossible to robustly assess monetary poverty at the subnational level and to measure regional differences. Non-monetary indicators of wellbeing (e.g., life expectancy, unemployment, etc.) show disparities in various parts of the country 2 United Nations Peacebuilding and Reconstruction Program. 2018. Comprehensive Analysis of the Regional Labor Market and the State Employment Service and Their Impact on the Vocational Education System in Luhansk Region 3 See: Centre for Sustainable Peace and Democratic Development). Social Cohesion and Reconciliation (SCORE) Index frequency data for Donetsk and Luhansk (2019) Page 6 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) (Figure 1) to stimulate economic growth while promoting constructive opportunities for citizen and government engagement in addressing local challenges. 5. The project was complimentary to the government’s commitment to move forward an ambitious and wide-ranging reform agenda, which included prioritization of outreach and support to conflict-affected communities in the east of Ukraine. This was in addition to key initiatives such as the Mariupol Investment Forum which convened Ministers, local administration, private sector representatives and international partners in October 2019 to underscore the government’s commitment to promote investment, economic opportunity, and growth of the region. The project also supported the Luhansk Regional Development Strategy of 2016-2020 which highlighted agricultural development as a key Figure 1: Map showing the linkages in the transport and agricultural investments under the project in the target area objective, including increasing productivity and efficiency and facilitating processing and access to markets. 6. The project also aligned with the World Bank’s Country Partnership Framework (CPF) 2017-2021, which focused on supporting Ukraine to move forward its ambitious reform agenda to achieve economic recovery, development, and growth. The project was consistent with the CPF’s Focus Area 3: Effective Services and Targeted Assistance/targeted support to conflict-affected populations and contributed to achievement of CPF cross-cutting issues such as public administration reform and citizen engagement. 7. The design of the project, including its focus on transport and agriculture, built on the World Bank’s national portfolio of investments (for example, Accelerating Private Investment in Agriculture Program (P166941) and Road Sector Development Project (P149322)) and sector knowledge, as well as the World Bank’s support for land reform and the opening of the land market. In addition, this project built on the Conflict Response and Recovery Pilot and Capacity Building Project (P158091), whose objective was to improve capacity of Ministry for Reintegration of Temporarily Occupied Territories of Ukraine (MRTOT) to address the development impacts of the conflict in Eastern Ukraine was achieved. Through this project, MRTOT demonstrated improved capacity to lead and coordinate recovery planning and programming and was effectively the leading state agency for development and implementation of policy and strategic engagement on peacebuilding and recovery in Eastern Ukraine. Hence MRTOT was selected as the main implementing agency for the 3R project. Finally, 3R Project was also consistent with the World Bank Group Strategy for Fragility, Conflict, and Violence (FCV) 2020–2025, which commits the WBG to “increase the effectiveness of its development support to both low- and middle-income Page 7 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) countries that are dealing with diverse challenges across the FCV spectrum, including subnational conflict.” Theory of Change (Results Chain) 8. The project’s results chain was well-articulated for the original PDO and is presented below in Figure 2. It was underpinned by four assumptions: a. Continued strong government commitment to recovery and development of Eastern Ukraine b. Communities, regional and local administrations, and private sector engage and support project implementation c. No major escalation of conflict/expansion of active conflict zone to project areas d. Government makes relevant investments to ensure the operation, maintenance, and sustainability of project-supported infrastructure Figure 2: Results chain of the project at approval 9. While the Government of Ukraine (GoU) remained committed and supportive of the project, Russia’s invasion of Ukraine in February 2022 was the main impediment to the achievement of any of the stated objectives. This is because Russia’s invasion of Ukraine significantly changed the context of implementation, thereby compromising the critical assumptions as it was a major escalation of hostilities not only in the project targeted areas, but across the country. This rendered the project inoperable. Moreso, Russia’s invasion of Ukraine broke out early during implementation before any concrete project activities were implemented. Project Development Objectives (PDOs) 10. The Project Development Objective (PDO) was to improve transport connectivity and promote agricultural sector recovery in project areas with the active engagement of conflict-affected communities. Page 8 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) Key Expected Outcomes and Outcome Indicators 11. The PDO Level Indicators were: i. Enhanced mobility: travel time between rural areas and service centers/markets in Luhansk Oblast GCAs ii. Percentage of beneficiaries of Agri-hub and agricultural cluster investments reporting increased profits and/or improved access to new technologies due to project interventions (disaggregated by type and size of producer, women-headed enterprises) iii. Cumulative number of users of agricultural testing and food safety services provided by the project (disaggregated by type of service provided, type and size of user) iv. Percentage of target beneficiaries who report that the design/operation of infrastructure investments financed by the project reflect their inputs (disaggregated by gender) Components 12. The project comprised four components: a. Component 1: RECONNECT - Road Investments to Link Rural Communities to Processing, Markets, and Services (US$65 million): Component 1 was intended to provide support to: (a) rehabilitate roads in Luhansk Oblast GCAs in support of the agricultural sector; and (b) connect rural communities to urban service centers in Luhansk Oblast GCAs. i. Subcomponent 1A: Road rehabilitation of the target road network in Luhansk Oblast GCAs (US$63 million) ii. Subcomponent 1B: Technical assistance, capacity building, and community engagement on road investments. (US$500,000) iii. Subcomponent 1C: Project management expenses for Ukravtodor (US$1.5 million) supported project management and implementation support to implement Component 1. b. Component 2: RECOVER - Agriculture Investments to Support Sector Recovery and Modernization (US$32 million). i. Subcomponent 2A: Agricultural logistics and service hub (US$12 million) ii. Subcomponent 2B: Regional agricultural testing and food safety laboratory (US$10 million) iii. Subcomponent 2C: Agricultural cluster development (US$10 million) c. Component 3: REVITALIZE - Implementation Support Platform, including communications, community, youth, and private sector engagement (US$3 million) i. Subcomponent 3A: Project management (US$1.7 million) ii. Subcomponent 3B: Community, youth, and private sector engagement (US$1 million). iii. Subcomponent 3C: Communications (US$300,000). d. Component 4: Contingent Emergency Response Component (~US$0) B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) 13. The main changes made during implementation relate to the activation of the Contingency Emergency Response Component (CERC) following Russia’s invasion of Ukraine on February 24, 2022. This resulted in the: i) revision of the PDO, ii) revision of the results framework, iii) change in the closing date, and iv) change in disbursement categories (a full list of changes is presented in Table 1 in Annex 4). In discussion with the World Bank, the government requested to activate the CERC under this project as part of its response to Internally Page 9 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) Displaced Persons (IDPs) needs. The CERC is a financing window under Investment Project Financing (IPF) operations such as this project, which allows the World Bank to rapidly provide funds for an eligible crisis or emergency. As such, a CERC need not be related to the regular project objectives, underlying Theory of Change, or area of intervention. Given its purpose, when a CERC is activated, the flexibilities for situations of urgent needs and capacity constraints apply (as established in Paragraph 12 of the IPF Policy of the World Bank). If a CERC is activated, it is possible to reallocate up to the total amount of uncommitted funds from the project,4 and the restructuring of such project is deferred to three months after the activation to allow for adjustments to emergency needs. 14. In this regard, the Government shifted its priorities in terms of World Bank-financed activities to redirect funds to respond to immediate needs due to the impacts of Russia’s invasion of Ukraine.5 Within the broader framework of Bank support to the crisis faced by Ukraine, the activation of the CERC under this Project in response to IDP needs was considered strategically relevant given that the original project was no longer viable. The institutional set up provided readiness for implementation of the emergency activities planned under the CERC. On March 20, 2022, the government launched a large-scale response to the rapidly growing numbers of IDPs, utilizing an existing social program to provide cash transfers for basic needs including food, health care and energy to registered IDPs who are defined as: a. Persons who had moved from Crimea and Sevastopol, b. Persons, who after the imposition of martial law were forced to leave their place of residence located in fourteen regions with active hostilities, and c. Persons who as of March 1, 2022, were registered as IDPs and were receiving benefits under the pre- existing social assistance program which was in response to the 2014 conflict. 15. The World Bank assessment of the Government’s social assistance programs determined that the existing IDP cash assistance program was: i) functioning well, ii) had appropriate accountability mechanisms, and iii) was comparable to similar systems in neighboring/other countries (additional details on the assessment are provided in the section on efficiency). This assessment informed the approval by the World Bank’s approval of the proposal to utilize the CERC to reimburse government’s cash assistance to IDPs through the existing social assistance program. The World Bank approved the CERC activation on June 7, 2022. The World Bank approved the CERC activation on June 7, 2022. On June 15, 2022, the Ministry of Social Policy which was responsible for administration of the social assistance provided documentation to the World Bank that more than US$175 million had been transferred to IDPs bank accounts in the months of March and April 2022. This documentation was reviewed and accepted as sufficient to reimburse the Government for a portion of these expenditures. On June 22, 2022, US$99 million of undisbursed amount – the total funds redistributed from Components 1, 2, and 3 to Component 4 - to the CERC component, were transferred to the State Treasury Service of Ukraine. Of the funds remaining under Component 3, two additional contracts were processed for the project audit and beneficiary survey. The cash transfers to IDPs were channeled through an existing social assistance program of 4 Uncommitted funds refer to the remaining Bank financing after considering contractual obligations related to ongoing project activities, as well as related fiduciary, environmental and social requirements, and project management costs 5 It should be noted that Borrowers have the options of requesting additional financing to replenish the funds reallocated to a CERC and continue implementing the original project; or as was the case with the 3R Project, to scale down or repurpose the operation. Page 10 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) the Government, which as detailed in the subsequent sections, was assessed to be fully functional and ready for CERC implementation. 16. By the time the Government, through the Minister of Finance formally requested World Bank to activate the CERC through a letter on May 25, 2022, the Government had already met the three CERC disbursement conditions under the Loan Agreement: a. The Government’s citation of a State of Emergency6 declared on February 24, 2022, was duly documented, and accepted by the World Bank as an eligible crisis, b. The Emergency Action Plan7 (EAP) prepared by the Government was satisfactory to the World Bank, and c. The Government had adequate staff and resources for the purposes of EAP activities. 17. At the time of Russia’s invasion of Ukraine, the following bid submission closing dates had passed and contracts were about to be signed8: a. All planned road reconstruction and supervision activities under Component 1, b. A design study for an agriculture testing and food safety laboratory under Component 2, and c. A baseline survey of socioeconomic conditions in the oblast under Component 3. 18. Prior to Russia’s invasion of Ukraine, the project became effective on March 21, 2021, and actions to commence project activities ensued, including establishment of a fully operational Project Implementation Unit (PIU) with seven full-time consultants in the MRTOT. In addition to staffing the PIU, three additional contracts were also concluded as follows: a. Purchase of office and computer equipment ($28,528.16), b. Hiring of a specialized consultant designing a Terms of Reference for a feasibility study for an agriculture services and logistics hub and agriculture cluster development ($2,000.00), and c. Provision of technical services for the development of the Brand Project 3R ($8,532.67). 19. After the CERC was activated, the PIU in the MRTOT retained its role as the implementing agency and had several consultants engaged that could implement all proposed activities. Additionally, the PIU revised several project documents for use in implementing the CERC activities. The Emergency Response Operating Manual (EROM) required for the CERC (Annex 1 of the Project Operations Manual (POM)) was updated and endorsed by the Government on June 3, 2022. The project’s environmental and social instruments were revised to reflect possible social risks and mitigation actions, in particular the Stakeholder Engagement Plan, which was cleared by the World Bank and subsequently disclosed and made available to the public. 20. As per the World Bank policy, an ex-post Level II Project Restructuring was processed within three months of the CERC activation. A detailed summary of the changes is summarized in Table 1 in Annex 4. The revised disbursement categories are summarized in Table 2 in Annex 4. The overall amount of disbursement under the Project comprises $99,574,735.37 or 99.57% of the total Project amount of $100 million. An amount of $425 264.63 was unused and returned to the World Bank. The disbursed amounts comprised: i) $99 million for 6 Decree of the President of Ukraine No. 63/2022 and martial law imposed in Ukraine by the Decree of the President of Ukraine No. 64/2022 as of 24 February 2022 7 The EAP defines the details of the emergency support provided through the CERC. It includes, inter alia, the activities and cost estimates, and confirms the implementation arrangements and fiduciary and environmental and social requirements 8 Other procurement contracts were under competitive selection Page 11 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) the CERC, Component 4; ii) $521,924.92 which relates to the contracts financed under Component 3, completed prior to the restructuring; and iii) $52,810.38 which consists of two contracts that were tendered under Component 3 to facilitate the completion of the CERC.9 Rationale for Changes and Their Implication on the Original Theory of Change 21. Due to the changes in PDO and results framework at ex-post restructuring, the original project results chain was no longer relevant. There was no revision of the results chain at the time of project restructuring, though a revised results framework was developed t based on the beneficiary survey which was administered ex-post. as discussed in the subsequent sections below). II. OUTCOME A. RELEVANCE OF PDOs Assessment of Relevance of PDOs and Rating 22. Rating: High 23. The revised PDO is consistent with the World Bank Group Support to Ukraine,10 in which the Bank is leveraging its broad range of financing instruments to mobilize financing and donor partner support; as well as facilitate the rapid disbursement of funds to meet Ukraine’s urgent needs. Additionally, by providing adequate budget support to keep the government running and to provide minimal essential services, the project enabled government to mitigate the risk of more people falling into poverty as a result of the impacts of Russia’s invasion of Ukraine, which could make subsequent efforts to rebuild and recover more costly. Hence the social assistance program targeting IDPs, to which the CERC funds were directed is critical. 24. Similarly, by targeting Ukraine’s eastern region, which was in the process of recovering from the ongoing conflict that began in 2014, the original PDO was consistent with CPF 2017-2021 Focus Area 3: Effective Services and Targeted Assistance/targeted support to conflict-affected populations. Moreover, the focus on transport and agriculture was an overarching complementary effort to the government’s reform agenda to achieve economic recovery, development, and growth, which was also the CPF’s overall objective. More so, the project design aligned with the World Bank Group Strategy for Fragility, Conflict, and Violence 2020–2025, which commits the WBG to “increase the effectiveness of its development support to both low- and middle-income countries that are dealing with diverse challenges across the FCV spectrum, including subnational conflict”. 25. In this case, the project was informed by and complemented the initiatives of the Recovery and Peacebuilding Assessment for Eastern Ukraine (RPBA), which was co-led by the World Bank’s FCV Group and Social Sustainability and Inclusion Global Practice, alongside the UN and the EU, and was adopted by the GoU in August 2015. The RPBA led to: i) a pilot and capacity building project focusing on conflict response and recovery (US$3.6 million) which was financed by the State- and Peace-building Fund, and ii) the design of a World-Bank Administered 9 I.e., i) survey of beneficiaries with feedback ($37,190.38), and ii) Project Audit ($15,620.00). 10See the Bank’s statement: https://thedocs.worldbank.org/en/doc/1cbfe97313f071d12a1a073cf94992d8- 0080012023/original/World-Bank-Group-Support-to-Ukraine.pdf (Accessed June, 2023) Page 12 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) Multi-Partner Trust Fund on Peacebuilding and Recovery (MPTF) (US$2.07 million) which was a fund to finance analytics, technical assistance and capacity building support to a new national Ministry focused on reintegration and recovery efforts (MRTOT), and pilot programming in Eastern Ukraine to address the needs of IDPs, veterans, and host communities. MRTOT was one of the two PIUs under the 3R Project (in addition to Ukravtodor), and it is this ministry, together with Ministry of Social Policy (MoSP) and Ministry of Finance (MoF) that exercised leadership over the CERC component. 26. The revised PDO remains highly relevant, given that after Russia’s invasion of Ukraine, both the World Bank and the Government moved quickly to respond to the evolving situation and redirected project funds to support the urgent needs of the IDPs. As of June 2023, the registered number of IDPs is 7.7million. In the second Rapid Damage and Needs Assessment (RDNA2) which was released in March 202311, it is estimated that the full year of Russia’s invasion of Ukraine has resulted in more than US$135 billion in direct damage to buildings and infrastructure. The most affected sectors have been housing (38 percent), transport (26 percent), and energy (8 percent); which the RDNA2 also asserts as the top three recovery priorities for the government of Ukraine for 2023, the fourth priority being social protection and livelihoods. In this regard, the RDNA acknowledges that the government has already taken steps to provide for the urgent needs of its citizens through its budget, most notably supporting IDPs and the broader provision of social protection. It is towards this effort to meet the urgent needs of IDPs that the CERC activities were targeted towards meeting the urgent needs of IDPs. Hence the restructuring of the project following the CERC activation, including the change in PDO and results indicators was not only appropriate, but remains highly relevant. More broadly, the CERC aligns with the World Bank’s overall shift in strategic focus and financing from longer term development goals to the shorter-term response to the impacts of Russia’s invasion in Ukraine. B. ACHIEVEMENT OF PDOs (EFFICACY) Assessment of Achievement of Each Objective/Outcome 27. Original PDO Rating: Negligible 28. Rating of the original PDO covers the period from project approval to the date of CERC activation on June 7, 2022. On June 7, 2022, less than 1 percent of the project funds had been disbursed. The project underwent a CERC activation and ex-post Level II Restructuring within 6 months, which led to 99 percent of the project funds being redistributed from Components 1, 2 and 3 to Component 4, such that the PDO of the project and the results indicators were significantly revised. In February/March 2022, project implementation had not reached the point of yielding measurable results, although there was progress on procurement and technical design activities which could not be captured through results indicators. One intermediate results indicator on the development of a communications strategy was achieved, but this is quite a negligible achievement with respect to the overall PDO results targets. 29. Revised PDO Rating: Substantial 30. The restructured PDO is as follows: “to improve the living conditions of IDPs by providing them with short term financial assistance to respond to urgent, basic needs.” This PDO is assessed as a whole, rather than breaking it 11 RDNA2 was developed by the World Bank Group, the Government of Ukraine, the European Commission, and the United Nations; and it presents an assessment of one year of Russia’s invasion of Ukraine impacts, in line with a globally accepted methodology. It quantifies direct physical damage to infrastructure and buildings as well as the needs related to the costs for recovery and reconstruction. Page 13 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) down into parts. The core objective is to “improve living conditions” and this is accomplished by “providing short- term financial assistance to respond to urgent needs.” 31. There are three main PDO indicators that capture information about IDP living conditions, those reporting on: beneficiary opinions as to whether (i) the cash assistance “improved their living conditions; (ii) “whether the cash assistance reduced beneficiaries’ feelings of stress; and (iii) “the percentage of beneficiaries that reported using cash assistance for the highest priority use, food.” In the beneficiary survey, 86 percent of respondents stated that the cash assistance improved their living conditions, only 4 percent short of the target of 90 percent.12 Eighty- nine percent of respondents stated that they had reduced feelings of stress, 1 percent short of the target of 90 percent.13 Only 57 percent of respondents reported using cash assistance for food compared to the target of 70 percent, 13 percent short of the target. Food was, however, the most cited use of cash assistance, followed by housing rent (43 percent) and utilities (34 percent) and health and medical services (28 percent).14 These are important contributions to improving living conditions. 32. The other two PDO indicators capture the breadth of coverage of beneficiaries with the exact target of 467,930 beneficiary families reached. As the funds were disbursed before the restructuring paper was processed, the actual beneficiary numbers were incorporated into the results framework. The Emergency Action Plan submitted by Government estimated that 600,000 families would benefit, but the result revealed a higher number of beneficiaries per household so a lower number of total household beneficiaries. The fifth PDO indicator was a measure of the efficiency of the cash assistance distribution with 49 percent of beneficiaries saying that they receive funds within one month of application compared to the target of 80 percent.15 While this does not reflect on living conditions, it does indicate the social assistance program was responding a bit slower than desired. More so, close to 20 percent of the beneficiaries reported to have experienced difficulties in applying for the cash assistance through the program. Although the social assistance program was an existing program, the CERC funds reimbursed payments for cash transfers in the first two months of when the program was adapted to respond to the needs of IDPs. It is likely that there may have been improvements to the program administration over time. However, this is beyond the scope of this project. 33. Yet despite these inefficiencies, up to 96 percent of the beneficiaries reported to have been satisfied with the responses they received from the government on their inquiries regarding the program, based on the intermediate indicator which exceeds its target by 6 percent. Moreover, 4 percent of the beneficiaries were families caring for persons with disabilities, 2 percent less than the target. In a situation of IDPs where vulnerabilities are universal, it is significant that the program maintained a dimension of intersectional vulnerability. 34. While the project did not fully meet all its stated targets, a majority of the project beneficiaries are reported to have felt that the cash assistance improved their living conditions, which is the primary objective of the project 12 The indicator value was calculated as the proportion of respondents who answer between 2 and 5 on a scale of 1 to 5 (with 5 being the highest) on the beneficiary survey question asking- to what extent the cash assistance has improved their living conditions. 13 The indicator value was calculated as the proportion of respondents who answer between 2 and 5 on a scale of 1 to 5 (with 5 being the highest) on a survey question asking to what extent the cash assistance has reduced feelings of stress. 14 Indicators were developed based on the methodology of UNHCR surveys of cash assistance to refugees. 15 The indicator value was calculated as the proportion of respondents who indicate that it took up to one month to receive the first cash payment from the moment of submitting the application. Page 14 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) following restructuring. As evidenced by the results, the cash assistance was used to meet basic needs mainly to buy food (although the actual usage falls short of the expected target result), and other main uses were reported to have been rent, utilities, or medical expenses. Whereas the program administration manifested inefficiencies, these are acknowledgeable, given that the beneficiary survey was administered among some of the early beneficiaries of the IDP support program which the GoU had commenced implementation in unprecedented circumstances of hostilities with limited institutional arrangements. Moreover, close to 96 percent of the beneficiaries felt that the government’s response was satisfactory to their enquiries. In general, the PIU moved quickly to respond to the most urgent needs of the government by activating the CERC and disbursing 99 percent of the project funds, hence the substantial overall rating on efficacy. C. EFFICIENCY Assessment of Efficiency and Rating 35. Efficiency Rating: Substantial 36. Efficiency is rated substantial, driven mainly by the efficiency of the CERC which represented 99 percent of disbursed funds. There were no outcomes from the project prior to activation of the CERC, so the efficiency of implementation up to that point has not been assessed here. 37. The CERC did not have long term developmental outcomes. Instead, it was aimed at providing IDPs with short term financial assistance to respond to urgent basic needs, with the goal of improving their living conditions. The Government has been preventing further deterioration in living conditions and poverty in Ukraine as a result of the impacts of Russia’s invasion of Ukraine. In 2022, poverty increased from 5.5 to 24.2 percent pushing 7.1 million more people into poverty and retracting 15 years of progress.16 As underscored in the two RDNAs, livelihoods have been lost and access to basic services, such as healthcare, education, energy, and transportation have been severely disrupted because of Russia’s invasion of Ukraine. The cash transfers provided to IDPs were beneficial to the recipients, as demonstrated in the above sections. The beneficiary survey (see section on Revised PDO rating justification) shows that the majority of IDP beneficiaries of the CERC funds confirm that the cash transfers improved their living conditions, with the most cited uses of the cash being food, housing rent, utilities, as well as health and medical services. This affirms the broad knowledge on the importance of cash transfer in improving the short-term household welfare in response to shocks arising from impacts of war. However, since these positive results could be eroded, should the cash transfer cease, the medium- and long-term impacts of such a short-term cash transfer intervention cannot be expected in terms of promoting human capital or livelihood outcomes. 38. This ICR does not quantify the value for money for the CERC i.e., how economically resources and inputs were converted to the above stated results. The main reason for this is that the scope of this ICR could not generate sufficient information to make critical assumptions to perform an economic analysis of the program. The Strategic Note: Cash Transfers in Humanitarian Contexts (2016) by the World Bank highlights the importance of establishing clear links between the needs assessment and the response analysis of the cash transferred. The same Note recommends that these linkages ought to consider factors including program objectives, the level of market functionality, procurement practices, implementation capacity and financial infrastructure, and the ability to 16 According to the World Bank, see: https://www.worldbank.org/en/country/ukraine (accessed July 18, 2023) Page 15 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) manage risks such as those around security and exclusions (such as based on gender, beneficiaries’ preferences, and or disabilities). 39. Instead, this ICR focuses on highlighting factors which contributed to the efficiency of the CERC: a. The CERC was largely a one-time disbursement to the State Treasury of Ukraine. The funds were a reimbursement of payments already incurred under the government’s social assistance program. The main administrator of the program was the MoSP through an existing program. As such, there were no additional implementation related activities under the CERC. b. It took only four weeks between the time the CERC was activated in May 2022 to when the money was disbursed in June 2022, which is a rapid response. This quick disbursement points to the World Bank and the Government’s exceptional collaboration during this intense period, in virtual form since missions to the country by World Bank staff were suspended by the Bank. The World Bank was in constant communication with the government, which is commendable for both parties given the situation of active hostilities and working across time zones. The World Bank rapidly mobilized Social Protection Specialists to be part of the task team, providing helpful technical guidance in assessing social protection mechanisms of the Government. These synergies between the World Bank and the Government, in addition to everyone’s willingness to work round the clock under dangerous circumstances in-country was key to identifying which costs would be eligible for CERC expenditures and which implementation options were viable. c. The World Bank’s assessment of the existing social assistance program under MoSP confirmed the following: i) The social assistance program was technically sound, comparing favorably with the EU support provided to the Ukrainian refugees and cash transfers provided to IDPs under the World Bank lending operations. The benefit size under the program is comparable to the subsistence minimum17 level adopted for 2022. More so, compared to other options which were explored,18 cash transfers were deemed to provide the widest reach to the greatest number of IDPs. ii) The program had accountability mechanisms that were reliable in terms of supervisory requirements from both the World Bank and the Government. The system for error, fraud, and corruption control are in place and the Social Inspectorate at MoSP has the capacity to effectively identify and correct benefit irregularities related to errors and fraud. Previously, between 2014 -2022, the World Bank channeled almost US$600 million of its Social Safety Nets Modernization Project proceeds to the State Budget to co-finance Guaranteed Minimum Income benefits, administered through the same accountability mechanisms at MoSP. Further, the social assistance program already had line items in the 2022 budget which could be used, and easily be extended to include support to more beneficiaries. 17 Subsistence minimum (SM) means the cost of food, goods, and services sufficient to ensure the normal functioning of a human body and meet basic social and cultural needs. The SM is established by the Law of Ukraine ‘On Subsistence Minimum,’ No. 966-XIV, https://zakon.rada.gov.ua/laws/show/966-14#Text 18 Other options explored for the CERC included construction of modular homes which would have a double outcome of income to IDPs while providing housing to the IDPs, however this was logistically not efficient in a situation of Russia’s invasion of Ukraine. Other options to repair infrastructure which as being damaged was faced with similar limitations. Page 16 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) iii) The Ukrainian banking system remained fully functional to deliver payments to the beneficiaries. On March 7, 2022, the Government adopted Resolution No. 215 to strengthen administration and provision of payments under all social assistance programs during martial law. This adapted the procedures for processing beneficiary data, preparation of the payment statements and making transfers. Here, the social assistance program of the government should be acknowledged for its advancement in technology utilization such as the Diia platform, which have allowed digitization of the IDP benefits program. The RDNA estimates that more than 60 percent of the IDP beneficiary under the program enrolled online.19 iv) The beneficiary survey reports that 65 percent of beneficiaries found the process of applying for financial assistance under the program “very easy”, with an average mean of 4.39 on a 5-point scale across income levels (5 being very easy and 1 being difficult). Nevertheless, only about half of the applicants to the program received their cash assistance in the first month of applying (as discussed in the section above on efficacy). The most common challenge in accessing the funds was queues (59 percent of respondents). 40. Considering the foregoing factors, the project’s efficiency is rated substantial as it is comparable to other similar projects that aim to respond to IDPs needs. D. JUSTIFICATION OF OVERALL OUTCOME RATING 41. Rating: Satisfactory 42. A split rating is applied for the calculation of the overall outcome rating of this project using the methodology per Appendix I of the Bank Guidance (ICR for IPF Operations- December 9, 2021). While a single rating is provided for both relevance and efficiency throughout the project lifetime, the rating for efficacy takes into consideration the achievement of the original PDO and the revised PDO. The overall outcome rating of the project is rated Satisfactory. Table 1 below presents the methodology used to derive the overall outcome rating. Table 1: Application of the split rating methodology to derive the overall outcome Rating Before After Restructuring Restructuring Relevance of objective High Efficacy (PDO) Negligible Substantial Efficiency Substantial Outcome ratings Unsatisfactory Satisfactory Numerical value of the outcome ratings 2 5 Disbursement $575,000 $99,000,000 Share of disbursement 0.006 0.99 Weighted value of outcome rating= numerical outcome ratings 20 = 2 *0.006= 0.012 =0.99*5= 4.95 share of disbursement 19 Diia is a mobile application which allows Ukrainians to access various government services and digital documents such as IDs 20 Numeric value for each of the outcome ratings: Highly Satisfactory = 6, Satisfactory = 5, Moderately Satisfactory = 4, Moderately Unsatisfactory = 3, Unsatisfactory = 2, Highly Unsatisfactory = 1 Page 17 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) Numerical ratings= sum of weighted value of outcome ratings: Satisfactory Final Overall outcome: (0.012 + 4.95 rounding it to 5) E. OTHER OUTCOMES AND IMPACTS (IF ANY) Institutional Strengthening 43. The 3R project contributed to strengthening capacity of MRTOT to implement complex investment projects, which is crucial to its role as an instrumental government agency for coordinating emergency humanitarian response with all local state administrations.The Implementation Completion Report of a prior trust funded operation, Conflict Response and Recovery Pilot and Capacity Building Project (P158091), ascertained that MRTOT demonstrated: i) improved capacity to lead and coordinate recovery planning and programming, ii) ability to attract the support of other donors, given its demonstrated effectiveness in developing policy, community outreach, and coordination functions, and iii) had developed a modern, innovative online platform for monitoring projects. The 3R Project was going to be the first major investment project to be managed by MRTOT and it demonstrated the Ministry’s capacity to implement complex investment projects. Upon the establishment of martial law, MRTOT also became an instrumental government agency for coordinating emergency humanitarian response with all local state administrations. The government, in their comments as part of the preparation process of this ICR affirms that the 3R project contributed to strengthening capacity of MRTOT to implement complex investment projects. Other Unintended Outcomes and Impacts 44. The project contributed to the Disability inclusion agenda. Persons with disabilities were not part of the explicit target group of beneficiaries under the original project design, but the benefits to this subgroup was captured as part of the cash assistance to IDPs financed through the CERC. This is particularly noteworthy, considering that in a situation of conflict and where people are displaced, the population at large is vulnerable. However, it is important that the IDP social assistance program recognized the additional needs of persons with disabilities by providing an increased cash assistance amount for such beneficiaries. The beneficiary survey found that 4 percent of all beneficiary households included at least one person with a disability, and 49 percent of households with three recipients of cash assistance had a person with a disability. 45. The 3R project proactively included a CERC and was the first and only CERC in the Ukraine Portfolio at the time it was activated, hence offering a model for responding to the urgent needs of IDPs in the context of Ukraine. For example, the Public Expenditures for Administrative Capacity Endurance (PEACE) Project- which is an emergency operation focused on supporting the GoU to maintain core functions- adopted a similar approach as the CERC of the 3R project.21 While the parent PEACE Project reimbursed government expenditures for salaries of government and school employees, five rounds of AF22 expanded the types of expenditures reimbursed to include social assistance to IDPs.23 Although these is no explicit reference to the 3R in the project appraisal documents of 21 The project is a US$1.492 billion IPF financed approved on June 7, 2022, and currently on its fifth round of additional financing. The project aims to contribute to sustaining the government administrative and service delivery capacity to exercise core government functions at the national and regional levels. 22 The first AF was approved on June 26, 2022 (P179344), for US$1.3 billion of grant funding; the Second AF was approved on August 2, 2022 (P179456) for US$4.5 billion of grant funding; and the third AF was approved on September 2, 2022, in the amount of US$529.9 million 23 Other expenditures added were pension, wages of first responders and deliver healthcare services. Page 18 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) the PEACE project and its related additional financing project papers, the implementation arrangements of the PEACE project are similar to the CERC of the 3R. PEACE relies on country systems and reimburses eligible government expenses which include payments made through the social assistance program of the government, comparable to the modus operandi of the CERC under the 3R project which preceded PEACE. 46. The beneficiary survey of the Government’s IDP cash assistance program, which is the only rigorous evaluation of the effectiveness of the program, was as a result of the 3R project. The survey report provides valuable information regarding the overall situation of IDPs in the country which can be used by the government and development agencies to design support activities for IDPs in the country. For example, according to the beneficiary survey, IDPs had to leave their place of residence because of Russia’s invasion of Ukraine, and every eighth out of ten respondents (81 percent) left or lost real estate or housing in the abandoned place of residence. In addition, more than a third of respondents indicated that they had left their business or job. The survey also shows that 82 percent of those who left their place of residence plan to return. These results point to the loss of assets and livelihoods, which should be prioritized when designing long-term development response investments. The Survey also categorizes the diverse types of assets and livelihoods that the IDPs had prior to Russia’s invasion of Ukraine, which could offer baselines with which to track results of long-term livelihood restoration investments in the areas of origin of the IDPs. In terms of integrating IDPs in their new locations, the beneficiary survey also has insights on what the main challenges are, namely: i) lack of funds for renting an apartment (37 percent), ii) absence of own dwelling (35 percent), and (iii) lack of jobs/difficulties with employment (21 percent). More broadly, the survey can also be useful when considering the intersectional challenges across age, income levels, geographic areas, and gender; as well as insights into the IDP’s perception and trust of service providers. These issues have been factored into the methodological framework of the survey. III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A. KEY FACTORS DURING PREPARATION 47. The original project was preceded by collaborative initiatives between the World Bank, the EU, the UN, and the Government of Ukraine, which informed the project design, including the choice of project activities and implementing arrangements. These include: i) the Recovery and Peacebuilding Assessment for Eastern Ukraine which was initiated by the World Bank, through the FCV Group which was co-authored with the UN and the EU; and was adopted by the Government in August 2015; ii) the Conflict Response and Recovery Pilot and Capacity Building Project (US$3.6 million) which led to the World-Bank Administered Multi-Partner Trust Fund on Peacebuilding and Recovery (MPTF) (US$2.07 million) and supported the capacity building of the then newly created national Ministry (MRTOT- which housed the PIU) to lead reintegration and recovery efforts, and pilot programming in Eastern Ukraine to address the needs of IDPs, veterans, and host communities; and iii) a study on Economic Recovery of Eastern Ukraine to generate evidence-based policies and recommendations to promote medium- to longer-term development and growth of the region; which was being conducted alongside the project design, whose results were to inform priorities for future investments in the region. 48. Within the World Bank, the original project was a cross-GP collaboration. In addition to being co-led by the Social Sustainability and Inclusion Global Practice and the Transport Global Practice, the project also reflected lessons and recommendations from the FCV Group and included significant support from the Agriculture and Page 19 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) Food Global Practice given the component on agriculture sector recovery. 49. In the World Bank’s portfolio, this was the only investment project pursuing developmental outcomes in a post-conflict context, focused on Eastern Ukraine. Hence, the project included a CERC component to allow the World Bank to respond to emergencies arising from conflict escalation. The CERC was also the first one to be activated in the World Bank’s Ukraine portfolio and offers an example on how to design and activate CERCs in Ukraine, particularly in response to impacts of conflict and internal displacement. B. KEY FACTORS DURING IMPLEMENTATION 50. During the initial stages of implementation, the 3R project faced delays in decision making on procurement of design studies for agricultural-related activities under Component 2, and the overall slow progress in the project activities and disbursements.24 There are two main factors that can explain these delays. Firstly, there was already anticipation of an escalated conflict and a possible Russia’s invasion of Ukraine, which was shifting government activities and priorities. Secondly, there was a change in Minister at MRTOT, as well as several other changes in the project leadership at critical junctures. For example, within a period of 9 months between November 2021- July 2022, the position of Project Coordinator was filled by five different people and the composition of the Tender Committee was changed at least three times between December 2021- March 2022. The changes were largely due to the appointment of the position of Project Coordinator and the Tender committee, by order of the Vice- Prime Minister for Reintegration of the Temporarily Occupied Territories of Ukraine. Nevertheless, for both components, no physical infrastructure was erected, which may have been abandoned or potentially destroyed during Russia’s invasion of Ukraine, considering that the project target area of Luhanska oblast lies along the contact line of hostilities with Russia and has been the location of massive destruction. 51. Despite the initial delays, technical discussions and decision making during the period following Russia’s invasion of Ukraine were well coordinated leading to the rapid activation of the CERC and the subsequent project restructuring. Within the Government, technical discussions involved four key ministries including MRTOT, MoF, MoSP, in addition to the Ukravtodor which was already part of the project. By the end of March 2022, merely four weeks after Russia’s invasion of Ukraine, an initial Emergency Action Plan, required for CERC activation, was elaborated with measures and procurement procedures to respond to the short-term basic needs of the civilian population and emergency services such as food, medicine, temporary shelter, as well as the repair and rehabilitation of infrastructure facilities. The approach then shifted to construction of modular housing for IDPs and job creation in industrial zones. Eventually a decision was made to focus on using the project funds to reimburse government for IDP cash assistance expenditures. All funds reallocated to the CERC component were rapidly disbursed and data reporting on the results indicators that were added at the time of restructuring, to reflect results under the new PDO. 52. Collaboration across World Bank Global Practices25 was key to informing the project design and in the activation of the CERC, and as such, driving the project results. Firstly, the complementarity of Component 1 and Component 2 in the initial project design prior to the restructuring were well articulated, with demonstrable linkages between the transport and agriculture investments; hence this project was co-led by the Transport and Social Sustainability and Inclusion Global Practices. In addition, the project design included community engagement and communication activities which were essential for managing social and contextual risks to 24 There was steady regarding procurement under Component 1 largely because the technical designs were initiated under the AF to the Road Sector Development Project - P176081 25 Global practices are units within the World Bank, responsible for sectors, such as Agriculture, Social Protection and Jobs, Social Inclusion and Sustainability, Energy, Transport, and so on. See more: https://www.worldbank.org/en/about/unit Page 20 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) achieving the PDO. The TTLs have acknowledged the key role that the Agriculture Specialists played in providing technical assistance during the project design and implementation. Further, during the CERC activation process and the subsequent restructuring, the task team benefited from inputs from the Social Protection and Jobs Global practice. This is with regards to the assessment of the government social assistance program to which the CERC funds were directed as well as in the design of the beneficiary survey which informed the results framework. In addition, the PIU at MRTOT was maintained to coordinate the CERC activation and implementation. These factors were key to readiness for implementation of the CERC, avoiding delays and bottlenecks which may have arisen from identifying or setting up appropriate alternative institutional and implementation arrangements for the CERC IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design 53. The original design of the results framework detailed the outputs, indicators, and expected results in a manner consistent with the PDO and the results chain (refer to Annex 1) . Both the MRTOT and Ukravtodor assumed reporting responsibilities, based on the project output measures as defined in the project documents and safeguards instruments. In terms of beneficiary feedback, the project linked MRTOT’s existing data portal on Peacebuilding and Recovery. There was potential for adapting the portal to include satellite and other geocoded and visual data and for communities to post photographic evidence of the progress of infrastructure investments. Semiannual progress reports were to be provided to the World Bank from MRTOT, including inputs from Ukravtodor (for Component 1) with clearly set timelines. The results framework was disaggregated by gender, youth, veteran, and IDP beneficiaries for appropriate indicators. The Project Operations Manuals (POMs) for each implementing agency, in M&E sections, defined the responsibility and methodology for the measurement of each indicator, and provided templates for regular reporting. 54. The project would have potentially benefitted from community monitoring through surveys and community forum discussions facilitated by MRTOT. With the support of the PIU team members based in Luhanska oblast GCAs, a training and facilitating partner (TFP) who would have been hired to support the capacity building of the Project teams and relevant stakeholders, as well as the engagement of 40 Luhansk GCA youth who would have been contracted to serve as 3R Youth Leaders. The surveys and community forums were envisioned to provide ongoing feedback and dialogue in relation to the progress of the project; in addition to other feedback mechanisms such as that dedicated to grievances. This community front was critical, considering that the project area was post-conflict. 55. After the post-CERC activation restructuring, the project results framework was changed to reflect the change in PDO and activities (refer to Table 1 in Annex 4). MRTOT maintained the responsibility to report on the CERC utilization, based on data from the MoSP in terms of number of beneficiaries of the social assistance to IDPs financed under the CERC. The new results framework was revised with new indicators developed based on the Page 21 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) beneficiary survey which was administered ex-post. The choice of indicators was informed by good practices on cash assistance programs to IDPs.26 M&E Implementation and Utilization 56. The beneficiary survey whose results were used to develop the revised indicators of the revised PDO in relation to the CERC was methodologically sound.27 The survey sampled 2,000 beneficiaries which was representative of IDPs in Ukraine, over the age of 18 (excluding temporarily occupied territories) of the appropriate age categories by gender, age, and macro-region of residence. The sample was generated based on a random sample of generated mobile phone numbers, followed by screening for: a. Residence in the currently controlled territory of Ukraine b. Left their place of residence due to military actions or came from the temporarily occupied territory of Ukraine at the time of conducting the research (November 2022) c. The status of an internally displaced person (IDP) d. Beneficiaries of the government social transfers program that was financed by the 3R Project. Justification of Overall Rating of Quality of M&E 57. The overall rating of Quality of M&E is substantial. While the original M&E was well articulated through a results chain with clear indicators and methodologies for M&E, this was not implemented fully, and the revised results framework did not have a theory of change. Nevertheless, the revised results framework was sufficient to report on the revised PDO, given the circumstances surrounding the CERC activation (active hostilities, urgency of needs and ex-post restructuring). The beneficiary survey which was used to monitor and report on results indicators was methodologically robust and executed in a timely manner. However, the survey was limited to exploring the opinions of the beneficiaries with regards to the financial assistance received and not necessarily examining the actual effect on improved living conditions (which would have been a challenge given the context of active hostilities and short implementation period of the CERC). Moreover, the CERC was a disbursement focused on reimbursing funds to an existing program of the government, which was already under implementation using country client systems. Beyond the reimbursement of funds, the CERC activities did not include any additional inputs to the design, implementation, or administration of the social assistance program. B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE 58. Environment and Social: The project complied with the Environmental and Social Framework standards. A grievance redress mechanism was established for the project. In the duration of the project, eleven grievances were recorded and resolved. Under the CERC, grievances related to the IDP social assistance were submitted directly to the MoSP but were not tracked or reported. 59. Financial management: Financial management of the project did not face any issues during implementation, 26The indicators, although included ex-post, were based on a review of other social assistance programs to IDPs as well as other notable practices of the World Bank and UNHCR; including the World Bank’s Strategic Note on Cash Transfers in Humanitarian Contexts (June 2016) and UNHCR’s report on Main Outcomes of Cash Assistance In 2021: Findings from Post Distribution Monitoring (2021) 27 Full details on the methodology of the survey can be found in the Eastern Ukraine: Reunification, Reconstruction and Revival: Analytical Report on the Results of Sociological Survey (2022), produced by Rate 1 Research, a firm contracted by the project for this purpose Page 22 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) nor were any issues identified in the financial audit which was contracted by MRTOT. The beneficiary survey served as a performance audit, wherein through its methodology of random selection of the stated beneficiaries of the social program since Russia’s invasion of Ukraine, the survey examined whether funds were received by the beneficiaries and if they were used for the appropriate purposes. A project audit was conducted to assure that the funds of this project were used economically, efficiently, and only for the purposes for which they were intended, as described in the loan legal agreement and the first amendment to loan agreement. However, an audit of compliance with the Emergency Response Operations Manual, World Bank Anticorruption Guidelines, as well as environmental and social policies and procedures and fiduciary guidelines of the World Bank were not conducted. 60. Procurement: The implementing agencies followed the procurement procedures specified in their respective POMs and in the project legal documents. With no physical investments, the project mainly procured services contracts, all of which were guided by the Project Procurement Strategy for Development (PPSD). The main procurement issues related to delays in tender committee processing and decision making, were largely due to the frequent changes in the project leadership and committee composition. The EAP of the CERC did not include procurable items, except for the contract to conduct the Beneficiary Survey which evaluated elements of the government’s social assistance program vis-à-vis the CERC results framework. 61. The project complied with all legal covenants (both original and revised). C. BANK PERFORMANCE Quality at Entry 62. The World Bank team was well-staffed both during preparation and implementation. There were two task team leaders, one each from the relevant sectors (Social Sustainability and Inclusion and Transport Global Practices) in addition to environmental, social, financial management and procurement specialists. There were also various other technical specialists from the Agriculture and Food Global Practice who provided guidance and coordination with the Ministry of Agriculture for Component 2. The project preparation was adequately aligned to the CPF, and it reflected both local and national strategies for post-conflict recovery in the Donbas. The selection and design of road investments under Component 1 was supported through another WB-financed road project (Additional Finance to the Road Sector Development Project – P176081)). Therefore, once the 3R project became effective, the documents were already ready for procurement to begin. This sped up the implementation of Component 1 while design documents for Component 2 were being prepared during project implementation. The project risks were adequately identified, and mitigation measures were appropriate. A comprehensive economic analysis was conducted for the project. In addition, the project was gender-tagged, based on a comprehensive analysis of gender- gaps in transport and agricultural sectors. Citizen engagement was one of the core components of the project activities under Component 3, and generally, was mainstreamed across the project components. The choice of implementing arrangements was complementary, with the Ukravtodor responsible for Component 1 related to transport, and the PIU at MRTOT responsible for the rest of the project components. 63. CERC Preparation and activation processes were also led by a well-staffed Bank team, maintaining two task team leaders as described above; and including in the task team additional Social Protection Specialists who provided technical expertise in relation to the CERC. The social protection team particularly guided the Bank’s assessment Page 23 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) of the social assistance program of the client based on their ongoing engagement with the GoU in this regard. The task team referred to global knowledge and good practices of social protection in FCV contexts to inform the development of the new PDO as well as in setting the new indicators in the results framework and the design of the beneficiary survey during the ex-post restructuring. The client, through their project completion report and comments provided as part of the preparation process of this ICR, acknowledges the professionalism and dedication of the Bank team as demonstrated through “effective communication, expert support, prompt feedback on all related issues, (and) timely financial disbursements.” This was a key driving factor to the quick turnaround which led to the CERC activation being completed in four weeks. The World Bank’s strong commitment and quick intervention to address emerging challenges through approving the possibility of shifting the strategic focus on response to the impacts of Russia’s invasion of Ukraine within CERC activation, is commendable. Quality of Supervision 64. The World Bank team maintained a well-staffed team. After the project was approved, the co-TTLs were not able to travel to the field for supervision due to Covid-19 travel restrictions which was then superseded by security restrictions due to Russia’s invasion of Ukraine. For the CERC, specialists on Social Protection joined the World Bank team to support the preparation of social assistance to IDPs. The World Bank team has been commended by the GoU for their dedication and expertise, both during the project preparation and implementation; particularly during the preparation of the CERC and subsequent prompt disbursement of funds. Five Implementation Status and Results reports were prepared, documenting general progress of the project. Initially, the project conducted two mainly virtual implementation support missions due to Covid-19 travel restrictions which included visits to Luhanska oblast by two in-country project consultants: one in October 2021 when Bank consultants and the PIU met with farmers, representatives of agricultural cooperatives and associations to share information about the project such as the format of cooperation within the framework of the 3R Project, the main areas of activity within the framework of the Project, the needs and problems of small and medium-sized agricultural enterprises, and the development of agricultural clusters in the region. The second field visit by consultants was conducted in December 2021 to raise awareness of the Project among residents and farmers in the Region and conduct consultations on the sub-component “Training and Facilitation Partner”. Thereafter, meetings were largely virtual, given the security situation. Justification of Overall Rating of Bank Performance 65. Rating: Satisfactory 66. The World Bank allocated sufficient resources for the duration of this project, as can be seen in the technical expertise, professionalism, and dedication of the Bank team. The project team moved quickly to respond to the urgent request to activate the CERC and funds were disbursed within four weeks. This project also paved way for another World Bank project, PEACE in Ukraine (P179456) which was approved on June 7, 2022, as discussed under the unintended outcomes and impacts (in section E). D. RISK TO DEVELOPMENT OUTCOME 67. Since the main outcomes of the project were intended to be short-term improvement in living conditions, the Page 24 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) outcomes were not expected to last into the future. The ability of displaced persons to cope with their immediate needs shortly after displacement can help them to become established in their temporary locations and regain their abilities to provide for themselves and their families. This project also paved way for another World Bank project, PEACE in Ukraine (P179456) which was approved on June 7, 2022, as discussed under the unintended outcomes and impacts (in section E). V. LESSONS AND RECOMMENDATIONS 68. Having a project in the portfolio with a CERC that was positioned to respond to conflict-related emergencies allowed for a rapid, flexible response to the country needs. The main reason the CERC was included under this project was because the project target area was specifically along the conflict contact line in the Donbas, unlike the rest of the projects in the portfolio. Given the history of the 2014 conflict in the region, the project design included the CERC to cater to any such eventualities in this region. However, what was not anticipated is that the CERC would be critical to respond to a national emergency at the scale of the events following Russia’s Invasion of Ukraine. Nevertheless, the CERC was the only one in the portfolio at the time of Russia’s invasion of Ukraine, and the project was able to promptly disburse funds to respond to the urgent needs of the country at a time when fiscal resources diminished greatly. Based on the experience in Ukraine, it is important that projects in this portfolio and other contexts where the risk of invasions, conflicts or war are high, to include CERCs. 69. CERCs should be designed with more technical scenarios during project preparation. In a situation as was the case in Ukraine, it was not possible or efficient to have extensive discussions on which activities would be financed with the CERC allocation, in the most efficient manner and as soon as possible. It is recommended therefore that at design stage, projects with CERCs that may be responding to potential invasions, conflicts, or war situations should conduct an advanced vetting of the existing government accountability and implementation mechanisms. While all likely emergency situations cannot be predicted in advance during project preparation, it is likely that response to invasions, conflicts, or war emergencies could include cash assistance to affected populations; hence pre-assessment of existing government social assistance programs is recommended for contexts where the CERC includes response to a conflict situation. In the case of the 3R project, the IDP cash assistance program was already in place, and it was useful that the World Bank had already assessed the program, hence the World Bank’s decision to agree to the use of this program for the CERC. As other options only become available in response to conflict emergencies, these could also be assessed as they arise. 70. Cross-GP collaboration within the World Bank as demonstrated by this project is a value proposition for Bank- financed operations, especially in FCV contexts and when including CERCs in the project design. Throughout this project, the value of cross-GP collaboration was evident, as described in detail in the section on key factors during implementation above. The World Bank’s multi-disciplinary team offered unparalleled technical support to the Government of Ukraine. The agility of the Bank in navigating new externalities, while providing the Government of Ukraine with professional expertise that is grounded in the World Bank’s global experiences and knowledge have been recognized by the Government of Ukraine in their comments as part of the preparation of this ICR (see annex 5) as well as in their project completion report. This Bank collaboration across sectors was also mirrored in the government’s institutional arrangements which were equally collaborative across various ministries; initially between MRTOT and Ukravtodor for both the original project and thereafter MRTOT working closely with MoSP and MoF during the CERC activation process. Hence, this multidisciplinary team composition and project design is Page 25 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) commendable and should be carried over in similar operations. . Page 26 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS A. RESULTS INDICATORS A.1 PDO Indicators Objective/Outcome: Assistance provided in response to an eligible crisis or emergency Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of families and Number 0.00 467,930.00 467,930.00 individuals benefitting from the cash assistance financing 24-May-2022 30-Dec-2022 05-Dec-2022 provided by the project Comments (achievements against targets): The project baseline was zero, and the target was 467,930 families, and the target was achieved in its totality. This figure is based on records of the MoSP, which were reported to the Bank. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Percentage of beneficiaries Percentage 0.00 90.00 86.00 reporting that the cash assistance improved their 24-May-2022 30-Dec-2022 05-Dec-2022 Page 27 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) living conditions Comments (achievements against targets): This indicator was an assessment of beneficiary perceptions as to whether the amount of cash assistance provided has made at least some improvement to their living conditions. The indicator value was calculated as the proportion of respondents who answer between 2 and 5 on a scale of 1 to 5 (with 5 being the highest) on the beneficiary survey question asking- to what extent the cash assistance has improved their living conditions. The 90% target fell slightly short of being achieved, of which 86% was reached against a baseline of zero Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Percentage of beneficiaries Percentage 0.00 90.00 89.00 reporting that the cash assistance helped to reduce 24-May-2022 30-Dec-2022 05-Dec-2022 feelings of stress Comments (achievements against targets): This indicator sought to assess the extent to which beneficiaries believe that the cash assistance has reduced their feelings of stress caused by displacement. The indicator value was calculated as the proportion of respondents who answer between 2 and 5 on a scale of 1 to 5 (with 5 being the highest) on a survey question asking to what extent the cash assistance has reduced feelings of stress. 89% of the target value of 90, against a baseline of zero, was achieved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Percentage of beneficiaries Percentage 0.00 70.00 57.00 Page 28 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) who report using cash 24-May-2022 30-Dec-2022 05-Dec-2022 assistance for food Comments (achievements against targets): This indicator was an assessment of whether beneficiaries used cash assistance for the most basic need targeted by the program, food. The indicator value was calculated as the percentage of survey respondents who indicate using the cash assistance to purchase food. The project achieved 57% of the 70% target against the baseline value of zero. Looking further into the overall results of the beneficiary survey, the cash was broadly used to cover basic needs, considering that the other top reported uses for the cash assistance were housing rent (42%), utilities (34%) and health and medical services (28%). Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Percentage of beneficiaries Percentage 0.00 80.00 49.00 who report receiving their first monthly cash assistance 24-May-2022 30-Dec-2022 05-Dec-2022 in less than one month Comments (achievements against targets): This indicator assessed the efficient of the government program that is delivering cash assistance financing by the project. The indicator value was calculated as the proportion of respondents who indicate that it took up to one month to receive the first cash payment from the moment of submitting the application. The results yielded 49% of the 80% target against a baseline of zero. A.2 Intermediate Results Indicators Component: Component 3: REVITALIZE Page 29 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Completion of a Yes/No No Yes Yes Yes communications strategy for the project 25-Mar-2021 25-Mar-2021 30-Nov-2022 19-Nov-2021 Comments (achievements against targets): a communication strategy was produced for the project Component: Component 4: Contingent Emergency Response Component Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Percentage of beneficiaries Percentage 0.00 90.00 96.00 satisfied with the response they receive from the 24-May-2022 30-Dec-2022 05-Dec-2022 government regarding the IDP social assistance program Comments (achievements against targets): The target of 90% was surpassed by 6%, an indication that more beneficiaries than anticipated were satisfied with the response they receive from the government regarding the IDP social assistance. Indicator Name Unit of Measure Baseline Original Target Formally Revised Actual Achieved at Page 30 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) Target Completion Percentage of IDP Percentage 0.00 10.00 18.00 beneficiaries experiencing difficulties applying for cash 24-May-2022 30-Dec-2022 05-Dec-2022 assistance program Comments (achievements against targets): 8% more than the anticipated target of the 10% of the beneficiaries experienced difficulties applying for cash assistance program, based on the survey respondents Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Percentage of beneficiary Percentage 0.00 6.00 4.00 families comprising persons with disabilities 24-May-2022 30-Dec-2022 05-Dec-2022 Comments (achievements against targets): Only 4% of the beneficiaries were families caring for persons with disabilities, which is lower than the anticipated target of 6% Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Weeks between the Weeks 0.00 5.00 4.00 Page 31 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) Government request to 24-Jun-2022 30-Dec-2022 24-Jun-2022 activate the Contingent Emergency Response Component and the disbursement of all requested funds Comments (achievements against targets): The Bank responded with noteworthy speed, disbursing the funds in 4 weeks from the time the Government requested to activate the CERC Page 32 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) B. KEY OUTPUTS BY COMPONENT Objective/Outcome 1 Improve the living conditions of IDPs by providing them with short term financial assistance to respond to urgent, basic needs 1. Number of families and individuals benefitting from the cash assistance financing provided by the project (467,930 families) 2. Percentage of beneficiaries reporting that the cash assistance improved their living conditions (target 90%, achieved 86%) 3. Percentage of beneficiaries reporting that the cash assistance helped to reduce Outcome Indicators feelings of stress (target 90%, achieved 89%) 4. Percentage of beneficiaries who report using cash assistance for food (target 7-%, achieved 57%) 5. Percentage of beneficiaries who report receiving their first monthly cash assistance in less than one month (target 80%, achieved 49%) 1. Percentage of beneficiaries satisfied with the response they receive from the government regarding the IDP social assistance program (target 90%, achieved 96%) 2. Percentage of IDP beneficiaries experiencing difficulties applying for cash assistance program (target 10%, achieved 18%) 3. Percentage of beneficiary families comprising persons with disabilities (target 6%, Intermediate Results Indicators achieved 4%) 4. Weeks between the Government request to activate the Contingent Emergency Response Component and the disbursement of all requested funds (target 5 weeks, achieved 4 weeks) 5. Completion of a communications strategy for the project (target yes; achieved, yes) Key Outputs by Component Component 3: Communications strategy (Linked to the achievement of the Component 4: Cash payments to 467,930 families Objective/Outcome 1) Page 33 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A. TASK TEAM MEMBERS Name Role Preparation Holly Welborn Benner, Yevhen Bulakh Task Team Leader(s) Dmytro Donets Procurement Specialist(s) Iryna Babich Financial Management Specialist Oksana Rakovych Environmental Specialist Sergii Grabskyi Team Member (Security Specialist) Oleksandra Shatyrko Team Member (Social Development Specialist) Klavdiia Maksymenko Senior Country Officer Fiona J Collin Team Member (Lead Transport Specialist) Aimonchok Tashieva Social Developmemt Specialist Harun Onder Team Member (Seniro Economist) Mariia Nikitova Team Member (Social Development Specialist) Mohamed Ghani Razaak Senior Social Development Specialist Ulrich K. H. M. Schmitt Team Member (Operations Manager) Erik Caldwell Johnson Team Member (Senior Social Development Specialist) Moustafa Baher El-Hefnawy Team Member Anatol Gobjila Team Member (Senior Agriculture Economist Supervision/ICR Erik Caldwell Johnson, Yevhen Bulakh. Task Team Leaders Dmytro Donets Procurement Specialist(s) Iryna Babich Financial Management Specialist Page 34 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) Yu Ri Park Team Member (Social Development Specialist) Oksana Rakovych Environmental Specialist Anna Baranova Team Member (Social Protection) Warren Paul Mayes Team Member (Senior Social Development Specialist) Sergii Grabskyi Team Member (Security Specialist) Oleksandra Shatyrko Team Member (Social Development Specialist) Klavdiia Maksymenko Team Member (Senior Country Officer) Anastasiia Soltis Procurement Team Daria Gulei Procurement Team Mariia Nikitova Social Development Specialist Nataliia Zabielkina Team Member Rahmoune Essalhi Procurement Team (Procurement Analyst) Moustafa Baher El-Hefnawy Team Member (Lead Transport Economist) Kateryna Petryna Team Member (Sr Social Protection Specialist) Anatol Gobjila Team Member (Senior Agriculture Economist) B. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY20 66.253 383,629.35 FY21 13.844 64,761.42 Total 80.10 448,390.77 Supervision/ICR FY21 25.333 136,171.62 FY22 70.712 492,984.54 FY23 41.138 237,471.80 Total 137.18 866,627.96 Page 35 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) ANNEX 3. PROJECT COST BY COMPONENT Components Amount at Amount at Actual at Percentage of Approval Restructuring Project Closing Approval (US$) (US$) (US$) (%) RECONNECT: Roads 65,000,000 $522,000 $522,000 0.0052 Investments to Link Rural Communities to Processing, Markets, and Services RECOVER: Agricultural 32,000,000 0 0 0 Investments to Support Sector Recovery and Modernization REVITALIZE: 3,000,000 53,000 53,000 0.00053 Implementation Support Platform CERC: Contingent 0 0 99,000,000 0.99 Emergency Response Component Unused funds 99,425,000 425,000 0.00425 Total 100,000,000 100,000,000 100,000,000 100 Page 36 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) ANNEX 4. SUMMARY OF CHANGES MADE DURING POST-CERC ACTIVATION RESTRUCTURING Table 1: Summary of Changes Change introduced in the Level Rationale Revisions II Restructuring Revised PDOs The PDO was revised to capture the CERC activation, which in this case involved Improve the living conditions of IDPs by providing significant reallocation of financing and related change in the overall use of project them with short term financial assistance to respond funds for activities different than the original intended purposes. to urgent, basic needs Change in Results Framework As none of the main project activities had been implemented at the time of Revised PDO and intermediate results Indicators activating the CERC, all the original results indicators have been dropped except for one intermediate indicator and replaced by indicators that were relevant to the use of CERC funds. A beneficiary survey was completed under Component 3 of the project to collect data from households that have been recipients of support from the Social Assistance to IDPs program. This data collection instrument was used to revise the results framework and report on project results. Change in loan closing date The relevance of the project had changed and all project activities including those Loan closing date advanced from November 30, implemented as part of the CERC were completed except for the beneficiary survey, 2025, to December 31, 2022 at the time of restructuring. In addition, neither MRTOT nor Ukravtodor had allocations for the project in the 2023 government budget, so all expenses had to be paid by the end of the 2022 budget year, December 31, 2022. Government decided not to request additional financing (AF) and additional implementation time for the project to accomplish its original objectives or to respond to Russia’s invasion of Ukraine as other Bank instruments were deemed preferable, including the FREE project which provided budget support and the Public Expenditures for Administrative Capacity Endurance (PEACE) in Ukraine (P179456) project which finances civil servant salaries and other essential social services. Change in disbursement As the activation of the CERC allowed for $99 million to be spent under Component See Table 2 below categories 4 (disbursement category 3), this is reflected in the revised table below. A small amount was retained under Category 1 for the contracting of an environment and social risk specialist and Category 2 (which includes Components 2 and 3) included all PIU-related expenses as well as investments in communications and consultants to prepare technical terms of reference under Component 2. As there was only one financial transaction under Part 1 of the Project, the project audit that is financed under Category 2 included this financial transaction as it required minimal effort by the audit firm and had no contract cost implications. Page 37 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) New Procurement item A contract was added to the Procurement Plan as part of the restructuring to An additional procurement item was added to the conduct a beneficiary survey which evaluated elements of the government’s social procurement plan assistance program for IDPs. This contract closed prior to revised project closing date. MRTOT Project As of November 30, 2022, the contracts for all eight of the original PIU members Implementation Unit expired and the responsibility for all additional project activities were conducted by staff of MRTOT, including assistance during procurement post reviews to be conducted by the World Bank virtually, submission of the Implementation Completion Report and project audit. Disbursement As of November 6, 2022, US$99.48 million had been disbursed. A total of US$229,250 advanced to the MRTOT Designated US$229,250 was advanced to the MRTOT Designated Account. A balance of these Account to cover the costs of the final two contracts funds was expected to be utilized, plus an additional amount to cover the costs of the final two contracts. All unused funds were returned to the World Bank according to standard procedure. Table 2: Change in Disbursement Categories Category Original Amount Restructured Percentage of Expenditures to be financed of the Loan Amount of the (Inclusive of Taxes) Allocated Loan (USD) Allocated (USD) (1) Goods, works, non-consulting services, consulting services, Training and Operating Costs for Part 1 of the Project 64,840,000 4,000 100% (2) Goods, works, non-consulting services, consulting services, Training and Operating Costs for Part 2 and 3 of the Project 34,910,000 746,000 100% (3) Emergency Expenditures under Part 4 of the Project 0 99,000,000 100% (4) Front-end Fee Amount payable pursuant to Section 2.03 of this 250,000 250,000 Agreement in accordance with Section 2.07 (b) of the General Conditions (5) Interest Rate Cap or Interest Rate Collar premium Amount due pursuant to Section 4.05 © of the 0 0 General Conditions Total Amount 100,000,000 100,000,000 Page 38 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) ANNEX 5. BORROWER COMMENTS Key Outcomes/Unintended Outcomes Eastern Ukraine: Reconnect, Recover, and Revitalize (3R) Project was initially developed to contribute to the social, and economic recovery of Luhanska oblast following the armed conflict of 2014 through improving transport connectivity, and promoting agricultural sector recovery with the active engagement of conflict- affected communities. The 3R Project had been implemented according to the approved design but Russia’s invasion of Ukraine which began on February 24, 2022, did not allow for this to continue and as a result the Project did not fully meet all its stated goals and objectives. To respond to immediate needs due to the impacts of Russia’s invasion of Ukraine, the Government of Ukraine in cooperation with the World Bank on June 07, 2022, made the decision to reallocate US$99 million of the US$100 million from Components 1, 2 and 3 of the Project to the Component 4 (Contingent Emergency Response Component / CERC). The aim was to provide social assistance payments to IDPs by granting monthly targeted assistance to cover living expenses, including payment of housing and communal services in accordance with the Resolution of the Cabinet of Ministers of Ukraine No 332, approved on March 20, 2022. Due to the restructuring of the Project, among other changes, the Project Development Objective was revised to - improve the living conditions of IDPs by providing them with the short- term financial assistance to respond to urgent basic needs. The loan funds were used for this purpose and the Project Objective was achievement of the Project’s goals and the maximum effect of its implementation were ensured. Positive Results Effective Project management, active involvement of all interested national level and international stakeholders, flexibility demonstrated in the decision-making process as well as the ability to act quickly and collaboratively in conditions of instability and uncertainty, in our opinion, are considered to be fundamental factors that allowed to achieve optimal results. In particular, timely change of the vector of Project implementation and the determination of the most relevant goals and tasks within and restructuring procedure contributed to the expected outcomes. It should be noted that the World Bank team provided the much-needed support at different stages from designing and planning to implementing the Project activities. Due to the World Bank’s professional vision and dedicated work of its team (including effective communication, expert support, prompt feedback on all related issues, timely financial disbursements, and procurement) the Project management process was well established. The World Bank’s strong commitment and quick intervention to address emerging challenges through approving the possibility of shifting the strategic focus on response to the impacts of Russia’s invasion of Ukraine within CERC activation, is commendable. Moreover, the Project contributed to strengthening capacity of the Ministry for Reintegration to implement complex investment projects, which is crucial to its role of an instrumental government agency for coordinating emergency humanitarian response with all local state administrations. Lessons Learned The Ministry for Reintegration shares almost the same vision with the World Bank regarding knowledge gained during the Project realization. One of the most valuable experiences as a result of the Project implementation is the necessity of having a CERC component positioned to respond to conflict-related emergencies included in all future projects. Continuous identification of risks that the project may face at achieving its goals and tasks as well as determination of those responsible for their management; risk assessment and definition of an acceptable level risks; determination of response measures (incl. allocation of funds on emergency activities); leading staff’s Page 39 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) confidence that the risks are appropriately managed and controlled are supposed to be the most crucial steps to be taken within the framework of project planning and implementation process. Comments and Recommendations Within the framework of the Project realization there were some additional issues that required separate attention. In particular, some personnel changes led to delays in the processes of approval of the main areas of work and approval of the documents necessary for the implementation of the Project. As regards the payment procedures, they should have been better coordinated with the local financial reimbursement system in order to simplify the process of preparation materials of reimbursement. At the same time despite these facts, due to good level of commitment, and clear sense of ownership exhibited by the Government of Ukraine and World Bank, the key decisions vital to the progress of the Project were adhered to. Page 40 of 41 The World Bank Eastern Ukraine: Reconnect, Recover, Revitalize (3R) Project (P172348) ANNEX 6. SUPPORTING DOCUMENTS (IF ANY) a. Project Appraisal Document b. Aide Memoires of Implementation Support Missions c. Implementation Status and Results (5 ISRs) d. Restructuring Paper e. Beneficiary Survey Report f. A full list of publicly disclosed documents can be found here: https://projects.worldbank.org/en/projects-operations/document-detail/P172348?type=projects Page 41 of 41