The World Bank Competitive and Livable City of Karachi Project (P161402) REPORT NO.: RES52888 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF COMPETITIVE AND LIVABLE CITY OF KARACHI PROJECT APPROVED ON JUNE 27, 2019 TO ISLAMIC REPUBLIC OF PAKISTAN URBAN, RESILIENCE AND LAND SOUTH ASIA Regional Vice President: Martin Raiser Country Director: Najy Benhassine Regional Director: John A. Roome Practice Manager/Manager: Meskerem Brhane Task Team Leader(s): Zishan Faiza Karim, Adja Mansora Dahourou Simpore, Suhaib Rasheed The World Bank Competitive and Livable City of Karachi Project (P161402) ABBREVIATIONS AND ACRONYMS BPR Business Process Re-engineering CERC Contingent Emergency Response Component CLICK Competitive and Livable City of Karachi E&TD Excise, Taxation and Narcotics Department GoS Government of Sindh LC Local Council LGD Local Government Department MC Minimum Condition MTR Mid-term Review PDMA Provincial Disaster Management Authority PIU Project Implementation Unit PM Performance Measure S-BOSS Sindh Business-One-Stop-Shop SID Sindh Investment Department SRP Sindh Resilience Project SSWMB Sindh Solid Waste Management Board TA Technical Assistance TMC Town Municipal Council USD United States Dollar The World Bank Competitive and Livable City of Karachi Project (P161402) The World Bank Competitive and Livable City of Karachi Project (P161402) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P161402 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 27-Jun-2019 30-Jun-2024 Organizations Borrower Responsible Agency Islamic Republic of Pakistan Project Development Objective (PDO) Original PDO To improve urban management, service delivery and the business environment in Karachi OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-89980 27-Jun-2019 26-Nov-2019 26-Nov-2019 30-Jun-2024 230.00 43.07 186.93 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Competitive and Livable City of Karachi Project (P161402) Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Background 1. The World Bank loan of US$230 million for the Competitive and Livable City of Karachi (CLICK) Project was approved on June 27, 2019, and became effective on November 26, 2019. The closing date of the loan is June 30, 2024. The project development objective (PDO) is to improve urban management, service delivery and the business environment in Karachi. The project comprises four components: Component 1 - Performance-based Grants to Local Councils and Capacity Building; Component 2 - Modernizing Urban Property Tax Administration and Systems; Component 3 – Improvement of City Competitiveness and Business Environment; and Component 4 -Technical Assistance for Solid Waste Management. The project was restructured on May 18, 2022 when the implementation responsibility for Component 2 – Modernizing Urban Property Tax Administration and Systems was transferred from the Excise, Taxation and Narcotics Department (E&TD) to the Local Government Department (LGD). B. Project Status 3. As of September 8, 2022, disbursement from the loan was US$43.07 million (18.7 percent of the loan). Project implementation has been slow, in part due to the impact of the COVID-19 pandemic since March 2020, the monsoon rains and the subsequent flooding in 2020, as well as the notification of 25 Town Municipal Councils (TMCs) based on the amendment to the Local Government Law that was passed on November 26, 2021. The likelihood of achieving the PDO and overall implementation progress are currently rated Moderately Unsatisfactory; however, the provincial government remains committed to achieving the PDO. Following the project mid-term review (MTR) in end May 2022, several adjustments will be implemented in the coming months. The status of implementation of the project components is summarized below. 4. Component 1 - Performance-based Grants to Local Councils and Capacity Building. Contracts for all 15 sub- projects being financed under the first Minimum Condition (MC) Grant (US$7 million) have been awarded and ten are under implementation. One sub-project financed under the Emergency Response Grant (US$25 million) is under implementation. Performance Measure (PM) Grants have not yet been disbursed, as it was agreed during the MTR that the PMs would be revised through a project restructuring. 5. Component 2 - Modernizing Property Tax Administration and Systems. Following the recent restructuring in May 2022, activities under this component have recommenced and procurement documents for the property tax survey are being finalized. The Request for Proposal for the satellite imagery to inform the property tax survey is expected to be completed by end September 2022. 6. Component 3 - Improvement of City Competitiveness and Business Environment. Under Sub-component 3.1: Streamlining and Integrating Business Regulations for City Competitiveness, the business process re-engineering (BPR) consultant is developing the systems requirements as well as specifications and Request for Proposal documents for the subsequent procurement related to automation of business processes through the Sindh Business-One-Stop-Shop (S-BOSS). Under Sub-component 3.2: Establishment of the PPP Node at LGD, a PPP node has been established, with the LGD Special The World Bank Competitive and Livable City of Karachi Project (P161402) Secretary as the Head of the Node. A Technical Specialist and a Finance Specialist have been recruited; the position of Legal Advisor is currently vacant. 7. Component 4 - Technical Assistance for Solid Waste Management. The Sindh Solid Waste Management Board (SSWMB) has made use of the TA support available from CLICK for several important activities, including the engagement of capacity to improve waste management services; engagement of technical, financial, and legal consultants to advise on setting up performance-based waste collection and transfer contracts for Districts Central and Korangi; technical, financial, and legal consultants to help in the preparation of a roadmap for the development of advanced waste diversion and treatment capacity; and communications and media consultants to develop a communications strategy as well as content for various media and communication channels. 8. Compliance with fiduciary and safeguards requirements and loan covenants. The project is in compliance with legal covenants, as well as fiduciary and safeguards requirements. There are no overdue audits and there are no audit observations that are unaddressed. C. Rationale for Restructuring 9. As a result of the abnormal monsoon rains between June and August 2022, an estimated 14.5 million people have been affected with 1.5 million houses, 2,688 km of roads and 63 bridges damaged. More than 570,000 people are in camps throughout the province1. The GoS has requested the inclusion of a Contingent Emergency Response Component (CERC) in the project to repurpose US$27 million of the CLICK loan to meet the immediate needs of the flood emergency response, including emergency equipment and supplies (e.g., tents and mosquito nets) to the worst affected areas of the province, which are largely outside of Karachi. An Emergency Action Plan outlining the detailed needs is currently under preparation by GoS. D. DESCRIPTION OF PROPOSED CHANGES 10. Addition of the CERC. A CERC is proposed to be added to the project as Component 5, which will be immediately activated to respond to the ongoing flood emergency, when the loan amendment is effective. The component will be allocated US$27 million of the CLICK loan. A new disbursement category (Category 5) will be introduced for CERC emergency expenditures. A CERC manual and an Emergency Action Plan detailing the use of these funds are currently under preparation. Payments under the CERC will be made from the LGD Project Implementation Unit (LGD-PIU) Designated Account. The Direct Payment method will be utilized, as needed. The LGD-PIU’s Financial Management team will record the CERC related expenditures separately in the books of account under the segregated component and category. The IFRs will also report CERC-related expenditures separately. The CERC will be audited as part of the CLICK audit, as required under Section 29 of the Bank Guidance on CERC. 11. Safeguard policies. No changes are envisaged to the Bank social and environmental safeguard policies applicable to CLICK as a result of the proposed activities under the CERC. The project safeguard documents will be updated to include any required mitigation measures as a result of the CERC and will be disclosed in-country and at the Bank. 1 OCHA. Pakistan Monsoon 2022 Situation Report. 9 Sept 2022. The World Bank Competitive and Livable City of Karachi Project (P161402) 12. Implementation arrangements. The current implementation arrangements of CLICK will remain unchanged. The CERC will be implemented by the LGD-PIU, which will be responsible for procurement and financial management for CERC. The LGD-PIU will receive technical assistance from the Sindh Resilience Project – Provincial Development Agency (PDMA) PIU (SRP-PIU). The SRP PIU will: (i) undertake a market assessment to identify both national and international suppliers; (ii) estimate costs associated with the supply of goods, services and works; (iii) draft key terms of contract and technical specifications; and (iv) identify risks associated with the existing market and describe measures to manage these risks. Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. The World Bank Competitive and Livable City of Karachi Project (P161402) II. SUMMARY OF CHANGES Changed Not Changed Reallocation between Disbursement Categories ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES The World Bank Competitive and Livable City of Karachi Project (P161402) Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IBRD-89980-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: W,G,CS,NCS,&TR EXCL LAND ACQ PT1.1 140,000,000.00 1,233,585.93 140,000,000.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: G,W,NCS,CS,TR,&OC EXCEPT. PT.1.1 89,425,000.00 1,782,379.53 89,425,000.00 100.00 100.00 iLap Category Sequence No: 4 Current Expenditure Category: PREMIUM FOR CAPS/COLLARS 0.00 0.00 0.00 iLap Category Sequence No: FEF Current Expenditure Category: FRONT END FEE 575,000.00 575,000.00 575,000.00 Current Expenditure Category: Emergency Expenditures under Part 5 of the iLap Category Sequence No: 5 Project 0.00 0.00 0.00 100 Total 230,000,000.00 3,590,965.46 230,000,000.00 . Note to Task Teams: End of system generated content, document is editable from here. Please delete this note when finalizing the document