REPORT NO.: RES50399 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF STRENGTHENING RISK INFORMATION FOR DISASTER RESILIENCE IN BHUTAN APPROVED ON NOVEMBER 26, 2021 TO THE KINGDOM OF BHUTAN URBAN, RESILIENCE AND LAND SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Mercy Miyang Tembon Global Director: Sameh Naguib Wahba Tadros Practice Manager/Manager: Abhas Kumar Jha Task Team Leader(s): Naho Shibuya, Arati Belle ABBREVIATIONS AND ACRONYMS ADSS Agromet Decision Support System AF Additional Financing CDB Construction Development Board CIF Climate Investment Fund CoC Code of Conduct CQCM Construction Quality Compliance Mechanism DDM Department of Disaster Management DOA Department of Agriculture E&S Environment and Social ESF Environmental and Social Framework ESMF Environmental and Social Management Framework EU European Union FEMD Flood Engineering and Management Division FMP Flood Management Plan GFDRR Global Facility for Disaster Reduction and Recovery GLOF Glacial Lake Outburst Flood GRM Grievance Redress Mechanism IA Implementing Agency ICT Information and Communications Technology MHRDSS Multi-Hazard Risk Decision Support System MOWHS Ministry of Works and Human Settlement NCHM National Center for Hydrology and Meteorology OP Operational Policy PDO Project Development Objective PMU Project Management Unit PPCR Pilot Program for Climate Resilience PSC Project Steering Committee RGOB Royal Government of Bhutan SWMP Storm Water Management Plan TF Trust Fund The World Bank Strengthening Risk Information for Disaster Resilience in Bhutan (P175081) BASIC DATA Product Information Project ID Financing Instrument P175081 Investment Project Financing Environmental and Social Risk Classification (ESRC) Moderate Approval Date Current Closing Date 26-Nov-2021 30-Jun-2025 Organizations Borrower Responsible Agency National Center for Hydrology and Meteorology,Department of Disaster The Kingdom of Bhutan Management,Ministry of Works and Human Settlement,Department of Agriculture,Construction Development Board Financing (in USD Million) FIN_SUMM_PUB_TBL SUMMARY Total Project Cost 0 Total Financing 0 Financing Gap 0 DETAILS -NewFin3 The World Bank Strengthening Risk Information for Disaster Resilience in Bhutan (P175081) Project Development Objective (PDO) Original PDO To enhance Bhutan’s capacity for risk-informed decision making and development planning in targeted sectors. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net TF Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-B7339 26-Nov-2021 10-Dec-2021 11-Dec-2021 31-Mar-2022 .74 .60 .13 TF-B7349 26-Nov-2021 10-Dec-2021 11-Dec-2021 30-Jun-2025 2.30 .06 2.24 TF-B7443 26-Nov-2021 10-Dec-2021 11-Dec-2021 30-Jun-2025 .47 .01 .46 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. Progress towards achievement of the Project Development Objective (PDO) and implementation progress are both rated Satisfactory. The Project Management Unit (PMU) led by the Department of Disaster Management (DDM) was established on November 9, 2021 and is fully functional. The Project Steering Committee (PSC) constituted by the heads of implementing agencies (IAs) and chaired by the Director General of DDM has been established and held its first meeting on January 10, 2022. As of February 28, 2022, US$0.68 million (19.3 percent) has been disbursed including retroactive financing of US$0.12 million, despite the COVID-19 restrictions and lockdown since January 2022. The first internal audit is planned in June 2022 and an external audit for FY21/22 is due on December 31, 2022. No audit reports are due as of March 30, 2022. Key progress for each component is described below. 2. Component A. Development and Piloting of a Multi-Hazard Risk Decision Support System (MHRDSS): This component aims to improve the availability and accessibility of national-level multi-hazard risk information. This component is implemented by the DDM, the National Center for Hydrology and Meteorology (NCHM), and the Ministry of Works and Human Settlement (MoWHS). It consists of (i) development of MHRDSS; (ii) capacity building and piloting of MHRDSS; and (iii) strengthening policy and institutional frameworks for disaster risk management and climate change resilience. The majority of goods procurement (e.g., high spec computers for risk modelling) have been advanced or completed. Some activities such as building inventory surveys for earthquake risk assessment and procurement of some ICT, survey equipment, and field extension kits have been delayed due to COVID-19 related travel restrictions and lockdowns between January and March 2022. The World Bank Strengthening Risk Information for Disaster Resilience in Bhutan (P175081) 3. Component B. Strengthening Hydromet and Agromet Services Delivery: This component aims to strengthen (i) agrometeorological services through the operationalization of Agromet Decision Support System (ADSS); and (ii) hydromet and climate services through the formulation of the National Hydromet Policy and capacity building of NCHM to provide medium-range weather forecasts. The Department of Agriculture (DOA) has conducted a workshop on incorporation of climate and crop data into the ADSS. The NCHM has developed a draft Hydromet Policy with technical assistance from the World Bank and is expected to commence stakeholder consultations. 4. Component C. Professionalization of Construction Industry for Green and Resilient Infrastructure Development: This component aims to enhance the enabling environment and the capacity of the construction industry, including public and private sector engineers and contractors, for integrating risk information into buildings and infrastructure designs, and ensure quality of construction, operation, and maintenance. This component consists of (i) strengthening policy and institutional frameworks and (ii) developing a Construction Quality Compliance Mechanism (CQCM) for green and resilient infrastructure development. With support from Bank-executed technical assistance, the MoWHS formulated the draft Construction Bill in October 2021. The Construction Development Board (CDB) is procuring consultants to develop the CQCM and Rules and Regulations of the Construction Authority proposed in the Construction Bill. 5. A Summary of Performance of Environmental & Social (E&S) Risk Compliance. Since the project became effective in December 2021, E&S implementation is at the very initial stage. The PMU has formulated and disclosed the Grievance Redress Mechanism (GRM) and activated the Grievance Comittees at different levels. The Worker’s Code of Conduct (CoC) including CoC for Sexual Exploitation and Abuse/Sexual Harassment has been prepared. The PMU will recruit an E&S specialist by March 31, 2022. The Flood Engineering and Management Division (FEMD) will conduct consultation meetings with different stakeholders and commence field activities to conduct risk assessment of existing flood and drainage management systems. The PMU will share risk assessment questionnaires with the World Bank to ensure E&S requirements are incorporated in the questionnaires. The Project will adhere to all national COVID-19 protocols and safety measures when implementing project activities, including when conducting stakeholder engagement activities. As part of the capacity building, the Bank will provide training on the Environmental and Social Framework (ESF) to the PMU by April 2022. The FEMD will recruit E&S consultants to prepare an Environment and Social Management Framework (ESMF) and TORs for associated E&S instruments for the downstream works on flood management in Haa and stormwater management in Gelephu. The Design Consultants of a Flood Management Plan (FMP) and a Storm Water Management Plan (SWMP) will also include E&S Specialists in their team. 6. The project continues to build on the successful initiatives undertaken by the NCHM, DDM, DOA, MoWHS, among others through related World Bank supported activities. The Regional Hydromet Services and Disaster Resilience Project (P154477) supported the enhancement of weather forecasting, aviation meteorology, establishment of a National Emergency Operation Center and strengthening of the DM Information System. The Strategic Program for Climate Resilience (P159600) supported the analytical studies on climate change impacts and capacity building. A technical assistance on Capacity Building for Climate Resilient Infrastructure (P158723) supported an assessment and management of climate risks focusing on landslide and flood along the East-West Highway. The reforms on construction and housing industries build on the Development Policy Financing with Catastrophe Deferred Drawdown Option (P173008) and the Bhutan Second Urban Development Project (P090157). B. Rationale for Restructurings 7. The team proposes to (i) extend the closing date of the Global Facility for Disaster Reduction and Recovery (GFDRR)’s European Union (EU) grant (TF0B7339) to May 31, 2022 from March 31, 2022, and (ii) provide additional financing (AF) of US$750,000 from the Climate Investment Fund (CIF)’s Technical Assistance Facility for Green and Resilient Recovery to the The World Bank Strengthening Risk Information for Disaster Resilience in Bhutan (P175081) Project. This will be done in a two-part restructuring with the first part for extending the closing date of the EU grant and the second part for the AF. This restructuring paper is for the first part. 8. Restructuring #1: Extension of the closing date of the GFDRR’s EU grant to May 31, 2022 from March 31, 2022. Due to the prolonged and ongoing lockdowns in Bhutan since January 2022 due to COVID-19, there is a significant delay in completing the procurement packages and commencing major activities such as the building inventory surveys. While the project has disbursed US$0.6 million from this grant as of February 28, 2022, this extension is required to accommodate this delay in fully utilizing the remaining budget of approximately US$0.14 million. 9. Restructuring #2: AF from CIF. The Bank team had applied for this financing in March 2021 during the preparation of the original project. However, the expected confirmation of AF was not received in advance of the approval of the original project on November 26, 2021. The original project approvals could not be delayed as the planned closing date of TF0B7339 was March 31, 2022 and the Royal Government of Bhutan urgently needed to make payment for retroactively- financed activities. While the CIF funding was planned at the outset, the timelines for its availability did not allow it to be processed as a part of the original funding. The AF will complement the financing, addressing in part the concerns of the peer reviewers regarding the adequacy of financing as recorded in the Decision Note. The AF is designed to enhance and scale up the activities planned in the original project in line with the PDO. 10. In particular, there is a need to scale up the activities to comprehensively address climate risks and further advance policy and institutional reforms. Bhutan’s economy is shaped by hydropower development that is vulnerable to climate change impacts including changes in precipitation and hydrological patterns and Glacial Lake Outburst Floods (GLOF). Being located in seismically active Himalayas and also vulnerable to avalanches and landslides that can trigger GLOFs or other extreme flooding, Bhutan faces risks to key infrastructure such as hydropower plants. The risk of potential disasters induced by GLOF affecting the construction and operation of hydropower plants is pronounced, as the country is home to 700 glaciers and 2,674 glacial lakes, of which 17 are identified to pose medium to high risks. The International Monetary Fund’s Article IV Staff Assessment highlighted the risks to the macroeconomic outlook, primarily from delays in the completion of hydropower projects. Therefore, it is critical to strengthen hydromet and climate services to secure the country’s economic backbone for green and resilient recovery. II. DESCRIPTION OF PROPOSED CHANGES 11. Extension of the grant closing date. The GFDRR’s EU grant (TF0B7339) is extended from March 31, 2022 to May 31, 2022 to fully disburse the fund. The disbursement deadline date will be reduced by two months and all withdrawal applications shall be received within this date. All activities will be financed under GFDRR’s EU grant for expenditures incurred until May 31, 2022 or the date of the trust fund being fully disbursed, whichever is earlier. After this date, activities would be financed in a joint co-financing arrangement between the CIF’s Pilot Program for Climate Resilience (PPCR) and GFDRR’s Japan Program. III. SUMMARY OF CHANGES Changed Not Changed Loan Closing Date(s) ✔ Disbursements Arrangements ✔ The World Bank Strengthening Risk Information for Disaster Resilience in Bhutan (P175081) Disbursement Estimates ✔ Implementing Agency ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Cancellations Proposed ✔ Additional Financing Proposed ✔ Reallocation between Disbursement Categories ✔ Change in Overall Risk Rating ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline TF Status Closing Closing(s) Closing for Withdrawal Applications TF-B7339 Effective 31-Mar-2022 31-May-2022 30-Sep-2022 TF-B7349 Effective 30-Jun-2025 30-Jun-2025 30-Oct-2025 TF-B7443 Effective 30-Jun-2025 30-Jun-2025 30-Oct-2025 The World Bank Strengthening Risk Information for Disaster Resilience in Bhutan (P175081) OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Expected Disbursements (In US$) Fiscal Year Annual Cumulative 2021 0.00 0.00 2022 733,879.00 733,879.00 2023 750,000.00 1,483,879.00 2024 1,500,000.00 2,983,879.00 2025 523,000.00 3,506,879.00 2026 0.00 3,506,879.00