Document of The World Bank FOR OFFICIAL USE ONLY Report No: RES18121 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF JILIN AGRICULTURAL PRODUCT QUALITY AND SAFETY PROJECT (LN. 7899-CN) May 13, 2010 TO THE PEOPLE’S REPUBLIC OF CHINA February 4, 2015 AGRICULTURE GLOBAL PRACTICE EAST ASIA AND PACIFIC REGION This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ABBREVIATIONS AND ACRONYMS PAD Project Appraisal Document PDO Project Development Objective PDRC Provincial Development & Reform Council PFB Provincial Finance Bureau PMO Project Management Office PPMO Provincial Project Management Office Regional Vice President: Axel van Trostenburg, EAPVP Country Director: Bert Hofman, EACCF Senior Global Practice Director: Juergen Voegele, GFADR Practice Manager/Manager: Nathan Belete, GFADR Task Team Leader: Rabih Karaky, GFADR 2 China Jilin Agricultural Product Safety and Quality Project (P101716) CONTENTS DATA SHEET .............................................................................................................................................4 3 DATA SHEET China Jilin Agricultural Product Safety and Quality (P101716) EAST ASIA AND PACIFIC 0000009056 Report No: RES18121 Basic Information Project ID: P101716 Lending Instrument: Specific Investment Loan Regional Vice President: Axel van Trotsenburg Original EA Category: Partial Assessment (B) Country Director: Bert Hofman Current EA Category: Partial Assessment (B) Senior Global Practice Juergen Voegele Original Approval Date: 13-May-2010 Director: Practice Nathan M. Belete Current Closing Date: 30-Jun-2016 Manager/Manager: Team Leader(s): Rabih H. Karaky Borrower: PEOPLE'S REPUBLIC OF CHINA Responsible Jilin Province Agency: Restructuring Type Form Type: Short Form Decision Authority: Country Director Approval Restructuring Level 2 Level: Financing ( as of 22-Dec-2014 ) Key Dates Approval Effectiveness Original Revised Project Ln/Cr/TF Status Signing Date Date Date Closing Date Closing Date P101716 IBRD-78990 Effective 13-May-2010 20-Jul-2010 02-Sep-2010 30-Jun-2016 30-Jun-2016 Disbursements (in Millions) Undisbur % Project Ln/Cr/TF Status Currency Original Revised Cancelled Disbursed sed Disbursed P101716 IBRD-78990 Effective USD 100.00 100.00 0.00 37.92 62.08 38 Policy Waivers Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ] Does the project require any policy waiver(s)? Yes [ ] No [ X ] 4 A. Summary of Proposed Changes The restructuring consists of reallocating part of the loan proceeds among expenditure categories and adjusting the disbursement rate for civil works, based on the request submitted by the client. The reallocation is necessary to account for the following changes: a) the appreciation of the CNY vs the USD since the time of project appraisal; b) the escalation in the cost of building materials and labor; and c) the increase in the cost due to the difference between the actual detailed designs and the indicative estimates made during project preparation. The restructuring would help the PMOs complete project activities prior to project closure and would contribute to achieving the overall project development objective. B. Project Status In the early years of project implementation, progress was constrained by a number of issues such as slow uptake of the demand driven activities, namely sub-components A2 (Demonstration bases) and A3 (Certification), and component D (Supply Chains); lack of clarity about disbursement procedure and reporting, which resulted in delayed payments to project beneficiaries and generated a lag between financial and physical progress for project activities; and a long review and approval process from concerned authorities to obtain the necessary clearances and permits for the laboratories construction/renovation activities (Sub-component B3), in addition to complications in the procurement and evaluation of large laboratory equipment packages. Several steps have been taken to address these bottlenecks. First, the operational manuals for sub- components A2 and A3, and component D have been simplified to increase the uptake for these activities. As a result, more applications have been collected which would help meet the targets for these activities as they get implemented. As part of the revised operational manuals, it was agreed that new applications under sub-components A2 and A3 will be financed by counterpart funding for faster implementation, without affecting the end targets for these activities. Second, closer guidance and training provided by the PFB to the project counties on the required disbursement documentation and procedure led to an accelerated disbursement for all activities and to an increase in the overall project disbursement rate. The overall disbursement rate has currently reached 38%, with an increase of 15% during the first half of the current FY. Third, concerted effort by the PMOs and close follow-up with the concerned agencies led to obtaining the final approvals and permits for labs construction and renovation. This was also coupled with a significant progress made to finalize procurement packages, sign contracts and begin construction. As of November 2014, the estimated value of the works completed accounted for 35 percent of the total value of civil works packages. Other project sub-components including A1 (Standards), B1 (Supervision systems), B2 (Information Monitoring Systems), B4 (Environmental Baseline), C1 (Applied Research), C2 (Training), and C3 (Public awareness) are proceeding well particularly in terms of physical progress. An implementation timetable has been agreed to with the PPMO to make sure that all project activities including the labs construction and decoration works, and the procurement of lab equipment are completed prior to project closure. At this stage, the Project Development Objective and the Implementation Progress are rated moderately satisfactory. The current overall risk is rated Moderate. This is primarily because of the 5 risks associated with the institutional capacity for implementation and sustainability, and the fiduciary risks linked to procurement and financial management arrangements. The PPMO has taken several steps to closely monitor and build the capacity of county level PMOs and train them on operational and fiduciary requirements. As noted earlier, this led to an improvement in the number of procurement packages prepared and signed, and an increase in overall project disbursement. The task team will continue to provide close support to the PPMO to ensure that these efforts are sustained over the remaining lifetime of the project. An assessment of the progress in achieving the results indicators indicate that a number of them have reached or exceeded their mid-term target levels as indicated in Annex III of the PAD. This includes the number of technical standards developed and adopted, the number of farmers visiting demonstration sites, the number of agricultural products quality and safety supervision offices operational, the number of quality and safety site inspections per year, in addition to the number of farmers and government staff trained. The simplification of the operational manuals for subcomponents A2 and A3, has led to an increase in the number of proposals received for these activities, which should help in achieving the target levels for the indicator on number of products certifications received. Similarly the additional resources that would be reallocated to civil works will accelerate the construction of the laboratories, and help achieve the target associated with the indicator on the number of operational food safety laboratories. C. Proposed Changes Financing Reallocations Explanation The financing changes are reflected in the table below. Part of the loan proceeds are reallocated away from the sub-grant, goods, and sub-loans categories, to civil works, consultants and other non-consulting services expenditures. In addition, the disbursement rate for civil works is increased from 65% to 86% to help finance the construction and renovation expenditures. Current Category Disbursement % Ln/Cr/TF Currency Allocation of Expenditure (Type Total) Current Proposed Current Proposed Sub-grants P. IBRD-78990 USD 8,410,000.00 3,790,000.00 100.00 100.00 A2,A3,C1 Civil Works 16,890,000.00 25,000,000.00 65.00 86.00 Goods 40,060,000.00 38,040,000.00 100.00 100.00 CS, non- CS,Train,Study 14,390,000.00 15,870,000.00 100.00 100.00 A2,B,C2,C3,E Sub-loans Part D 20,000,000.00 17,050,000.00 100.00 100.00 Designated 0.00 0.00 0.00 0.00 Account 6 FRONT END FEE 250,000.00 250,000.00 0.00 0.00 Total: 100,000,000.00 100,000,000.00 7