The World Bank Development of Businesses and Entrepreneurship for Syrians under Temporary Protection and Turkish Citizens Project (P168731) REPORT NO.: RES42968 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF DEVELOPMENT OF BUSINESSES AND ENTREPRENEURSHIP FOR SYRIANS UNDER TEMPORARY PROTECTION AND TURKISH CITIZENS PROJECT APPROVED ON NOVEMBER 20, 2018 TO MINISTRY OF INDUSTRY AND TECHNOLOGY SOCIAL PROTECTION & JOBS EUROPE AND CENTRAL ASIA Regional Vice President: Anna M. Bjerde Country Director: Auguste Tano Kouame Global Director: Michal J. Rutkowski Practice Manager/Manager: Cem Mete Task Team Leader(s): Ahmet Levent Yener, Sirma Demir Seker The World Bank Development of Businesses and Entrepreneurship for Syrians under Temporary Protection and Turkish Citizens Project (P168731) ABBREVIATIONS AND ACRONYMS COVID-19 Coronavirus disease GoT Government of Turkey KOSGEB Small and Medium Enterprises Development Organization M&E monitoring and evaluation PIU Project Implementation Unit PDO Project Development Objective RF Results Framework SME Small and Medium Enterprise SuTP Syrians under Temporary Protection The World Bank Development of Businesses and Entrepreneurship for Syrians under Temporary Protection and Turkish Citizens Project (P168731) BASIC DATA Product Information Project ID Financing Instrument P168731 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 20-Nov-2018 31-Dec-2020 Organizations Borrower Responsible Agency Small and Medium Enterprises Development Ministry of Industry and Technology Organization (KOSGEB) Financing (in USD Million) FIN_SUMM_PUB_TBL SUMMARY Total Project Cost 0 Total Financing 0 Financing Gap 0 DETAILS -NewFin3 The World Bank Development of Businesses and Entrepreneurship for Syrians under Temporary Protection and Turkish Citizens Project (P168731) Project Development Objective (PDO) Original PDO The development objective of the project is to support the growth of small and medium enterprises (SMEs) and increase employment and entrepreneurship opportunities for Syrians under Temporary Protection (SuTP) and Turkish Citizens in the pilot province of Gaziantep. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net TF Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A9099 19-Dec-2018 14-Mar-2019 17-Apr-2019 31-Dec-2020 2.16 .70 1.43 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. The project was approved on November 20, 2018 and became effective on April 17, 2019. 2. The Project aims to support the growth of small- and medium-sized enterprises (SMEs) and increase employment and entrepreneurship opportunities for Syrians under Temporary Protection (SuTP) and Turkish Citizens in the pilot province of Gaziantep. 3. The project is composed of two components. Component 1 for EUR 1,405,333 aims to support the Small and Medium Enterprises Development Organization (KOSGEB) in implementing a small grant scheme in Gaziantep to support existing businesses of SuTPs and Turkish citizens, and new SuTP entrepreneurs. Component 2 for EUR 434,667 aims to strengthen institutional capacity of KOSGEB. 4. The current ratings for the progress towards achievement of the PDO and the overall implementation progress are Moderately Satisfactory. Despite its best efforts, KOSGEB could not receive adequate applications for the entrepreneurship program under Component 1 of the Project due to the detrimental effects on the economy and the labor market caused by the COVID-19 pandemic. KOSGEB selected 60 applicants to attend entrepreneurship training activities. which were provided between October 7 and 11, 2019. Among the successful graduates of the training program, KOSGEB could identify only 26 entrepreneurs for further support against the target of 30. In the end, only 16 of the entrepreneurs were able to receive the 'start-up business support’ and establish their businesses mainly due to the impact of the COVID-19 pandemic. 5. The Project Support Program implementation under Component 1 has been stalled as well. Following the second call (targeting only firms with SuTP owners) and the business analyses, KOSGEB selected 15 firms with Turkish owners and 12 firms with SuTP owners to participate in the Project Support Program. KOSGEB also created a reserve list including 12 firms with Turkish owners and 5 firms with SuTP owners from the second call. Due to the July 2020 currency The World Bank Development of Businesses and Entrepreneurship for Syrians under Temporary Protection and Turkish Citizens Project (P168731) depreciation KOSGEB was able to support an additional 3 SuTP firms from the reserve list without transferring money from Entrepreneurship Program. By the end of September 2020, KOSGEB supported 30 firms in total (15 SuTP and 15 Turkish firms). 6. Some of the capacity building activities under Component 2 have been delayed due to the pandemic. In terms of the Project Implementation Unit (PIU) staffing, though the plan was to hire five consultants for different positions, KOSGEB decided to hire only one Financial Management Consultant and two Project Implementation Consultants and use their own staff to do Monitoring and Evaluation (M&E) and Procurement activities with the support of the Bank Team. 7. KOSGEB submitted the interim un-audited financial reports on time. The Project has no overdue audit reports. 8. Based on the procurement review in March 2020, the procurement performance of the Project is evaluated as moderately satisfactory due to moderate shortcomings in KOSGEB’s procurement processes, and/or contract administration. The Project’s procurement plan was updated on March 12, 2020 before the severity of the effects of the COVID 19 pandemic were clear; hence it may need to be updated once again to reflect the revisions in the timeline of the activities. 9. Disbursements are expected to increase with the successful initiation of the Entrepreneurship and Project Support Programs. The projection of disbursements with the proposed extension of the Closing Date is provided below. Projections for the implementation period (Euro) Quarter 2018-2020 2018/1. Quarter 0.00 2018/2. Quarter 0.00 2018/3. Quarter 0.00 2018/4. Quarter 0.00 2019/1. Quarter 0.00 2019/2. Quarter 593.58 2019/3. Quarter 41,174.95 2019/4. Quarter 40,201.73 2020/1. Quarter 47,915.16 2020/2. Quarter 250,342.93 2020/3. Quarter 339,056.71 2020/4. Quarter 464,073.81 2021/1. Quarter 381,633.94 2021/2. Quarter 224,610.30 2021/3. Quarter 22,633.94 2021/4. Quarter 27,762.95 TOTAL 1,840,000.00 The World Bank Development of Businesses and Entrepreneurship for Syrians under Temporary Protection and Turkish Citizens Project (P168731) B. Changes in Country Context 10. In addition to the direct health impact, the COVID-19 crisis has broad economic and employment effects. Mainly due to contraction in trade and tourism, drop in foreign exchange reserves, and containment measures, external financing, market pressures, current account imbalances have been observed in Turkey. Real sector impacts have exacerbated labor market challenges that were already in motion prior to the crisis. People in vulnerable employment have already lost jobs or are at risk of losing their jobs and livelihoods due to the social distancing and/or firm closures during this time, especially in sectors that are more likely to be affected by the outbreak and for those workers who cannot easily complete their daily tasks from home. A recent study in Turkey shows that four out of five SMEs in Turkey are significantly negatively affected by the COVID-19 crisis (Business for Goals, 2020). Depending on the intensity of face- to-face interactions required in performing the job, some sectors have been instructed to close temporarily by the Government of Turkey (GoT), while others have continued their operations. The Turkish government has put in place short-term labor market measures to mitigate income losses. The Turkish government has also announced three phases for cash assistance to households in need. C. Rationale for Restructuring 11. Due to insufficient demand for the entrepreneurship support program, and to accommodate the increased demand from employers for the project support program, KOSGEB has proposed a reallocation of funds from entrepreneurship program to project support program. Though the Project’s target of 30 entrepreneurs could not be met, KOSGEB does not plan to initiate a new call due to the experiences of the first call, and the worsening economic conditions due to the adverse impacts of the COVID-19 pandemic. With the aim to support an equal number of firms with Turkish and SuTP owners, KOSGEB proposes to use the funds to support 34 firms in total with the addition of two firms with Turkish owners and five firms with SuTP owners from the reserve lists. The original target was to support 30 firms in total (15 SuTP and 15 Turkish firms). The Administrative Agreement (AA) with the European Union under TF072780 was amended on September 29, 2020. The only relevant indicator in the AA is “Beneficiaries of small-grants” which includes both beneficiaries under entrepreneurship support program and project support program. The end target of that indicator was amended from 60 to 50. Therefore, the AA allows the above-mentioned proposed change in the GA. In addition, due to the currency depreciation, the number of firms supported under the Project may increase. 12. KOSGEB will require additional time to complete the activities. As explained previously, the entrepreneurship program and project support program implementation has been stalled and some of the capacity building activities under Component 2 has also been delayed due to the COVID-19 pandemic. A proposed one-year extension will help the PIU complete the project activities. In addition, the implementation plan will be updated and discussed regularly with the Bank in order to prevent any further delays. The amended AA allows this change; the end disbursement date of the AA was extended from June 2021 to June 2023. The closing date of the Grant Agreement with the MoIT will be extended accordingly. II. DESCRIPTION OF PROPOSED CHANGES 12. The following changes are proposed as part of project restructuring: a. Project’s target for entrepreneurship program will be revised from 30 to 16 entrepreneurs. b. Project’s target for project support program will be revised from 30 to 34 SMEs (17 Turkish and 17 SuTP firms). The World Bank Development of Businesses and Entrepreneurship for Syrians under Temporary Protection and Turkish Citizens Project (P168731) c. Project’s target for number of contractual KOSGEB staff hired number of contractual KOSGEB staff hired for PIU will be revised from 5 to 3. d. The wording of the second PDO indicator will be changed to “Number of newly employed SuTP employees in existing Turkish businesses”. It was “Number of newly employed SuTP employees in existing and newly established Turkish businesses”. The new wording reflects that there is no support for establishing new Turkish businesses. e. The project closing date will be extended from December 31, 2020 to December 31, 2021. 13. The budget allocated for Component 1 will stay the same. KOSGEB proposes reallocating the undisbursed amount of EUR 209,696.43 to the Project Support Program. While the original expected average realization of new entrepreneur support was EUR 18,844 the current realization for 16 firms is EUR 22,227 on average. In the Project Document, the upper limit of the project support was set at EUR 40,000 and the expected average realization of the grant amount was set at EUR 28,000. With the increase in the number of firms from 30 to 34, and the reallocation of the funds from the entrepreneurship program to the project support program, the expected average realization will be revised as EUR 30,873.4 for 34 firms. 14. The disbursement schedule will be adjusted to reflect the proposed extension of the closing date. 15. The overall risk rating will not change. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Loan Closing Date(s) ✔ Disbursement Estimates ✔ Implementation Schedule ✔ Implementing Agency ✔ Project's Development Objectives ✔ Components and Cost ✔ Cancellations Proposed ✔ Additional Financing Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Change in Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ The World Bank Development of Businesses and Entrepreneurship for Syrians under Temporary Protection and Turkish Citizens Project (P168731) Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators PDO_IND_TABLE Number of newly established firms Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 16.00 16.00 Revised Date 01-Oct-2018 30-Jun-2020 31-Dec-2021 Number of new formal SuTP employees in existing and newly established firms Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 24.00 45.00 Revised Date 01-Oct-2018 30-Jun-2020 31-Dec-2021 Number of new formal SuTP employees in existing Turkish firms Unit of Measure: Number Indicator Type: Custom Breakdown The World Bank Development of Businesses and Entrepreneurship for Syrians under Temporary Protection and Turkish Citizens Project (P168731) Baseline Actual (Current) End Target Action Value 0.00 17.00 15.00 Revised Date 01-Oct-2018 30-Jun-2020 31-Dec-2021 Number of new formal SuTP employees in existing and newly established SuTP firms Unit of Measure: Number Indicator Type: Custom Breakdown Baseline Actual (Current) End Target Action Value 0.00 7.00 30.00 Revised Date 01-Oct-2018 30-Jun-2020 31-Dec-2021 Number of jobs created in existing and newly established firms Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 69.00 90.00 Revised Date 01-Oct-2018 30-Jun-2020 31-Dec-2021 Intermediate Indicators IO_IND_TABLE Number of existing SuTP SMEs awarded by small grants Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 12.00 17.00 Revised Date 01-Oct-2018 30-Jun-2020 31-Dec-2021 Number of existing Turkish SMEs awarded by small grants Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 15.00 17.00 Revised Date 01-Oct-2018 30-Jun-2020 31-Dec-2021 KOSGEB staff trained in business mentorship, migration policies, and project management The World Bank Development of Businesses and Entrepreneurship for Syrians under Temporary Protection and Turkish Citizens Project (P168731) Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 16.00 12.00 Revised Date 01-Oct-2018 30-Jun-2020 31-Dec-2021 Number of applications for entrepreneurship training Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 87.00 60.00 Revised Date 01-Oct-2018 30-Jun-2020 31-Dec-2021 Number of businesses KOSGEB conducted financial analysis Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 63.00 30.00 Revised Date 01-Oct-2018 30-Jun-2020 31-Dec-2021 Number of contractual KOSGEB staff hired Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 3.00 3.00 Revised Date 01-Oct-2018 30-Jun-2020 31-Dec-2021 Number of PIUs established Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 2.00 2.00 Revised Date 01-Oct-2018 30-Jun-2020 31-Dec-2021 An analysis methodology to evaluate grant applications of existing SMEs developed Unit of Measure: Yes/No The World Bank Development of Businesses and Entrepreneurship for Syrians under Temporary Protection and Turkish Citizens Project (P168731) Indicator Type: Custom Baseline Actual (Current) End Target Action Value No Yes Yes Revised Date 01-Oct-2018 30-Jun-2020 31-Dec-2021 Number of information dissemination and communication activities towards SuTP and Turkish citizens Unit of Measure: Amount(USD) Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 4.00 6.00 Revised Date 01-Oct-2018 30-Jun-2020 31-Dec-2021 Implementation progress reports submitted Unit of Measure: Yes/No Indicator Type: Custom Baseline Actual (Current) End Target Action Value No Yes Yes Revised Date 01-Oct-2018 30-Jun-2020 31-Dec-2021 Percentage of grievances registered by SuTP and Turkish citizens that are addressed Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 100.00 90.00 Revised Date 01-Oct-2018 30-Jun-2020 31-Dec-2021 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline TF Status Closing Closing(s) Closing for Withdrawal Applications TF-A9099 Effective 31-Dec-2020 31-Dec-2021 30-Apr-2022 The World Bank Development of Businesses and Entrepreneurship for Syrians under Temporary Protection and Turkish Citizens Project (P168731) OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Expected Disbursements (In US$) Fiscal Year Annual Cumulative 2019 19,181.04 19,181.04 2020 0.00 19,181.04 2021 0.00 19,181.04 Note to Task Teams: End of system generated content, document is editable from here.