FOR OFFICIAL USE ONLY Report No: PAD3925 INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 4.7 MILLION (US$6.4 MILLION EQUIVALENT) AND A PROPOSED GRANT IN THE AMOUNT OF SDR 4.7 MILLION (US$6.4 MILLION EQUIVALENT) TO THE REPUBLIC OF MALDIVES FOR A COVID-19 EMERGENCY INCOME SUPPORT PROJECT May 27, 2020 Social Protection and Jobs Global Practice South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective April 30, 2020) Currency Unit = Maldivian Rufiyaa (MVR) MVR 15.435 = US$ 1 US$ 1.3664 = SDR 1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank ATM Automatic Teller Machine AWP Annual Work Plan BML Bank of Maldives CERC Contingent Emergency Response Component COVID-19 Coronavirus Disease 2019 CPF Country Partnership Framework DA Designated Account DPD Deputy Project Director ERP Economic Relief Program FM Financial Management GDP Gross Domestic Product GNI Gross National Income GoM Government of Maldives GRS Grievance Redress Service HDI Human Development Index HIES Household Income and Expenditure Survey IA Implementing Agency IPF Investment Project Financing IUFR Interim Unaudited Financial Report M&E Monitoring and Evaluation MCEP Maldives Clean Energy Project MMA Maldives Monetary Authority MoED Ministry of Economic Development MoF Ministry of Finance MoGFSS Ministry of Gender, Family and Social Services MPAO Maldives Pension Administration Office MRPS Maldives Retirement Pension Scheme NSPA National Social Protection Agency OHS Occupation Health and Safety PD Project Director PDO Project Development Objective PMU Project Management Unit POM Project Operations Manual PSC Project Steering Committee PTC Project Technical Committee SAP Strategic Action Plan SEP Stakeholder Engagement Plan SPIS Social Protection Information System STEP Systematic Tracking of Exchanges in Procurement TA Technical Assistance UN United Nations Regional Vice President: Hartwig Schafer Country Director: Idah Z. Pswarayi-Riddihough Regional Director: Lynne D. Sherburne-Benz Practice Manager: Stefano Paternostro Task Team Leader: Thomas Walker The World Bank COVID-19 Emergency Income Support Project (P174014) TABLE OF CONTENTS DATASHEET ........................................................................................................................... 1 I. STRATEGIC CONTEXT ...................................................................................................... 6 0BA. Country Context................................................................................................................................ 6 1BB. Sectoral and Institutional Context .................................................................................................... 7 2BC. Relevance to Higher Level Objectives............................................................................................. 11 II. PROJECT DESCRIPTION.................................................................................................. 12 3BA. Project Development Objective ..................................................................................................... 12 B. Project Components ....................................................................................................................... 12 4BC. Project Beneficiaries ....................................................................................................................... 13 5BD. Results Chain .................................................................................................................................. 14 6BE. Rationale for Bank Involvement and Role of Partners ................................................................... 15 7BF. Lessons Learned and Reflected in the Project Design .................................................................... 15 III. IMPLEMENTATION ARRANGEMENTS ............................................................................ 16 8BA. Institutional and Implementation Arrangements .......................................................................... 16 9BB. Results Monitoring and Evaluation Arrangements......................................................................... 17 10BC. Sustainability................................................................................................................................... 17 IV. PROJECT APPRAISAL SUMMARY ................................................................................... 18 1BA. Technical, Economic and Financial Analysis ................................................................................... 18 12BB. Fiduciary.......................................................................................................................................... 19 13BC. Legal Operational Policies ............................................................................................................... 20 14BD. Environmental and Social ............................................................................................................... 20 V. GRIEVANCE REDRESS SERVICES ..................................................................................... 23 VI. KEY RISKS ..................................................................................................................... 23 VII. RESULTS FRAMEWORK AND MONITORING ................................................................... 25 16BANNEX 1: Implementation Arrangements and Support Plan .......................................... 33 17BANNEX 2: Financial Management and Procurement ...................................................... 39 18BANNEX 3: Economic and Financial Analysis .................................................................... 45 19BANNEX 4: COVID-19 Support Allowance Program Details ............................................... 52 The World Bank COVID-19 Emergency Income Support Project (P174014) DATASHEET BASIC INFORMATION BASIC_INFO_TABLE Country(ies) Project Name Maldives COVID-19 Emergency Income Support Project Environmental and Social Risk Project ID Financing Instrument Process Classification Urgent Need or Investment Project P174014 Moderate Capacity Constraints Financing (FCC) Financing & Implementation Modalities [ ] Multiphase Programmatic Approach (MPA) [✓] Contingent Emergency Response Component (CERC) [ ] Series of Projects (SOP) [ ] Fragile State(s) [ ] Performance-Based Conditions (PBCs) [✓] Small State(s) [ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country [ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [✓] Responding to Natural or Man-made Disaster [ ] Alternate Procurement Arrangements (APA) Expected Approval Date Expected Closing Date 09-Jun-2020 30-Jun-2022 Bank/IFC Collaboration No Proposed Development Objective(s) The Project Development Objective (PDO) is to mitigate the economic impact of the COVID-19 crisis on workers and their families, and to increase the capacity of social protection programs to respond to future emergencies. Page 1 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) Components Component Name Cost (US$, millions) Temporary assistance to workers affected by the COVID-19 pandemic 12.00 Strengthening social protection delivery systems and institutions 0.80 Contingent Emergency Response Component (CERC) 0.00 Organizations Borrower: Republic of Maldives Implementing Agency: Ministry of Economic Development PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 12.80 Total Financing 12.80 of which IBRD/IDA 12.80 Financing Gap 0.00 DETAILS -NewFinEnh1 World Bank Group Financing International Development Association (IDA) 12.80 IDA Credit 6.40 IDA Grant 6.40 IDA Resources (in US$, Millions) Credit Amount Grant Amount Guarantee Amount Total Amount Maldives 6.40 6.40 0.00 12.80 National PBA 6.40 6.40 0.00 12.80 Page 2 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) Total 6.40 6.40 0.00 12.80 Expected Disbursements (in US$, Millions) WB Fiscal Year 2020 2021 2022 Annual 0.10 1.95 2.08 Cumulative 0.10 2.05 4.13 INSTITUTIONAL DATA Practice Area (Lead) Contributing Practice Areas Social Protection & Jobs Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating 1. Political and Governance ⚫ Substantial 2. Macroeconomic ⚫ High 3. Sector Strategies and Policies ⚫ Moderate 4. Technical Design of Project or Program ⚫ Moderate 5. Institutional Capacity for Implementation and Sustainability ⚫ Substantial 6. Fiduciary ⚫ Moderate 7. Environment and Social ⚫ Moderate 8. Stakeholders ⚫ Low 9. Other 10. Overall ⚫ Substantial Page 3 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) COMPLIANCE Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [✓] No Does the project require any waivers of Bank policies? [ ] Yes [✓] No Environmental and Social Standards Relevance Given its Context at the Time of Appraisal E & S Standards Relevance Assessment and Management of Environmental and Social Risks and Impacts Relevant Stakeholder Engagement and Information Disclosure Relevant Labor and Working Conditions Relevant Resource Efficiency and Pollution Prevention and Management Not Currently Relevant Community Health and Safety Relevant Land Acquisition, Restrictions on Land Use and Involuntary Resettlement Not Currently Relevant Biodiversity Conservation and Sustainable Management of Living Natural Not Currently Relevant Resources Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Not Currently Relevant Local Communities Cultural Heritage Not Currently Relevant Financial Intermediaries Not Currently Relevant NOTE: For further information regarding the World Bank’s due diligence assessment of the Project’s potential environmental and social risks and impacts, please refer to the Project’s Appraisal Environmental and Social Review Summary (ESRS). Legal Covenants Sections and Description Page 4 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) Section I.A.2.(a): The Recipient shall establish, no later than one (1) month after the Effective Date, and thereafter maintain, throughout the implementation of the Project, a Steering Committee, with membership, functions and terms of reference satisfactory to the Association, as set forth in the Project Operations Manual. Sections and Description Section I.B.(a): The Recipient shall: (a) no later than one (1) month after the Effective Date, adopt and thereafter throughout Project implementation maintain a Project Operations Manual, in form and substance acceptable to the Association; (b) carry out the Project in accordance with the Project Operations Manual; in the event of any inconsistency between the Project Operations Manual and this Agreement, the provisions of this Agreement shall prevail; and (c) not amend, revise or waive, nor allow to be amended, revised or waived, any provision of the Project Operations Manual, whether in whole or in part, without the prior written approval of the Association. Sections and Description Section IV.A: No later than one (1) month after the Effective Date, MoED, MoF and NSPA shall sign a Memorandum of Understanding (MoU) to formalize their respective Project co-implementation responsibilities in respect of the COVID-19 Support Allowances under Part 1 of the Project. Sections and Description Section IV.B: The Recipient, through MoED, shall ensure that the collection, use and processing (including transfers to third parties) of any Personal Data collected under this Project shall be done in accordance with the requirements and procedures set forth in the POM, and ensuring legitimate, appropriate, and proportionate treatment of such data. Conditions Type Description Disbursement Schedule 2, Section III.B: For payments under Category 1, the Recipient has: (i) adopted the Project Operations Manual in accordance with Section I.B (a) of Schedule 2 of the Financing Agreement; and (ii) the MOU has been signed in accordance with Section IV.A of Schedule 2 of the Financing Agreement. Page 5 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) I. STRATEGIC CONTEXT A. Country Context 0B 1. Maldives is an island state comprising nearly 1,200 coral islands grouped into 26 atolls, spread across roughly 90,000 square kilometers of the Indian Ocean. The Maldivian population, about 515,696 as of 2018, is widely dispersed across the islands, many of them remote and physically vulnerable to rising sea levels. Nearly 80 percent of the total land area of the country, which is less than 300 square kilometers, is lower than 1 meter above mean sea level. The country’s exposure to natural hazards and climate variability poses a threat to lives and the economy. More than 30 percent of the population lives in the capital city, Malé, while the rest are distributed across 200 other inhabited islands. Basic human development indicators are high: Maldives ranks 101 out of 189 countries in the Human Development Index (HDI) for 2017, the second-highest HDI rank in South Asia after Sri Lanka. 10F 2. Maldives is classified as an upper-middle-income country with gross domestic product (GDP) per capita of US$10,331 (2018). 2 Real GDP grew by 5.3 percent in 2019. In 1980, Maldives was among the 1F poorest countries in the world with a GDP per capita of US$268; it is now on track to reach high-income status in the next decade. This sustained economic growth has resulted in significant poverty reduction, and Maldives performs well on poverty outcomes compared to its regional, income, and small island peers. Tourism has been key to Maldives’ development success. Tourism directly and indirectly contributes to two-thirds of the Maldivian economy, 80 percent of exports, and at least 40 percent of state revenue collections. Despite limited backward links to local island economies, the ‘one island, one resort’ model has been successful in attracting a large amount of foreign direct investment and foreign exchange earnings from tourism. The high share of tourism in the economy is both a strength and a limitation. While it has lifted economic standards and living conditions, it has also made the Maldivian economy highly vulnerable to developments that affect the tourism sector and the direct and indirect transmission of these effects to other sectors of the economy. 3. Maldives will be one of the hardest-hit economies in the world from the coronavirus disease 2019 (COVID-19) pandemic. The Government of Maldives (GoM) has taken proactive steps to limit the spread of the disease to its population, restricting the entry of travelers from affected countries since February 4, 2020, and ramping up to a full border closure beginning March 27. These containment measures have had significant, adverse impacts on the Maldivian economy, state revenues, and the livelihoods of many households whose incomes depend on the sector. Local cases of the disease began to rise sharply in mid-April 2020, triggering a general lockdown that is likely to broaden the economic impact. While Maldives had recorded only 20 confirmed cases before this date, mostly involving foreigners or locals who returned from abroad, the number of cases has risen drastically. Local transmission was initially only reported in the Greater Malé area, but other inhabited islands have also reported cases. 4. Real GDP is projected to contract by at least 11.5 percent in 2020. Widespread job and income losses are already being observed as a result of the interruption to tourist arrivals and the general lockdown. Although the GoM has announced support packages for the private sector that incentivize firms to retain their workers, many firms have begun laying off their casual staff and asking contract staff to 1 Human Development Report 2017. 2 World Development Indicators 2018. Page 6 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) take leave without pay or significant pay cuts. Informal sector workers have also suffered sharp falls in their income. Government revenues are projected to fall by at least US$1 billion in 2020. The GoM has announced recurrent expenditure consolidation measures in the amount of MVR 1 billion (US$65 million) and capital expenditure cuts in the amount of MVR 2.6 billion (US$169 million). The International Monetary Fund approved a Rapid Credit Facility (RCF) in the amount of US$28.9 million (100 percent of the quota), and the Asian Development Bank (ADB) is expected to provide US$50 million in budget support under its countercyclical facility to help close the financing gap. 5. The population of Maldives is in urgent need of assistance to mitigate the impacts of the COVID- 19 pandemic. Despite efforts to protect jobs through industry support packages, the GoM expects 15,000–20,000 people to lose their jobs or incomes. Without financial assistance, many Maldivians would struggle to meet their basic needs, threatening human capital and social stability. The GoM requested financial support from the World Bank to address these urgent needs. Clearance was obtained to prepare this project in accordance with the World Bank Policy for Investment Project Financing, paragraph 12: Projects in Situations of Urgent Need of Assistance or Capacity Constraints. B. Sectoral and Institutional Context 1B 6. Maldives has a well-developed but narrowly targeted social protection system. It comprises social assistance (cash transfers to vulnerable groups and various subsidies), social insurance (health insurance and pensions), and social empowerment programs (training and job placement). The Aasandha program provides free public health care, covering the cost of treatment in public and many private facilities, as well as the cost of most prescription medications. This is supplemented by the Medical Welfare program, which covers residual health costs for the poorest. The pension system is well developed, with a national defined-contribution pension scheme run by the Maldives Pension Administration Office (MPAO) and a relatively generous social pension that tops up the incomes of those over 65 years of age to MVR 5,000 (about US$330) per month. Social cash transfer programs run by the National Social Protection Agency (NSPA) are narrowly targeted to a few vulnerable groups: people with disabilities, single and foster parents, and the elderly. There are also various subsidies—for food, electricity, fuel, and housing—that help defray the costs of living. However, Maldives has no broad-based cash transfer program for poor households not falling into the aforementioned ‘vulnerable’ categories and no unemployment insurance program. 7. Table 1 summarizes the cash transfer programs run by the NSPA. Taken together, these cash transfers cover less than 1 percent of the country’s population and accounted for around 0.3 percent of GDP in 2018. The Disability Allowance program is by far the biggest, covering around one-quarter of Maldivians with disabilities, and the coverage of the Single Parent Allowance and Foster Parent Allowance is also estimated to be quite high, but in all cases, the target groups are only a small share of the population. The Food Subsidy Program is a means-tested cash transfer introduced in 2016 to replace price- based food subsidies, but due to the relatively small monthly benefit, few households have enrolled. Page 7 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) Table 1. Cash Transfer Programs Run by NSPA (2018) Program Monthly Benefit Amount Number of Share of Budget in 2018 (MVR) Beneficiaries Population MVR, millions (June 2018) (%) (%GDP) Single Parent 1,000 per child up to 3,000 4,426 parents 1.2 60 (0.1) Allowance per household Foster Parent 500 for parent plus 1,000 per Parents: 104 0.1 2.5 (<0.1) Allowance child for up to 3 children Children: 147 Disability Allowance 2,000 per person 7,164 individuals 2.0 155 (0.2) Food Subsidy 40 per person up to 240 per 481 households 0.1 12 (0.02) Program household Source: Staff calculations based on data from NSPA and the NBS Statistical Yearbook 2018. 8. Inefficiencies in social spending limit fiscal space for more targeted and scalable social assistance. The Aasandha program’s costs have skyrocketed in recent years because of its expansion to near-universal coverage of public and private care and due to issues with pharmaceutical pricing and billing. Subsidies also remain for food, fuel, and electricity, which approached 10 percent of government spending in 2013. Finally, government pensions continue to weigh on the budget. Despite substantial legislative reform in 2009, which heralded the introduction of a defined-contribution pension scheme for public and private sector workers, a grandfathering arrangement still allows employees of some public sector agencies to receive a ‘double pension’, benefiting from the old defined-benefit pension as well as the new scheme. Put together, these policies consume a significant share of the government budget and limit fiscal space for broad-based social assistance to low-income households. While these issues have been flagged for attention by the GoM in its Strategic Action Plan (SAP) 2019–2023, the case for reforms has become even more urgent with the advent of the COVID-19 crisis. 9. Despite the limited scope of its programs, the NSPA has relatively well-developed delivery systems. The NSPA operates a modern customer service center in Malé to receive applications and handle matters relating to beneficiaries. The distances and costs involved in traveling between the nation’s many inhabited islands limit the NSPA’s capacity to conduct regular monitoring and outreach visits. It compensates for this by drawing on support from island council (local government) offices to receive applications and update beneficiary information. The NSPA maintains a robust beneficiary registry system called the Social Protection Information System (SPIS), which securely collects and maintains data provided by applicants, determines eligibility, and serves as a Management Information System. However, the system is offline and all interdepartmental coordination is done by email and telephone. The NSPA also relies on other government information systems, such as the courts registry, to cross-check the validity of claims made on applications, but again these systems are not linked to the SPIS. The NSPA’s payment system is well developed. Benefits are transferred electronically to beneficiary bank accounts at the Bank of Maldives (BML), and funds can be accessed through branches, automatic teller machines (ATMs), and point-of-sale devices in shops on most islands. In areas where electronic access to funds is not available, a boat-based mobile ATM visits islands regularly. With recent refinements to the payment system, payments are made monthly with no reported delays. 10. A new Jobcenter has recently been set up to improve matching between employers and jobseekers. Run by the Ministry of Economic Development (MoED), the Jobcenter publishes job Page 8 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) advertisements and general information about participating employers. 3 The online platform enables 2F registered jobseekers to be notified through a text message (SMS) and email whenever a new job offering appropriate to their skills and experience is posted. Since the start of the crisis, the MoED has used the Jobcenter to register terminated and furloughed workers and receive complaints about contract violations and unfair dismissal, which are investigated by the Labor Relations Authority (an independent body that enforces the Employment Act). 11. The GoM has announced measures to encourage businesses to retain employees and help those affected by the pandemic. The MoED and Ministry of Finance (MoF) have launched an Economic Relief Program (ERP) for businesses. Businesses with annual revenue above MVR 10 million are expected to apply for relief packages through the BML, while those with revenues below MVR 10 million will be eligible for relief packages through the SME Development Financing Corporation (SDFC). Relief will be provided only on the condition that firms do not dismiss any of their workers before or during the period of support. The MoED plays a key role in verifying applications for the ERP, using its data on employment contracts, in consultation with other actors such as the MPAO, to ensure that firms do not violate the conditions on retaining workers. 12. While the ERP is designed to prevent firms from dismissing workers, the MoED anticipates that many workers may temporarily lose income or be made redundant. Some employers are unable to continue to pay wages and have either reduced or stopped wage payments even for those workers with a contract. There are reports of casual and informal sector workers being laid off, while the self-employed are likely to see a significant drop in their incomes. Accordingly, on May 13, 2020, the GoM gazetted a temporary COVID-19 Support Allowance for formal and informal sector workers and the self-employed whose income has been affected by the crisis. The allowance will be offered to all Maldivian adults of working age, who were employed until March 1, 2020, and whose incomes are now below MVR 5,000 (about US$330) per month. The allowance will be provided as a top-up to any income received, to a level of MVR 5,000 per month. The program is initially authorized for three months but may be extended. Further details on the scheme are provided in annex 4. The scheme will be implemented in close consultation with the major resort operators, who together employ around 50,000 local and foreign workers. 13. This complements support being provided to foreign workers and low-income households. There is a large number of foreign workers in Maldives, many employed at resorts and in the construction sector. While some of these workers have returned home since the crisis began, others are remaining in Maldives at least temporarily. In the interim period, some resort workers continue to be housed and fed by their employers. Other workers—especially those in the construction sector—are being housed and fed by the Government. While the COVID-19 Support Allowance will be provided only to workers who can demonstrate having lost their incomes since the crisis began, the Government has also extended relief to the destitute and poor through other programs, including those provided by the NSPA and the Zakat scheme run by the Ministry of Islamic Affairs. 14. Further policies are under consideration to assist workers to cover their basic needs, stay active, and keep their skills current until business activity can resume. Such programs may include skills training, maintenance and improvement work, and other activities that can add value to workers and businesses 3 Accessible at https://jobcenter.mv. Page 9 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) without jeopardizing efforts to contain the spread of the virus. Emergency initiatives in this vein are yet to be announced; however, the registration of beneficiaries and micro-enterprises through the Jobcenter platform (and stored in the SPIS) will make it easier to target future financial support and labor market reinsertion and small business revival programs beyond the three-month period of the COVID-19 Support Allowance. It will also help link jobseekers to existing support programs. 15. The COVID-19 Support Allowance bridges a known gap in the current safety net. The GoM had already planned in its SAP 2019–2023 to develop a contributory unemployment insurance program and broaden the base of its social assistance to cover all low-income households. The COVID-19 Support Allowance will serve as a temporary safety net for affected workers until these programs are developed. The COVID-19 Support Allowance will be implemented using the NSPA’s administrative and payment systems, and beneficiary data will be stored in the NSPA’s SPIS, to facilitate a smooth transition to the new programs once they are launched. In the longer run, the goal is to have a system of targeted social protection that can easily be scaled up to address the needs of crisis-affected households. 16. This project will assist the GoM to respond to the COVID-19 crisis and build better social protection systems to improve responsiveness and resilience in the future. It will do this in the following manner: (a) Financing the COVID-19 Support Allowance, which will be implemented by the MoED in partnership with the NSPA. Although it is a temporary program, the data collected on beneficiaries will provide a basis for further Government support, activation, and reinsertion activities over time, with the objective of ensuring both the immediate welfare of beneficiaries and the rapid recovery of the economy and employment. (b) Providing technical assistance (TA) to the Government over a period of two years, to strengthen its social protection systems and programs with the objective of making the safety net more adaptive to future economic crises and disasters. This will include (i) Improvements to the software of the NSPA’s SPIS to enhance connectivity with other government databases for cross-validation of applications and data sharing and extend connectivity to island councils to streamline data collection and updating; (ii) Design of a new contributory unemployment insurance scheme, which will provide more fiscally sustainable income support for workers who lose their jobs or incomes in the future; (iii) Development of a program of reforms to the Maldives Retirement Pension Scheme (MRPS) and social and government pensions, to ensure adequate income protection for the elderly and address design issues that create a fiscal burden and distort labor markets; and (iv) Development of a National Social Protection Framework to ensure broad-based and adaptive social protection coverage of Maldivians across the life cycle and to improve coordination and data sharing between programs. Page 10 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) C. Relevance to Higher Level Objectives 2B 17. The proposed project is aligned with the World Bank Group’s strategy to respond to the COVID- 19 crisis. This involves providing a fast and flexible response while leveraging all World Bank Group operational and policy instruments and working in close partnership with the GoM. The project will provide immediate support to protect incomes and human capital while also investing in strengthening social protection delivery systems to enhance the capacity of the GoM to respond to this and future economic crises. The project will contribute to all three strategic objectives of the World Bank Group Country Partnership Framework (CPF) for Maldives (Report No. 103724-MV) and updated by the Performance Learning Review of the CPF FY16-20 (Report No. 123696-MV). It will further support the World Bank’s Twin Goals of ending extreme poverty and promoting shared prosperity. The project recognizes the need to protect the substantial investments Maldives has made in its human capital, preservation of which is critical to ensure future growth and shared prosperity. 18. The project is part of a broader response by the World Bank Group to address the negative impacts of the crisis. In addition to helping Maldivians cope with the short-term interruption to income as a result of the economic slowdown, the income support financed under this project will also help them meet their emergency health needs and encourage them to shelter at home to avoid infection. This will complement the efforts under the Maldives COVID-19 Emergency Response and Health Systems Preparedness Project (P173801) to contain the spread of the disease. Meanwhile, the MoED will link beneficiaries to training opportunities provided under the Maldives Enhancing Employability and Resilience of Youth Project (P163818). Coordination through the MoED and other partners will also ensure links, where appropriate, to World Bank Group-financed investments in other sectors which could be the basis of public works, resilience, and recovery programs in the medium term. 19. In addition to supporting the relief policy already announced by the GoM, this project will invest in priority reforms to the Maldives’ social protection system. The activities proposed under Component 2 of the project are all highlighted as priorities in the GoM’s SAP 2019–2023 (Section 2.4) and have strong Government commitment. The SAP includes time-bound plans to harmonize social protection programs, reform pension systems, and introduce an unemployment insurance scheme by 2023. The proposed capacity-building activities have been identified in close consultation with the GoM and other development partners and are based on findings from a two-year program of World Bank TA. The TA elements of the project will also provide the basis for future efforts to manage the socioeconomic impact of the COVID-19 crisis. Page 11 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) II. PROJECT DESCRIPTION A. Project Development Objective 3B PDO Statement 20. The Project Development Objective (PDO) is to mitigate the economic impact of the COVID-19 crisis on workers and their families, and to increase the capacity of social protection programs to respond to future emergencies. PDO Level Indicators 21. The PDO will be assessed with reference to the following results indicators: (a) Mitigate the economic impact of the COVID-19 crisis on workers and their families (i) Number of beneficiaries enrolled in COVID-19 Support Allowance (and number female) (b) Increase the capacity of social protection programs to respond to future emergencies (i) Island councils with access to NSPA SPIS to view and update records (percentage) (ii) National Social Protection Framework formally adopted by competent authority (Yes/No) B. Project Components 22. The proposed project would have three components and aim to achieve its PDO by (a) providing emergency cash transfers to individuals who have lost their jobs or income sources as a result of the COVID-19 crisis; (b) reinforcing the social protection policy framework by developing a new contributory unemployment insurance scheme, harmonizing social assistance programs, and improving pension schemes; and (c) enhancing social assistance policy and delivery systems to ensure that the Government can respond with assistance more quickly in future emergencies. Component 1. Temporary assistance to workers affected by the COVID-19 pandemic (US$12 million equivalent) 23. Financing for a program of temporary income support for individuals who have lost a job since the onset of the COVID-19 pandemic or suffered a loss of income as a result of the pandemic, including provision of a COVID-19 Support Allowance; data collection and storage in NSPA’s Social Protection Information System (SPIS) to facilitate follow-up and future support; and a program of media outreach to inform the public of the program and eligibility conditions. 24. The support will be a top-up of any existing income to a maximum of MVR 5,000 per month. This assistance would be offered to anyone applying through the Jobcenter (online or in person at local island council offices) and demonstrating that they have either lost a job since the onset of the crisis or are suffering a total loss of income as a result of the crisis. Documentation to substantiate eligibility would be Page 12 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) required as part of the application. Anyone requiring assistance in preparing the application or receiving funds will be provided support by the NSPA through their partners in the local island councils. Applications will be reviewed individually by the MoED team and assessed against a set of transparent criteria, and the final list of beneficiaries will be sent to the NSPA for payment. Component 2. Strengthening social protection delivery systems and institutions (US$0.8 million equivalent) 25. This component will invest in strengthening the GoM’s social protection system to better respond to future crises and disasters, including: (a) Strengthening NSPA’s Delivery and Targeting Systems: Expanding and improving the NSPA SPIS, including development of an online and mobile application portal, online and mobile complaint submission, and linkages to island council offices to facilitate regular updates of beneficiary data; a review of the GoM’s social protection programs and eligibility criteria therefor; testing and rollout of the new systems in major population centers in each atoll. (b) Developing a Fiscally Sustainable Unemployment Insurance Program: Design and implementation of a fiscally sustainable unemployment insurance program, which is financed in part through employer/employee contributions and covers both formal and informal sector workers. (c) Improving Retirement Pension Programs: Development of a plan to improve the fiscal sustainability, coverage and benefits of the MRPS and other government-financed pension schemes and social pensions programs in the Maldives, including a review of the programs and recommended changes to legislation and implementation arrangements to improve benefit adequacy and reduce the long-run fiscal burden of said programs. (d) Developing a National Social Protection Framework. Development of a comprehensive National Social Protection Framework, including a gender gap analysis to ensure that adequate actions are taken to strengthen gender-sensitive programming. (e) Project Implementation, management and reporting. This subcomponent will finance Incremental Operating Costs, project implementation staff and consultants, monitoring and evaluation, communication and relevant trainings. Component 3. Contingent Emergency Response Component (CERC) (US$0 million) 26. In the event of an eligible crisis or emergency, the project will contribute to providing immediate and effective response to this crisis or emergency. The allocation to this component is to minimize time spent on a reallocation of funds from programmed activities. C. Project Beneficiaries 4B 27. The project is expected to directly benefit 15,000–20,000 individuals (about 10 percent of the workforce) who have lost their incomes as a result of the COVID-19 health and economic crisis. Page 13 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) Furthermore, the project’s TA activities would contribute to strengthening of social protection delivery systems and institutions, which would primarily benefit around 10,000 poorer and vulnerable households who receive regular social assistance. These investments would also indirectly benefit all Maldivians to the extent that they would improve the capacity of the social protection system to respond rapidly to future emergencies. D. Results Chain 5B 28. The COVID-19 crisis is expected to lead to a loss of employment and income among a broad section of the population, and the GoM’s capacity to assist affected households is hindered by the lack of an adaptive social protection system. The goal of Component 1 is to ensure the impact of the crisis does not drive households to adopt negative coping strategies, which can deplete their human capital and push them into a vicious cycle of vulnerability. Another objective is to prevent the crisis creating mass unemployment, which could trigger workers to switch jobs or drop out of the labor force, reducing the available stock of human capital and forcing employers to hire and train new workers during the recovery. Global research shows that providing cash transfers to crisis-affected households enables them to meet their basic needs while building resilience against future shocks. Through Component 1 of the project, affected households will be able to apply for income support. This will help preserve their human and productive capital and thereby limit the long-term economic damage caused by the crisis. 29. Component 2 will address the limitations of the social protection delivery system. Although Maldives has a social registry, its data are not regularly updated or used beyond the NSPA. The project will invest in improvements to the SPIS that will improve overall coordination, consolidation, and monitoring of social protection interventions. A review and harmonization of social protection programs will provide a broader base for the scale-up of social protection programs in response to future emergencies, while the development of an unemployment insurance program and enhancements to retirement income support programs will help protect workers during their working lives and in retirement. Finally, a National Social Protection Framework will improve coordination between programs and fiscal sustainability of the social protection system. Page 14 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) Figure 1. Theory of Change Note: SP = Social protection. E. Rationale for Bank Involvement and Role of Partners 6B 30. The World Bank’s support to the GoM’s COVID-19 social protection response is strongly warranted. The GoM has announced proactive measures to prevent mass unemployment, which would result in a rise in the poverty rate and deterioration of human capital. External financing will be needed to meet the significant cost of supporting workers during what is likely to be a prolonged downturn in economic activity, at a time when taxation revenues and foreign currency earnings are sharply curtailed. The World Bank brings not only financing but also a wealth of expertise on the design of social protection programs and systems. Indeed, the project builds on an earlier engagement, under the Maldives Pension and Social Protection Administration Project (P104743) that was instrumental in helping the GoM set up the NSPA and the MPAO and establish the systems used by both agencies. F. Lessons Learned and Reflected in the Project Design 7B 31. The project has been designed following best practices for social protection programs while taking into account the situation of urgent needs. The COVID-19 Support Allowance will piggyback on existing NSPA delivery systems, which have been developed and used successfully throughout the past decade for the delivery of various social assistance programs. It will use the NSPA’s well-established SPIS, application processing and appeals mechanisms, and a mechanism for bank-based payment of benefits that can be accessed by beneficiaries electronically at payment points nationwide. During project Page 15 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) preparation, the GoM linked the new Jobcenter portal to the NSPA SPIS to enable the rapid collection and processing of applications. Since this arrangement is new, the project will finance TA to further develop these systems and train staff to use them. 32. The project also recognizes the importance of developing adaptive social protection systems to better respond to emergencies. While the Maldives social protection delivery system is advanced compared to its peers in the region, and even compared to other upper-middle-income countries, existing social protection programs were not equipped to scale up in response to the COVID-19 crisis. Specifically, Maldives lacks a broad-based safety net targeted to the poor, which could protect affected households by expanding vertically (to increase benefit amounts for existing beneficiaries) and horizontally (to bring in non-beneficiaries needing assistance). It also lacks an unemployment insurance program that could support workers laid off as a result of the crisis. The GoM has committed in its SAP to address these shortfalls in the near term, and therefore the project will support a review of the social protection system and development of a new unemployment insurance program to enable faster response to future emergencies. III. IMPLEMENTATION ARRANGEMENTS A. Institutional and Implementation Arrangements 8B 33. The project will be implemented by the MoED. The MoED has established a Project Management Unit (PMU) consisting of a project director (PD), deputy project director (DPD), financial management (FM) specialist, procurement specialist, an environment and social management specialist, an M&E specialist, and a communications specialist. All these positions have already been filled with consultants meeting the required qualifications. Some of these consultants are jointly supporting other projects; however, formal assurances have been obtained by the MoED that they will have the time to provide the required support for this project. The PMU will conduct the project with reference to a Project Operations Manual (POM) that will be drafted and approved by the World Bank before the first disbursement. 34. A Project Steering Committee (PSC) will be established to periodically review project progress, coordinate activities, and make decisions on implementation. It will be chaired a senior official from the MoED, with high-level representation from the MoF, NSPA, MPAO, President’s Office, and other stakeholders as will be specified in the POM. A Project Technical Committee (PTC) will also be formed comprising members from these stakeholders, to review proposals and technical outputs for contract work. 35. Given the current challenges posed by social distancing policies, the project will make use of online and mobile-based application technologies already prevalent in Maldives. To complement the online Jobcenter portal, island council staff will provide backup assistance to citizens who cannot access the internet and assist with sensitization and communications campaigns mainly through electronic media, radio, and television. Page 16 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) B. Results Monitoring and Evaluation Arrangements 9B 36. The MoED will be responsible for project M&E, with oversight from the MoF. The M&E Specialist will collect and maintain data needed to report on the Results Framework and other indicators as needed, following an M&E plan developed for this project and detailed in the POM. The World Bank will support the M&E Specialist to define a coordination plan that documents timing and responsibility of participating institutions for reporting against indicators and milestones. 37. The M&E process will involve progress reports, project monitoring meetings with participating stakeholders, and implementation support missions by the World Bank team. The MoED will provide quarterly reports on progress toward achieving the results indicators. The progress reports will be reviewed at meetings of the PSC, to take place at least quarterly. The World Bank task team will also hold quarterly project monitoring meetings and will conduct implementation support missions at least twice a year (which will be virtual until travel restrictions are relaxed) to review progress and help resolve implementation issues that may arise. C. Sustainability 10B 38. The immediate nature of income support provided under this project will contribute to the sustainability of the first element of the PDO—the welfare of Maldivian workers. International evidence shows that income support during periods of unemployment can be critical for preserving earnings capacity and human capital, as well as preventing discouragement. Thus, the project will help workers retain their skills and motivation to work once the crisis has passed. While the COVID-19 Support Allowance scheme has only been initially promised for three months, the Government recognizes that economic conditions will remain difficult for considerably longer. Therefore, an extension of the scheme is possible. Any residual World Bank financing for cash transfers under Component 1 are expected to be used for continuation of the program beyond the initial three-month period. In addition, the Government intends to link beneficiaries to training and employment opportunities through the Jobcenter platform, providing a basis for continued support aside from cash transfers. Support provided by the World Bank through other operations, as described in section I.C of this document, would complement this project and assist in achieving the PDO. 39. Component 2 of the project will enhance the fiscal sustainability and impact of the Maldives’ social spending by investing in improved social protection programs and systems. Building the capacity of the NSPA will help the country achieve its goal of having a fiscally sustainable, scalable safety net. The component will also help the GoM design and launch a contributory unemployment insurance program and a plan for incremental reforms to the country’s retirement income support programs, both of which will protect human capital through the life cycle and ensure the fiscal sustainability and adequacy of social spending. Finally, a National Social Protection Framework will help unify the GoM’s overall approach to social protection. The MoED will continue to play a central role for supporting jobseekers, through the Jobcenter platform and its links to employers. Therefore, the systems built and experience gained under this project will also strengthen the capacity of the GoM to implement social insurance and unemployment schemes in the future. Page 17 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) IV. PROJECT APPRAISAL SUMMARY A. Technical, Economic and Financial Analysis 1B 40. The proposed project will finance a technically sound relief program in response to the COVID- 19 crisis while also recognizing the need to invest in a more responsive and robust social protection system for future emergencies. Maldives is in the enviable position of having already established good social registry, online enrollment, and payment systems that could be adapted to a new income support program with little complication. This work has already been done as part of project preparation. However, the COVID-19 Support Allowance is a temporary measure in lieu of the type of scalable income support programs that are already established in many other upper-middle-income countries. The Maldivian social protection system is currently focused on categorical support to a narrow base of registered households and does not have the fiscal space to provide ad hoc unemployment insurance to the broader population. 41. The COVID-19 Support Allowance program follows international best practice in tapering support to workers, offering a top-up of income to those currently employed, and a guaranteed minimum income for those who have lost their jobs or incomes. It complements the ERP, which will discourage firms from taking advantage of this support to dismiss workers. During project preparation, the team has obtained assurances that the MoED and NSPA will be capable of handling the surge in applications. Being fully financed by the state, this program will not be fiscally sustainable over the longer term, however. The project will therefore finance TA to develop a contributory unemployment insurance scheme and review the design of the entire social protection system with a view to achieving cost savings on price subsidies and health insurance possibility replacing these with a targeted antipoverty program that can be scaled up in future emergencies. The TA will help the Government improve the interconnectivity of NSPA systems with those in other parts of government, to facilitate rapid registration, review, and periodic updating (that is, recertification) of applications and to shift to a more sustainable contributory basis for unemployment insurance. Finally, the TA will support reforms to the pension system to correct policy inconsistencies that currently provide double pensions to some civil servants and undercollect contributions from workers by allowing employers to underreport income. Both measures will save money and are therefore beneficial at a time when public resources are dwindling. 42. The Economic and Financial Analysis (see annex 3) takes into account the costs and benefits of the first two project components (the CERC being for the time being unfunded). First, an estimate is done of the aggregate impact of the COVID-19 Support Allowance on the discounted expected future income of 20,000 workers, based on estimates drawn from a range of international studies. Under the baseline scenario, in which no allowance is provided, it is assumed that wages of the affected workers would be 5 percent lower for low-skilled and 10 percent lower for high-skilled workers for a period of seven years. Under the project, conversely, a transfer of MVR 5,000 per month is provided for three months and workers regain employment at their former wage. The net gain of the program is MVR 41,474 per beneficiary, which is scaled up by a very conservative Keynesian multiplier of 1.2 to account for broader economic spillovers. This is added to the projected benefit from the TA provided under Component 2, which is estimated by discounting a savings of 1 percent of social protection spending annually over a 10-year period due to efficiencies and reduction in leakages. This estimate is also highly conservative. Combining the total cost and benefit of both components, a benefit-cost ratio of 3.4 is Page 18 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) derived, indicating high cost-effectiveness. The economic analysis is highly conservative in the sense that it underestimates the likely impact of spillovers, not only in the broader economy but also within the household. It is likely that beneficiaries with children will also benefit from the protection the income support offers to their nutrition and emotional well-being, protecting their human capital and thereby their lifelong welfare and earnings prospects. Additionally, the analysis does not consider the potential benefits of the program in promoting social stability at a time of mass unemployment, which could have broader consequences for the country’s economic future. B. Fiduciary 12B (i) Financial Management 43. The proposed FM arrangements are in line with the fiduciary requirements of the World Bank’s Investment Project Financing (IPF) Policy. An FM assessment of the MoED was carried out in consultation with the FM focal point assigned to the project. The MoED has no prior experience handling a World Bank- funded operation and thus no experience with World Bank fiduciary procedures and requirements. However, the FM focal point is a consultant who has handled several World Bank-financed operations in the past and is well versed with the requirements. For this, the MoED will assign to the PMU two more designated officials to work under the FM consultant on FM issues. FM risks are assessed as Moderate. Training and other capacity-building interventions on FM will be provided to relevant staff, especially during the initial phase of the project. 44. The PMU on behalf of the MoED will be responsible for the overall FM arrangements for the proposed project. The MoF will authorize payments upon submission of appropriate documentation by the PMU. No funds will be transferred to any other agencies. The consultant finance officer assigned by the MoED for the project will have oversight responsibility for implementing FM arrangements. The proposed FM arrangements are found to be adequate. There are no overdue audit reports or ineligible expenditures under the MoED. 45. After the Financing Agreement is signed, the PMU, with MoF approval, will open a dedicated Designated Account (DA) in US dollars with the Maldives Monetary Authority (MMA, the Central Bank of Maldives) to receive IDA funds. Disbursements will be report based and an initial advance will be deposited into the dedicated DA. Thereafter, withdrawals from the DA will be made on the basis of the six-monthly forecasts in the quarterly interim unaudited financial reports (IUFRs) for the project. IUFRs for the project will be prepared by the PMU in the MoED. Quarterly IUFRs will be submitted by the PMU to the World Bank within 45 days following the end of each quarter. Financial statements of the project will be prepared by the PMU and audited annually by the Auditor General’s Office of Maldives. These audited financial statements, together with the auditor’s report, will be submitted to the World Bank within six months of the end of the fiscal year. 46. The process of executing cash grants to the eligible beneficiaries would also be handled by the PMU through the DA at the MMA. The eligible beneficiary list will be verified by the MoED and NSPA, payments authorized by MoF, and funds transferred directly from the DA into beneficiary bank accounts. 47. As paragraph 12 of the IPF Policy has been triggered for the project, mandatory direct payment would be applicable for this project, in particular for Component 2. Direct payment or special Page 19 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) commitment disbursement methods may be used by the project, where payments need to be carried out for international open or limited and direct selection contracts, which would be identified in the Procurement Plan. The funds flow arrangements will include flexibility of using United Nations (UN) commitments and direct disbursement to UN agencies, with payment modalities as stated in the contract. Also, a lower threshold of US$50,000 for direct payments is allowed. Annex 2 provides further details on FM arrangements for the project. (ii) Procurement 48. Procurement under the project will be carried out in accordance with the World Bank Procurement Regulations for IPF Borrowers, dated July 1, 2016 (revised in November 2017 and August 2018). The project will be subject to the World Bank’s Anticorruption Guidelines, dated October 15, 2006, revised in January 2011, and as of July 1, 2016. The project will use the Systematic Tracking of Exchanges in Procurement (STEP) to plan, record, and track procurement transactions. 49. No major procurements are planned for the project. The bulk of the project expenditures will consist of cash transfers. However, there will be some procurement of consultants’ services under Component 2. These will be consultancies for the National Social Protection Framework development, consultancy services for the development of an unemployment insurance benefit program, consultancy services for preparation of a pension reform plan, and systems development for the NSPA SPIS. 50. Given the emergency nature of the requirements, the borrower has agreed to develop a streamlined Project Procurement Strategy for Development and finalize it early during the implementation phase. An initial Procurement Plan for the first three months has been agreed with the borrower and will be updated during implementation. . C. Legal Operational Policies 13B . Triggered? Projects on International Waterways OP 7.50 No Projects in Disputed Areas OP 7.60 No . D. Environmental and Social 14B 51. The project will provide emergency cash transfers to individuals who have lost their incomes as a result of the COVID-19 pandemic and also provide TA-type activities to strengthen social protection programs and delivery systems. The project will not support the procurement of any materials or goods or rehabilitation or construction activities that would have adverse environmental impacts. Thus, environmental risks associated with the project are considered Low. 52. However, social risks are considered to be Moderate due to (a) exclusion of potential beneficiaries, particularly vulnerable groups from access to information about the COVID-19 Support Allowance and project benefits; (b) inadequate consultations with relevant stakeholders during the preparation and finalization of the National Social Protection Framework, pension reforms, Page 20 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) unemployment insurance program, targeting systems, and so on under Component 2; (c) occupational health and safety (OHS) and community health and safety risks due to the COVID-19 contagion; (d) potential risks of gender-based violence linked to registration and increase in domestic violence due to financial strains on households and the receipt of financial transfer; these risks are however assessed to be Low; and (e) social tension between project beneficiaries and non-project beneficiaries, especially if there is lack of transparency in the application and decision-making process. 53. To address these risks, the project has prepared a Stakeholder Engagement Plan (SEP), a Labor Management Procedure, and an Environmental Social Management Framework that, among others, involve measures for community outreach and stakeholder consultations, assistance from island councils to submit the required documentation and establish bank accounts, OHS standards for workers to prevent the spread of infection, and a hotline for support with application and to register grievances. These instruments were reviewed and cleared by the World Bank and disclosed on the MoED’s website and on the World Bank’s external website on May 17, 2020. Since the MoED has not implemented any projects under the World Bank’s Environmental and Social Framework, the World Bank will provide training and implementation support to the PMU during the initial stages of the project. Climate 54. As described in the introduction, Maldives is highly vulnerable to the adverse effects of climate change due to exposure to high temperatures and rising sea level. Although this project is not primarily motivated by climate change and will not directly finance physical infrastructure, it will support soft interventions related to climate change adaptation and disaster risk mainstreaming. Component 1 will provide income support to households that have lost their income or livelihood due to COVID-19. In the absence of such support, these households are likely to adopt negative coping strategies, such as selling productive assets or taking children out of school, that can reduce their resilience to future shocks. Negative impacts of such coping mechanisms can be intergenerational because of their likely impact on nutrition and education of children in the household. The income support provided by the project will preserve and enhance household’s resilience to cope with shocks both in the short and long term by preserving the current physical and human capital of the household and preventing intergenerational transfer of the potential disadvantage. Another impact of income support could be diversification of livelihoods if household members can use this as a resource to learn a new skill or start a new livelihood to get them through the current crisis. This will make households more resilient to future climate shocks. 55. Component 2 will contribute to climate resilience by developing a National Social Protection Framework and strengthening the NSPA’s delivery systems to enable social protection programs to scale in response to future natural and man-made disasters in a timely manner. This will help circumvent negative coping strategies. Gender 56. The latest available data show that the labor force participation rate for women is 43.7 percent versus 84.6 percent for men. Almost 40 percent of women in the labor force work in the informal sector (compared to 31 percent of men), and 26 percent are own-account workers (versus 11 percent of men). Women are overrepresented in some of the occupations that will be hardest hit from the COVID-19 pandemic, such as retail, food and beverage, private tutoring, childcare, travel, leisure, and hospitality. Page 21 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) The burden of care on women is likely to rise as a result of illness among family members and the closure of schools. Labor force participation rates could therefore fall further if women who are made redundant as a result of the crisis decide to leave the labor force. The income support financed by Component 1 will be made available to informal sector workers as well as formal workers and will help them retain their jobs and businesses, thereby helping prevent further declines in the female labor force participation rate. The share of applications received from women at time of appraisal was around 20 percent, therefore the results indicator anticipates the overall share of applications from women to be 30 percent. 57. The project will also address issues of access and safety for women. Under Component 1, the project will introduce specific measures to ensure that women will be equally able to access the cash transfer benefits, including by informing them through targeted communication and assisting them with their applications. If micro-enterprise owners are required to register to receive assistance, the registration process will be made straightforward and there will be no difference in legal requirements for men and women. The risk of heightened domestic violence at this time is being addressed by the Ministry of Gender, Family and Social Services (MoGFSS), which is the parent ministry of the NSPA. Therefore, contact details provided by applicants will be made available to the MoGFSS to conduct text message- based and/or email-based information and outreach campaigns about the available domestic violence prevention and response services. The contact with women entrepreneurs afforded by registration for benefits will also make it possible to provide useful information on how to use mobile phones for money transfers and banking services, access finance, and improve their businesses. 58. The SAP 2019–2023 includes extensive sections on social protection and gender equality, including plans to strengthen the regulatory framework with respect to social protection, domestic violence, disability, gender equality, and sexual harassment; introduce community-based approaches to empower vulnerable groups and promote social inclusion; empower local women’s committees; and promote female economic empowerment. Under Component 2, the project will provide TA to support the review of the current social protection programs and systems. The TA will provide guidance to the GoM on how to make social protection programs responsive to the vulnerabilities of women throughout the life cycle. Citizen Engagement 59. Outreach and inclusion. The project will adopt a coherent approach for engaging citizens and relevant stakeholders in project activities. For Component 1, a public awareness campaign will be launched on social and broadcast media to inform potential beneficiaries about the COVID-19 Support Allowance. This will be complemented by outreach at the island council level, to ensure those without access to internet are informed about the COVID-19 Support Allowance program and given ample opportunity to apply. For the activities under Component 2, broad stakeholder consultation will be undertaken as part of the preparation and finalization of outputs. The SEP includes the specific measures that will be used for awareness as well as consultations. 60. Beneficiary feedback. A follow-up questionnaire will be provided to all applicants for the COVID- 19 Support Allowance to obtain feedback on the application process, including on the time taken to apply, receive a decision, and receive first payment (if applicable), and to determine whether any technical or other issues were encountered. A mechanism will also be incorporated into the Jobcenter website to receive unsolicited comments and feedback. There will also be a follow-up with complainants who have Page 22 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) lodged grievances, three weeks after the complaint has been resolved, to determine satisfaction. This feedback will be used at the aggregate level for results monitoring and to improve program operation. Information provided will be treated as confidential and not disclosed at the individual level or in a manner that could identify individuals. The quarterly project progress reports prepared by the PMU will provide details on how the feedback was used for course correction. The two beneficiary feedback indicators used for the project are (a) Beneficiary satisfaction with COVID-19 Support Allowance enrollment and payment processes (percentage by gender) and (b) Grievances addressed within two weeks (percentage). V. GRIEVANCE REDRESS SERVICES 61. Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org. VI. KEY RISKS 62. The overall risk to achieving the PDO is Substantial. This reflects high macroeconomic risk combined with substantial political and governance and institutional capacity risks. As the full extent of how the global COVID-19 pandemic will evolve remains unknown, the assessment of COVID-19’s impact on the project comes with a high degree of uncertainty. To address this uncertainty and increase the chance of achieving the project’s expected outcomes, the project’s design has been kept simple and streamlined by adopting a focused development objective, targeted interventions, and limited time frame for implementation. 63. The macroeconomic risk is High. Maldives is highly vulnerable to macroeconomic shocks due to its small size, lack of economic diversification outside tourism, and heavy reliance on imports. A sustainable macroeconomic position depends on whether the large downside fiscal, external, and political risks can be mitigated in the context of the COVID-19 crisis. Maldives faces a high risk of external debt distress and a heightened overall risk of debt distress. Maldives is also exposed to external exogenous risks, such as a worsening global downturn, global commodity price shocks and shortages, and deteriorating investor sentiment. Risks to the project include further worsening of the economic situation with larger job losses compounded with a tightening fiscal position that could limit Government ability to fund the relevant social safety net programs. The project itself as well as development partner financing and in-kind and technical support will help the Government weather this risk. Page 23 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) 64. The political and governance risk is Substantial. The current crisis raises the prospect of pressures associated with lockdowns, global uncertainty, and financing, and political conditions may change at any time. The income support element of the project will be delivered in a relatively short period and will not require sustained policy commitment. On the other hand, the consultancies under Component 2 will require sustained commitment to develop and implement; therefore, the project will rely on regular consultation and broad buy-in. For this reason, the PSC will include representatives from the key stakeholders. 65. There is a substantial risk stemming from institutional capacity. The implementing agency (IA) for this project is the MoED, which does not have experience in managing World Bank-financed projects. A new PMU has been established, but most of its staff have not worked on World Bank projects before and will likely need to go through a steep learning curve. Experienced staff are being seconded from other projects and may not be able to devote their full attention to the work. This is a substantial risk for an emergency project that needs to move quickly. To mitigate this risk, close support for the PMU will be provided by World Bank staff to ensure sufficient capacity at initial stages to ensure prompt implementation. . Page 24 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) VII. RESULTS FRAMEWORK AND MONITORING Results Framework COUNTRY: Maldives COVID-19 Emergency Income Support Project Project Development Objectives(s) The Project Development Objective (PDO) is to mitigate the economic impact of the COVID-19 crisis on workers and their families, and to increase the capacity of social protection programs to respond to future emergencies. Project Development Objective Indicators RESULT_FRAME_TBL_ PD O Indicator Name PBC Baseline Intermediate Targets End Target 1 Mitigate the economic impact of the COVID-19 crisis on workers and their families Beneficiaries of social safety net programs (CRI, 0.00 10,000.00 10,000.00 Number) Beneficiaries of social safety net programs - 0.00 3,000.00 3,000.00 Female (CRI, Number) Increase the capacity of social protection programs to respond to future emergencies Island councils with access to NSPA SPIS to view 0.00 50.00 and update records (Percentage) National Social Protection Framework formally No Yes approved by competent authority (Yes/No) PDO Table SPACE Page 25 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) Intermediate Results Indicators by Components RESULT_FRAME_TBL_ IO Indicator Name PBC Baseline Intermediate Targets End Target 1 Mitigate the economic impact of the COVID-19 crisis on workers and their families Time to receive first payment after application 0.00 4.00 4.00 (Weeks) Grievances addressed within 2 weeks (Percentage) 0.00 80.00 80.00 Beneficiary records stored and accessible in SPIS 0.00 90.00 90.00 (Percentage) Beneficiary satisfaction with COVID-19 Support Allowance enrollment and payment processes 0.00 75.00 75.00 (Percentage) Increase the capacity of social protection systems to respond rapidly to future emergencies National Social Protection Framework drafted and presented to competent authority (Yes/No) No Yes Unemployment insurance program designed and No Yes Yes presented to competent authority (Yes/No) Program for reforms to pension programs drafted No Yes Yes and presented to competent authority (Yes/No) Improvements to SPIS completed and tested (Yes/No) No Yes IO Table SPACE UL Table SPACE Page 26 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) Monitoring & Evaluation Plan: PDO Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Cumulative number of MoED beneficiaries enrolled in Annual administrativ MoED Beneficiaries of social safety net programs the COVID-19 Support e system Allowance program. Cumulative number of MoED female enrolled in the Beneficiaries of social safety net Annual administrativ MoED COVID-19 Support programs - Female e data Allowance program. NSPA will report on which councils can Share of island councils with access NSPA's social access to NSPA's social protection information Island councils with access to NSPA SPIS protection information Once NSPA MoED system and are viewing to view and update records system to view and update and updating records of records of beneficiaries of beneficiaries of NSPA's NSPA's programs. programs. A National Social Protection Formal evidence of National Social Protection Framework Framework will be reviewed President's approval, such as a Once MoED formally approved by competent and approved by a Office, NSPA media release or policy authority competent authority, likely statement. the President's Office. ME PDO Table SPACE Page 27 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) Monitoring & Evaluation Plan: Intermediate Results Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection The number of days elapsed between the date the first payment was received by each beneficiary, and the date of receipt of the Average time elapsed MoED application, averaged between first application administrativ over all accepted Time to receive first payment after and receipt of first payment Once e and MoED applications and application by beneficiaries of the payment divided by 7. COVID-19 Support data Applications received Allowance. before May 13 will be treated as having been received on May 13 for the purposes of this calculation. The PMU will keep records on the dates grievances were Percentage of grievances received, and the date about the COVID-19 Support MoED GRM of the subsequent Once MoED Grievances addressed within 2 weeks Allowance program lodged records interactions with the with MoED and responded applicant. This indicator to within 2 weeks will be calculated as the percentage of grievances lodged for which 10 business days Page 28 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) or less elapsed between receipt and first material response to the complaint (i.e. other than receipt or informational messages). The NSPA will provide a report on the number of records of COVID-19 Support Allowance beneficiaries whose core biographical data (i.e. identity card number, full name, gender, date of birth, Percentage of COVID-19 NSPA SPIS contact phone Support Allowance report and number), income and Beneficiary records stored and accessible beneficiaries whose Annual MoED occupation are MoED in SPIS biographical and socio- administrativ recorded in the SPIS economic details are stored e data (social registry). The in the NSPA SPIS. query will ensure that only those records for which these data are filled (i.e. not missing or dummy values) are counted. The number of records will be reported as a percentage of the cumulative number of Page 29 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) COVID-19 Support Allowance beneficiaries having been enrolled at the time of reporting. A tracer survey will be conducted by the PMU to measure beneficiary satisfaction. The PMU will contact each COVID-19 Support Allowance beneficiary after completion of the program and ask them Share of COVID-19 Support to report their Allowance beneficiaries who satisfaction with the Beneficiary satisfaction with COVID-19 are satisfied with the overall Once MoED application process, MoED Support Allowance enrollment and process for application, time time to receive first payment processes to payment, and payment payment, payment amount. amount and overall satisfaction with the program. The indicator will be defined as the percentage of beneficiaries who report being "satisfied" overall with the program. National Social Protection Framework A National Social Protection The report will be Once NSPA MoED drafted and presented to competent Framework will be prepared considered as drafted authority with a detailed assessment once it is finalized with Page 30 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) of the sector structure, inputs from all existing programs, their ministries financing and impact, and implementing social laying out a multi- protection programs stakeholder action plan for and submitted to the the future direction of the President's Office for sector. consideration. The GoM will develop a The unemployment comprehensive design for insurance program will an unemployment insurance be considered as program, comprising the drafted once a proposal program design, its Unemployment insurance program reflecting the program's components, financing, Once MoED MoED designed and presented to competent details has been implementing authority finalized and shared arrangements, monitoring with the President's and evaluation structure Office for and plan, staffing consideration. requirements, risks and mitigation strategies. A holistic, time-bound action plan will be The indicator will be developed for retirement considered as met once income support in the a report covering the Maldives, including Program for reforms to pension programs above areas has been strategies for improving Once MPAO MoED drafted and presented to competent drafted and presented compliance with MRPS authority to the President's contribution rules; a Office for strategy for reform of social consideration. pensions and government pensions; a strategy for maximizing retirement Page 31 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) savings and worker coverage; a payout phase assessment; and strategic direction for the sector. The SPIS will be improved NSPA will report on the according to NSPA's needs, SPIS's capabilities and Improvements to SPIS completed and with the overall objective of Once NSPA whether they have MoED tested improving connectivity with been improved as a island council offices and result of the project. other government agencies. ME IO Table SPACE Page 32 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) ANNEX 1: Implementation Arrangements and Support Plan 16B COUNTRY: Maldives COVID-19 Emergency Income Support Project Project Institutional and Implementation Arrangements 1. The project will be implemented by the MoED. The IA will work in collaboration with the NSPA, MPAO, MoF, MMA, employers and workers’ organizations, and other entities implementing social safety net programs that may be relevant to the development of the National Social Protection Framework. 2. The project will be guided by a PSC chaired by a senior official from the Ministry of Economic Development and including high-level representatives from the MoF, NSPA, MPAO, President’s Office, and other stakeholders as required. The PSC will, among other things, (a) provide strategic oversight and operational guidance for project implementation and ensure sustainability of project investments and interventions; (b) facilitate interagency coordination to ensure adherence to the project objectives; (c) resolve disputes, or conflicts related to the project, if any; (d) approve any policy, regulatory, and institutional recommendations from the project; and (e) facilitate timely approvals for project-related matters pertaining to agencies included in the PSC, where relevant. A PTC, with members drawn from the same agencies, will also be established to review proposals and technical outputs for contract work. 3. A PMU will be established within the MoED to carry out project activities; handle procurement, FM, and environment and social management; handle stakeholder engagement and grievance redressal; and conduct M&E. The PMU will be led by a PD, who will be assisted in day-to-day project management by a DPD. The PD and DPD will be supported by at least one full-time equivalent specialist for each of the following areas: FM, procurement, environment and social management, M&E, and communications, and other support staff as needed. The MoED will appoint a qualified internal auditor, who will report directly to the Chair of the PSC (see annex 2 for details on the internal auditor’s role.) The PD will have the authority to sign official documents as required for project implementation. Figure 1.1 shows the PMU structure. 4. The PMU shall be responsible for carrying out project activities, managing the new systems, and conducting M&E, including (a) preparing the annual work plans (AWPs), budgets, and quarterly project reports for endorsement by the PSC; (b) undertaking coordination, management, procurement, FM, communications, and environmental and social management activities under the project and related follow-up; (c) carrying out the overall communications and M&E; and (d) reporting to the PSC, acting as its technical adviser, and liaising with the World Bank team on any matters related to the progress of the project and the use of the proceeds of the financing. The GoM has advised that most of the PMU technical positions will be filled by consultants recruited by the MoED for terms of at least one year, with provision of contract extension based on good performance. 5. The PMU will develop and adopt a POM outlining the processes to be followed for project implementation, the income support program, and TA activities. The POM will describe in detail the organizational structure, roles, and functioning of the PMU, PSC, PTC, and other project stakeholders. Page 33 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) Figure 1.1. Project Management Unit Project Steering Committee Chair: MoED Members: MoF, NSPA, MPAO, PO Internal Auditor Technical Project Director Committee Deputy Project Director Procurement Financial Mgmt Safeguards Communications M&E Lead Specialist Lead Specialist Lead Specialist Specialist Specialist Advisor Manager Manager Officer Officer Officer Note: Specialists are consultant roles, and some staff work on other projects. Therefore, the proposed PMU has multiple staff in the case of procurement, FM, and safeguards to ensure adequate capacity. PO = President’s Office. Arrangements by Component 6. Component 1 will be implemented by the MoED with the NSPA as a service partner. The MoF will act as co-signatory with the MoED on the account used for COVID-19 Support Allowance cash payments. The MoED, MoF, and NSPA will sign a Memorandum of Understanding to formalize the project co- implementation responsibilities of benefit disbursement to claimants. Applications for income support will be made through the Jobcenter online platform (https://jobcenter.mv). Those who cannot access the site can obtain a paper form from their local island council office and submit the paper documents that will be scanned and submitted on their behalf by the island council. Applications will be received by the NSPA and stored in the SPIS using a back-end system that has already been developed and tested. The MoED will inform the NSPA of selection decisions for each applicant, and the NSPA will enroll and process applications of those who are eligible using the existing electronic payment systems. Under this process, the NSPA sends a list of account numbers to the MMA, which then transfers the funds to beneficiary accounts. A service-level agreement will be established between the MoED and the BML to ensure clarity on fees, service standards, and contingency arrangements. Beneficiaries will be able to easily access the funds when it is credited to their accounts, using point-of-service payment facilities available at many island stores, ATMs, and online payment facilities which are widespread in the country. 7. The COVID-19 Support Allowance was announced and initiated on May 13, 2020, and will be partially financed retroactively effective from this date. The World Bank team provided feedback on the Page 34 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) design and ensured the program satisfies the requirements for retroactive financing under a World Bank project, including compliance with environmental and social safeguards, gender, and citizen engagement. Accordingly, at the time of Board approval this program has been commenced and beneficiaries paid. The GoM will seek retroactive financing for benefit payments made to date, which have been authorized under Emergency Procedures up to 40 percent of the total financing for the project (US$5.12 million). It is expected that the retroactive financing will fully cover the first two months of benefit payments. 8. Component 2 of the project will be implemented by the MoED, but the primary beneficiaries of the activities under this component will include the President’s Office, NSPA, and MPAO. For these subcomponents, therefore, day-to-day liaison with consultants and responsibility for the completion of the tasks will lie with the respective agencies with oversight from the MoED. Arrangements for Monitoring and Evaluation 9. The MoED will be responsible for carrying out M&E of project activities, including measurement and reporting of the results indicators. At the project level, the PMU will prepare a quarterly implementation progress report. The report will assess the status of activities, measure results according to the results framework, identify issues and challenges, and propose solutions. If there are issues and challenges that cannot be resolved at the PMU level, those will be communicated to the PSC for resolution. Strategy and Approach for Implementation Support 10. The implementation support strategy has been formulated based on the design of the project and its risk profile to support the MoED to implement the project effectively despite the unusual situation facing both World Bank and GoM teams. It aims to mitigate the risks identified in the SORT and ensure rapid and effective implementation of the planned activities. 11. The supervision strategy consists of mechanisms that will enhance support to the GoM and ensure timely and effective monitoring while recognizing the impossibility of field missions in the near term. The supervision thus comprises (a) real-time online support for FM and procurement; (b) joint review missions (virtual until travel restrictions are relaxed); (c) regular technical meetings and phone check-ins with the PMU between formal review missions; (d) annual reporting based on the internal monitoring system; (e) independent third-party evaluation where relevant; and (f) internal and external audit and FM reporting. 12. Review missions. The World Bank team, together with the PSC and stakeholder ministries, will formally review project progress semiannually. Missions will be conducted virtually until such time physical mission travel is safe and feasible. The first mission will take place immediately after effectiveness, to assess implementation readiness of the project and facilitate rapid disbursement of funds against Component 1. The scope of supervision will also include monitoring compliance with stipulated FM, procurement, and environment and social safeguards guidelines. Missions will review progress and any issues related to project implementation. One month before each joint implementation review mission, the PMU will share with the World Bank a comprehensive progress report on project activities and an updated plan and budget. At the conclusion of each mission, the World Bank team will update the GoM and management on the status of the project. Page 35 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) 13. In addition to the review missions, ongoing real-time support will be provided to help accelerate implementation. The World Bank team will also participate in consultations with project stakeholders where possible. To ensure high-quality supervision, the World Bank team will comprise not only social protection specialists but also specialists in IT, implementation, FM, procurement, and environment and social management. The team composition for each mission will be determined based on supervision requirements at that time and be communicated ahead of time with counterparts. (a) Financial management. Comprehensive review missions will be conducted at least twice a year. The following activities will be carried out by the FM staff in the World Bank’s Colombo country office: (i) training as needed for FM staff of the PMU and IAs; (ii) FM system, starting with accounting, reporting, and internal controls; (iii) spot checks on random sample of activities; and (iv) review of all other FM arrangements including fund flow mechanisms and suggestion of recommendations for improvements. The World Bank team will also work with the PMU to help improve coordination between departments and agencies on FM and reporting. (b) Procurement. Support for procurement management will focus on effective implementation of Component 2 in line with the World Bank Group procurement guidelines. The following activities will be carried out by procurement staff in the World Bank’s Colombo country office: (i) training as needed for staff of the PMU and IAs; (ii) review of procurement documents prepared by the MoED; and (iii) monitoring of progress against the Procurement Plan. (c) Environment and social safeguards. The mission will review aspects of project implementation related to social safeguards including citizen engagement, grievance redress mechanism, and gender. (d) Other issues. Sector-level political and other risks will be addressed at the policy and program level through dialogue with the stakeholder ministries. However, as risks are closely related to government policy directions, financial constraints, and sustainability, the team will monitor them closely throughout project implementation. 14. Implementation support. Most of the World Bank team members will be based in Colombo and other country offices in the region to ensure timely, efficient, and effective support to the client. Formal supervision and field visits will be semiannual, with more frequent virtual support missions during the first year of the project. Detailed inputs from the World Bank team would comprise the following: (a) Technical inputs are required to review preparation of policies, procedures, and implementation of the project. Technical supervision is required to ensure proper implementation by carrying out field visits throughout the life of the project. It is envisaged that frequent communication on technical aspects of the project will be carried out between the World Bank, PMU, and MoF. (b) Fiduciary requirements and inputs. Before the project becomes effective, training will be provided to the PMU staff by the World Bank’s FM and procurement specialists. The team will also help the MoED identify capacity-building needs in FM and procurement management. Support missions, including procurement and FM reviews, will be semiannual. Procurement and FM support will also be provided to the client as required. Page 36 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) (c) Safeguards. An orientation program will be conducted for the PMU and IA staff on environment and social safeguards issues. A social development specialist based in Colombo will provide technical support and guidance as needed. (d) Operations. An operations officer will provide day-to-day supervision of all operational aspects, as well as coordination with the client and among World Bank team members. 15. The main implementation support is summarized in tables 1.1 and 1.2. Table 1.1. Staff Level of Effort for Project Implementation Support Staff Weeks Time Focus Skills Needed Required Team leadership Task team leader 6 Technical support Safety net specialist 6 IT specialist 4 Pensions specialist 4 First 12 Jobs specialist 4 months FM training and supervision FM specialist 4 Procurement training and supervision Procurement specialist 4 Safeguards Social development specialist 2 Implementation arrangements and project Operations officer 6 supervision coordination Second Team leadership Task team leader 6 12 months Technical support Safety net specialist 4 IT specialist 2 Pensions specialist 2 Jobs specialist 4 FM training and supervision FM specialist 2 Procurement training and supervision Procurement specialist 2 Safeguards Social development specialist 1 Implementation arrangements and project Operations officer 4 supervision coordination Page 37 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) Table 1.2. Staff Skill Mix Required Skills Needed Number of Staff Weeks Number of Trips Comments Task team leader 6 SWs annually To be evaluated Field based Social protection 6 SWs for the 1st year, 4 SWs thereafter based on Field based specialist evolving health Jobs specialist 4 SWs annually situation HQ based IT specialist 4 SWs for the 1st year, 2 SWs thereafter Consultant Pensions specialist 4 SWs for the 1st year, 2 SWs thereafter HQ based Operations officer 6 SWs for the 1st year, 4 SWs thereafter Country office based FM specialist 4 SWs for the 1st year, 2 SWs thereafter Country office based Procurement 4 SWs for the 1st year, 2 SWs thereafter Country office based specialist Social development 2 SWs for the 1st year, 1 SWs thereafter Country office based specialist Note: SW = Staff weeks. Page 38 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) ANNEX 2: Financial Management and Procurement 17B COUNTRY: Maldives COVID-19 Emergency Income Support Project Financial Management and Disbursement Arrangements Budgets 1. The project will prepare AWP-based budgets. The budget shall be prepared through a consultative process involving all relevant agencies concerned. The bulk of the budget would be for cash grant payments. The budgeted amounts for cash transfers would need to be determined in consultation with the MoED and NSPA. The process followed would be that each of the agencies shall prepare their estimated budgets and submit to the PD for consolidation. The addition of budgets for Components 1 and 2 would comprise the total project budget. Accounting 2. At present, the MoED follows the Government Accounting System. This system is well documented in the GoM’s Financial Rules. Government Accounting currently is being carried out using SAP software and because of its limitation (that is, no separate chart of accounts can be created, recording of expenditure at an aggregate level, and so on), the PMU will record and maintain project books of account in both an Excel system and a manual system. 3. The PMU will maintain separate sets of books of accounts/accounting records/registers and other relevant documentation for the project to enable separate tracking of expenditures related to the project. All funds for the proposed project will be routed through the PMU, which will be responsible for funding all project expenditures, accounting for them, and reporting on the financial and physical progress. Hence, the PMU will be the primary accounting center for the project. Books of accounts will be maintained on a cash basis. Relevant accounting standards and policies as per the GoM’s Financial Rules will apply for the project. 4. This project is fully financed by the World Bank. All project expenditure inclusive of taxes and duties, as applicable, will be financed by World Bank and will be recorded at the actual US dollar expenditure at the date of the payment. Financial Reports 5. The financial reporting for the project funds will be carried out through the submission of IUFRs. Once the project becomes effective, the PMU will prepare quarterly IUFRs in the prescribed format, which would be submitted to the World Bank within 45 days from the end of the quarter and will also form the basis for disbursement by the World Bank. The IUFRs will disclose receipt and utilization of project funds during the quarter, year to date, and project to date. The IUFRs will be based on project accounts and supported with the required reconciliations and bank statements. Page 39 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) Internal Audit 6. The project will be subject to a regular internal audit by internal auditor.the State Department at the MoF The internal audit will assess whether funds have been disbursed on a timely basis and reached the intended recipients and transactional controls and propriety have been maintained and used effectively and efficiently for the intended purposes. The internal audit reports will be shared with the World Bank. Fund Flow/Disbursement Process 7. A DA in US dollars will be set up with the MMA, which is the Central Bank of Maldives, to receive funds from the World Bank. The project will use the report-based disbursement method. The World Bank will advance an amount to the DA to meet the estimated expenditures for the six-month period, as forecasted in the IUFRs. From this DA, payments will be made to suppliers, vendors, and consultants and for incremental operating costs. With respect to large international payments, the PMU will have the option of requesting the World Bank to make direct payments to the supplier. Several sector agencies/institutions may be involved in planning, coordinating, and implementing project activities. FM will, however, be centralized at the PMU and all payments will be initiated directly by the PMU at the MoED with authorization coming from the MoF, with the supporting documents attached. It is agreed that no other entity will get involved in handling project funds and executing payments. However, the required technical recommendations would need to come from the respective sector agency (NSPA, MoED, and so on) when making certain payments for interventions specific for the sector (for example, cash grants) before the PMU executes the final payment to the cash grant beneficiaries. Reporting for cash grants will be done. For this, focal points may be appointed at each agency involved in this project. The MoF has already provided a list of authorized signatories across all projects in the portfolio; therefore, the MoF will have authorizing rights for requesting disbursements against grant and creditproceeds from the World Bank. All relevant documentation for such requests will come from the PMU to the MoF. The grants funds will be used before the credit funds for non-retroactive expenditures. External Audit 8. Financial statements of the project will be prepared by the PMU and will be audited annually by the Auditor General’s Office of Maldives, which is acceptable to the World Bank. This statutory audit report will provide the audited project financial statement along with audit observations. The audited financial statements included in the auditor’s report along with the response from the project on the audit observations, if any, will be submitted to the World Bank within six months (that is, June 30 each year) of the end of the fiscal year. According to the World Bank’s Access to Information Policy, the audit report will be disclosed publicly on the World Bank’s website. The timely submission of the audit report will be monitored by the World Bank. Financial Management Supervision 9. FM supervision consists of visits by the World Bank FM specialist to the PMU, desk reviews of internal and external audit reports, review of IUFRs, and other relevant reviews as required to periodically assess and monitor the adequacy of the project’s fiduciary arrangements. The World Bank will carry out a field-level FM supervision mission at least once every six months. Page 40 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) Eligible Expenditure Categories 10. Table 2.1 specifies the categories of eligible expenditures to be financed out of the proceeds of the credit (‘category’), the allocations of the amounts of the credit to each category, and the percentage of expenditures to be financed for eligible expenditures in each category. Table 2.1. Category of Eligible Expenditures and Amount Allocated to Each Category Percentage of Amount of the Amount of the Expenditures to be Credit Allocated Grant Allocated Financed Category (US$ equivalent) (US$ equivalent) (inclusive of taxes) (1) Cash grants under the part A of the 6,400,000 5,600,000 100 Project (2) Goods, non-consulting services, 800,000 100 consulting services, Training and Workshops, and Incremental Operating Costs under the part B of the Project TOTAL AMOUNT 6,400,000 6,400,000 100 Retroactive Financing 11. The project also intends to utilize the retroactive financing facility. The maximum retroactive financing amount of up to US$ 5.12 million (40 percent of the total funds available for the project) will cover eligible expenses under Category 1 incurred on or after May 13, 2020, which may be refinanced from the World Bank financing at effectiveness. The expenditure must be backed by adequate documentation, that is, including evidence of payment, list of payees and remittance advices. It was agreed that the designated staff at the MoED for FM matters will handle all payments or transactions that will be carried out using retroactive financing and will maintain all required supporting documents. Transactions carried out to incur eligible expenditure under retroactive financing can be submitted to the World Bank for reimbursement once the project is declared effective. Cash Grants 12. The basic principles agreed for the provision of cash grants under the COVID-19 Support Allowance are the following: (a) All identified beneficiaries would need to have a bank account. (b) All payments will be initiated by the PMU under the MoED and authorized by the MoF. (c) All payments will be carried out directly using funds in the DA. (d) Funds will be transferred electronically and directly to the beneficiary’s bank account. Page 41 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) 13. The process will be as follows: (a) Workers who have lost income will be registered at the online Jobcenter portal managed by the MoED. (b) The MoED and NSPA will evaluate case by case and decide who are eligible for the COVID- 19 Support Allowance. (c) Based on above evaluation, the MoED will generate a list of eligible employees with all verified banking details from the Jobcenter portal monthly. (d) The MoED will share the list with the PMU to process the payment voucher. The MoED will also share the same list with the NSPA to update their records. (e) The PMU will prepare one single payment voucher with total amount, attached with all employees’ bank details (this will be the MoED approved list generated from the Jobcenter portal). (f) Payment voucher will be sent to the MoF for payment processing. Hard copyHardcopy and soft copysoftcopy generated from the Jobcenter portal will be shared. (g) The MoF will advise the MMA to make the payments to all beneficiaries as per the list attached in the voucher. The file (soft copy) generated by the Jobcenter portal will be uploaded to the MoF system in the same way as done for a slips transfer. (h) The PMU will update the financial records as per the MMA bank advice once the payment is done. 14. Further details on the rules and processes for the cash grant program are provided in annex 4. Procurement 15. Procurement under the project will be carried out in accordance with the World Bank Procurement Regulations for IPF Borrowers - Procurement in Investment Project Financing for Goods, Works, Non-Consulting and Consulting Services, dated July 1, 2016 (revised in November 2017 and August 2018). The project will be subject to the World Bank’s Anticorruption Guidelines, dated October 15, 2006, revised in January 2011, and as of July 1, 2016. The project will use STEP to plan, record, and track procurement transactions. 16. No major procurements are planned for the project. The bulk of the project expenditures will consist of cash transfers. However, there will be some procurement of consultants’consultant’s services under Component 2. These will be consultancies for the National Social Protection Framework development, consultancy services for the development of unemployment insurance benefit program, consultancy services for a pension reform plan, and systems development for the NSPA SPIS. 17. Given the emergency nature of the requirements, the borrower has agreed to develop a streamlined Project Procurement Strategy for Development and finalize it early during the implementation phase. An initial Procurement Pprocurement lan for the first three months has been agreed with the borrower and will be updated during implementation. Page 42 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) 18. The proposed procurement approach prioritizes fast-track procurement for the emergency required goods and services. Key measures to fast-track procurement include the following: (a) Using framework agreements with international agencies like the UN for procurement of TA, communications, and capacity building (b) Increasing the threshold, as applied to the Maldives, for Goods Shopping to US$100,000 from the existing US$25,000 and for National Procurement to US$400,000 from the existing US$100,000 (c) Conducting all emergency procurement under this project for relief phases as post review (d) Applying other measures like shorter bidding time, no bid security, advance payments, direct payments, and so on a case-by-case basis by the World Bank’s Accredited Procurement Specialist. 19. The procurement functions will be handled through the PMU at the MoED. The MoED has assigned a lead procurement specialist and two support staff. All three are part-time staff and will work on other projects as well. In addition, the procurement specialist from the Maldives Clean Environment Project (MCEP) under the Ministry of Environment has agreed to act as an adviseradvisor to the PMU. The specialist has experience of implementing project procurement under the Regulations and is familiar with STEP. This arrangement will be continued until capacity at the PMU can be augmented through training. Furthermore, there will be close supervision support provided to project staff by the World Bank procurement specialists on a regular basis to facilitate smooth procurement. 20. Fraud and corruption and audit rights.Audit Rights Contracts that were procured in advance of the signing of the Financing Agreement will be eligible for the World Bank’s retroactive financing if the contractor has explicitly agreed to comply with the relevant provisions of the World Bank’s Anti- Corruption Guidelines, including the World Bank’s right to inspect and audit all accounts, records, and other documents relating to the project that are required to be maintained pursuant to the Financing Agreement. 21. The overall project procurement risk is assessed as Moderate. Major risks to procurement and proposed mitigation measures are summarized in table 2.2. Table 2.2. Procurement Risks and Mitigating Measures Risk Mitigation Measures Limited capacity to conduct Procurement staff from the MCEP will be seconded to the PMU on an emergency procurement interim basis, until capacity is supplemented with training and capacity building on the use of the Regulations and STEP. Impact of emergency on supply There are no goods procurements foreseen under this project. Any chains and lead times limited requirements can be met from the local market. Social impacts of emergency on There are no known restrictions on use of foreign personnel. markets especially on labor markets and acceptability of foreign labor Page 43 of 55 The World Bank COVID-19 Emergency Income Support Project (P174014) 22. Prior review thresholds and procurement methods. All procurement methods and approaches listed in the Regulations may be followed in this project. Table 2.3 provides the thresholds for the prior review and methods of procurement. Table 2.3. Prior Review and Procurement Thresholds Expenditure Contract Value Procurement Contracts/Processes Subject to Category (Threshold) Method Prior Review (each PE) Works >US$1,000,000 ICB • None during emergency phase • Thereafter, all contracts above US$500,000 US$400,000 during emergency ICB and Framework • None during emergency phase non- phase; thereafter, >US$100,000 Agreements • Thereafter, all contracts above consulting US$300,000 services US$300,000 US$200,000 All competitive • All contracts over US$200,000 services methods; advertise (firms) internationally