Document of
                    The World Bank


                                           Report No: 62114-KG




                 RESTRUCTURING PAPER

                         ON A

           PROPOSED PROJECT RESTRUCTURING
                            OF
SMALL TOWNS INFRASTRUCTURE & CAPACITY BUILDING PROJECT
             CREDIT 4016-KG/GRANT H-139-KG
               Approved on December 14, 2004

                          and

SMALL TOWNS INFRASTRUCTURE & CAPACITY BUILDING PROJECT
                 ADDITIONAL FINANCING
             CREDIT 4556-KG/GRANT H-455-KG
                  Approved on April 2, 2009



                        TO THE

                   KYRGYZ REPUBLIC




                     {May 27, 2011}
                         ABBREVIATIONS AND ACRONYMS


STICBP      Small Town Infrastructure & Capacity Building Project
STICBP-AF   Small Town Infrastructure & Capacity Building Project Additional Financing




               Regional Vice President:             Philippe H. LeHouerou
                      Country Director:             Motoo Konishi
              Sector Manager / Director:            Wael Zakout
                     Task Team Leader:              Anna Cestari




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                       KYRGYZ REPUBLIC
     SMALL TOWNS INFRASTRUCTURE & CAPACITY BUILDING PROJECT
                            P083377
                          CONTENTS

                                                                                                    Page
EXTENSION OF CLOSING DATE ............................................................................... 4




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                        Extension of Closing Date

    KYRGYZ REPUBLIC — SMALL TOWNS INFRASTRUCTURE & CAPACITY
                         BUILDING PROJECT
                               P083377
                   CREDIT 4016-KG/GRANT H-139-KG
                     Approved on December 14, 2004

                                          and

    SMALL TOWNS INFRASTRUCTURE & CAPACITY BUILDING PROJECT
                     ADDITIONAL FINANCING
                 CREDIT 4556-KG/GRANT H-455-KG
                      Approved on April 2, 2009


                                 Restructuring Paper


1.     The closing date for Kyrgyz Republic, Small Towns Infrastructure and Capacity
Building Project, [CREDIT 4016-KG/GRANT H-139-KG and CREDIT 4556-KG/GRANT
H-455-], P083377 will be extended from June 30, 2011 until September 30, 2011.
2.     STICBP (P083377) was approved by the Board on December 14, 2004. Activities
were scaled up by an Additional Financing (AF) (P115460) which was approved on April
2, 2009. The current Closing Date is June 30, 2011. Both operations are financed through
a blend of IDA Credits and IDA Grants.
3.     The Development Objectives of STICBP (and STICBP AF) are “to improve the
availability, quality, and efficiency of the delivery of local infrastructure services to
the population of participating towns.” To date, the objectives have been fully
achieved. Total disbursements are as follows: IDA Credit 40160 are 100%; IDA Grant
H1390 are 99.7%; IDA AF Credit are about 95%; and IDA AF Grant are about 19.3 %.
4.     Project implementation performance has been consistently rated “Satisfactory”
throughout implementation. The project was expected to be completed by the end of
2010, six months ahead of the Closing Date, but due to the political unrest in the Kyrgyz
Republic in the Spring and Summer of 2010, the pace of project implementation was
slower than anticipated. As of May 15 2011, two reaming activities were experiencing
delays beyond the control of the Implementing Agency, ARIS. ARIS, in coordination
with the Ministry of Finance, applied to the World Bank for an extension of the project
closing date by three months, until September 30, 2011, based on force majeure.
The proposed extension is necessary to complete (i) the procurement of special
machinery and (ii) ongoing works in Kok-Jangak, a town located in the South of the
Kyrgyz Republic.


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5.      For the procurement of special machinery, ARIS successfully signed two
contracts earlier this year, and delivery is well under way. A third contract, for the
remaining lot, could not be signed because the manufacturing plant had suspended its
production. ARIS, in consultation with the World Bank, swiftly proceeded with new
procurement, however there is a high risk that the delivery of the remaining special
machinery will not take place by June 30, 2011. This could result in non-execution of
part of the Project proceeds and consequently, failure to address some of the small towns’
needs.
6.      Rehabilitation of the water supply system in Kok-Jangak has been severely
delayed by the April and June 2010 events. Despite substantial progress by the contractor
since September 2010, ARIS specialists have concluded that the works will only be
completed after June 30 2011. This is due to the requirement that adequate concrete
curing times be allowed before further installations can be made.
7.      Based on the above, the task team concurs with the concerns raised by ARIS, and
finds the request for extension of the closing date by three months justified to ensure
efficient and full use of the Project’s funds.
8.     The extension until September 30, 2011 has been officially requested by the
Ministry of Finance on May 20, 2011.
9.     This will be the second extension of the Closing Date, the first being a 15-month
extension granted when the Additional Financing was approved in April 2009. With this
second extension, the cumulative extension period granted is 18 months.




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