Document of The World Bank FOR OFFICIAL USE ONLY Report No: 74054-PH RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF MINDANAO RURAL DEVELOPMENT PROJECT - PHASE 2 PROJECT LOAN 7440-PH 22 MARCH 2007 TO THE REPUBLIC OF THE PHILIPPINES December 6, 2012 PHILIPPINES SUSTAINABLE DEVELOPMENT UNIT SUSTAINABLE DEVELOPMENT DEPARTMENT EAST ASIA AND PACIFIC REGION This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ABBREVIATIONS AND ACRONYMS CAF Certificate of Availability of Funds CFAD Community Fund for Agricultural Development DA Department of Agriculture LDP Local Development Plan LGU Local Government Unit NRM Natural Resource Management PDOs Project Development Objectives RAFMP Regional Agriculture and Fisheries Modernization Plan RI Rural Infrastructure Regional Vice President: Pamela Cox Country Director: Motoo Konishi Sector Manager: Ousmane Dione Task Team Leader: Felizardo Jr K. Virtucio 2 Restructuring Restructuring Type: Level two 1. Basic Information Project ID & Name P084967: PH Mindanao Rural Dev. Project - Phase 2 Country Philippines Task Team Leader Felizardo Jr K. Virtucio Sector Manager/Director Ousmane Dione Country Director Motoo Konishi Original Board Approval Date 03/22/2007 Original Closing Date: 12/31/2012 Current Closing Date 12/31/2012 Proposed Closing Date [if applicable] 12/31/2014 EA Category B-Partial Assessment Revised EA Category B-Partial Assessment EA Completion Date 08/02/2004 Revised EA Completion Date 2. Revised Financing Plan (US$m) Source Original Revised BORR 39.90 40.57 IBRD 83.75 83.75 PHPT 0.00 3.00 Total 123.65 127.32 3. Borrower Organization Department Location Government of the Philippines Philippines Department of Finance Philippines 4. Implementing Agency Organization Department Location Department of Agriculture Philippines 5. Disbursement Estimates (US$m) Actual amount disbursed as of 12/06/2012 41.17 Fiscal Year Annual Cumulative 2013 8.37 49.54 2014 20.58 70.12 2015 13.63 83.75 Total 83.75 3 6. Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? N Does the restructured projects trigger any new safeguard policies? If yes, please select N from the checklist below and update ISDS accordingly before submitting the package. 7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes MRDP 2 aims to (i) improve livelihood opportunities of targeted communities and (ii) institutionalize a decentralized system for agriculture and fisheries service delivery that promotes participation, transparency and accountability. 7b. Revised Project Development Objectives/Outcomes Not applicable 4 Extension of Closing Date PHILIPPINES – SECOND MINDANAO RURAL DEVELOPMENT PROJECT P084967 LOAN PH-7440 Restructuring Paper 1. The Borrower is requesting that the closing date for the Philippines – Second Mindanao Rural Development Project (MRDP2), Loan PH-7440 be extended from December 31, 2012 to December 31, 2014. This restructuring proposes only a time extension and no other changes are being sought. 2. The Project is in a good position to achieve its development objectives. The mid- term outcome targets were estimated to have been exceeded. For instance, the goal of increasing the household incomes of the target beneficiaries by 7% over the baseline by mid-term was estimated to have been surpassed, already reaching around 16%. Thus, for the Project Development Objective (PDO) 1 on “improving the livelihood opportunities of targeted communities”, the project is currently performing better than expected. The mainstreaming of MRDP 2 reforms in line with PDO 2 (institutionalizing a decentralized system for agriculture and fisheries service delivery that promotes participation, transparency and accountability) is also well under way. The continuing progress in the pilot-testing of the Department of Agriculture’s (DA) Harmonized Interim Operations Manual for Local Government Unit (LGU) engagement, and the support provided by the project to the DA Planning Service’s initiative to better integrate Local Development Plans (LDPs) in Regional Agriculture and Fisheries Modernization Plans (RAFMPs) are expected to be effective instruments for the institutionalization of the target reforms. 3. Implementation progress, in terms of both physical and financial accomplishments, continued to accelerate and is poised to further improve. The recent 8th World Bank Implementation Support Mission for MRDP 2 (July 31 to August 16, 2012) observed that physical accomplishment is better than the best-case scenario projection for the review period. The physical accomplishment of the rural infrastructure (RI) component of the project reached 34.1% during the mission, a remarkable 15.5 percentage point increase over a six-month period. It is, therefore, highly likely that the end-2012 physical accomplishment target of 50% will be met. Meanwhile, disbursements reached 41.2% during the mission, posting a hefty 11.2 percentage point increase over the past 6 months. This favorable trend in project performance is expected to continue due to the progress achieved in procurement. For RI, there have been dramatic advances to the procurement stage so that only 3 subprojects worth PhP43 million (US$1 million) remain in the Feasibility Study/Detailed Engineering stage. As of August 2012, RI subprojects worth about PhP1.6 billion (US$39 million) have been awarded. There has been considerable progress in the implementation of the Community Fund for Agriculture Development (CFAD) and Natural Resource Management (NRM) subprojects for livelihood and sustainable resource management and conservation. 5 4. Project implementation progress continues to accelerate and has been rated satisfactory for the past year. Virtually all project funds are fully obligated or committed to specific subprojects. As of this date, a total of PhP3.79 billion (US$92.39 million) worth of rural infrastructure are currently under various stages of contract implementation. Meanwhile, about 96% of the PhP1.3 billion (US$31.7 million) CFAD funds have already been obligated or have been issued Certificate of Availability of Funds (CAF) by end- June 2012. 5. It has been estimated that a 2-year extension of the closing date is necessary to fully complete and disburse all remaining sub-projects primarily to make up for the 18- month implementation hiatus brought about by the re-examination of the National Government-Local Government Unit cost sharing policy made by the Oversight Agencies the at the start of the project. An action plan has been prepared by the Department of Agriculture to complete the project by end-2014 and has been reviewed and found adequate by the Bank. There are no outstanding audit reports and interim financial reports for the project. 6. This will be the first extension of the project. 6