Document of The World Bank Report No: 65578-GA RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF LOCAL INFRASTRUCTURE DEVELOPMENT PROJECT LOAN NO. 7373-GA BOARD APPROVAL DATE: MARCH 14, 2006 TO THE GABONESE REPUBLIC DECEMBER 12, 2011 ABBREVIATIONS AND ACRONYMS CN-TIPPEE Commission Nationale – Travaux d’intérêt public pour la promotion de l’entreprenariat et de l’emploi (National Commission for Labor intensive small-scale public infrastructure works) PDO Project Development Objective SME Small- and Medium-sized Enterprise Regional Vice President: Obiageli K. Ezekwesili Country Director: Gregor Binkert Sector Director Jamal Saghir Sector Manager: Junaid Kamal Ahmad Task Team Leader: Deo-Marcel Niyungeko 2 GABONESE REPUBLIC LOCAL INFRASTRUCTURE DEVELOPMENT PROJECT P082812 CONTENTS Page A. SUMMARY................................................................................................................ 4 B. PROJECT STATUS.................................................................................................... 5 C. PROPOSED CHANGES ............................................................................................ 5 3 GABONESE REPUBLIC LOCAL INFRASTRUCTURE DEVELOPMENT PROJECT RESTRUCTURING PAPER SUMMARY 1. The proposed changes are (i) to amend Article III, Section 3.02 (c) of the Loan Agreement for the Local Infrastructure Development Project; and (ii) to increase the percentage of expenditures to be financed under category 3 (a) Works for Part C of the Project from 40 to 80 percent. The amendment refers to a reduction in the Borrower’s counterpart funding requirements as a result of scaling down of component 3 (Development of local SMEs in the construction industry) as per March 2011 restructuring. Project Background The project has two main objectives: (i) increased access of the population living in low-income settlements to basic services; and (ii) sustained access of small- and medium-sized enterprises (SMEs) to civil work and construction contracts with the public sector. The project includes five components: (i) community-based infrastructure in low-income settlements, (ii) capacity building, targeted to officials from the municipalities covered by the project, as well as various ministries, and the beneficiary communities including technical assistance, and limited contribution to equipment and operating costs; (iii) development of local SMEs in the construction industry; (iv) support to the reform of public infrastructure management, and (v) support to HIV/AIDS prevention programs in the six cities targeted by the project. The project experienced a slow start-up due to: (i) a late fulfillment of effectiveness conditions, (ii) the temporary suspension of disbursements to Gabon due to delays encountered by the Government of Gabon in settling outstanding special accounts of previous Bank projects, and (iii) a slow set- up of the Project Coordinating Unit A first restructuring was approved in May 2009 in order to focus on project activities critical to achieve the project development objective (PDO) by increasing their allocations to compensate for cost escalation; and (ii) to reduce the scope of activities related to Part C of the project (Development of local SMEs in the construction industry). The restructuring involved (i) streamlining a number of project activities; (ii) reallocating among project components; and (iii) simplifying some of the output indicators for added practicality and easier monitoring. A second restructuring was approved in March 2011 for a reallocation of funds from component 3 to component 1 (Community-based infrastructure upgrading in low-income settlements). This reallocation to component 1 related to community infrastructure in low-income settlements of the 4 six targeted cities helped to offset the unexpected high increase in construction costs incurred during that period. PROJECT STATUS Implementation performance has been satisfactory since the two consecutive restructurings and the project is likely to achieve its objectives. Results of the project activities performed most of appraisal targets; both in terms of physical infrastructure, access to services and capacity building. As of November 11, 2011, disbursements amount to about 84 percent of the loan with commitments at 100 percent. Most infrastructure works are expected to be completed by the current closing date of December 31, 2011. Key results include an additional 65,818 people who now benefit from improved sanitary conditions, compared to an end-of-project target of 70,000. 74 remaining micro projects have been contracted out and works are expected to be completed before December 2011. It is also expected that an additional 4,000 people will benefit from the remaining activities such as pedestrian crossings/gateways in marshlands, public toilets to be completed by end November 2011. With respect to improved and sustained access of SMEs to civil work and construction contracts with the public sector, more than 100 SMEs have been contracted through the project. All neighborhood development plans for the six targeted municipalities have been completed. About 51,381 people in urban areas have access to all-season roads within a 500-meter range under the project, compared to an end-of-project target of 75,000. Although the targeted output of 15.5 km of roads was achieved, project site changes during implementation have affected the number of beneficiaries. These changes were caused by current activities supported by the Borrower to support the 2012 Africa Soccer Cup to be organized in Libreville in June 2012. Beneficiary satisfaction with the project continues to be very high, as was evidenced in the mission's field visits and during the stakeholder’s consultation workshop organized during the mid-term review mission. The event evidenced a strong demand for additional sub-projects aiming to improve access to basic services to by population living in low-income settlements and the need to move away from the classic project approach to a broader sector framework focusing on the governance and capacity of cities and towns to deliver services on a sustainable basis. PROPOSED CHANGES As a consequence of the second restructuring (March 2011), the scaling down of component 3 (reallocation of funds from component 3 to component 1) implied a reduction in the required counterpart funding for this component (the loan agreement has foreseen a 60 percent counterpart funding for component 3 and 20 percent for all the other components). This aspect was overlooked in the second restructuring. Hence, we need to increase the disbursement percentage of category 3 (a) Works for Part C of the Project – from 40 to 80 percent. The proposed changes in this Restructuring Paper are: 5 (i) to amend Article III, Section 3.02 (c) of the Loan Agreement for the Local Infrastructure Development Project to reflect the reduction in total counterpart funding requirements from FCFA 5,077,826,454 to FCFA 3,769,332,043. Section 3.02 (c) will therefore read as follows: “ (c) (i) deposit into the Project Account before April 30, 2007, an amount of CFAF 994,666,216, (ii) deposit into the Project Account, by April 30, 2008, an amount of CFAF 1,924,665,827 and (iii) deposit into the Project Account, by April 30, 2009, an amount of CFAF 850,000,000; and�. (ii) to amend Schedule I (Withdrawal of the Proceeds of the Loan) by increasing the percentage of expenditures to be financed under category 3 (a) to 80 percent. 6 7 8 9