Document of The World Bank FOR OFFICIAL USE ONLY Report No: 78334 v1 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE SECONDARY EDUCATION DEVELOPMENT AND GIRLS ACCESS PROGRAM PROJECT CREDIT NO. 4401-YEM THE NETHERLANDS TRUST FUND TF094223 (CO-FINANCING) APPROVED ON MARCH 18, 2008 TO THE REPUBLIC OF YEMEN June 3, 2013 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. Regional Vice President: Inger Andersen Country Director: Hartwig Schafer Sector Manager: Mourad Ezzine Task Team Leader: Kamel Braham 2 YEMEN, REPUBLIC OF SECONDARY EDUCATION DEVELOPMENT AND GIRLS ACCESS PROGRAM CONTENTS Page ANNEX 2: REALLOCATION OF PROCEEDS ......................................................................... 8 3 ANNEX 2: Reallocation of Proceeds _______________________________________________________________________ REPUBLIC OF YEMEN – SECOND EDUCATION DEVELOPMENT AND GIRLS ACCESS PROJECT P089761 CREDIT 4401-YEM THE NETHERLANDS TRUST FUND TF094223 (CO-FINANCING) Restructuring Paper 1. Proceeds for the Yemen Secondary Education Development and Girls Access Project (Credit No. 4401-YEM) (P089761) will be reallocated as follow: IDA Credit 4401-YEM Category Amount of the Credit Percentage of Expenditures to be Financed Allocated (inclusive of taxes) (expressed in SDR) Current Revised Current Revised Current Revised (1) Goods under: Such percentage as the Unchanged (a) Part A.1(a) of the 676,500 460,030 Association shall Project determine from time to (b) Other Parts of the 1,729,300 1,729,300 time Project (2) Works under Part A.1(a) of 6,539,200 6,755,670 Such percentage as the Unchanged the Project Association shall determine from time to time (3) Consultants’ services under: Such percentage as the Unchanged (a) Part A.1(a) of the 191,400 191,400 Association shall Project determine from time to (b) Other Parts of the 383,440 383,440 time Project (4) Training 1,410,000 1,410,000 Such percentage as the Unchanged Association shall determine from time to time (5) Incremental Operating Costs Such percentage as the Unchanged incurred by: Association shall (a) PAU 331,760 331,760 determine from time to (b) PMU 216,300 216,300 time (6) School Community Grants 1,282,100 1,282,100 Such percentage as the Unchanged Association shall determine from time to time (7) Unallocated 0 0 TOTAL AMOUNT 12,760,000 12,760,000 The Netherlands Trust Fund TF094223 Category Amount of the Grant Percentage of Expenditures to be Allocated Financed (expressed in USD) (exclusive of taxes) Current Revised Current Revised Current Revised (1) Goods under: Such percentage as Unchanged (a)Part A.1(a) of the Project 350,300 240,300 the Association shall (b)Other Parts of the Project 900,000 900,000 determine from time to time (2) Works under Part A.1(a) of the Project 3,390,000 3,500,000 Such percentage as Unchanged the Association shall determine from time to time (3) Consultants’ services under: Such percentage as Unchanged (a)Part A.1(a) of the Project 99,000 99,000 the Association shall (b)Other Parts of the Project 199,000 199,000 determine from time to time (4) Incremental Operating Costs incurred by: Such percentage as Unchanged (a)PAU the Association shall (b)PMU 172,000 172,000 determine from time 112,200 112,200 to time (5) Training 730,000 730,000 Such percentage as Unchanged the Association shall determine from time to time (6) School Community Grants 662,500 662,500 Such percentage as Unchanged the Association shall determine from time to time TOTAL AMOUNT 6,615,000 6,615,000 2. Background. SEDGAP, a project initially co-financed by several Development Partners (World Bank, Embassy of the Kingdom of the Netherlands (EKN), the British Department for International Development (DFID), the German Development Bank (KFW), and German Society for International Cooperation (GIZ)) and the Government of Yemen for a total amount of US$103.4 million equivalent, became effective on June 6, 2009 with an overall budget of US$18.75 million for civil works (Component 1) to extend, rehabilitate and upgrade 00 existing schools in the governorates of Ibb, Taiz, Lahj Abyan and Hadramout. 3. In 2010, EKN decided to reduce its contribution to the project while DFID fully withdrew, hence reducing the total project amount from US$103.4 million to US$50.2 million. Also, following the lengthy and far-reaching country unrest, the World Bank decided to temporarily suspend disbursement (from March 2011 until January 2012). Project implementation was significantly affected by the country unrest, and the reduction in funds made it necessary to reorganize activities based on new priorities. 4. As a result, a first “Level II� restructuring of SEDGAP (for both the IDA Credit (4410-YEM) and co-financing Trust Fund (TF094223) with EKN and DFID) was completed in April 2012 to reduce and refocus project activities. The restructuring 5 consisted of: (i) revising result indicators; (ii) revising Project components; (iii) reallocating proceeds for both the IDA Credit and Trust Fund (TF094332) with EKN and DFID; and (iv) revising disbursement arrangements. Among the many activities which were revised, the end target for the civil works program was reduced from 50 to 43 existing schools for an overall revised budget of US$24.2 million. In the meantime, as a result of the disbursement suspension and contract payment delays, some contractors decided to terminate their contracts. As a consequence – and when disbursement resumed - contracts for 36 schools had to be re-bid. In addition, the Memorandum of Understanding (MOU) signed between the Development Partners (DPs) also had to be revised in order to allow for project disbursements based on pooled-funding; the revision took time and further delayed disbursement. The task team conducted several reverse missions due to travel restrictions to Yemen and spent significant time consulting and reaching agreement with DPs. This revision of the MOU was finalized in August 2012. 5. After the lifting of disbursement suspension, the project picked up speed and as of May 2013, overall project implementation is on track. Out of the 44 schools targeted for completion at the 2012 restructuring, one school was dropped due to land availability issues, thereby reducing the end target to 43 schools for the remainder of the project. To date, contracts for 34 schools have been signed and work has fully resumed in those schools, with physical progress rates ranging from 4 to 52 percent. Contracts for 8 additional schools were recently awarded and one school had to be re-tendered due to unsatisfactory proposals by bidders. After the April 2012 restructuring, disbursement has also quickly improved: disbursement of the IDA Credit is currently at 26.4 percent (compared to 6 percent in July 2012), and disbursement of the Grant currently represents 35 percent of the total Grant amount. The issues encountered as a result of disbursement suspension and revision of the MOU have since been resolved and implementation is expected to continue to progress smoothly in the coming months. 6. Due to the ongoing security issues in some parts of the country where schools are being built, commodity prices in the country increased sharply over the past two years which prompted the Government to issue a decree (Cabinet Decree No. 30/2013 (Attachment 1)) to add a 15 percent increase to construction costs. The costs of construction material and labor, in particular, were strongly affected by this increase. This was not anticipated during the 2012 restructuring and reallocation of SEDGAP funds, which were based on a price contingency of 10 percent. Consequently, the MOE and Public Works Project (PWP) at the Ministry of Planning and International Cooperation (MOPIC), which is responsible for implementing civil works, revised the estimates of the school construction program, and came up with an anticipated deficit of US$1.25 million, cleared by the project’s Inter-ministerial Steering Committee on March 17, 2013. On May 15, 2013, the MOPIC requested that funds be reallocated among categories to cover that deficit (Attachment 2). The proposed reallocation of funds is necessary to complete the construction program in the 43 schools. 7. The proposed reallocation consists of transferring the budget originally allocated to the provision of school equipment administration (US$800,000, being financed by all Development Partners) to finance a portion of the US$1.25 million deficit in civil work activities. As far as the IDA Credit and Netherlands Trust Fund are concerned, it is 6 proposed to reallocate a total amount equivalent to US$432,882 which will be divided as follows: (i) IDA Credit Nr. 4401-YEM: Transfer a total amount of SDR216,470 from Category (1) Part A.1(a) of the Project or Other Parts of the Project to Category (2) “Works under Part A.1 (a) of the Project�. (ii) Netherlands Trust Fund (TF094223): Transfer a total amount of US$110,000 from Category (1) Part A.1(a) of the Project or Other Parts of the Project to Category (2) “Works under Part A.1 (a) of the Project�. 8. The remaining balance to cover the US$1.25 million gap (US$817,118) will be covered by KfW and the Government (US$470,983), and from savings resulting from previous civil works activities (US$346,135). 9. The provision of equipment for school administration initially consisted of the acquisition of photocopiers, desktop computers, school radios, speakers etc. A full review of the budget by the MOE revealed that the selected schools had already received this equipment, or had sufficient resources to acquire this equipment during the school year 2013-2014. The MOE submitted a detailed memorandum indicating that this equipment had been provided to those schools, and this memorandum was reviewed and approved by the Development Partners (KFW, EKN). Thus, it was jointly assessed that the reallocation would not negatively affect the quality of the administration in the schools supported by the project, and timely re-allocation of funds is crucial for successful completion of the civil works construction in the 43 schools. Attachment 1: Cabinet Decree No. 30/2013 Attachment 2: Official request from Government of Yemen 7