The World Bank Solomon Islands Rural Development Program II (P149282) REPORT NO.: RES30045 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SOLOMON ISLANDS RURAL DEVELOPMENT PROGRAM II APPROVED ON NOVEMBER 21, 2014 TO SOLOMON ISLANDS SOCIAL, URBAN, RURAL AND RESILIENCE GLOBAL PRACTICE EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Michel Kerf Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager/Manager: Susan S. Shen Task Team Leader: Kosuke Anan The World Bank Solomon Islands Rural Development Program II (P149282) ABBREVIATIONS AND ACRONYMS ASEF Agriculture Supplemental Equity Facility CDG Community Development Grant DDO Deferred Drawdown Option DRG Disaster Recovery Grant EA Environmental Assessment IDA International Development Association KPI Key Performance Indicator MTR Midterm Review PDO Project Development Objective SBD Solomon Islands Dollar USD United States Dollar The World Bank Solomon Islands Rural Development Program II (P149282) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P149282 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 21-Nov-2014 28-Feb-2020 Organizations Borrower Responsible Agency Ministry of Agriculture and Livestock Solomon Islands Development,Ministry of Development Planning and Aid Coordination Project Development Objective (PDO) Original PDO The proposed development objective for the project is to improve basic infrastructure and services in rural areas and to strengthenthe linkages between smallholder farming households and markets. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed COFN-C1360 07-May-2015 07-May-2015 07-May-2015 30-Jun-2020 4.30 3.65 .66 IDA-55740 21-Nov-2014 29-Jan-2015 27-Feb-2015 28-Feb-2020 5.00 4.56 .01 IDA-D0220 21-Nov-2014 29-Jan-2015 27-Feb-2015 28-Feb-2020 4.00 3.75 0 TF-A5083 14-May-2017 29-Sep-2017 29-Sep-2017 28-Aug-2019 5.10 0 5.10 The World Bank Solomon Islands Rural Development Program II (P149282) TF-19256 21-Nov-2014 17-Apr-2015 17-Apr-2015 28-Feb-2020 9.00 7.46 1.54 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. The Project was approved on 21 November 2014, the IDA Financing Agreement was signed on 29 January 2015, and became effective on 27 February 2015. The Project’s Overall Implementation Progress is currently rated “Moderately Satisfactory”, since the project has made substantial progress in the first half of the implementation period, and the project is on track to complete the planned implementation cycles for subprojects by the closing date, notwithstanding some delays (about six months) experienced to date. To date, the Project has disbursed 70% of its financing envelope. Nonetheless, the Project’s overall progress towards achievement of the PDO is currently rated “Moderately Unsatisfactory”, as the Project is not likely to meet the target values for three of its four current Key Performance Indicators (KPIs), even if all the planned activities are completed by the closing date. The Midterm Review (MTR) of the Project was advanced to September 2017 to proactively address a number of critical issues that have affected the ability of the Project to meet its objectives. Financial audits received to date have all been unqualified, and there are no outstanding financial audits for the Project. 2. The Project is experiencing a financial shortfall of approximately USD5.8 million. A total financing of USD46.9 million was initially committed for the Project in various currencies, which equated to the initial project budget of SBD341 million at the time of Project appraisal. During implementation, the projected cost of the project activities has increased to approximately SBD 349 million (2% increase). However, at the same time, the total amount of available financing has declined to approximately SBD303 million equivalent due to the depreciation of some financing currencies, creating a financial shortfall of SBD46 million (approximately USD5.8 million). Consequently, the Project cannot fully implement all the activities envisaged during preparation. To address this constraint, the MTR mission, in consultation with government counterparts, proposed adjustments that result in a cost reduction of SBD 21 million under Component 1 and SBD25 million under Component 2 (a total cost reduction of SBD46 million). These adjustments include: (a) cessation of activities in 56 wards that have already received five rounds of Community Development Grants (CDGs) from the second cycle of CDGs under RDP II out of a total number 172 wards; (b) a reduction in the number of Agribusiness Partnerships (APs) to be assisted (from an initially planned 79 to about 43 partnerships); (c) a reduction in the amount of Agriculture Supplemental Equity Facility (ASEF) grants to SBD8 million; (d) a reduction of training activities for the staff of the Ministry of Agriculture and Livestock; and (e) cancellation of community scorecards activities. These adjustments imply that the number of subprojects, partnerships, and beneficiaries supported under the Project will be reduced, with implications for the Results Framework of the Project as outlined below. The World Bank Solomon Islands Rural Development Program II (P149282) 3. The Project Results Framework requires modifications to more accurately reflect project realities. In addition to financing constraints, a number of technical and beneficiary changes need to be reflected in the RF based on implementation experience to date. First, the estimated number of beneficiaries from Community Development Grant (CDG) subprojects under Subcomponent 1.1 and Disaster Recover Grant (DRG) subprojects under Subcomponent 1.3 was overestimated, as fewer people are benefitting from each subproject on average to date. Second, the Project was projected to support up to 79 agribusiness partnerships under Subcomponent 2.1; however, as each partnership has required a greater grant amount than originally estimated, this number needs to be revised downward. Also, the average number of beneficiaries per agribusiness partnership has been approximately 300 persons to date rather than 900 as estimated at appraisal. Finally, the number of beneficiaries of agriculture and livestock disaster recovery and resilience support (Subcomponent 2.4) was overestimated, as further assessment and verification on the losses sustained by households has led to a reduction of the number of eligible households. 4. These over-estimates in the beneficiary estimates, together with the reduction in the scale of Project activities required by financing shortages, necessitate a revision of the target values for some PDO and intermediate outcome level indicators in the Results Framework. Furthermore, some intermediate results indicators in the Results Framework will be adjusted to make them more relevant and measurable. II. DESCRIPTION OF PROPOSED CHANGES 5. This restructuring involves changes to the results framework. Specifically, the target values for three of the four PDO level indicators will be adjusted downwards to reflect the reduction in the numbers of (a) CDG and DRG subprojects and their beneficiaries; (b) agribusiness partnerships and their beneficiaries; and (c) beneficiaries receiving agriculture and livestock support to recover incomes lost from April 2014 flooding. Furthermore, a PDO level indicator on “Increase in sales for farmers engaged in partnerships” will be revised to “Increase in the volume of produce sold by households engaging in agricultural partnerships” to better reflect the nature of partnerships and to avoid dependency on external factors, such as weather and markets. At the intermediate outcome level, (d) the target values will be adjusted downwards for five indicators; (e) three indicators will be revised; (f) a new indicator will be added; and (g) five indicators that do not adequately reflect the scope and nature of the Project will be removed. 6. The proposed changes to the target values and indicators of the results framework, as well as their justifications are summarized in the table below. The new revised Results Framework is found in Section IV: Detailed Changes. Indicator Target Value Reason for Revision Current Revised Current Revised PDO Level (No change) Beneficiaries with improved 262,850 140,000 The expected number of beneficiaries was quality of, and/or, access to rural reduced, since 260 subprojects (as infrastructure or services (including from opposed to 374 subprojects) are expected disaster recovery) to be completed under the Project. Based on data collected from ongoing subprojects, each is on average estimated to benefit approximately 500 individuals. Therefore, 140,000 individuals are The World Bank Solomon Islands Rural Development Program II (P149282) Indicator Target Value Reason for Revision Current Revised Current Revised expected to benefit from 260 subprojects (260*500). (No change) …Of which female (beneficiaries) 131,425 70,000 The target value was revised in accordance to the new target value for the above indicator (50% of beneficiaries). (No change) Male and female members of 68,200 14,000 The expected number of beneficiaries was farming households engaged in productive reduced, since 43 partnerships (as partnerships with commercial enterprises opposed to 79 partnerships) are expected to be supported under the Project. Based on data collected from ongoing partnerships, each partnership is on average estimated to benefit approximately 325 individuals. Therefore, 14,000 individuals are projected to benefit from 43 partnerships (43*325). Increase in sales for Increase in the 30% 15% The original indicator is highly dependent farmers engaged in volume of produce on market prices and weather. The new partnerships sold by households indicator removes the effect of prices, and engaging in more accurately reflects the nature of the agribusiness partnerships. The revised indicator partnerships assumes that the skills and inputs farmers gain through partnerships are translated into increased volume of production, which will be sold even at low prices, due to the farmers’ commitments to sell the products to the lead partners. (No change) Number of male and female 5,400 2,500 The number of beneficiary households beneficiaries receiving agriculture and was reduced, based on further livestock support to recover incomes lost from assessment and verification on the losses April 2014 flooding sustained by the households. Intermediate Results (Component 1): Community infrastructure and services (No change) Number of community 374 260 The number of target wards will be infrastructure sub-projects completed reduced by 56 for the second cycle of (including from disaster recovery) community development grants, bringing down the total number of sub-projects to 325 (this number reflects the additional subprojects that have been implemented under the first cycle and through disaster recovery grants). Aiming to complete 80% of all sub-projects implemented with community development grants and disaster recovery grants, the target value is adjusted to 260 (325*0.8). Percentage of sub- Percentage of 100 The indicator was strengthened as it is projects for which completed sub- important for communities to have actual plans for community projects for which O&M arrangements in place (verified by engagement in post- community the Project Team), rather than just plans. project operations and engagement in post- The World Bank Solomon Islands Rural Development Program II (P149282) Indicator Target Value Reason for Revision Current Revised Current Revised maintenance are project operations confirmed and maintenance are established (No change) Community and other non-project 30 20 The target value was revised to be financed contributions as a percentage of total consistent with the value that had been sub-projects costs (at the time of completion) established in the Project Implementation Manual. Percentage of sub- (Removed) 30 (Removed) The indicator was not relevant to the projects with co- project’s intended outcomes, as financing from MPs, contributions from MPs or provincial MPAs or Provincial counterparts lie beyond the control of the Government project, and do not necessarily reflect the project’s success. Intermediate Result (Component 2): Agriculture Partnerships and Support -- (New) The economic -- 11% This indicator was introduced to measure rate of return of a the economic viability of agribusiness sample of partnerships. agribusiness partnerships (No change) Number of agribusiness 79 43 The initial target value was based on the partnerships established assumption that 21%, 36%, and 43% of the partnerships would receive large (≈SBD1.5 –2.0 million), medium (≈SBD1.0 million), and small (≈SBD0.2-0.5 million) grants, respectively. The projected distribution of grants is updated, since approximately 50%, 27%, and 23% of proposals were received for partnerships that require large, medium, and small grants, respectively. Considering the reduced budget allocated for agribusiness partnership grants (from SBD72 million to SBD61.5 million) due to financial shortages, the target number of agribusiness partnerships was adjusted to 43 (21 large, 12 medium, and 10 small). Increase in area of Number of male and 25% 7,000 This indicator was revised to more crops with improved female partnership accurately reflect the extent to which farming practices members who adopt improved farming practices are adopted under partnerships improved farming by partnership members, since area does practice due to not effectively capture the extent to engagement in which improved farming practice is agribusiness applied for many products. partnerships (No change) Total value of ASEF grants 2,000,000 1,000,000 The target value was adjusted in disbursed (USD) accordance with the reduction in the budget allocated for ASEF grants due to financial shortages. The World Bank Solomon Islands Rural Development Program II (P149282) Indicator Target Value Reason for Revision Current Revised Current Revised Increase in employees (Removed) 10% (Removed) The indicator was removed, since the of small and medium- number of employees of ASEF recipients is sized enterprises (ASEF subject to many external factors, and ASEF recipients) and is not per se intended to increase the agricultural number of employees of ASEF recipients. partnerships ASEF grants may have substantial positive impacts on farmers along the value chain, who supply the enterprises that receive ASEF, without increasing the number of employees of ASEF recipients. Male and female (Removed) 60% (Removed) This indicator was removed, because most farmers who are partnership members are already members of a formal members of an association in the context association, and who of Solomon Islands, and tracking this participate in indicator does not add value (it does not agriculture demonstrate that the participation of partnerships farmers in agriculture partnerships contributes to their membership in a formal association). Intermediate Result (Component 3): Project Management (No change) Audit reports submitted on time 5 4 The target value was adjusted, since audit reports are due six months after the completion of each fiscal year, and it is thus not possible to submit five audit reports during the five-year implementation period of the Project. Percentage of sub- (Removed) 60% (Removed) This indicator was removed, since tracking projects with data the conformity to a particular data entered into the MIS collection and entry method is not a from the field representative indication of the quality of project management. Social Accountability (Removed) Yes (Removed) This indicator was removed, since this pilot scaled up beyond activity, which does not directly pilot communities contribute to the achievement of the Project Development Objective, was cancelled as part of the cost reduction exercise. Years with adequate The agreed amount 5 6,250,000 This indicator was revised, since the government of government amount of adequate government counterpart counterpart counterpart contribution, rather than the contribution contribution being years of contribution is more important disbursed (USD) and relevant for successful project implementation. 7. The modifications proposed under this restructuring will not change the Project Development Objective (PDO). No new activities are being proposed and there are no changes to Project components, as the restructuring only involves scaling The World Bank Solomon Islands Rural Development Program II (P149282) down of activities. There is no escalation of the safeguard rating, and no additional safeguards policies are triggered. The Project cost, as indicated in USD, will not change at this time. 8. The proposed adjustments to the Results Framework do not require a change in Economic and Financial Analysis of the Project. The original economic and financial analysis conducted during the preparation of the Project remains valid. New project costs and target values were used to update and validate the results of the original economic and financial analysis. The validation exercise also involved some updates to assumptions and estimates based on more accurate data obtained during the implementation of the project. The updated overall economic internal rate of return (EIRR) for the Project is 12% with a Net Present Value (NPV) of USD2.6 million, compared to the original estimates of an EIRR of 17% and an NPV of USD22 million. This is consistent with the sensitivity analysis conducted as part of the original economic analysis, which had estimated an EIRR of 10% and an NPV of USD0.25 million, if (a) only 50% of Component 2 were implemented, (b) the second round of CDG was scaled-down by 15%, and (c) the benefits of each CDG were reduced by 5%, but (d) the project cost remained the same. III. SUMMARY OF CHANGES Changed Not Changed Change in Results Framework ✔ Change in Implementing Agency ✔ Change in DDO Status ✔ Change in Project's Development Objectives ✔ Change in Components and Cost ✔ Change in Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Change in Disbursements Arrangements ✔ Change in Disbursement Estimates ✔ Change in Overall Risk Rating ✔ Change in Safeguard Policies Triggered ✔ Change of EA category ✔ Change in Legal Covenants ✔ Change in Institutional Arrangements ✔ Change in Financial Management ✔ The World Bank Solomon Islands Rural Development Program II (P149282) Change in Procurement ✔ Change in Implementation Schedule ✔ Other Change(s) ✔ Change in Economic and Financial Analysis ✔ Change in Technical Analysis ✔ Change in Social Analysis ✔ Change in Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators PDO_IND_TABLE Beneficiaries with improved quality of, and/or, access to rural infrastructure or services (including from disaster recovery) Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 19398.00 140000.00 Revised Date 27-Feb-2015 28-Aug-2017 28-Feb-2020 Of which female (beneficiaries) Unit of Measure: Number Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 9684.00 70000.00 Revised Male and female members of farming households engaged in productive partnerships with commercial enterprises Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 6460.00 14000.00 Revised Date 27-Feb-2015 28-Aug-2017 28-Feb-2020 The World Bank Solomon Islands Rural Development Program II (P149282) Female members of farming households engaged in productive partnerships with commercial enterprises Unit of Measure: Number Indicator Type: Custom Breakdown Baseline Actual (Current) End Target Action Value 0.00 3048.00 7000.00 Revised Date 27-Feb-2015 28-Aug-2017 28-Feb-2020 Increase in the volume of produce sold by households engaging in agribusiness partnerships Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 15.00 Revised Date 27-Feb-2015 28-Aug-2017 28-Feb-2020 Number of male and female beneficiaries receiving agriculture and livestock support to recover incomes lost from April 2014 flooding Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 2469.00 2500.00 Revised Date 27-Feb-2015 28-Aug-2017 28-Feb-2018 Female beneficiaries of agriculture and livestock recovery support Unit of Measure: Number Indicator Type: Custom Breakdown Baseline Actual (Current) End Target Action Value 0.00 1200.00 1250.00 Revised Date 27-Feb-2015 28-Aug-2017 28-Feb-2018 Intermediate Indicators IO_IND_TABLE Number of community infrastructure sub-projects completed (including from disaster recovery) Unit of Measure: Number Indicator Type: Custom The World Bank Solomon Islands Rural Development Program II (P149282) Baseline Actual (Current) End Target Action Value 0.00 43.00 260.00 Revised Date 27-Feb-2015 28-Aug-2017 28-Feb-2020 Participants in community prioritization/consultaton meetings Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 213088.00 180000.00 No Change Date 27-Feb-2015 28-Aug-2017 28-Feb-2018 Participants in community prioritization/consultaton meetings (of which are women) Unit of Measure: Number Indicator Type: Custom Breakdown Baseline Actual (Current) End Target Action Value 0.00 105927.00 90000.00 No Change Date 27-Feb-2015 28-Aug-2017 28-Feb-2020 Percentage of completed sub-projects for which community engagement in post-project operations and maintenance are established Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 73.00 100.00 Revised Date 27-Feb-2015 28-Aug-2017 28-Feb-2020 Community and other non-project financed contributions as a percentage of total subproject costs (at the time of completion) Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 27.00 20.00 Revised Date 27-Feb-2015 28-Aug-2017 28-Feb-2018 Representatives in Ward Development Committees who are women Unit of Measure: Percentage Indicator Type: Custom The World Bank Solomon Islands Rural Development Program II (P149282) Baseline Actual (Current) End Target Action Value 0.00 37.00 50.00 No Change Date 27-Feb-2015 28-Aug-2017 28-Feb-2020 Percentage of Subprojects with co-financing from MPs, MPAs or Provincial Government Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 7.65 20.00 Marked for Deletion Date 27-Feb-2015 28-Aug-2017 28-Feb-2020 The economic rate of return of a sample of agribusiness partnerships Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 11.00 New Date 08-Sep-2017 08-Sep-2017 28-Feb-2020 Number of agribusiness partnerships established Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 20.00 43.00 Revised Date 27-Feb-2015 28-Aug-2017 28-Feb-2020 Number of male and female partnership members who adopt improved farming practice due to engagement in agribusiness partnerships Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 7000.00 Revised Date 08-Sep-2017 08-Sep-2017 28-Feb-2020 Total value of ASEF grants disbursed Unit of Measure: Amount(USD) Indicator Type: Custom The World Bank Solomon Islands Rural Development Program II (P149282) Baseline Actual (Current) End Target Action Value 0.00 88700.00 1000000.00 Revised Date 27-Feb-2015 28-Aug-2017 28-Feb-2020 Increase in employees of small and medium-sized enterprises (ASEF recipients) and agricultural partnerships Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 10.00 Marked for Deletion Date 27-Feb-2015 28-Aug-2017 28-Feb-2020 Male and female farmers who are members of a formal association, and who participate in agriculture partnerships Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 60.00 Marked for Deletion Date 27-Feb-2015 28-Aug-2017 28-Feb-2019 Client days of agriculture training provided (number) Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 3109.00 20000.00 No Change Date 27-Feb-2015 28-Aug-2017 28-Feb-2020 Client days of agriculture training provided - Female (number) Unit of Measure: Number Indicator Type: Custom Breakdown Baseline Actual (Current) End Target Action Value 0.00 0.00 8000.00 No Change Date 27-Feb-2015 13-Feb-2017 28-Feb-2020 Audit reports submitted on time Unit of Measure: Number Indicator Type: Custom The World Bank Solomon Islands Rural Development Program II (P149282) Baseline Actual (Current) End Target Action Value 0.00 2.00 4.00 Revised Date 27-Feb-2015 28-Aug-2017 28-Feb-2020 Percentage of subprojects with data entered into the MIS from the field Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 15.00 60.00 Marked for Deletion Date 27-Feb-2015 28-Aug-2017 28-Feb-2020 Social accountability pilot scaled up beyond pilot communities Unit of Measure: Yes/No Indicator Type: Custom Baseline Actual (Current) End Target Action Value No No Yes Marked for Deletion Date 27-Feb-2015 28-Aug-2017 28-Feb-2018 The agreed amount of government counterpart contribution being disbursed Unit of Measure: Amount(USD) Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 1250000.00 6250000.00 Revised Date 27-Feb-2015 08-Sep-2017 28-Feb-2020