Document of The World Bank Report No: 67701 v1 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SECOND DECENTRALIZED CITY MANAGEMENT PROJECT ORIGINAL CREDIT OF NOVEMBER 3, 2005 ADDITIONAL CREDIT OF SEPTEMBER 12, 2008 TO THE GOVERNMENT OF BENIN March 28, 2012 ABBREVIATIONS AND ACRONYMS IDA International Development Association PDO Project Development Objective Vice President: Obiageli Ezekwesili Country Director: Madani M. Tall Sector Director: Jamal Saghir Acting Sector Manager: Alexander Bakalian Task Team Leader: Kwabena Amankwah-Ayeh 2 BENIN SECOND DECENTRALIZED CITY MANAGEMENT P082725 CONTENTS Page A. SUMMARY IMPLEMENTATION PROGRESS ....................................................................... 4 B. PROJECT STATUS .......................................................................................................................... 4 ANNEX 3: EXTENSION OF CLOSING DATE ................................................................................... 4 3 SECOND DECENTRALIZED CITY MANAGEMENT Project ID: P082725 -- Loan/Credit No.: IDA 44900, IDA 411701 RESTRUCTURING PAPER Extension of Closing Date 1. The closing date for BENIN-- Second Decentralized City Management will be extended from 03/31/2012 until 06/29/2012. Briefly summarize project implementation progress and confirm whether project objectives continue to be achievable. 2. Government of Benin, through a letter dated March 1, 2011, made a request to the Bank to apply funds remaining in Credit 4117-BEN totaling SDR 2,044,717.35 (US$ 3,163,218.63 equivalent) that is currently available in the project account to make some payments for the counterpart funding on the project. This remaining amount emanates from the open procurement processes applied by the Government in line with the Bank's procurement guidelines which elicited bids that were lower than some of the estimated amounts for some of the works and equipment in the original project. There were also some favorable exchange rate gains in the process of transferring funds from SDR into CFA Francs. The Bank's project Team has no objection to the request and in line with Bank procedures has agreed with Legal Department to restructure the project to make a change to the schedules of payment that is in the Original (Credit 4117-BEN) and Additional Financing (Credit 4490-BJ) project documents. 3. The overall project implementation has progressed well. As of March 28, 2012, 100% of the Additional Financing credit and 91.48% of the original project funds had been disbursed respectively. All works promised in the PAD under the original and Additional Financing credits (Credit 4117-BEN and 4990-BJ) have been completed and fees for implementing agencies up to closing date of project have been taken care of. 4. The achievement of the project is as follows: (i) the rehabilitation (paving and drainage) of 32.9 kilometers of urban roads is completed (about 126% of original project target) providing to 384,000 residents better access to the city centers (121% of end of project target); and (ii) the construction of 17.5 km of primary drainage network, protecting more than 981,000 residents from periodic flooding (end of project target exceeded). The Implementation Progress rating is satisfactory and the Project Development Objective (PDO) rating is also satisfactory at this close-to- closure of the project. 14 operational neighborhood development committees have been established surpassing the end of project target of 10. The committees are supporting the entrenchment of community participation in decision making in the project. All participating municipalities (except one) have increased their overall 1 This memo should be a maximum of one page. 4 internally generated funds and are consistently allocating funds for urban infrastructure maintenance per project agreements and targets. Indeed the PDO is on course to being achieved. 5. The Team confirms that all the project works have been completed and handed over to Government including the last works on Takon Landfill site which were completed and finally handed over to Government on March 8, 2012. 6. As of March 28, 2012, Government owes (counterpart funding) a total amount of US$ 3.48 million to vendors/contractors who have provided services in construction of various facilities in the works of the project. The remaining funds in Credit 4117 BEN total US$ 3.165 million equivalent. If the remaining funds are applied to the counterpart funding owed by Government it still leaves a shortfall of about US$ 0.315 equivalent that must be paid for by Government itself. As of now, Government has not fully and credibly shown the Project Team how this small shortfall amount will be paid. The only reason for extending this project closing date is therefore to ensure that Government will find the shortfall amount of US$ 0.315 million equivalent and pay it to the project account. This will bring to a complete balance all payments and obligations of the project to vendors and contractors and remove a possible reputational risk the Bank may face should the project close without Government paying all its obligations to vendors/contractors who worked on the project. The Bank Team believes that, if approved, the time requested will allow for Borrower to seek the needed funds to finance the shortfall identified above. 7. The Borrower has submitted a request for extension of project closing date on March 27, 2012. This will be the 3rd extension (from March 31, 2012 to June 29, 2012) of the project. The first (from June 30, 2010 to December 31, 2010), concluded during the preparation of the Additional Financing Credit (for six months), was to allow for works envisaged to be completed. The second (from December 31, 2010 to March 31, 2012) was to make more time available for the completion of works after Government lost 16 months in getting Parliament to approve the Additional Financing Credit and therefore works could not begin at the appropriate time. The cumulative extension is 23 months. 8. There are no audit report issues. The 2011 audit reports were unqualified for the implementing agencies (AGETUR and SERHAU). 9. The Task Team confirms that the three conditions required by Bank policy (O.P. 13.30, paragraph 3) to be fulfilled before a closing date can be extended have been met: (i) the objectives of the project continue being attainable, (ii) the performance of the Recipient is satisfactory, and (iii) the Recipient has prepared a specific action plan acceptable to the Bank to complete the activities within the period up to the new closing date. 5