$ Report No: RES00300 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF Marshall Islands Maritime Investment Project APPROVED ON 09-May-2019 TO Republic of the Marshall Islands Transport East Asia And Pacific Regional Vice President: Manuela V. Ferro Regional Director: Sudeshna Ghosh Banerjee Country Director: Stephen N. Ndegwa Practice Manager: Benedict Eijbergen Task Team Leader(s): Keelye Rinchen Hanmer, Toufiq Ahmed The World Bank Marshall Islands Maritime Investment Project (P161382) ABBREVIATIONS AND ACRONYMS AtoNs Aids to Navigation CERC Contingent Emergency Response Component CIU Central Implementation Unit D&S Design and Supervision E&S Environmental and Social FM Financial Management FY Financial Year GoRMI Government of the Republic of the Marshall Islands IDA International Development Association IFR Interim Financial Reports ISPS International Ship and Port Facility Security Code MIMIP Marshall Islands Maritime Investment Project MOFBPS Ministry of Finance, Banking and Postal Services PDO Project Development Objective PIU Project Implementation Unit RMI Republic of the Marshall Islands RMIPA Republic of Marshall Islands Port Authority SDR Special Drawing Rights USD United States Dollar The World Bank Marshall Islands Maritime Investment Project (P161382) @#&OPS~Doctype~OPS^dynamics@restrhybridbasicdata#doctemplate BASIC DATA Product Information Operation ID Operation Name P161382 Marshall Islands Maritime Investment Project Product/Financing Instrument Geographical Identifier Investment Project Financing (IPF) Marshall Islands Approval Date Current Closing Date 09-May-2019 01-Aug-2024 Original EA Category Partial Assessment (B) (PAD Approval Package-09 May 2019) Organizations Borrower Responsible Agency Republic of the Marshall Islands Republic of Marshall Islands Port Authority @#&OPS~Doctype~OPS^dynamics@restrhybridoperationstatus#doctemplate OPERATION STATUS Project Development Objective (DO) Original Development Objective To improve the safety, efficiency and climate resilience of maritime infrastructure and operations in the Recipient's territory, and in the event of an Eligible Crisis or Emergency, to provide an immediate response to the Eligible Crisis or Emergency. Disbursement Summary (in USD million) Source of Funds Net Commitment Disbursed Balance % Disbursed IBRD -- -- -- 0 i The World Bank Marshall Islands Maritime Investment Project (P161382) IDA 17.06 11.04 6.01 64.74 Grants -- -- -- 0 Policy Waivers Does this restructuring trigger the need for any policy waiver(s)? No @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate ii The World Bank Marshall Islands Maritime Investment Project (P161382) TABLE OF CONTENTS I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1 II. DESCRIPTION OF PROPOSED CHANGES 3 III. PROPOSED CHANGES 4 IV. DETAILED CHANGE(S) 5 The World Bank Marshall Islands Maritime Investment Project (P161382) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. PROJECT STATUS 1. This paper proposes to restructure the Republic of Marshall Islands (RMI) Marshall Islands Maritime Investment Project (“MIMIP”, P161382). This proposed Level 2 Restructuring includes (a) a partial cancellation of proceeds for IDA Grant Number D4520-MH; and (b) associated changes to the category allocations and disbursement estimates. These proposed changes are in response to a letter of request from the Government of RMI (GoRMI)1 dated 25 July 2024. The proposed restructuring does not change the Project Development Objective (PDO), introduce new activities, or propose changes to the Results Framework. No additional safeguard policies would be triggered, and there would be no change in the safeguards Category. 2. Project Background. The World Bank Board of Executive Directors approved MIMIP on 9 May 2019 and the project was declared effective 19 July 2019. Project financing consists of a Grant (IDA D542-MH) in the amount of SDR 23.7 million (US$33.12 million equivalent). The PDO is to “improve the safety, efficiency and climate resilience of maritime infrastructure and operations in the Recipient’s territory, and in the event of an Eligible Crisis or Emergency, to provide an immediate response to the Eligible Crisis or Emergency.” 3. The first Level 2 Restructuring for MIMIP was signed on 18 July 2023. The scope of that restructuring was to: (i) revise project components, (ii) revise the results framework, including adjusting intermediate and end target indicators; (iii) revise the disbursement schedule; (iv) revise project implementation arrangements; (v) revise the Disbursement Categories in the Financing Agreement; and (vi) reduce the Minimum Value of Application in the Disbursement and Financial Information Letter. A second restructuring, processed on 9 April 2024, effected a partial cancellation of SDR 12.1million of the IDA Grant financing, reducing its value to SDR 11.6 million. 4. The project closing date is 1 August 2024. MIMIP has been rated Unsatisfactory for Progress towards achievement of the PDO and Implementation Progress since May 2022. After five years of implementation, MIMIP will not achieve its development objectives and will close in Unsatisfactory status. The project ratings and poor implementation progress are largely attributed to: (i) thin capacity within implementing agencies and inadequate staffing within the Project Implementation Unit (PIU) of the Republic of Marshall Islands Port Authority (RMIPA); (ii) delayed procurement and implementation of the Needs Assessment and travel restrictions related to COVID-19, which have delayed subsequent works under the project and which did not improve after COVID-19 restrictions were lifted; (iii) challenges with the operationalization of the Central Implementation Unit (CIU); and, (iv) delays at the Ministry of Finance, Banking and Postal Services for contract signature and invoice processing. 5. The objectives of MIMIP were to be achieved through four components: a) Component 1: Maritime Infrastructure. This component was intended to finance civil works at Delap Dock, Uliga Dock, and Outer Island Docks, including: (i) pavement and drainage works at Delap Dock; (ii) repairing berthing facilities and installing port control, maintenance and passenger unloading facilities at Delap Dock; (iii) repairs and upgrades to existing facilities on the main Outer Island docks at Arno, Jaluit and Wotje; and, (iv) acquisition of cargo handling equipment and Delap and Uliga docks. b) Component 2: Maritime Safety and Security. This component includes support for safety and security upgrades at the above-mentioned docks, including: (i) quay wall structures and furniture; (ii) security 1Ministry of Finance, Banking and Postal Services (MOFBPS). Page 1 The World Bank Marshall Islands Maritime Investment Project (P161382) features such as gates, CCTV, and backup generators needed to comply with International Ship and Port Facility Security Code (ISPS) requirements; (iii) Aids to Navigation (AtoNs); and (iv) other measures to mitigate environmental and social risks, including risks related to human trafficking. c) Component 3: Technical Assistance for Port Planning and Project Management. This component finances technical assistance to strengthen the planning and management of climate resilient port facilities, improve coordination of emergency response systems, and elevate awareness of ISPS and Search and Rescue requirements. The critical activities of Component 3 are a Maritime Safety and Security Needs Assessment to identify and prioritize Component 1 and 2 works (“Needs Assessment”), and a Design and Supervision (D&S) consultancy to prepare detailed designs and supervise works implementation. d) Component 4: Contingent Emergency Response Component (CERC). The CERC is designed to provide a swift response in the event of an Eligible Crisis or Emergency by enabling uncommitted funds to be quickly reallocated to address immediate post-crisis and emergency financing needs. The CERC may be used following natural disasters or other crises and emergencies, allowing funds to be reallocated from other components of the project. 6. As of July 2024, the following activities have been achieved: a) Component 1 Maritime Infrastructure. I. Progress on this component has been limited. While works cannot be completed within the remaining implementation period, detailed designs and cost estimates were completed under Phase 1 of the D&S consultancy. II. The acquisition of equipment proposed under MIMIP has been delayed and will not progress, except for the Uliga boatlift which has been delivered and installed. b) Component 2: Maritime Safety and Security. I. Repairs and upgrades to quay wall structures and furniture, and infrastructure upgrades to ensure compliance with ISPS requirements, are informed by the D&S consultancy, and while works are not progressing under MIMIP, detailed designs and cost estimates have been prepared. II. Replacement and upgrading of aids to navigation (AtoNs) have been procured for Majuro. AtoNs for the neighbouring islands have not been procured. III. Search and rescue equipment has been purchased and distributed as required. c) Component 3: Technical Assistance for Port Planning and Project Management. I. The Needs Assessment for Component 1 (Maritime Infrastructure) and Component 2 (Maritime Safety and Security) was completed with the final report submitted in March 2022. II. The D&S consultancy provided detailed designs to RMIPA in March 2024. Supervision of civil works did not take place as the civil works did not proceed. III. The technical assistance activities, ‘Institutional and Governance Review of Structures for Port Management’ and the ‘RMI strategic Development Plan’, were completed. IV. The project is financing project management costs for RMIPA and the CIU until project closure. d) Component 4: Contingent Emergency Response Component (CERC). I. The CERC was not triggered. Page 2 The World Bank Marshall Islands Maritime Investment Project (P161382) 6. Environmental and Social (E&S) Safeguards. The project’s overall safeguards rating is currently Moderately Satisfactory. As part of the proposed restructuring, no additional E&S policies will be triggered, and there will be no change to the current “Category B” safeguards classification. 7. Procurement. The procurement performance rating remains as Unsatisfactory since it was downgraded in October 2023. The rating is unsatisfactory due to delays in procurement processes that have delayed disbursements. 8. Financial Management (FM). The FM performance rating remains as Moderately Unsatisfactory as of 23 July 2024 due to ongoing shortcomings in timeliness and reliability of financial reporting. There was a delay in the submission of the semesterly unaudited interim financial report (IFR) to 31 March 2024. The report has been reviewed and accepted. Project implementation and FM support missions and transaction reviews identified expenditures which may not contribute to the project’s development objectives. Project expenses for both MIMIP and Project Management components will be subjected to a review post project closure. The contract register does not accurately capture payments made to project consultants and vendors. Withdrawal applications submitted for Category 4, CIU and PIU management costs, have been incorrectly disbursed under Category 1. WFA has provided guidance on next steps for correction by project closure. 9. The FY22 audited financial statements (AFS) were due no later than 31 December 2023 but remain outstanding. The Borrower advised via email on 2 July 2024 that there would be further delays to finalising the AFS, which are not expected to be received until 30 September 2024. The FY23 AFS were due no later than 30 June 2024 and are also overdue. The Bank has engaged a consultant to assist GoRMI in the preparation of the financial statements for submission for audit. B. RATIONALE FOR RESTRUCTURING 10. As MIMIP will close on time and some of the remaining project resources will not be utilized by closing, the GoRMI requested cancellation of SDR 2,402,171 from MIMIP. The cancellation is processed in accordance with Section 8.01 of Article VIII of the IDA General Conditions which states that, except as required for a special commitment, the Borrower may request cancellation of IDA resources at any time. II. DESCRIPTION OF PROPOSED CHANGES 11. The key proposed changes are: (a) partial cancellation of SDR 2,402,171 of the proceeds of IDA D4520-MH; and (b) revision of the disbursement category allocations and disbursement schedule to reflect the partial cancellation. The proposed cancellation will reduce the value of IDA Credit IDA D4520-MH from SDR 11.60 million to SDR 9,197,829. Table 1 shows the current category allocations, amount to be cancelled from each category as requested by GoRMI, and the revised category allocations after cancellation. The updated disbursement projections are presented in Section IV - Detailed Changes of this Restructuring Paper. Page 3 The World Bank Marshall Islands Maritime Investment Project (P161382) Table 1. Cancellation against the Disbursement Categories (expressed in SDR) Category Current Allocation Cancellation Amount Proposed Allocation (1) Goods, works, non-consulting services, consulting services, Operating Costs, and Training and Workshops, 7,300,400.00 970,929.00 6,329,471.00 for Parts 1, 2 and 3 of the Project, except Part 3.6 3.7 (a) (2) Emergency Expenditures under - - - Part 4 of the Project (3) Refund of Preparation Advance 329,600.00 - 329,600.00 (4) Goods, non-consulting services, consulting services, Operating Costs, 3,970,000.00 1,431,242.00 2,538,758.00 and Training and Workshops for Parts 3.6 and 3.7 (a) of the Project Total Amount 11,600,000.00 2,402,171.00 9,197,829.00 @#&OPS~Doctype~OPS^dynamics@restrhybridsummarychanges#doctemplate Summary changes III. PROPOSED CHANGES Operation Information Proposed Changes Operation Information Proposed Changes Disbursements Estimates Yes Loan Cancellations Yes Development Objective No Reallocations Yes Safeguard Policies Triggered No Loan Closing Date Extension No ISDS No Financial Management No MFD/PCE No Procurement No Results No Institutional Arrangement No Risks No Implementation Schedule No Legal Covenants No Conditions No Implementation Modalities No Disbursements Arrangements No DDO No Clients No Appraisal Summary No Page 4 The World Bank Marshall Islands Maritime Investment Project (P161382) Components No @#&OPS~Doctype~OPS^dynamics@restrhybriddetailedchanges-disclose#doctemplate IV. DETAILED CHANGE(S) COSTS & FINANCING Private Capital Facilitation Is this an MFD-Enabling Project (MFD-EP)? Is this project Private Capital Enabling (PCE)? LOANS Cancellations Reason Value Loan/Credit/ Current Cancellation New for Status Currency Date of Trust Fund Amount Amount Amount Cancellati Cancellation on BORROWE R'S IDA-D4520- Disbursi 11,600,000.0 REQUEST XDR 2,402,171.00 25-Jul-2024 9,197,829.00 001 ng 0 FOR COUNTRY REASONS Reallocations IDA-D4520-001 Cancellations (if any): New Allocation: Currency: XDR 2,402,171.00 9,197,829.00 Financing % (Type Total) Category Expenditure Current Actuals + Proposed No. Category Allocation Committed Allocation Current Proposed 1 GD WK NCS CS IOC TN 7,300,400.00 6,060,579.96 6,329,471.00 100.00 100.00 WS PTS 1, 2 and 3.1 – 3.6, 3.7 (b), 3.8 – 3.9; 2 EMERGENCY 0.00 0.00 0.00 100.00 100.00 EXPENDITURES PT 4; Page 5 The World Bank Marshall Islands Maritime Investment Project (P161382) 3 REFUND PPA; 329,600.00 329,599.10 329,600.00 0.00 0.00 4 GD NCS CS OC TN WS 3,970,000.00 1,474,462.81 2,538,758.00 100.00 100.00 PT3.6 AND 3.7(a); Total 11,600,000.00 9,197,829.00 DISBURSEMENTS Operation Dates & Projection Details Reasons to change the full Disbursement date and/or the projection Restructuring Implementation Start Date Operation Closing Date 09-May-2019 01-Aug-2024 Projected Date for Full Disbursement 27-Oct-2023 Expected Disbursements (in US $) (Absolute) Original Estimation at Preparation Actual Year Revised Estimation (Approval Package – 09 May 2019) FY2019 400,000.00 0.00 0.00 FY2020 1,851,076.80 1,129,766.73 1,129,766.73 FY2021 2,941,917.12 726,156.29 726,156.29 FY2022 5,298,868.80 2,152,647.04 2,152,647.04 FY2023 9,094,001.92 1,278,582.56 1,278,582.56 FY2024 12,040,655.20 4,272,579.36 4,272,579.36 Page 6