$ Report No: RES00344 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF Integrated Flood Resilience and Adaptation Project APPROVED ON 25-May-2023 TO Islamic Republic of Pakistan Water South Asia Regional Vice President: Martin Raiser Regional Director: Dina Umali-Deininger Country Director: Najy Benhassine Practice Manager: Josses Mugabi Task Team Leader(s): Kamran Akbar, Maha Ahmed, Carlo Alberto Amadei The World Bank Integrated Flood Resilience and Adaptation Project (P180323) ABBREVIATIONS AND ACRONYMS BIWRMDP Balochistan Integrated Water Resource Management and Development Project BLEP Balochistan Livelihood and Entrepreneurship Project CD Country Director CERC Contingent Emergency Response Component DAV Damage Assessment and Verification DDO Deferred Drawdown Option DFIL Disbursement and Financing Instruction Letter E&S Enviroment and Social ESMF Enviroment and Social Management Framework ESRC Enviromental and Social Risk Classification FPMU Federal Project Management Unit HRU Housing Reconstruction Unit IBRD International Bank for Reconstruction and Development IDA International Development Association IFRAP Integrated Flood Resilience and Adaptation Project IPF Investment Project Financing LMP Labor Management Procedures MFD Maximizing Finance for Development MoPDSI Ministry of Planning Development and Special Initiatives PCE Private Capital Enabling PCU Provincial Coordinating Unit PDO Project Development Objective PIU Project Implementation Unit PMD Pakistan Metrological Department RF Results Framework The World Bank Integrated Flood Resilience and Adaptation Project (P180323) @#&OPS~Doctype~OPS^dynamics@restrhybridbasicdata#doctemplate BASIC DATA Product Information Operation ID Operation Name P180323 Integrated Flood Resilience and Adaptation Project Product/Financing Instrument Geographical Identifier Investment Project Financing (IPF) Pakistan Approval Date Current Closing Date 25-May-2023 31-Dec-2028 Environmental and Social Risk Classification (ESRC) Substantial Organizations Borrower Responsible Agency Irrigation Department, Province of Balochistan, Ministry of Islamic Republic of Pakistan Planning, Development and Special Initiatives, Planning and Development Department, Province of Balochistan @#&OPS~Doctype~OPS^dynamics@restrhybridoperationstatus#doctemplate OPERATION STATUS Project Development Objective (DO) Original Development Objective The project development objective (PDO) is to improve livelihoods and essential services and enhance flood risk protection in selected communities affected by the 2022 floods. Disbursement Summary (in USD million) i The World Bank Integrated Flood Resilience and Adaptation Project (P180323) Source of Funds Net Commitment Disbursed Undisbursed % Disbursed IBRD -- -- -- 0 IDA 213.00 22.39 171.74 10.51 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 Integrated Flood Resilience and Adaptation Project (P180323) TABLE OF CONTENTS I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING ........................................................................................1 II. DESCRIPTION OF PROPOSED CHANGES ....................................................................................................................4 III. PROPOSED CHANGES ................................................................................................................................................6 IV. DETAILED CHANGE(S) ...............................................................................................................................................6 The World Bank Integrated Flood Resilience and Adaptation Project (P180323) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. The 2022 floods have had a particularly severe impact on Balochistan, the largest and poorest province in Pakistan. The floods have exacerbated existing socioeconomic challenges in the province, pushing the multidimensional poverty rate from 70.2 percent to 81.1 percent. The agricultural sector, which accounts for a significant portion of the provincial GDP and employment, has been particularly hard hit. The floods have also caused widespread damage to infrastructure, including housing, transport, and communication systems. 2. The Government of Pakistan requested technical and financial assistance from the World Bank to support the recovery and reconstruction efforts in Balochistan. The Integrated Flood Resilience and Adaptation Project (IFRAP) signed on 3rd July 2023 aims to revive and enhance the livelihoods of communities affected by the 2022 floods and strengthen adaptive capacity to future extreme flooding events. The project focuses on restoring essential services, including housing, WASH, transport, agriculture, and irrigation, while building a foundation for long-term flood resilience through strengthening institutions and information systems. 3. The project consists of six components, including a Contingent Emergency Response component, aimed at rehabilitation and resilience in response to flood damage, primarily in Balochistan. The Ministry of Planning Development and Special Initiatives (MoPDSI) as the project implementing entity has established a Federal Project Management Unit (FPMU) based in Islamabad, whereas most of the implementation is to take place in the province of Balochistan. 4. Project has so far disbursed equivalent to US $ 22.38 million. Component wise disbursement is as follows: Disbursement (JPY) DA-A IDA 73330 MoPD and SI 160,000,000 DA-B IDA 73330 PMD PIU 270,000,000 DA-C IDA 73330 BIWRMDP PIU 1,400,000,000 DA-D IDA 73330 BLEP PIU 1,590,339,419 3,420,339,419 5. After some delay, all the implementation arrangements are now in place, summarized as follows: a. The Project Implementation Unit (PIU) responsible for implementing Component 1, is currently housed under the Balochistan Integrated Water Resource Managements and Development Project (BIWRMDP). This process is transitioning into creation of a satellite PIU, led by a Project Director with delegated authority from the BIWRMDP Project Coordinator. The tendering process for consultancy services across three sub-components— irrigation, water supply, and roads and bridges are currently underway. Overall progress review indicates that; (i) Annual Work Plan submitted to the WB and FPMU approved by the Federal Project Steering Committee; (ii) Annual work plan updated as per the ECNEC decision in consultation with FPMU; (iii) Client Connection activated and functional; (iv) Cash flow plans are updated as per ECNEC decision in consultation with the FPMU; (v) STEP is operational and functional; (vi) Assignment account opened and withdrawal application also processed. As far as subcomponent-4 'Restoration of Small Community Facilities' is concerned hiring of engineering firm is in process for health and education facilities. Page 1 The World Bank Integrated Flood Resilience and Adaptation Project (P180323) b. For Component 2 “Strengthening Hydromet and Climate Services”, a PIU has been established in the Pakistan Meteorological Department, headed by a Deputy Project Director. PIU positions have been filled. The PIU is in advance stages of finalizing the technical specifications for doppler weather radars procurement package worth an estimated US$ 25 million. The invitation for bids is expected to be advertised by mid of October 2024. c. A dedicated implementing unit ‘Housing Reconstruction Unit’ (HRU) has been established for implementation of Component 3 “Resilient Housing Reconstruction and Restoration”. HRU will be supported by implementation partners with a track-record of on-ground presence in supporting community interventions. d. PIU of the Balochistan Livelihood and Entrepreneurship Project (BLEP) has been entrusted with responsibility of implementing Component 4 “Livelihood Support and Watershed Management”. Beneficiary selection and necessary preparatory steps have been completed however expenditures cannot be undertaken unless issues pertaining to project management are resolved. e. A functional FPMU is responsible for Component 5 ‘Project Management, Technical Assistance, and Institutional Strengthening’ as part of the MoPDSI. 6. Performance: As of August 19, 2024, the project has disbursed USD 22.3 million of the committed USD 213 million. Following are the key ratings: Overall: Name Ratings Progress towards achievement of PDO Moderately Satisfactory Overall Implementation Progress (IP) Moderately Satisfactory Component Ratings Components Ratings 1. Community infrastructure rehabilitation Moderately Satisfactory 2. Strengthening hydromet and climate services Moderately Satisfactory 3. Resilient housing reconstruction and restoration Moderately Satisfactory 4. Livelihood support and watershed management Moderately Satisfactory 5. Project management, technical assistance, and institutional strengthening Moderately Satisfactory 6. Contingent Emergency Response:(Cost 0.00) Satisfactory Other Ratings Name Ratings Financial Management Satisfactory Project Management Moderately Satisfactory Procurement Satisfactory Monitoring and Evaluation Moderately Satisfactory 7. Functioning of the HRU: The HRU supports the flood-affected people in the reconstruction and repairs of their houses. House reconstruction and repair work will be undertaken in a way that such constructions are geared to withstand Page 2 The World Bank Integrated Flood Resilience and Adaptation Project (P180323) future extreme weather events. The HRU is supporting a systematic approach to housing reconstruction based on resilience principles. The HRU will provide cash grants to eligible homeowners for reconstruction of damaged houses. The unit will support owner-driven reconstruction scheme. The grant to eligible beneficiaries would finance a) replacement of a destroyed house with new multi-hazard resilient core unit; b) restoration and strengthening of a damaged house to an acceptable resilience standard. The project incentivizes and reinforces the focus on outcomes and checks and balances for effective targeting where affected households are identified based on robust survey of damaged houses to minimize administrative discretion. The HRU is set to open an assignment account by mid- September 2024 and has finished data cleaning for the beneficiary assessment from NDMA/PDMA Balochistan. Detailed analysis is to be shared with the World Bank team, which has suggested using RAAST for beneficiary accounts and consulting with SPHF for process insights. The HRU has selected the first 100 beneficiaries and plans for their bank account openings and house reconstruction. Release of funds is contingent upon the endorsement of reconstruction guidelines by a technical working group and relevant authority. The Bank is reviewing draft contracts of Project Implementation Partners (PIPs), with awards expected by mid-September 2024. A GIS-enabled MIS is being developed for transparency, with a dashboard and Android app underway. Regular reviews between PIPs and the MIS team will be the key feature of the implementation methodology. Training for PIPs staff and VRCs is being developed, including ToRs and VRC guidelines. The HRU's housing reconstruction guidelines, reviewed by a TWG, will determine fund release to beneficiaries. The Bank specifies minimum house sizes and specifications but not designs, allowing beneficiaries to choose compliant designs using local materials. The HRU is to expedite guideline endorsement by end-September 2024. Rationale For Restructuring: 1. A dedicated implementation unit Housing Reconstruction Unit (HRU) has been established in Quetta as an extension to the Federal Project Management Unit for implementing Component 3 on housing reconstruction and restoration. The HRU is responsible for managing and monitoring the performance of implementing partners, whose selection is in the final stages. The HRU will receive Damage Assessment and Verification (DAV) data collected by the implementing partners. The HRU will also carry out spot checks and monitor data collection not only of the DAV but also that of technical inspections for release of housing reconstruction subsidy grant tranches. The HRU will open centralized bank accounts in commercial bank branches of the choices of beneficiaries to transfer housing reconstruction grants directly into individual beneficiaries' bank accounts without involvement of any third party. This necessitates ringfencing the financial management arrangement under this component to maintain separate and clean housing subsidy records as it is likely to involve over half a million small transactions. 2. The current DFIL restricts the opening of a separate designated account for the HRU, requiring all disbursements to be processed through the Federal Project Management Unit (FPMU) housed in the Ministry of Planning Development and Special Initiatives (MoPDSI). This arrangement may lead to inefficiencies and delays in fund disbursement due to the centralized nature of the financial management. 3. In order to facilitate quick disbursements of project funds earmarked for resilient housing reconstruction and restoration, revisions are proposed in the Disbursement and Financing Instruction Letter (DFIL) through this restructuring. The withdrawal categories in Section III of the Second Schedule to the Financing Agreement will be amended to allow for the opening of a Designated Account for Category 4 for Housing Reconstruction Unit (HRU) activities. 4. By amending the withdrawal categories and revising the DFIL, the HRU would have direct access to the funds, which would result in a more streamlined and responsive financial management system. This change would enable the HRU to operate more autonomously and respond more quickly to the needs of the project, thereby enhancing the overall effectiveness and efficiency of Part-3's implementation. The proposed amendments would also align the financial Page 3 The World Bank Integrated Flood Resilience and Adaptation Project (P180323) management structure with the operational structure, as the HRU has been established to specifically handle the tasks under Part-3. II. DESCRIPTION OF PROPOSED CHANGES 1. To ensure efficient and smooth implementation of Part-3 of the project, this restructuring proposes changes in the withdrawal categories in Section III of the Second Schedule to the Financing Agreement and revision in Disbursement and Financing Instruction Letter (DFIL) to allow for the opening of a Designated Account for Category 4 for Housing Reconstruction Unit (HRU) activities. 2. Inclusion of HRU under the IFRAP project will involve some changes into the FM function and processes. These includes opening of a separate designated account which means that this change will need production of separate IUFR and annual financial statements. A dedicated FMS is needed to oversee HRU’s FM function which will be a signatory to the DA and will get a login in for client connection for submitting the reports and perform documentation of expenditures. Project wide internal audit firm will also perform the IA activity of HRU and the Office of Auditor General will perform its statutory audit. Revised Financing Table: Category Amount of the Proposed Categories Proposed Difference Credit Amount of the Allocated Credit (expressed in Allocated JPY) (expressed in JPY) 1) Goods, Works, non- 6,803,800,000 1) Goods, works, non- 6,803,800,000 – consulting services, consulting services, consulting services, consulting services, Incremental Incremental Operating Operating Costs, and Costs, and Training Training under Part 1 under Part 1 for the for the Project Project (BIWRMDP PIU) (BIWRMDP PIU) 2) Goods, works, non- 5,443,000,000 2) Goods, works, non- 5,443,000,000 – consulting services, consulting services, consulting services, consulting services, Incremental Incremental Operating Operating Costs, and Costs, and Training Training under Part 2 under Part 2 for the for the Project (PMD Project (PMD PIU) PIU) 3) Goods, non- 3,129,700,000 3) Goods, non- 1,088,600,000 2,041,100,000 consulting services, consulting services, consulting services, consulting services, Incremental Incremental Operating Page 4 The World Bank Integrated Flood Resilience and Adaptation Project (P180323) Category Amount of the Proposed Categories Proposed Difference Credit Amount of the Allocated Credit (expressed in Allocated JPY) (expressed in JPY) Operating Costs and Costs and Training Training under Parts 3 under Part 5 for the and 5 for the Project Project (MoPD&SI) (MoPD&SI) 4) Housing 8,164,500,000 4) Housing 10,205,600,000 (2,041,100,000) Reconstruction Reconstruction Grants Grants under Part 3.1 under Part 3.1 and for the Project (HRU) Goods, works, non- consulting services, consulting services, Incremental Operating Costs, and Training under Part 3.2 for the HRU 5) Goods, works, non- 476,300,000 5) Goods, works, non- 476,300,000 – consulting services, consulting services, consulting services, consulting services, Incremental Incremental Operating Operating Costs, and Costs, and Training Training under Part 4 under Part 4 for the for the Project (BLEP Project (BLEP PIU) PIU) 6) Livelihood Grants 4,966,700,000 6) Livelihood Grants 4,966,700,000 – under Part 4 for the under Part 4 for the Project (BLEP PIU) Project (BLEP PIU) 7) Emergency – 7)Emergency – – Expenditures Expenditures Total Amount 28,984,000,000 28,984,000,000 Summary of Performance of E&S Risk Compliance The environmental and social performance of the project is satisfactory. The project became effective on 20th of July, 2023, however civil works have not yet commenced for any of the project components. The FPMU and PIUs have been set up. E & S positions are filled at PIU of HRU (Component-3 under restructuring) including one environmnet specialist, one social development specialist and one gender specialist. The PIUs E & S staff at Balochistan Integrated Water Resource Management and Development Project (BIWRMP) and PIU of Balochistan Livelihood and Entrepreneurship Project (BLEP) supported preparation of framework instruments of the project and will continue to support the Project. Hiring of E & S positions at FPMU are under progress. The proposed restructuring will not effect environment and social risks of the project, therefore the project Page 5 The World Bank Integrated Flood Resilience and Adaptation Project (P180323) risk rating will remain unchanged. There is no ammendment required in the Environment and Social Commitment Plan (ESCP) and ESCP of the original project will continue to apply for the project. @#&OPS~Doctype~OPS^dynamics@restrhybridsummarychanges#doctemplate Summary changes III. PROPOSED CHANGES Operation Information Proposed Changes Operation Information Proposed Changes Implementation Modalities Yes Reallocations Yes Disbursements Estimates Yes Financial Management Yes Disbursements Arrangements Yes Institutional Arrangement Yes Development Objective No Loan Closing Date Extension No Summary Description No Loan Cancellations No (Operation Abstract) Legal Operational Policies No Procurement No MFD/PCE No Implementation Schedule No Results No Risks No Legal Covenants No Conditions No DDO No Clients No Appraisal Summary No 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)? Page 6 The World Bank Integrated Flood Resilience and Adaptation Project (P180323) Is this project Private Capital Enabling (PCE)? LOANS Reallocations IDA-73330-001 Cancellations (if any): New Allocation: Currency: JPY 0.00 0.00 Financing % (Type Total) Category Expenditure Current Actuals + Proposed No. Category Allocation Committed Allocation Current Proposed 1 G,W,NCS,CS,OC,TR 6,803,800,000 0.00 6,803,800,000. 100.00 100.00 PT.1 (BIWRMDP PIU); .00 00 2 G,W,NCS,CS,OC,TR 5,443,000,000 28,803.33 5,443,000,000. 100.00 100.00 PT.2 (PMD PIU); .00 00 3 G,W,NCS,CS,OC,TR 3,129,700,000 367,050.46 1,088,600,000. 100.00 100.00 PT.3&5 (MoPD & SI); .00 00 4 HOUSING RECONST'N 8,164,500,000 0.00 10,205,600,00 100.00 100.00 GR PT3.1(MoPD&SI); .00 0.00 5 G,W,NCS,CS,OC,TR 476,300,000.0 0.00 476,300,000.0 100.00 100.00 PT.4 (BLEP PIU); 0 0 6 LIVELIHOOD GRANTS 4,966,700,000 0.00 4,966,700,000. 100.00 100.00 PT.4 (BLEP PIU); .00 00 7 EMERGENCY 0.00 0.00 0.00 100.00 0.00 EXPENDITURES; Total 28,984,000,00 28,984,000,00 0.00 0.00 DISBURSEMENTS Operation Dates & Projection Details Reasons to change the full Disbursement date and/or the projection Implementation Start Date Operation Closing Date 25-May-2023 31-Dec-2028 Projected Date for Full Disbursement 29-Apr-2029 Page 7 The World Bank Integrated Flood Resilience and Adaptation Project (P180323) Expected Disbursements (in US $) (Absolute) Original Estimation at Preparation Actual Year Revised Estimation (Approval Package – 25 May 2023) FY2023 500,000.00 0.00 0.00 FY2024 35,000,000.00 0.00 22,382,186.87 FY2025 65,000,000.00 0.00 3,181.39 FY2026 70,000,000.00 0.00 0.00 FY2027 30,000,000.00 0.00 0.00 FY2028 10,000,000.00 0.00 0.00 FY2029 2,000,000.00 0.00 0.00 ENVIRONMENTAL & SOCIAL Environmental & Social Assessment According to the E/S Specialist are there changes proposed to the operation’s design that No would impact the Bank’s E&S assessment?” Page 8