$ Report No: RES00398 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF Jiangxi Farm Produce Distribution System Development APPROVED ON 15-Dec-2017 TO People's Republic of China Agriculture and Food East Asia And Pacific Regional Vice President: Manuela V. Ferro Regional Director: Anna Wellenstein Country Director: Mara K. Warwick Practice Manager: Paavo Eliste Task Team Leader(s): Sandra Broka The World Bank Jiangxi Farm Produce Distribution System Development (P147009) ABBREVIATIONS AND ACRONYMS ISR Implementation Status Report IP Implementation Progress JRCB Jiangxi Rural Commercial Bank MOF Ministry of Finance MS Moderately Satisfactory PCG Partial Credit Guarantee PFI Participating Financial Institution PDO Project Development Objective VFIH Village Farmer Information Hubs The World Bank Jiangxi Farm Produce Distribution System Development (P147009) @#&OPS~Doctype~OPS^dynamics@restrhybridbasicdata#doctemplate BASIC DATA Product Information Operation ID Operation Name P147009 Jiangxi Farm Produce Distribution System Development Product/Financing Instrument Geographical Identifier Investment Project Financing (IPF) China Approval Date Current Closing Date 15-Dec-2017 31-Dec-2024 Original EA Category Partial Assessment (B) (PAD Approval Package-15 Dec 2017) Organizations Borrower Responsible Agency People's Republic of China Jiangxi Department of Agriculture and Rural Affairs @#&OPS~Doctype~OPS^dynamics@restrhybridoperationstatus#doctemplate OPERATION STATUS Project Development Objective (DO) Current Development Objective The Project Development Objective (PDO) is to improve the distribution systems of selected farm products in participating counties of Jiangxi. Disbursement Summary (in USD million) Source of Funds Net Commitment Disbursed Undisbursed % Disbursed IBRD 150.00 134.20 15.80 89.46 IDA -- -- -- 0 i The World Bank Jiangxi Farm Produce Distribution System Development (P147009) 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 Jiangxi Farm Produce Distribution System Development (P147009) TABLE OF CONTENTS I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING ........................................................................................1 II. DESCRIPTION OF PROPOSED CHANGES ....................................................................................................................4 III. PROPOSED CHANGES ................................................................................................................................................5 IV. DETAILED CHANGE(S) ...............................................................................................................................................5 The World Bank Jiangxi Farm Produce Distribution System Development (P147009) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. This restructuring paper seeks approval for a six-month extension of the closing date of the Jiangxi Farm Produce Distribution System Development Project (P147009) from December 31, 2024, to June 30, 2025. This extension is essential to completion of the remaining project activities, towards achieving the project development objectives and full utilization of the loan proceeds. This restructuring is in response to a request received from the Ministry of Finance (MOF) on August 21, 2024. This will be the second extension of the closing date for a cumulative extension of 18 months. 2. This is the third restructuring of the project. The first and second restructuring followed on from the mid-term review (MTR) in May 2021 and covered the changes agreed during the MTR. The Phase 1 restructuring was approved on June 27, 2022 and included: (i) extending the Project closing date from December 31, 2023, until December 31, 2024, to alleviate some of the implementation pressures created by the COVID-19 management measures and provide additional time towards the completion of activities; and (ii) reallocating loan proceeds between existing Disbursement Categories which was required for financial planning to complete construction. The Phase 2 restructuring was approved on June 30, 2023, and aimed to: (i) adjust the Project Development Objective (PDO) from “improve the distribution systems of selected farm products in participating counties of Jiangxi” to “improve the production and distribution systems of selected farm products in participating counties of Jiangxi”, to enable the inclusion of activities related to agricultural production within the Project scope; (ii) modify the design of the Project’s risk sharing scheme, specifically, the Partial Credit Guarantee (PCG) under Component 1; (iii) increase the disbursement percentage for Works from 85 percent to 100 percent retroactively starting September 1, 2018; (iv) create a new Disbursement Category of “Works, goods, non-consulting services, consultants’ services, Sub-grants, Training and Incremental Operating Costs” with an allocation of the available undisbursed balance under Categories (1) and (2) as of the cut-off date of March 31, 2023, agreed between the Bank and Jiangxi, and a disbursement percentage of 100 percent; (v) adjust the amounts under Components 1 and 2; and (vi) modify the Results Framework to adjust the end of Project targets in line with the revised county financing plans and clarify the definition of certain indicators. A. Project Status 3. The Project is financed by a US$150 million International Bank of Reconstruction and Development (IBRD) loan (Loan no. 8800-CN). It was approved by the World Bank Board on December 15, 2017, and became effective on March 5, 2018. The Project Development Objective (PDO), as revised during the second restructuring, is to improve the production and distribution systems of selected farm products in participating counties of Jiangxi. The Project comprises four components; Component 1: Strengthening production logistics; Component 2: Improving Distribution Logistics; Component 3: Support Services for the Whole Distribution System; and Component 4: Project Management, Monitoring and Evaluation. 4. Progress Towards Achievement of the PDO. To date, the project’s progress towards achievement of the PDO is rated as Moderately Satisfactory (MS). The PDO remains relevant, and the government's commitment to achieving it is steadfast. Overall, the project implementation is progressing well since the pace of implementation accelerated significantly since 2022. Under Component 1, a significant part of the activities has been completed or almost completed, except for development of e-commerce and Village Farmer Information Hubs (VFIH), implementation of which has been delayed mostly due to the need to change the development modalities. The Partial Credit Guarantee (PCG) program implementation, while moving forward, is slower than expected (more on VFIHs and PCGs below). Under Component 2, which supports construction and operationalization of nine wholesale markets, significant Page 1 The World Bank Jiangxi Farm Produce Distribution System Development (P147009) progress has been achieved, with four markets having completed the construction and utility and equipment installation, and the remaining five are expected to be completed by the end of 2024. However, there are some delayed procurement contracts for equipment, development of the digital information platform had just recently started, as well as a few activities important for achievement of the Results Framework (RF) target are either not completed or have just been started (such as development of the digital platform at the provincial and county levels, training of the market participants, and connecting the project-supported farmers to the markets). Under Component 3, all three studies have been completed. 5. Implementation Progress (IP). The Project encountered a range of implementation challenges during the early years; however, the implementation notably accelerated since 2022.Currently, the disbursements under the IBRD loan stand at 89.5 percent, equivalent to US$134.2 million. The most recent (August 2024) assessment of the project’s Implementation Progress (IP) rating was also Moderately Satisfactory (MS). A detailed account of the progress for each component is summarized below. 6. Component 1: Strengthening Production Logistics (IBRD US$29.83 million). This component aims to increase efficiency and productivity of production logistics and farm systems, including the integration of systems to collect, sort, package, and store agricultural products. Component 1 finances small sub-grants for various agriculture products distribution systems, and a PCG scheme which backs the loan portfolio of the Jiangxi Rural Commercial Bank (JRCB), the project’s Participating Financial Institution (PFI). Overall, at this time, this component has achieved 96.5 percent of its disbursement target. 7. Additional time, however, is required to complete these two activities under Component 1: a. Sub-grants for the establishment of the Village Farmer Information Hubs (VFIH) and e-commerce points/outlets. A new approach for establishment of VFIHs and e-commerce providers was designed in the first half of CY2024, given that the feasibility of the original design was no longer valid as a result of changes in e-commerce approaches in the agrifood sector. Under the new modality, 140 VFIHs have been established to date. Further 74 VFIHs and 272 e-commerce points are under development and expected to be fully established by the newly proposed closing date. b. Partial Credit Guarantee (PCG). As part of the second restructuring completed in June 2023, the design and implementation arrangements of the PCG scheme were adjusted. Six of the project counties signed legal agreements with the Jiangxi Rural Commercial Bank (JRCB), currently the project’s PFI, to implement the PCG scheme under the new modalities. However, the overall progress of the PCG program implementation remains somewhat slower than expected, mostly related to the need for the implementing bank to re-learn the operational modalities, as well as availability of other similar competing programs in the counties. Currently, the achievement of the PCG target for all six counties is 53.3 percent, with significant variations across the counties. A set of activities to accelerate the PCG implementation (including meeting with the JRCB’s management, regular contact with the JRCB and prompt re-signing of the agreements between the PDOF and County Finance Bureaus adjusting the PCG allocations), were agreed during the June 2024 mission. Additionally, it was agreed to allocate additional PCG funds for Huichang county which identified demand for loans with PCGs of up to CNY 200 million by agribusiness entities in a recent survey and has been able to mobilize one additional bank to implement the PCG program. With most of these additional facilitating actions well under implementation, the PCG program is expected to be fully implemented by the newly proposed closing date. Page 2 The World Bank Jiangxi Farm Produce Distribution System Development (P147009) 8. Component 2: Improving Distribution Logistics (IBRD US$105.28 million). This component builds, equips and establishes farm produce markets/distribution centers to increase marketing efficiency, provide value added benefits and reduce waste of farm produce. It includes: (a) building of new market/distribution infrastructure; and (b) supporting the establishment of a market information system consisting of market/distribution center monitoring, operating and management; information collection and disclosure; food safety tracing; and transaction management. The market information system also includes a County Operations and Service Center (COSC) for E-commerce at each market/distribution center. This COSC aims to be the connecting point of the E-commerce households, Village Farmer Information Hub (VFIHs), the e-trading/electronic settlement system, and the provincial information platform. 9. Additional time is required to complete the establishment and operation of the physical markets. The project supports construction and launch of nine markets of which four (in Yushan, Huichang, Jiujiang and Pengze) have already been completed. The outstanding five sites, in Anyuan (two markets), Jing’an, Longnan and Taihe, are at various stages of completion, varying between 93 percent to 99 percent of the contract value. All construction activities are expected to be completed by November 2024 and the target operation date for all markets is December 2024. However, the two markets in Anyuan will need more time to obtain the land certificates prior to the operation of markets. Additionally, activities related to the establishment of the data and management platforms and linking farmer groups to the project-supported markets, should be implemented, which is estimated to take place by March 2025. All the project markets are expected to be operational by the newly proposed closing date. 10. Component 3: Support Services for the Whole Distribution System (IBRD US$0.47 million). This component provides support services to the whole agricultural product distribution system. Two of the reports, which are the main outputs of this component, on: (i) Study on Modern Farm Product Distribution System, and (ii) Study on "Internet +" Jiangxi Provincial Farm Product Distribution System, have been completed. The third study on “Strategic Planning for Jiangxi Province Farm Product Distribution System” is well advanced and expected to be completed by the end of December 2024. With the newly proposed closing date, consultations with provincial authorities on the results of the studies are expected to take place by end of March 2025. 11. Component 4: Project Management, Monitoring and Evaluation (IBRD US$1.08 million). The component provides support to the project implementing agencies at both provincial and county levels to manage, implement, supervise, and monitor project activities and progress. The memorandum of understanding (MOU) signed with Jiangxi Agricultural Investment Information Technology Co. (Gannongtou) to assist with the training, and hiring of the Jiangxi Zhonggantou Survey and Design Co., Ltd. as the project management consultancy agency (PMC) have helped to speed up the project implementation. In addition, third-party agencies have been hired to conduct project environmental management, project monitoring and evaluation, and baseline surveys. 12. Fiduciary and Safeguards Compliance. External audit reports for the IBRD Loan proceeds have been conducted under terms of reference acceptable to the Bank, submitted to the Bank on time, and presented unmodified opinions. Thus, all audit reports were acceptable to the Bank. The audit report for CY2023 has been received timely and actions have been taken by the relevant entities to address the issues disclosed by the external auditors. The project has adequately complied with all the environmental and social safeguards as well as the legal covenants. Anyuan local authorities are taking measures to resolve the land certificate issue for the two markets. One of the certificates is expected to be available by end of December 2024, and the other by March/April 2025. The latest implementation status report (ISR) rated the financial management (FM) as Moderately satisfactory (MS), and procurement compliance as Moderately Satisfactory (MS). The safeguards performance rating remains Satisfactory (S). 13. Risk Assessment. Based on the latest ISR, the overall risk to the project is Substantial, mostly driven by the Substantial risk ratings for Technical Design, and Institutional Capacity for implementation. At the time of this restructuring, the Page 3 The World Bank Jiangxi Farm Produce Distribution System Development (P147009) risk ratings remain unchanged. Although the establishment of the VFIHs and e-commerce providers was delayed, with the new workable and already tested under the project modalities these activities are expected to be fully completed. To accelerate the implementation of the PCGs, the PPMO had several meetings with the JRCB branches in the relevant project counties and the implementation has accelerated. Additionally, Huichang county has requested additional PCG funds from the other counties where implementation is not as active, as well as included another PFI (the Bank’s no objection was issued on October 18, 2024) under the PCG program. With these additional measures, the PCG funds are expected to be fully utilized by the newly proposed closing date. The extension of the project’s closing date is part of the mitigation measures, as it will allow the PMOs to provide additional time for the construction and other key activities under the project. All other risks are rated as Moderate or Low. The team will revisit the risk ratings during the next supervision mission, based on the progress achieved on the ground following the restructuring. B. Rationale for Restructuring 14. Despite the accelerated implementation progress due to the strong dedication of provincial and county authorities after the two-stage project restructuring in June 2022 and June 2023, completing all project activities by the current closing date of December 31, 2024, is not feasible. The World Bank received a request from the Ministry of Finance on August 21, 2024, requesting an extension of the project closing date from December 31, 2024, to June 30, 2025. The extension is needed to complete the following tasks: a. Component 1: completion of the achievement of targets related to the establishment of the Village Farmer Information Hubs (VFIHs) and e-commerce outlets. b. Component 2: activities to be completed include those related to development of digital platforms and linking farmer cooperatives to the project-supported markets, which are PDO-level indicators. 15. If the project were to close without these activities fully completed, it will negatively affect full achievement of all three PDO indicators, namely, Farmers reached with agricultural assets and services, which is currently achieved at 84 percent; Increased number of farmer cooperatives with service access provided by the project financed markets, achievement of which currently stands at 19 percent; and Increased producers’ direct sales of farm produce (percentage) through project-finance markets, which currently is at zero percent (although it should be noted that Huichang, Yushan and Longnan have started trial operations to benefit local farmers by selling their farm produce through the project-supported markets thus the first results are expected soon). Hence, the achievement of the overall PDO would be negatively affected. All the Intermediate Results Indicators (IRIs) are also expected to be fully achieved by the newly proposed closing date. II. DESCRIPTION OF PROPOSED CHANGES 16. Project Closing Date. The proposed extension of the project closing date from December 31, 2024, to June 30, 2025, will afford the necessary time to complete the remaining project activities as described in paragraph 14 above. 17. Activity completion action plan. The client has prepared a time-bound action plan for the remaining project activities, which has been discussed with the Bank and deemed viable. The expected completion schedule of the activities is attached as Annex 1 to this RP. @#&OPS~Doctype~OPS^dynamics@restrhybridsummarychanges#doctemplate Summary changes Page 4 The World Bank Jiangxi Farm Produce Distribution System Development (P147009) III. PROPOSED CHANGES Operation Information Proposed Changes Operation Information Proposed Changes Disbursements Estimates Yes Loan Closing Date Extension Yes Development Objective No Implementation Schedule Yes Safeguard Policies Triggered No Loan Cancellations No ISDS No Reallocations No MFD/PCE No Financial Management No Results No Procurement No Risks No Institutional Arrangement No Legal Covenants No Conditions No Implementation Modalities No Disbursements Arrangements 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)? Is this project Private Capital Enabling (PCE)? LOANS Loan Closing Page 5 The World Bank Jiangxi Farm Produce Distribution System Development (P147009) Original Revised Proposed Proposed Deadline Loan/Credit/Trust Status Closing Closing(s) Closing for Withdrawal Fund Applications IBRD-88000-001 Effective 31-Dec-2023 31-Dec-2024 30-Jun-2025 30-Oct-2025 DISBURSEMENTS Operation Dates & Projection Details Reasons to change the full Disbursement date and/or the projection Restructuring Implementation Start Date Operation Closing Date 15-Dec-2017 31-Dec-2024 Projected Date for Full Disbursement 26-Oct-2025 Expected Disbursements (in US $) (Absolute) Original Estimation at Preparation Actual Year Revised Estimation (Approval Package – 15 Dec 2017) FY2018 0.00 0.00 0.00 FY2019 11,000,000.00 3,000,000.00 3,000,000.00 FY2020 16,000,000.00 7,032,301.48 7,032,301.48 FY2021 39,000,000.00 18,225,367.46 18,225,367.46 FY2022 61,000,000.00 28,059,215.43 28,059,215.43 FY2023 23,000,000.00 27,793,855.70 27,793,855.70 FY2024 0.00 36,744,358.05 36,744,358.05 FY2025 0.00 29,144,901.88 0.00 FY2026 0.00 0.00 0.00 Page 6 The World Bank Jiangxi Farm Produce Distribution System Development (P147009) Annex 1: Updated Implementation Plan Expected Compone Activity name Results Remaining completion date nts achieved to result to be (month/year) date achieved 1. Establishment of the Village 12 Farmer Information Hubs (VFIHs) 140 74 12/2024 (number) Component 2 Component 1 2. Establishment of the e- 0 272 3/2025 commerce outlets (number) 3. Complete draw-down of the 13.2 million 11.6 million Partial Credit Guarantees (PCG) 5/2025 (US$ equivalent, at US$1:CNY7). 4. Provincial digital platform for Development Provincial of platform platform 12/2024 agriculture operationalized. underway. operationalized. Component 2 5. County platforms linked with the Activity not yet County provincial digital platform for started. platforms 2/2025 agriculture. linked. Pilot in Complete 6. Linking farmer cooperatives to selected linking farmer the project-supported markets counties cooperatives. 5/2025 (number). underway. Page 7