Bangladesh: Export Competitiveness for Jobs (IDA 6042-BD) Implementation Support Review September 5-13, 2018 Aide Memoire 1. During September 5-13, 2018, a World Bank Task Team1 conducted an Implementation Support Review of the Export Competitiveness for Jobs Project (EC4J). This Aide Memoire summarizes the status of implementation activities and presents recommendations and agreements reached during the mission. It was discussed at a wrap-up meeting on September 13, 2018, chaired by the Additional Secretary, Mrs. Mahmuda Begum, from the Economic Relations Division (ERD). The Task Team is grateful to the Ministry of Commerce (MoC) for its collaboration and excellent organization of the mission. Besides Project Implementation Unit (PIU) staff, the Task Team met with members of the Business Promotion Council (BPC), the Bangladesh Foreign Trade Institute (BFTI), and the Bangladesh Economic Zones Authority (BEZA) in addition to industry associations and private sector representatives. As agreed, this Aide Memoire will be classified as public under the World Bank’s Access to Information policy. OVERALL STATUS AND KEY PROJECT DATA 2. The EC4J project was declared effective on December 17, 2017. The PIU is fully staffed and led by the Additional Secretary of the MoC as Project Director. The PIU comprises three Deputy Project Directors, one Project Manager, one Component Coordinator and technical and support staff. Implementation of planned activities is underway under all components and the PIU has delivered on agreed action plans from earlier missions. Three large technical assistance packages are at an advanced stage of the bidding process and the selected firms are expected to be mobilized before the end of the calendar year. 3. Overall, the Mission is pleased with the progress made since the first Implementation Support Mission held shortly after the project became effectiveness. Implementation Progress is rated Satisfactory. Likewise, Achievement of Project Objectives is also rated Satisfactory, with ongoing activities in line to start delivering the results as projected planned for 2019. It is now critically important for the PIU to expediate the process to secure land title for all sites that will host the four technology centers. Another key priority is to ensure that the technical committees are appointed, and their time blocked, for the first half of October to ensure that the evaluation of the technical proposals can be completed by mid-October for (i) the Export Readiness Fund (ERF), (ii) the feasibility studies for the three general engineering technology centers (TCs), and (iii) the Public Investment Facility for Infrastructure Constraints (PIFIC). Table 1: Project Data Board Approval June 1, 2017 Effectiveness date December 17, 2017 Closing Date of IDA Credit June 30, 2023 IDA Credit Amount US$100 million Amount Disbursed so far US$3.8 million 1 Michael Engman (Sr Economist/TTL), Hosna Sumi (Private Sector Specialist/TTL), Thomas Farole (Lead Economist), Ciliaka Millicent Wanjiru Gitau (Economist), Justin Hill (Sr Private Sector Specialist), Yasuo Konishi (Consultant), Mrinal Kanti Sircar (Consultant), M. Masrur Reaz (Sr Economist), Arafat Istiaque (Procurement Specialist), Tomas JR. Sta. Maria (Sr Financial Management Specialist), Sabah Moyeen (Sr Social Development Specialist), Suiko Yoshijima (Sr Environmental Specialist), Dr Khaliquzzaman (Environmental Consultant), Mostofa Hamza Mehedi (Program Assistant), Mehar Akhter Khan (Program Associate) and Nahid Sharmin (Team Associate). David Phillips (Consultant) supported the mission from Washington DC. 1 KEY POINTS DISCUSSED AND AGREED ACTIONS Component 1: Market Access Support Program 4. Sub-component 1.1: The PIU has made good progress in implementing the agreed awareness raising and capacity building program in the leather sector, which includes the launch and promotion of media showcasing appropriate tools and techniques for animal skinning, to ensure hide quality. The awareness campaign has reached more than 20 million viewers through TV commercials and 80 million cell phone subscribers. Priority areas for new awareness and training activities have been identified jointly with industry association representatives from all targeted sectors.2 In addition, industry association representatives from the light engineering and plastics sectors will organize brainstorming sessions and present the PIU with proposed action plans by September 30 to deepen this engagement. 5. It was agreed that the capacity building and awareness raising activities will be carried out jointly by the BPC and the BFTI. BFTI will prepare a strategy and action plan on the prioritization of Environmental, Social and Quality (ESQ) compliance capacity building and awareness-raising activities in each sector. It was also agreed that the contract with BFTI will be awarded in the week following the mission and tasks will generally be completed within five months. The only exception is the leather sector plan, which will be completed within three months. 6. Sub-component 1.2: The request for proposals (RFP) for the Export Readiness Fund (ERF) was issued in August and the bidding process will close on October 3. It is essential that the members of the committee that will conduct the technical evaluation of the full proposals have their calendars blocked well in advance so that the complete evaluation can be concluded within three weeks of the end of the bidding process. 7. The draft ERF Grant Manual is in excellent shape and ready to be shared with the selected firm after some rounds of technical reviews. In addition, a draft template with guidelines to be used for carrying out ESQ assessments under the first window of the ERF has been completed. The mission conducted a workshop with prospective service providers to inform them of the upcoming program and solicit feedback on the proposed approach of short-listing capable firms to deliver ESQ assessments. The participants agreed to develop a profile of their companies, including the range of their services and technical capabilities, and submit it to the PIU by September 30, according to a standard format. In addition, the PIU will prepare and distribute an information package to potential assessors so they can prepare proposals for the PIU’s shortlisting exercise of willing and capable service providers. Formal TORs for the shortlisting will be prepared in the coming months. 8. Sub-component 1.3: The project will support a leather sourcing fair to be held in Dhaka on November 22-24 and a new sector compliance handbook and Leather Sector Export Roadmap prepared under a complementary advisory project led by the IFC will be launched during this fair. The project will hire an agent to identify and facilitate participation of buyers from key target markets. The Leather Footwear Manufacturers and Exporters Association, Bangladesh (LFMEAB) will provide the PIU with a list of 2 Plastics: lifecycle awareness (focus on waste minimization and consumer safety); Light Engineering: battery dismantling and disposal; metal finishing and industrial coating, particularly nickel; end-of-pipe waste collection and management for furnace (focus on environment and health); and waste minimization through improved product design (focus on environment and product quality); Leather Tanneries: tools and techniques for animal skinning (focus on product quality); management of liquid and solid discharge (focus on environment and health); preservation of skins/hides (focus on product quality); and resources use awareness, particularly for water (focus on environment and health) 2 priority markets along with the concept note for the show by September 14, and the PIU will solicit input from the industry to detail out the activities required for branding under this sub-component. Component 2: Productivity Enhancement Program 9. The key priority under this component is to secure land title to appropriate sites for the four technology centers (TCs) that will be established under the project. One of the four sites will be in the economic zone of Mirsarai, near Chittagong, and the PIU is in the process of acquiring the land from BEZA. The PIU and Mission have inspected the site and found it to be appropriate for the first general engineering TC. Other potential government/quasi-government or privately-owned sites are being explored in various locations for evaluation to then commence the acquisition process. Industry representatives have been invited to propose potential sites for evaluation by October 2 and it is paramount that the three remaining sites are identified, selected and cleared by March (2019) and land title obtained by September (2019), by which time the feasibility study firm will be in an advanced stage of its assignment. 10. Detailed discussions on various implementation issues were held during the mission, including on the governance and board structures for both the implementation phase and for the TCs once established; potential recruitment processes for key positions such as CEOs; the cementing of the business model for each center; the potential recruitment of management companies and/or technology experts for the centers; procurement of plant and equipment; deciding on the right model for the provision of testing services; the development of training capacity, branding, ensuring knowledge flows between the centers and the provision of shared services. The Mission prepared a detailed list of actions for the appointment of a design, supervision and management general contractor, with other implementation elements, which will be further detailed over the coming months. 11. The feasibility study for the TC for the leather goods and footwear sector was completed ahead of the Mission. Industry representatives were invited for a final review during the mission where the draft was adopted. A separate consultation session was held with leather goods and footwear industry representatives to discuss the terms of reference for the planned makeshift arrangement that will be established as a temporary operation to start delivering selected services, while the main TC is built. Component 3: Public Investment Facility for Infrastructure Constraints (PIFIC) 12. The PIFIC consultancy will help prioritize, design, and prepare bidding documents for the project’s infrastructure investments and then supervise and monitor the delivery of the public works packages that the PIU will contract directly. The services will be delivered over several years and in practice be an important extension of the PIU. The RFP for the PIFIC consultancy was workshopped in June and shared with six short-listed firms in August. The Task Team noted that the short-list was relatively strong and it is essential that the selection process is finalized and the firm contracted by end-November. As for the ERF, it is essential that the technical committee that will conduct the evaluation of the full proposals is formed and the schedules of members imminently blocked so that the complete evaluation can be concluded within two weeks of the end of the bidding process on October 3. The PIFIC Operational Guidelines have been drafted and will be presented to the selected service provider. Component 4: Project Management, Monitoring and Evaluation 13. The PIU has the required management and technical staff and it operates from its own dedicated office space. Two Project Steering Committee (PSC) meetings were held until date to guide and monitor progress of the project. As per the legal covenant of the Financing Agreement, the Grant Advisory Committee and the Bid/Proposal Evaluation Committees (six) have been formed. The PIU, Task Team and other government participants held a week-long technical workshop in May to review, update and finalize key manuals, guidelines and terms of references for the projects largest technical assistance packages. Capacity building sessions on financial management, procurement, safeguards management and monitoring 3 and evaluation have been conducted and the PIU has requested support to upgrade project management skills through participation in an international training program. The PIU is setting up a data collection mechanism to update baseline data by November 2018. There is a project website (www.ec4j.gov.bd) that is appropriately maintained. FIDUCIARY COMPLIANCE 14. Procurement Performance: Project procurement is conducted in the Systematic Tracking of Exchanges in Procurement (STEP) system and the Procurement Plan was comprehensively revised and approved in May with minor updates thereafter. The revised Procurement Plan will be the basis for the first revision of the Detailed Project Plan. The PIU agreed to identify all packages that require environmental and social (E&S) safeguards attention and the PIU’s E&S safeguards specialists will work closely with the PIU procurement specialist to review bidding documents and ensure that E&S instruments are properly incorporated and costed in the bidding documents. The PIU has completed pre-proposal meetings with shortlisted consultants for two major consulting services packages—the ERF Manager and the PIFIC Advisor. During the mission, the PIU was advised to reconstitute both proposal and bid evaluation committees to expediate the procurement decision process. The project procurement status is currently rated as Moderately Satisfactory. 15. Financial Management Performance: The PIU has recruited a financial management specialist who started work on July 5. It is also in the process of hiring an additional accountant. The project is currently keeping its books of records in manual format and financial reports are prepared using spreadsheets. The project will procure an off-the-shelf accounting software, which is essential to produce timely and accurate financial statements, and the procurement and installation of the software is expected to be completed by September 30. The Mission noted that the PIU submitted a draft first interim unaudited financial report (IUFR) with a delay of 25 days so there is scope to improve the timeliness of submission. 16. It was agreed that internal audits will be carried out by an external professional auditing firm at least thrice over the life time of the project. To this end, the PIU will share a draft ToR with the Bank by September 30. The annual external audit of the project will be conducted by Foreign Aided Projects Audit Directorate (FAPAD) of the CA&G’s office. The first audited financial statements (FY 2017 -18) of the project will be submitted to the Bank by December 31, 2018. US$3.81 million had been disbursed to the designated account as of September 9 and the Financial Management performance is rated Moderately Satisfactory. SAFEGUARD MANAGEMENT 17. Environmental Safeguards: An environmental specialist joined the PIU in June who attended a half-day environmental training workshop organized for the PIU during the Mission. The sessions focused on OP4.01 and World Bank Environmental, Health and Safety Guidelines relevant for some targeted sectors: general; tanning and leather finishing; metal, plastic, and rubber products manufacturing as well as applicable international best practice documents. 18. The ESQ assessments under ERF will be conducted for an estimated 400 firms under Sub- component 1.2. Those subprojects that are then proposed under the ERF small and large grants program, are likely to involve rather small interventions to improve ESQ standards. Therefore, a Limited Environmental Assessment (LEA) using a screening checklist is appropriate for the matching grants. The PIU should prepare this checklist before subprojects are proposed so that the subprojects are screened for E&S impacts as per the initial screening checklist. The LEAs will focus on the relatively few potential impacts that are identified in advance. A LEA form will be specific to the subproject type, and the mitigation measures recommended by the specialist will be incorporated at the design stage. As all the subprojects 4 include existing assets, an environmental audit with legacy issues should be incorporated in the LEAs. It is to be noted that the plastic industry has the dubious distinction for fire safety lapses. The leather, leather products and engineering industries are also known to be highly polluting. Thus, environmental audit and legacy issues must be carefully looked into at the LEA preparation stage. The responsibility of LEA preparation lies with the management of the subprojects; as many of the data needed may be available from ESQ questionnaire, the effort level needed to prepare LEAs may be considerably reduced. These documents, once approved by the PIU, should be shared with the Bank for review. Progress reports on environmental safeguards activities should be shared with the Bank twice annually. 19. Social Safeguards: The PIU has hired a full-time social management specialist who participated in two recent safeguards training workshops. Safeguards training for all team members will be conducted by Nov 15. As the project is likely to have many sub-projects, which are yet to be identified and locations yet to be specific, this training workshop will guide the PIU to select project locations with minimal or no impacts. Progress review meetings should be organized on a monthly basis to address potential challenges once the main implementation activities kick in. 20. The Project activities will trigger OP 4.10 and OP 4.12 if land acquisition is necessary for the construction of TCs and access roads. The project will try to avoid or minimize acquisition by sourcing government land or purchasing through willing buyer-willing seller arrangements. The required safeguards documents3 until date have been disclosed to all relevant stakeholders through workshops and websites. The PIU will update these based on the new Acquisition and Requisition of Immovable Property Act 2017 and disclose them on the project website by Nov 15, 2018. During construction and operational stages of the activities there may be impact on labor working conditions and labor influx. The PIU has prepared ESQ Assessment Guidelines which will help firms to minimize the labor impacts. NEXT REVIEW 21. The next regular Implementation Support Review Mission is scheduled for the first half of March 2019. Table 2: Summary of Agreed Actions # Actions Responsibility Agreed timeline 1 Develop awareness and capacity building plans jointly with PIU Sept. 30 the light engineering and plastics sectors 2 Award contract for ESQ awareness and capacity gap analysis PIU Sept. 20 3 Share format with the ESQ assessment companies to solicit PIU Sept. 25 company profiles with range of services 4 Solicit company profiles of potential ESQ assessment firms, PIU, ESQ Oct. 15 including the range of services and technical capabilities assessment candidates 5 Complete technical evaluation of ERF proposals PIU Oct. 25 6 Finalize ERF negotiations and award contract PIU Dec. 20 7 Organize inclusive meetings with stakeholders to detail out PIU Oct. 15 branding activities 8 Collect land proposals about potential sites for the TCs PIU, Sector Oct. 2 Associations 3 Social Management Framework (SMF, Resettlement Policy Framework (RPF), Small, Ethnic and Disadvantageous Communities Development Framework (SEDCDF) 5 9 Conduct bi-weekly progress review meetings with Task Teams PIU, WBG Bi-weekly to trouble shoot and deal with the land acquisition process 10 Finalize shortlist of feasibility study consultancy firms PIU Oct. 23 11 Complete technical evaluation of feasibility study proposals PIU Jan. 7 12 Finalize feasibility study negotiations and award contract PIU Feb. 4 13 Complete technical evaluation of PIFIC proposals PIU Oct. 28 14 Finalize PIFIC negotiations and award contract PIU Dec. 25 15 Establish data collection mechanism with updated baseline PIU Nov. 30 16 Share procurement plan with all packages requiring E&S PIU Oct. 15 management attention 17 Procure and install accounting software PMU Sept. 30 18 Submit TOR for internal auditor for Bank review PMU Sept. 30 19 Submit timely IUFRs on a quarterly basis PMU Within 45 days of each quarter 20 Submit external audit report for FY2017-18 FAPAD Dec. 31 21 Develop and submit screening checklist for LEAs for PIU Prior to ERF appropriate subprojects for Bank review commencement 22 Update SMF, RPF and SEVCDF following the new PIU Nov. 15 Bangladesh land Act (ARIPA 2017) and disclose on website 23 Conduct training program on updated SMF, RPF and WB Nov. 15 SEVCDF for PIU staff 24 Update safeguards documents based on new Acquisition and PIU Nov. 15 Requisition of Immovable Property Act 2017 and disclose on website 25 Share TORs for Establishment Committees for TCs, and PIU Oct. 15 identify and establish leather sector members, for review by Bank 26 Share draft Articles of Association for TC company model for PIU Oct. 15 Bank review, and commence process to establish companies for each TC 27 Share draft TOR for overall TC design and construction WB Sept. 30 general contractor 28 Undertake awareness raising activity in Chattogram with PIU Nov. 15 industry about the establishment of the Light Engineering TC to be established in Mirsarai 6 Annex 1: List of persons met Economic Relations Division Mrs. Mahmuda Begum, Additional Secretary Mr. Zahid Hossain Munshi, Deputy Secretary Ministry of Commerce (Project Implementation Unit) Mr. Munshi Shafiul Haque, Additional Secretary Mr. Md. Obaidul Azam, Additional Secretary, Project Director Mr. Khaled Mamun Chowdhury, Deputy Secretary, Deputy Project Director Mr. Md. Abu Sayed Joarder, Deputy Secretary, Deputy Project Director Mr. Md. Lutfur Rahman, Project Manager Mr. Mahmood Hasan Khan, Environment Management Specialist Mr. Md. A. Halim Miah, Social Management Specialist Mr. Mustain Billah, Component Coordinator-1 Mr. Md. Abdul Wadud, Monitoring and Evaluation Specialist Mr. Md. Abdur Rashid, Financial Management Specialist Mr. Aminul Islam, Procurement Specialist Business Promotion Council Mr. Md. Selim Uddin, (Joint Secretary), Coordinator Ms. Ishrat Jahan, Executive Officer, LSBPC Ms. Fathama Nargis, Executive Officer, MPHPBPC Mr. Md. Kamruzzaman, Executive Officer, LEPBPC Bangladesh Foreign Trade Institute Mr. Ali Ahamed, Chief Executive Officer Mr. Nesar Ahmed, Senior Research Fellow Ms. Nahrin Rahran Swarna, Research Associate Mr. Majbahul Islam, Research Associate Department for International Development Ms. Tasnim Siddiq, Growth and Private Sector Development Mr. Mashfique Ibne Akbar, Private Sector Development Advisor Consulting Service International Ltd. Mr. Joseph Strasser, Consultant Private Sector Representatives Mr. Md. Saiful Islam, President, LFMEAB Ms. Kazi Roushan Ara, Executive Director, LFMEAB Mr. Md. Joinal Abedin, Secretary, Bangladesh Finished Leather, Leather goods and Footwear Exporters Association Mr. Md. Abdur Razzaque, President, Bangladesh Engineering Industry Owners Association Mr. Anowarul Haque Ansari, Joint Secretary, Bangladesh Engineering Industry Owners Association Mr. Md. Mizanur Rahman,Treasurer, Bangladesh Tanners Association Mr. Sarwar NA Khan, Executive Secretary, Bangladesh Automobiles Assemblers & Manufacturers Association Mr. Shahidul Islam, Secretary, Bangladesh Accumulator and Battery Manufacturers Association Mr. Shamim Ahamed, Ex. President, Bangladesh Plastic Goods manufacturer & Exporter Association Ms. Rehana Akter Ruma, Bangladesh Tanners Association Mr. Mohiuddin Ahmed Mahin, Chairman, Bangladesh Finished Leather, Leather goods and Footwear Exporters Association Testing and Certification Companies Mr. Kamal Hosain Bhuiyan, CEO, Qtex Solutions Ltd. Mr. Abdur Rashid, SGS Bangladesh Ltd. Mr. A.K.M. Shafiul Hassan, SGS Bangladesh Ltd. 7 Mr. Nurul Huda, Compliance Specialist, Support People Planet Profit. Mr. Mahmood Hasan Khan, Environmental Management Specialist, EC4J Project Mr. Md. Abdul Khabir, Regional Manager, TUV SUD Bangladesh Ltd. Mr. Asim Kumar Mondal, Senior Manager, TUV SUD Bangladesh Ltd. Mr. Md. Omar Faruqe, Regional Sales Manager, UL VS Bangladesh Ltd. Mr. Md. Golam Sarwar, Head of Business Consumer and Retail Services, UL VS Bangladesh Ltd. Mr. Aliza Sultana Mitul, Manager, Softlines (Leather & Footwear Lab) Mr. Rashed Ahmed Mostafa, Senior Manager, Softlines Sales & Business Development. Mr. Md. Sharif Mollah, Business Development Manager, UL VS Bangladesh Ltd. Mr. Captain M. Kamruzzaman, Head of Business Development, Royalcert International Registrars Mr. Aslam Khan, Country Head, Royalcert International Registrars Ms. Tahura Khanam, Managing Director, Qtex Solutions Ltd. Mr. ASM Samiur Rahman, Branch Manager, Mitra S.K. Bangladesh (Pvt.) Ltd. Mr. Md. Rezaqul Haider, General Manager, Mitra S.K. Bangladesh (Pvt.) Ltd. Mr. Kazi Sagor, Regional Manager, Bureau Veritas Mr. Charan Singh, Vice President, TUV Rheinland India (Pvt.) Ltd. Mr. Mohammad Syful Islam Khan, Managing Director, TUV SUD Bangladesh Ltd. Mr. Md. Wakil Hossain, Program Manager, TUV Rheinland Bangladesh Pvt. Ltd. 8 Annex 2: Results Framework Indicator Name Unit Baseline Cumulative Target Values Achieved Values YR1 YR2 YR3 YR4 YR5 YR6 PDO Indicators 1. Number of firms directly exporting No 501 521 532 533 575 589 647 in targeted sectors 501 501 2. Number of new jobs created in No 0 0 2,000 8,600 20,700 38,800 90,600 targeted sectors 0 0 3. Average wage growth in beneficiary % 0 0 0 6 12.4 19.1 33.8 firms in targeted sectors n.a n.a 4. Direct project beneficiaries No 0 0 4,200 11,700 15,700 21,500 31,700 n.a 0 5. 5. Female beneficiaries % 25 0 0 30% n.a n.a Intermediate Results Indicators Component 1: Market Access Support Program 1.1 Number of ESQ compliance No 0 0 100 250 325 375 400 assessments n.a 0 1.2 Number of matching grant firm No 0 0 40 140 200 250 250 beneficiaries n.a 0 1.3 Value of private co-investment US$ M 0 0 1 4 8 10 10 generated by ERF n.a 0 1.4 Sales growth of ERF beneficiary firms % 0 0 2.4 4.9 7.4 10.0 12.7 n.a 0 1.5 Share of complaints and grievances % 0 0 80 85 90 90 90 received by the project that are n.a 0 recorded, addressed satisfactorily and the actions documented in the established grievance redressal mechanism 1.6 Number of recognized new ESQ No 0 0 0 13 46 80 100 certifications and/or accreditations Acheivment n.a n.a obtained by ERF beneficiaries Component 2: Productivity Enhancement Program 2.1 Number of TCs feasibility assessment No 0 0 4 4 4 4 4 completed Acheivment n.a 1 2.2 Number of TCs operating No 0 0 0 0 0 1 4 Acheivment n.a n.a 2.3 Utilization rate of installed % 0 0 0 0 0 30 42 equipment in TCs n.a n.a 2.4 Number of skill development No 0 2 4 6 8 10 10 content/modules developed 0 0 Component 3: Public Investment Facility for Infrastructure Constraints 3.1 Number of infrastructure feasibility No 0 0 10 15 20 20 20 studies completed 3.2Firms benefiting from infrastructure No 0 0 0 0 5,000 10,000 19,000 improvements n.a n.a 3.3 Beneficiaries that feel project % 0 0 0 75 75 75 75 investments reflect their need n.a n.a 9