The World Bank Strengthening Social Protection and Inclusion System (P155097) REPORT NO.: RES27191 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF STRENGTHENING SOCIAL PROTECTION AND INCLUSION SYSTEM APPROVED ON SEPTEMBER 23, 2015 TO REPUBLIC OF PANAMA SOCIAL PROTECTION & LABOR LATIN AMERICA AND CARIBBEAN Regional Vice President: Jorge Familiar Calderon Country Director: Yaye Seynabou Sakho Senior Global Practice Director: Michal J. Rutkowski Practice Manager/Manager: Pablo Gottret Task Team Leader: Snjezana Plevko, Gonzalo Javier Reyes Hartley The World Bank Strengthening Social Protection and Inclusion System (P155097) ABBREVIATIONS AND ACRONYMS 120/65 Non-contributory pension program “120 at 65” (120 a los 65) CCT Conditional Cash Transfer DSI Directorate of Social Inclusion FM Financial Management IBRD International Bank for Reconstruction and Development IADB Inter-American Development Bank INADEH National Professional Training Institute (Instituto Nacional de Formación Profesional y Capacitación para el Desarrollo Humano) MEF Ministry of Economy and Finance (Ministerio de Economía y Finanzas) MIDES Ministry of Social Development (Ministerio de Desarrollo Social) MITRADEL Ministry of Labor (Ministerio de Trabajo y Desarrollo Laboral) OAS Organization of American States PAIL Support to Labor Market Insertion Program PIU Project Implementation Unit PPCP Plan Panama Cero Pobreza RdO Network of Opportunities (Red de Oportunidades) SP Social Protection UEAF Administrative Financial Executing Unit (Unidad de Enlace Administrativo-Financiero) UNDP United Nations Development Programme The World Bank Strengthening Social Protection and Inclusion System (P155097) BASIC DATA Product Information Project ID Financing Instrument P155097 Investment Project Financing Original EA Category Current EA Category Not Required (C) Not Required (C) Approval Date Current Closing Date 23-Sep-2015 28-Feb-2022 Organizations Borrower Responsible Agency Republic of Panama Ministerio de Desarrollo Social (MIDES) Project Development Objective (PDO) Original PDO The Project Development Objective is to increase the efficiency of the social protection system and improve the income generation capacity of the poor and vulnerable. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-85320 23-Sep-2015 18-Dec-2015 18-Apr-2016 28-Feb-2022 75.00 1.00 74.00 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING The World Bank Strengthening Social Protection and Inclusion System (P155097) Project Status 1. The Project was approved by the Bank on September 23, 2015, signed on December 18, 2015 and declared effective on April 18, 2016. Soon after loan signing, Project implementation was adversely affected by a series of events that led to the slowdown in Project implementation and resulted in the lack of progress towards the achievement of the Project PDOs. These events included: a. Lack of Government budget allocation in 2016: Given that the loan was signed in December 2015, there was no budget allocation provided in the 2016 national budget. During CY2017 budget planning discussions, an allocation of US$1 million was approved and disbursed to the designated Project account in December 2016. While the currently approved budget allocation for the Project in CY2018 is US$2 million, the Ministry of Finance has confirmed its intention to revisit and revise this allocation based on expected improvement in the pace of Project implementation. b. Reorganization of internal structure of Ministry of Social Development (MIDES): Immediately following Project effectiveness implementation was delayed due to the internal reorganization in the MIDES, the Project implementing agency. A new Directorate of Social Inclusion (DSI) was created to oversee the management of the three conditional-cash transfer (CCT) programs and assumed administrative and M&E functions that previously rested within the oldest CCT program, Red de Oportunidades (RdO). To facilitate the Project’s implementation, the structural reorganization of MIDES also shifted the location of the Project Implementation Unit (PIU), which now rests at the DSI. The initial Director of the DSI was appointed in June 2016 and became the Project Coordinator. The initial Director left MIDES in September 2017, and the new Director resumed the role of Project Coordinator and at which point implementation quickly picked up. In addition, responsibility for activities related to the development of service protocols for indigenous populations, in line with the indigenous people framework developed for the Project, were transferred from the Red de Oportunidades program to the Division of Social Policy within MIDES. As a result, although overall institutional arrangements for the Project were not modified as the PIU is still under MIDES, the original internal MIDES institutional arrangements changed as reflected in the following figures: Figure 1. Original MIDES Institutional Arrangements The World Bank Strengthening Social Protection and Inclusion System (P155097) Figure 2. Current MIDES Institutional Arrangements Ministry of Social Social Cabinet Development Direction of Social Inclusion Department of Department Administration of Finance Red de 120/65 Angel Oportunidades Guardian 2. The focus on the internal reorganization of MIDES also resulted in some initial delays in the implementation of the labor intermediation and training activities under Component 3, since the Cooperation Agreements with MITRADEL and INADEH were only signed on September 5 and 15, 2017 respectively. Rationale for Restructuring 3. Given the delays in implementation, and the Government’s new focus on strengthening MIDES’ productive inclusion programs and the need to align the Project with the objectives of the PPCP, the Ministry of Economy and Finance (MEF) sent to the Bank a formal request to restructure the Project. 4. While the Government remains fully committed to the Project Development Objectives, their achievement requires the adjustment of Project activities, modification of components costs, reallocation of resources across components and categories, and revision of the Results Framework. Also, due to the delays in implementation which resulted in some activities carried out outside of the Project, the total Project amount would be reduced to US$60 million, thus a cancellation of US$15 million was also requested by Government. The World Bank Strengthening Social Protection and Inclusion System (P155097) II. DESCRIPTION OF PROPOSED CHANGES 5. This cancellation proposal is based on the Government’s request expressed through letter from the MEF dated February 7, 2018, that was received by the World Bank on February 8, 2018. 6. To facilitate Project’s implementation, the restructuring will be carried out in two stages. This first stage, which is the subject of this restructuring paper, will cancel US$15 million from the Loan, and reallocate funds across expenditure categories and Project components. All other changes will be processed under a second restructuring. Dividing the process in two stages will enable a quick processing of the cancellation and reallocation of loan proceeds. 7. Based on the Government’s request, the revised reallocation across the Project components will be as follows: Original Project Restructured Project Component 1: Strengthening and Efficiency of the Social Protection system 25,000,000 31,000,000 Component 2: MIDES territorial structure and direct family support 17,000,000 13,500,000 Component 3: Productive inclusion services for the poor and vulnerable 33,000,000 15,500,000 TOTAL 75,000,000 60,000,000 III. SUMMARY OF CHANGES Changed Not Changed Change in Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Change in Implementing Agency ✔ Change in DDO Status ✔ Change in Project's Development Objectives ✔ Change in Results Framework ✔ Change in Loan Closing Date(s) ✔ Change in Disbursements Arrangements ✔ Change in Disbursement Estimates ✔ The World Bank Strengthening Social Protection and Inclusion System (P155097) Change in Systematic Operations Risk-Rating Tool ✔ (SORT) Change in Safeguard Policies Triggered ✔ Change of EA category ✔ Change in Legal Covenants ✔ Change in Institutional Arrangements ✔ Change in Financial Management ✔ Change in Procurement ✔ Change in Implementation Schedule ✔ Other Change(s) ✔ Change in Economic and Financial Analysis ✔ Change in Technical Analysis ✔ Change in Social Analysis ✔ Change in Environmental Analysis ✔ IV. DETAILED CHANGE(S) COMPONENTS Current Proposed Current Proposed Cost Action Cost Component Name Component Name (US$M) (US$M) Strengthening and efficiency of Strengthening and efficiency of 25.00 Revised 31.00 social protection system social protection system MIDES Territorial structure and MIDES Territorial structure and 17.00 Revised 13.50 direct family support direct family support Productive inclusion services for Productive inclusion services for 33.00 Revised 15.50 the poor and vulnerable the poor and vulnerable TOTAL 75.00 60.00 The World Bank Strengthening Social Protection and Inclusion System (P155097) CANCELLATIONS Value Reason Current Cancellation New Ln/Cr/Tf Status Currency Date of for Amount Amount Amount Cancellation Cancellation BORROWER' S REQUEST IBRD-85320- Disburs 15,000,000.0 USD 75,000,000.00 08-Feb-2018 60,000,000.00 FOR 001 ing 0 COUNTRY REASONS REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IBRD-85320-001 | Currency: USD Current Expenditure Category: Goods, Non-consuting services, consultant's iLap Category Sequence No: 1 services, Training and Operating costs under Parts 1, 2 and 3 of the Project 43,000,000.00 0.00 52,500,000.00 100.00 100 iLap Category Sequence No: 2 Current Expenditure Category: Stipends under Part 3.1(c) of the Project 7,500,000.00 0.00 4,500,000.00 100.00 100 Current Expenditure Category: INADEH Training Payments under Part 3.1(e) of iLap Category Sequence No: 3 the Project 10,000,000.00 0.00 1,500,000.00 100.00 100 Current Expenditure Category: MITRADEL Intermediation under Part 3.2(e) of iLap Category Sequence No: 4 the Project 14,500,000.00 0.00 1,500,000.00 100.00 100 Total 75,000,000.00 0.00 60,000,000.00