The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) REPORT NO.: RES38092 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF FOSTERING INNOVATION THROUGH RESEARCH, SCIENCE AND TECHNOLOGY (FIRST) APPROVED ON MAY 31, 2013 TO SOCIALIST REPUBLIC OF VIETNAM EDUCATION EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Ousmane Dione Regional Director: Daniel Dulitzky Practice Manager/Manager: Tobias Linden Task Team Leader: Dilip Parajuli, Dung Thi Thuy Dao The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) ABBREVIATIONS AND ACRONYMS CPMU Central Project Management Unit NASATI National Agency for Scientific and Technological Information FM Financial Management PDO Project Development Objective(s) GOV Government of Vietnam PIM Project Implementation Manual GRI Government Research Institute R&D Research and Development HHTP Hoa Lac High-Tech Park S&T Science and Technology M&E Monitoring and Evaluation SPMU Subsidiary Project Management Unit MOF Ministry of Finance STI Science, Technology and Innovation MOST Ministry of Science and Technology VINALAB- National Core Technology Laboratory for MAMET Mechanical Manufacturing Automation and Embedded Technology MPI Ministry of Planning and Investment The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P117394 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 31-May-2013 31-Dec-2019 Organizations Borrower Responsible Agency Socialist Republic of Vietnam Ministry of Science and Technology Project Development Objective (PDO) Original PDO The project development objective is to support science, technology and innovation (STI) in Vietnam by designing and piloting of STI policies, enhancing the effectiveness of project-aided research and development (R&D) institutions, and encouraging the development of innovative technology enterprises. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-52570 31-May-2013 25-Jul-2013 22-Oct-2013 31-Dec-2019 78.00 41.92 28.94 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. Context and previous restructuring: The Government of Vietnam (GoV), with support from the World Bank, has been implementing the Fostering Innovation through Research, Science and Technology (FIRST) Project since October 2013. In line with the 2012 National Strategy for Science &Technology and High Technology Law of 2008, FIRST Project was designed and implemented on a pilot basis to increase innovation activity in key technology sectors through an enhanced role of the state to provide Science Technology and Innovation (STI) as a public good and at the same time foster innovation in Vietnamese enterprises. The FIRST Project was approved on May 31, 2013, signed on July 25, 2013 and became effective on October 22, 2013. The FIRST Project encountered significant implementation delays during the first three years, in large part because of the nature of the project focusing on innovation as well as the lack of experience in implementing such an operation. The lack of experienced staff and the centralization of approval steps also blocked project implementation. 2. In light of the challenges, the GoV and the Bank agreed to Project restructuring in April 2017 to simplify project activities and the fiduciary arrangements, after which the project started to demonstrate significant progress in achievements towards project objective and implementation activities. Key changes from the 2017 restructuring included: (a) discontinuation of two project activities - namely (i) Part 2(B) New Enterprise Grants and (ii) Part 2C Government Owned Company Operated (GOCO) model laboratory at the Hoa Lac High Tech Park (HHTP) - and cancelling the corresponding credit amount of US$22 million equivalent; and (b) simplification of fiduciary arrangements whereby the procurement and financial management authorities including the implementing and reporting procurement and FM activities would be decentralized to the grant beneficiaries to enhance their ownership and implementation capacity. The Project turned around positively with significant implementation and thus both DO and IP ratings were upgraded to Moderately Satisfactory in December 2017. 3. At the GOV’s request, a second Project restructuring was approved in January 2019 (process started in 2018) to: (i) extend the project closing date by six months from June 30, 2019 to December 31, 2019 to ensure that the project beneficiaries have sufficient time to implement their sub-project grant activities and achieve the results (linked to PDO and indicators); and (ii) revise the Project Results Framework (RF) to better reflect the attribution of project interventions, in light of the first project restructuring and provide greater alignment of the project’s achievements with project implementation. The revisions included (i) the removal of one intermediate indicator and reduction in target of another indicator to reflect the cancellation; and (ii) the addition of two new indicators to better measure the project development objective and reflect the project achievements. 4. The project has made significant progress over the past 12 months. The likelihood of meeting the end-of- project PDO and intermediate indicators has improved substantially. Out of the three PDO indicators, “number of international scientific publications” and “number of innovative activities” have already The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) surpassed their end-of-project targets. The third indicator “number of consortia and start-up sub-projects completed successfully” is currently lagging and it is expected that by project end it will reach more than 90% of the target. The achievements of the eight intermediate indicators are all on track to meet their targets by end of the project. Overall project implementation has improved considerably: (i) credit disbursement doubled from US$19 million (27%) to US$42 million (59%) since October 2018; (ii) 32 sub-projects have been successfully completed; (iii) the remaining 33 sub-projects are on track to be completed by September 30, 2019; and (iv) the Project met all the key milestones agreed during the last supervision mission in October 2018. All three components are progressing satisfactorily. Accordingly, both the project DO and IP ratings were upgraded from MS to Satisfactory in the ISR from July 2019. 5. Rationale for Restructuring: After taking into account the project activities from now to end of the project, the Central Project Management Unit (CPMU) of Ministry of Science and Technology (MOST) has estimated an amount of US$13 million equivalent that will remain unutilized by project closing. The savings are from three key sources: (i) savings from competitive procurement processes resulting in lower actual expenditures compared to initially estimated contract package;, (ii) reduced “recurrent expenditures” on training and operating cost activities as per the Government’s new regulations1; and, (iii) dropping of 7 consortia sub-project grants which have been terminated for various reasons, including changes in enterprise priority focus, funding secured through alternative resources, and unforeseen financial difficulties. 6. Therefore, the Government of Vietnam – through the Ministry of Finance (MOF) – has on August 19, 2019 sent a cancellation request for an amount of SDR9,400,000 (US$13 million equivalent). The cancelled amount is expected to be recommitted and reprogrammed in the Vietnam country program for FY20 on the blend terms. 7. The cancellation of project funds is not expected to impact the project’s achievement of PDO and results mainly because the cancellation amount comes from project savings (see para. 5) and does not affect the completion of project activities. II. DESCRIPTION OF PROPOSED CHANGES 8. The main change is the cancellation in the amount of SDR 9,400,000 (US$13 million equivalent) – out of which SDR 7,250,000 (US$10 million equivalent) comes from Category 1 (The Foreign Talents STI Grants, GRI STI Grants, New Enterprises STI Grants and Research and Innovation Consortium STI Grants under the Project) and the remaining SDR2,150,000 (US$3 million equivalent) from Category 2 (Goods, works, services, Incremental Operating Costs, and Training and Workshops under the project). For more information please refer to Section IV below. 1The Government’s Decree No. 131/2006/ND-CP on the ODA Management and the revised Law on Public Investment have restricted the use of ODA fund on “recurrent expenditures” which is understood to include expenditures on training, seminars and operating costs. The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. III. SUMMARY OF CHANGES Changed Not Changed Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE CANCELLATIONS Value Reason Current Cancellation New Ln/Cr/Tf Status Currency Date of for Amount Amount Amount Cancellation Cancellation LOAN Disburs IDA-52570- RESTRUCTUR ing&Re XDR 50,585,975.00 9,400,000.00 19-Aug-2019 41,185,975.00 001 ING, COST paying SAVINGS OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-52570-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: FRGN TAL,GRI, NEW ENT&RIC STI GRANT 42,656,576.00 22,812,368.72 35,406,576.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: IDA 52570-GDS,WORKS,SERV,IOC, TR&WS 7,929,399.00 2,479,442.15 5,779,399.00 100.00 100.00 Total 50,585,975.00 25,291,810.87 41,185,975.00 .