Document of The World Bank FOR OFFICIAL USE ONLY Report No: RES14087 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SUPPORT FOR STRATEGIC LOCAL DEVELOPMENT AND INVESTMENT LOAN 48330-PH JUNE 29, 2006 TO THE LAND BANK OF THE PHILIPPINES WITH GUARANTEE OF THE REPUBLIC OF THE PHILIPPINES APRIL 22, 2014 SUSTAINABLE DEVELOPMENT UNIT EAST ASIA AND PACIFIC REGION This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ABBREVIATIONS AND ACRONYMS ICB International Competitive Bidding IESSF Integrated Environmental and Social Safeguards Datasheet IP Indigenous Peoples ISDS Integrated Safeguards Datasheet LBP Land Bank of the Philippines LGU Local Government Unit NCB National Competitive Bidding OP Operational Policy PDO Project Development Objective RVP Regional Vice President SSLDIP Support for Strategic Local Development and Investment Project Regional Vice President: Axel van Trotsenburg Country Director: Motoo Konishi Sector Manager: Ousmane Dione Task Team Leader: Christopher T. Pablo 2 PHILIPPINES Support for Strategic Local Development and Investment Project CONTENTS A. SUMMARY 5 B. PROJECT STATUS 6 C. PROPOSED CHANGES 7 D. APPRAISAL SUMMARY 11 ANNEX 1: RESULTS FRAMEWORK AND MONITORING 12 ANNEX 2: OPERATIONAL RISK ASSESSMENT FRAMEWORK 22 3 DATA SHEET Philippines Support for Strategic Local Development and Investment Project (P064925) EAST ASIA AND PACIFIC EASPS . Report No: RES14087 . Basic Information Project ID: P064925 Lending Instrument: Specific Investment Loan Financial Intermediary Regional Vice President: Axel van Trotsenburg Original EA Category: Assessment (F) Financial Intermediary Country Director: Motoo Konishi Current EA Category: Assessment (F) Sector Director: John A. Roome Original Approval Date: 29-Jun-2006 Sector Manager: Ousmane Dione Current Closing Date: 30-Apr-2014 Team Leader: Christopher T. Pablo . Borrower: Land Bank of the Philippines Responsible Land Bank of the Philippines Agency: . Restructuring Type Form Type: Full Restructuring Paper Decision Authority: Board Approval Restructuring Level 1 Explanation of To support reconstruction and Level: Approval Authority: rehabilitation of areas affected by Typhoon Yolanda (internationally named “Haiyan”); Triggering two new safeguard policies. . Financing ( as of 15-Apr-2014 ) Key Dates Approval Effectiveness Original Revised Project Ln/Cr/TF Status Signing Date Date Date Closing Date Closing Date P064925 IBRD-48330 Effective 29-Jun-2006 03-Oct-2006 28-Feb-2007 30-Jun-2012 30-Apr-2014 P064925 TF-58154 Closed 11-Jul-2007 11-Jul-2007 11-Jul-2007 10-Jul-2011 10-Jul-2011 Disbursements (in Millions) % Cancelle Disburse Undisbur Project Ln/Cr/TF Status Currency Original Revised Disburse d d sed d P064925 IBRD-48330 Effective USD 100.00 100.00 0.00 99.86 26.20 100 P064925 TF-58154 Closed USD 1.91 1.91 0.00 1.91 0.00 100 . 4 Policy Waivers Does the project depart from the CAS in content or in other significant Yes [ ] No [ X ] respects? Does the project require any policy waiver(s)? Yes [ ] No [ X ] . A. Summary of Proposed Changes This restructuring of the Support to Strategic Local Investment and Development Project (SSDLIP, LN 4833) is being undertaken at the request of the Borrower (Land Bank of Philippines) with the endorsement of the Guarantor (Republic of the Philippines). This is a Level One restructuring due to the triggering of new safeguards policies (discussed in more detail below). The SSLDIP is a key instrument of the government in supporting local infrastructure development. The restructuring is to respond to the Borrower’s request to use the estimated USD9.4 million of uncommitted project funds to support the reconstruction and rehabilitation of areas affected by the recent disasters, including Typhoon Yolanda and the earthquake in Bohol, and to apply the exceptions set out under paragraph 11 (a) and (b) of OP 10.00 for Projects in Situations of Urgent Need of Assistance or Capacity Constraints. Approval from the RVP has been sought to apply the exceptions set out in paragraph 11 (a) and (b) of OP10.00 to this request of the Borrower. The proposed restructuring will entail the following project changes: 1. Reflecting proper documentation of safeguards policies triggered during project implementation, namely OP 4.37 (Safety of Dams) and OP 4.10 (Indigenous Peoples). An updated Integrated Safeguards Data Sheet (ISDS) has been disclosed on April 21, 2014 reflecting the additional safeguards policies triggered during implementation. As the Borrower will not have time to prepare, hold consultations on and disclose the safeguard instruments prior to Board approval, the team has sought RVP approval to apply the exception at paragraph 11(a) of OP 10.00 to this restructured Project. Consequently, the Integrated Environment and Social Safeguards Framework (IESSF) is being updated by the Borrower to provide the guidelines for social and environmental safeguards for subprojects financed under this Project. The IESSF will include an Indigenous Peoples (IP) Framework, a Resettlement and Compensation Framework an environmental assessment framework and management plan and chance find procedures for cultural property. A Safeguards Action Plan was prepared on February 7, 2014 and updated on April 16, 2014. 2. Extension of the Loan Closing Date from April 30, 2014 to April 30, 2016; 3. Amendment to Schedule 4 (Procurement) of the Loan Agreement to reflect the addition of new procurement methods consistent with the exceptions set out in paragraph 11(b) of OP 10.00 (the approval of the RVP has been sought for this change); 4. Revision of the Financing Plan to include contributions of the Republic of the Philippines in subproject financing; and 5. Revision of the Results Framework to refine the existing indicators and targets to better capture project achievements, and reflect the shift of project performance indicators from Schedule 6 of the Loan Agreement to the Project Operations Manual. The use of the remaining loan for reconstruction subprojects, including the procedures for processing, will be reflected in an amended Project Operations Manual. Additionally, the Republic of Philippines will provide contribution of up to 90percent of total subprojects cost. This arrangement will likewise be reflected in the updated Project Operations Manual. This restructuring will not affect the PDO. The activities that can be financed under the loan (defined in Schedule 2 of the Loan Agreement) include those that are required for reconstruction and rehabilitation of disaster-affected areas, such as reconstruction, rehabilitation, expansion and upgrading of basic local 5 infrastructure facilities. Change in Implementing Agency Yes [ ] No [ X ] Change in Project's Development Objectives Yes [ ] No [ X ] Change in Results Framework Yes [ X ] No [ ] Change in Safeguard Policies Triggered Yes [ X ] No [ ] Change of EA category Yes [ ] No [ X ] Other Changes to Safeguards Yes [ ] No [ X ] Change in Legal Covenants Yes [ X ] No [ ] Change in Loan Closing Date(s) Yes [ X ] No [ ] Cancellations Proposed Yes [ ] No [ X ] Change to Financing Plan Yes [ X ] No [ ] Change in Disbursement Arrangements Yes [ ] No [ X ] Reallocation between Disbursement Categories Yes [ ] No [ X ] Change in Disbursement Estimates Yes [ X ] No [ ] Change to Components and Cost Yes [ ] No [ X ] Change in Institutional Arrangements Yes [ ] No [ X ] Change in Financial Management Yes [ ] No [ X ] Change in Procurement Yes [ X ] No [ ] Change in Implementation Schedule Yes [ X ] No [ ] Other Change(s) Yes [ ] No [ X ] Appraisal Summary Change in Economic and Financial Analysis Yes [ ] No [ X ] Appraisal Summary Change in Technical Analysis Yes [ ] No [ X ] Appraisal Summary Change in Social Analysis Yes [ X ] No [ ] Appraisal Summary Change in Environmental Analysis Yes [ X ] No [ ] Appraisal Summary Change in Risk Assessment Yes [ ] No [ X ] . B. Project Status The SSLDIP, a financial intermediation loan, was approved by the Board on June 29, 2006, declared effective on February 28, 2007 and is scheduled to close on April 30, 2014. The PDO is “to improve local public service provision and management by facilitating local government unit (LGU) access to viable financing to implement strategic infrastructure investments”. The project has two components: Component 1 (Sub-projects for Infrastructure and Finance Improvement) provides sub-loans to LGUs and participating institutions for local infrastructure services and financial management investments, and Component 2 (LGU Capacity Building and Project Implementation Support) provides assistance to LGUs in subproject preparation and implementation and to the Borrower to support project implementation. The project remains a key instrument of the government in supporting infrastructure investments at the local level. The project has substantially achieved its PDO. A total of 210,000 households are benefiting from 65 completed subprojects over an initial target of 100, 000 households and 50 subprojects. Achievement of the PDO is rated “Satisfactory” while implementation progress “Moderately Satisfactory”. As of March 18, 2014, disbursement stood at 79.2 percent. There are no outstanding financial or audit reports. 6 . Development Objectives/Results Project Development Objectives Original PDO The project development objective is to improve local public service provision and management by facilitating LGU access to viable financing to implement strategic infrastructure investments. Change in Project's Development Objectives Change in Results Framework Explanation: The Results Framework is proposed to be revised to: 1. Refine the existing indicators and targets to better capture project achievements. An earlier extension of the loan closing (to complete on-going subprojects and utilize additional funds generated by the appreciation of the Yen in early years of project implementation) resulted in additional activities being financed by the Project, and therefore should be accounted for. 2. Include World Bank core sector indicators to better assess project performance; 3. Include indicators and targets relating to the post-disaster support provided by the Project (see Annex 1); and 4. Remove the provision on the project performance indicators from Schedule 6 of the Loan Agreement and instead present these in the Project Operations Manual, consistent with current practice regarding Results Frameworks. . Compliance Change in Safeguard Policies Triggered Explanation: During preparation the Project did not trigger two safeguards policies namely OP 4.37 (Dam Safety) and OP 4.10 (Indigenous Peoples). These policies were triggered during implementation by the fact that the Project funded a mini-hydropower subproject that involved construction of a small dam that is also situated in an IP area. Due diligence was carried out for this subproject and is found to comply with Bank dam safety and IP policies. An updated ISDS was disclosed on April 21, 2014. In addition, an IESSF is currently being updated, consulted upon and will be disclosed following approval of this restructuring. The IESSF will include an IP Framework, a Resettlement and Compensation Framework, and other guidelines and requirements on environmental assessment, due diligence and public disclosure, in accordance with Bank safeguards policies. A Safeguards Action Plan was prepared on February 7, 2014 and updated on April 16, 2014. Current and Proposed Safeguards Policies Triggered: Current Proposed Environmental Assessment (OP) (BP 4.01) Yes Yes Natural Habitats (OP) (BP 4.04) Yes Yes Forests (OP) (BP 4.36) No No Pest Management (OP 4.09) No No Physical Cultural Resources (OP) (BP 4.11) Yes Yes Indigenous Peoples (OP) (BP 4.10) No Yes Involuntary Resettlement (OP) (BP 4.12) Yes Yes 7 Safety of Dams (OP) (BP 4.37) No Yes Projects on International Waterways (OP) (BP 7.50) No No Projects in Disputed Areas (OP) (BP 7.60) No No . Change in Legal Covenants Explanation: The revised legal covenants include: The Borrower shall submit to the Bank for prior approval the following: (a) each Subproject Proposal that is submitted by a Participating Institution rather than a Participating LGU, except as may be otherwise agreed by the Bank; (b) the first Subproject Proposal that involves a program of infrastructure investments rather than a single infrastructure investment; (c) each Subproject Proposal with procurement requiring prior review as set out in the Procurement Plan; (d) each Subproject Proposal with a resettlement action plan as defined in the IESSF; (e) each Subproject Proposal with an Indigenous Peoples Plan as defined in the IESSF; (f) the first applicable environmental assessment instrument, as defined in the IESSF, prepared for a sub-project in each of the areas of housing and new site development, sewerage, sanitary landfill, drainage and flood control, hospital and medical facilities, water supply systems; roads; and bridges; (g) each Subproject Proposal that (i) involves significant conversion or degradation of critical forest areas or related critical natural habitats, or natural forests or related natural habitats; (ii) affects the rights and welfare of people and their level of dependence upon or interaction with forests; and (iii) aims to bring about changes in the management, protection, or utilization of natural forests or plantations; and (h) each Subproject Proposal that involves pest management and procurement of any pesticide; each in accordance with the IESSF. The revision is to reflect the change introduced in paragraph 4 of Schedule 5 regarding the implementation of the updated IESSF. Finance Ln/Cr/T Date Recurre Frequen Agreement Description of Covenant Status Action F Due nt cy Reference Submit for review and approval a draft annual IBRD- LA, Schedule plan of project activities, Expected No Yearly 48330 5, para 5 with work program, soon Change budget and commitment plan For an approved subject involving a program of infrastructure IBRD- LA Schedule Complie No investments, ensure that Yearly 48330 5, para 6 d with Change such program has prior approval of relevant LGU's council Submit for prior approval TORs for consulting IBRD- LA Schedule 27-Nov- Complie No firms for capacity 48330 5, para 7 2009 d with Change building activities under Part 2 of project 8 Prepare and furnish to the Bank a mid-term report IBRD- LA, Schedule 30-Jun- Complie No including report on 48330 5, para 12(d) 2009 d with Change implementation of safeguards framework The Borrower shall submit to the Bank for prior approval the following: (a) each Subproject Proposal that is submitted by a Participating Institution rather than a Participating IBRD- LA, Schedule LGU, except as may be Not yet CONTIN New 48330 5, para 4 otherwise agreed by the due UOUS Bank; (b) the first Subproject Proposal that involves a program of infrastructure investments rather than a single infrastructure investment; (c) each Subproject Proposal with . Financing Change in Loan Closing Date(s) Explanation: It is proposed to extend the Loan Closing Date by two years until April 30, 2016. This extension is necessary to allow completion of on-going and additional subprojects, and fully achieve the PDO. Ln/Cr/T Original Closing Current Closing Proposed Closing Previous Closing Status F Date Date Date Date(s) IBRD- Effective 30-Jun-2012 30-Apr-2014 30-Apr-2016 30-Jun-2012 48330 TF- Closed 10-Jul-2011 10-Jul-2011 10-Jul-2011 58154 Change to Financing Plan Explanation: Originally, project funds are composed of loan proceeds amounting to USD100 million equivalent and estimated Borrower/LGU counterpart of USD9 million, and the loan proceeds were to finance 100 percent of the sub-project costs. Under the restructured project, the Government of the Republic of Philippines will provide up to USD84.6 million new grant funding to sub-projects. IBRD will provide USD 9.4 million (estimated uncommitted funds from the loan proceeds of SSLDIP) while the Borrower/LGU counterpart would be USD8.2 million. In sum, the Borrower and the Republic of the Philippines will provide a total of up to USD92.8 million to the project. The financial management arrangements as required by the loan agreement will remain the same. However, the Operation Manual will be revised to include the financial reporting requirements of the Department of Budget and Management. The funds flow arrangements for the Government of the Republic of Philippines grant funding will be agreed with the LBP shortly, and 9 once agreed will be reflected in the updated Operational Manual as well. Source(s) At Approval Current (from AUS) Proposed BORR 9,000,000.00 9,000,000.00 92,800,000.00 IBRD 100,000,000.00 100,000,000.00 100,000,000.00 Total 109,000,000.00 109,000,000.00 192,800,000.00 Disbursement Estimates Change in Disbursement Estimates Explanation: The cumulative disbursement as of March 18, 2014 is USD99.8 million representing 79.2 percent of total loan proceeds. An estimated USD 9.4 million under Part 1 of the Project remains uncommitted. This is proposed to be utilized in the next two years. The Borrower estimates that, by February 2015, it would be able to disburse USD 113.2 million. This represents around 90 percent of total loan proceeds. By April 2016, the Borrower expects to fully disburse the loan amount of JPY 11.7 billion (USD126 million at current exchange rate). The table below will be updated after the approval of this restructuring. Fiscal Year Current (USD) Proposed (USD) 2007 242,603.80 242,603.80 2008 10,809,488.08 10,809,488.08 2009 10,428,962.00 10,428,962.00 2010 18,580,420.76 18,580,420.76 2011 29,940,335.36 29,940,335.36 2012 10,699,924.40 10,699,924.40 2013 16,980,000.00 16,980,000.00 2014 11,320,000.00 11,320,000.00 Total 109,001,734.40 109,001,734.40 . Other Change(s) Change in Procurement Explanation: The Project proposes to adopt simplified procedures following the Guidance on Situations of Urgent Need of Assistance or Capacity Constraints issued in April 2013 for the procurement of goods, works and consulting services, non-consulting services financed under Part 1 of the Project. In addition, the Bank issued in March 2013 a notice to the Republic of the Philippines about increasing the thresholds for use of NCB method and short-list comprising only national consultants, as well as the prior review thresholds under Bank-funded projects, as follows: 1. NCB Works from USD5 million to USD15 million; 2. NCB Goods from USD1 million to USD3 million; 3. Short-list of National Consultants from USD200,000 to USD500,000; and 4. Prior review of only the first NCB contract while prior review of all ICB contracts remains. The LBP shall submit to the Bank for no objection a revised Procurement Plan that will reflect use of emergency procurement procedures and the new thresholds listed above. The procurement plan will be 10 updated annually. Change in Implementation Schedule Explanation: The implementation schedule will be revised to reflect a new completion schedule of project activities, i.e., April 30, 2016. . Change(s) in Appraisal Summary Appraisal Summary Change in Social Analysis Explanation: The IESSF is being updated to include guidelines for social and environmental safeguards in Projects in Situations of Urgent Need of Assistance or Capacity Constraints. The updated IESSF would include an IP Framework, a Resettlement and Compensation Framework, and other guidelines and requirements on due diligence and public disclosure. Appraisal Summary Change in Environmental Analysis Explanation: Consistent with the requirements of the Instructions: Preparation of Investment Project Financing- Situations of Urgent Need of Assistance or Capacity Constraint, the team has prepared a Safeguards Action Plan, which references the updated IESSF and sets out the due diligence to be undertaken by the team with respect to several ongoing subprojects that have safeguards issues. The Safeguards Action Plan has been reviewed and cleared by the Regional Safeguards Secretariat. 11 ANNEX 1: RESULTS FRAMEWORK AND MONITORING Project Support for Strategic Local Development and Investment Project Restructuring Status: DRAFT Name: Project (P064925) Stage: Team Requesting Christopher T. Pablo EACPF Created by: Mari Anne DL. Trillana on 12-Mar-2014 Leader: Unit: Product Responsible IBRD/IDA EASPS Modified by: Mari Anne DL. Trillana on 22-Apr-2014 Line: Unit: Country: Philippines Approval FY: 2006 Lending Region: EAST ASIA AND PACIFIC Specific Investment Loan Instrument: . Project Development Objectives Original Project Development Objective: The project development objective is to improve local public service provision and management by facilitating LGU access to viable financing to implement strategic infrastructure investments. Results Core sector indicators are considered: Yes Results reporting level: Project Level . Project Development Objective Indicators Status Indicator Name Core Unit of Measure Baseline Actual(Current) End Target Marked for Number of people with access Text Value 221,050 1,000,000 Deletion to municipal infrastructure Date 23-Jan-2014 23-Jan-2014 28-Feb-2016 services in participating LGUs Comment The indicator was The revised changed/refined target of from “number of 1,000,000 households” to people takes “number of into account the individuals”. increase in project funds The benefits of resulting from some subprojects foreign financed by exchange SSLDIP (e.g., windfall. sports complex, transport terminals, etc.) accrue to individuals and not to households. This is also consistent with the World Bank approach in measuring relevant core sector indicators. The term “improved access” was changed to “access” to account for the varying baseline conditions in participating LGUs and the diversity of subprojects in the 13 SSLDIP portfolio. The project utilizes service coverage analysis in estimating the number of beneficiaries, i.e., the surrounding geographical area servedor covered by the subprojects financed under SSLDIP, not necessarily the municipality’s population. Marked for Percentage of female Percentage Value 40.00 Deletion beneficiaries with access to Date 23-Jan-2014 23-Jan-2014 28-Feb-2016 municipal infrastructure services under the project Comment Data gathering on-going This indicator intends to monitor gender impacts under the project. Marked for Number of people in urban Number Value 0.00 83725.00 200000.00 Deletion areas provided with access to Date 23-Jan-2014 23-Jan-2014 28-Feb-2016 14 improved water system under Comment the project New Direct project beneficiaries Number Value 221050.00 896815.00 1000000.00 Date 23-Jan-2014 23-Jan-2014 28-Feb-2016 Comment The indicator was The revised changed/refined target of from “number of 1,000,000 households” to people takes “number of into account the individuals”. increase in project funds The benefits of resulting from some subprojects foreign financed by exchange SSLDIP (e.g., windfall sports complex, transport terminals, etc.) accrue to individuals and not to households. This is also consistent with the World Bank approach in measuring relevant core sector indicators. The term “improved access” was 15 changed to “access” to account for the varying baseline conditions in participating LGUs and the diversity of subprojects in the SSLDIP portfolio. The project utilizes service coverage analysis in estimating the number of beneficiaries, i.e., the surrounding geographical area served or covered by the subprojects financed under SSLDIP, not necessarily the municipality’s population. New Female beneficiaries Percentage Value 0.00 0.00 40.00 Sub Type Supplemental New Number of people in urban Number Value 0.00 83725.00 200000.00 areas provided with access to Date 23-Jan-2014 23-Jan-2014 28-Feb-2016 16 Improved Water Sources under Comment the project Revised Number of ordinances enacted Text Value 0 50 by participating LGUs to Date 23-Jan-2014 23-Jan-2014 28-Feb-2016 operate infrastructure facilities under the project Comment The original indicator “increase in proportion of infrastructure investment to total expenditure among participating LGUs” is not relevant. It does not capture project contribution in terms of improving “management of local public services”, as specified in the PDO. In addition, the “increase in proportion of infrastructure investment to total expenditures” cannot be fully 17 attributable to the project. Revised Number of women benefiting Text Value 40,000.00 from upgraded/improved water Date 23-Jan-2014 23-Jan-2014 28-Feb-2016 supply system under the project Comment Data gathering on-going This indicator intends to monitor gender impacts under the project. Revised Percentage of women Percentage Value 50.00 benefiting from public markets Date 23-Jan-2014 23-Jan-2014 28-Feb-2016 financed by the project. Comment Percentage of women benefiting from public markets financed by the project. Revised Number of people benefiting Number Value 0.00 from Date 23-Jan-2014 23-Jan-2014 28-Feb-2016 rehabilitated/reconstructed infrastructure Comment Target value to be determined within 3 months after restructuring approval Intermediate Results Indicators Status Indicator Name Core Unit of Measure Baseline Actual(Current) End Target 18 No Change Number of subprojects Text Value 0 70 completed under the project Date 23-Jan-2014 23-Jan-2014 28-Feb-2016 Comment New target value was set to take into account additional funds generated by the project from foreign exchange windfall. No Change Number of reconstruction Text Value 0 subprojects completed Date 23-Jan-2014 23-Jan-2014 28-Feb-2016 Comment Target value to be determined within 3 months after restructuring approval No Change Number of Project Text Value 0 477 Implementation Unit (PIU) Date 23-Jan-2014 23-Jan-2014 28-Feb-2016 staff participated in training activities (workshops, on-the- Comment The original job training, etc.) under the indicator was project refined to be more specific. Training is provided to PIU staff. In addition, counting number of staff is better than number of agencies. 19 No Change Number of training activities Number Value 0.00 110.00 120.00 (workshops, on-the-job Date 23-Jan-2014 23-Jan-2014 28-Feb-2016 training, etc.) under the project Comment This indicator was added to better capture Component 2 performance No Change Number of LGUs successfully Number Value 0.00 110.00 120.00 procured Date 23-Jan-2014 23-Jan-2014 28-Feb-2016 Comment This indicator was added to better capture Component 2 performance No Change Percentage of participants Percentage Value 0.00 88.00 80.00 satisfied with capacity-building Date 23-Jan-2014 23-Jan-2014 28-Feb-2016 workshops Comment This indicator was added to better capture Component 2 performance No Change PMO and Project Text Value None PMO established PMO Implementation Units are in 48 LGUs established at established and supported by LBP and Project technically equipped staff and Implementation are functioning Units are established and functioning in 100% of 20 participating LGUs. Date 23-Jan-2014 23-Jan-2014 28-Feb-2016 Comment All PIUs are operational. 48 subprojects are now completed. No Change Operations Manual completed , Text Value None Operations disseminated and updated Manual completed , disseminated and updated Date 30-Jun-2006 23-Jan-2014 28-Feb-2016 Comment No Change M and E system is installed Text Value None M&E system and corresponding M&E installed and manual completed, operational, and disseminated and updated corresponding M&E manual completed, disseminated and updated. Date 23-Jan-2014 23-Jan-2014 28-Feb-2016 Comment The indicator was revised to insert the term "operational". 21 ANNEX 2: OPERATIONAL RISK ASSESSMENT FRAMEWORK Operational Risk Assessment Framework (ORAF) Philippines: Support for Strategic Local Development and Investment Project (P064925) . . Project Stakeholder Risks Stakeholder Risk Rating Low Risk Description: Risk Management: The risk that National Government administration will not Task Team to maintain dialogue with National Government, donors and other provide broad support to the project. stakeholders through the Philippines Decentralization Forum, Philippines Urban Consortium and other platforms to discuss local government issues and reforms. Resp: Status: Stage: Recurrent: Due Date: Frequency: Bank In Progress Implementation 30-Apr-2014 Implementing Agency (IA) Risks (including Fiduciary Risks) Capacity Rating High Risk Description: Risk Management: Low demand from LGUs for on-lending support to Sub-loans of disaster affected LGUs will be matched by National Government grant of reconstruction due to high market interest rates or lack of up to 90 percent of total subproject costs. financial capacity of disaster-affected LGUs to access Resp: Status: Stage: Recurrent: Due Date: Frequency: credit. In addition, disaster affected LGUs are not ready or may not have technical capacity to implement Client In Progress Implementation 30-Apr-2014 infrastructure subprojects. Governance Rating Low Risk Description: Risk Management: LBP’s commitment may wane and may fail to adhere to PMO and Task Team have good working relationship. Both teams continue to work targets and deliverables. closely to discuss implementation issues and measures to address them to ensure that the 22 project effectively delivers intended outcomes. Resp: Status: Stage: Recurrent: Due Date: Frequency: Both In Progress Implementation 30-Apr-2014 Risk Management: The LBP and the Task Team will closely monitor procurement activities and will regularly carry out visits to project sites to review physical accomplishments (vs specifications) and review the reports and documentation of accounts and transactions. Resp: Status: Stage: Recurrent: Due Date: Frequency: Bank In Progress Implementation 30-Apr-2014 Project Risks Design Rating Moderate Risk Description: Risk Management: Inadequate technical capacity of LGUs and other Project preparation and supervision consultants will be mobilized by National proponents to prepare and implement projects with Government through the Department of Public Works and Highways to provide complex designs or implementation arrangements. technical assistance to LGUs. These consultants will work with the LGU- project implementation units. The World Bank Team will also provide guidance to LBP during processing and supervision. Resp: Status: Stage: Recurrent: Due Date: Frequency: Client In Progress Implementation 30-Apr-2014 Social and Environmental Rating Low Risk Description: Risk Management: ROW acquisition issue affecting one water supply Iligan City Government already initiated court proceeding to resolve the ROW case. subproject may not be resolved. PMO to closely follow up the case and provide the Task Team with updates. Resp: Status: Stage: Recurrent: Due Date: Frequency: Client In Progress Implementation 30-Apr-2014 23 Program and Donor Rating Moderate Risk Description: Risk Management: Municipal finance programs supported by other donors The remaining SSLDIP funds will be used for post-disaster re-construction support. may offer better loan terms to LGUs. PMO to continue to work with lending centers to market SSLDIP facility to disaster- affected LGUs. Resp: Status: Stage: Recurrent: Due Date: Frequency: Client In Progress Implementation 30-Apr-2014 Delivery Monitoring and Sustainability Rating Moderate Risk Description: Risk Management: Technical issues during project preparation PMO has mobilized a consultancy firm to carry out capacity-building activities for LGU implementation, and weak capacity of LGUs to operate clients, particularly on operation and maintenance of the completed facilities. and maintain the infrastructure subprojects financed by the Resp: Status: Stage: Recurrent: Due Date: Frequency: project. Client In Progress Implementation 30-Apr-2014 Other (Optional) Rating Moderate Risk Description: Risk Management: FM risk - Based on financial management capacity Mitigation assessment of selected LGUs affected by typhoon Yolanda To mitigate the FM risk, the funds will be disbursed by LBP directly to the contractors , the LGUs have limited capacity resulting in significant based on the recommendation of the construction supervision consultant and risks to financial management of project funds at the LGU concurrence by the LGU project implementation unit. LBP will comply with the level. financial reporting requirements of DBM included in the revised Operations Manual. Resp: Status: Stage: Recurrent: Due Date: Frequency: Both Not Yet Due Implementation 30-Apr-2014 Other (Optional) Rating Risk Description: Risk Management: 24 Resp: Status: Stage: Recurrent: Due Date: Frequency: Overall Risk Overall Implementation Risk: Rating Moderate Risk Description: Overall risk is rated Moderate. The project already achieved most of its KPI targets as of January 23, 2014. The remaining uncommitted SSLDIP funds will be used to provide reconstruction support to disaster-affected LGUs and participating institutions. The main risks foreseen by LBP and the Task Team are: (1) the possible low demand for SSLDIP funds given the constrained fiscal capacity of affected LGUs. The National Government will provide grants to match LGU borrowing from SSLDIP; and (2) the lack of readiness or low technical capacity of disaster-affected LGUs to plan and implement infrastructure subprojects. The National Government will mobilize project preparation and supervision consultants to provide technical assistance to LGUs. The World Bank Task Team will likewise provide guidance to LBP during processing and supervision. 25