The World Bank Skills Development Project (P132698) REPORT NO.: RES36161 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SKILLS DEVELOPMENT PROJECT APPROVED ON JUNE 20, 2014 TO DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA EDUCATION GLOBAL PRACTICE SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Idah Z. Pswarayi-Riddihough Global Practice Director: Jaime Saavedra Chanduvi Regional Director: Lynne D. Sherburne-Benz Practice Manager/Manager: Mario Cristian Aedo Inostroza Task Team Leader: Elizabeth Ninan Dulvy, Kinley Clemens Salmon The World Bank Skills Development Project (P132698) ABBREVIATIONS AND ACRONYMS ERD Department of External Resources GoSL Government of Sri Lanka MTR Mid-Term Review NPD National Planning Department PDO Project Development Objective SORT Systematic Operations Risk-Rating Tool SSDP Skills Sector Development Program TVET Technical Vocational Education Training The World Bank Skills Development Project (P132698) BASIC DATA Product Information Project ID Financing Instrument P132698 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 20-Jun-2014 31-Dec-2019 Organizations Borrower Responsible Agency Ministry of Industry & Commerce, Resettlement of Ministry Of Finance Protracted Displaced Persons, Co-operative DVTSD Project Development Objective (PDO) Original PDO The Project Development Objective is to expand the supply of skilled and employable workers by increasing access to quality and labor market relevant training programs. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-55160 20-Jun-2014 12-Sep-2014 23-Oct-2014 31-Dec-2019 21.70 0 19.75 IDA-55170 20-Jun-2014 12-Sep-2014 23-Oct-2014 31-Dec-2019 79.80 47.81 23.90 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Skills Development Project (P132698) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. The Skills Development Project was approved on June 20, 2014 and became effective October 23, 2014, for a total project cost of US$101.5 million. The closing date of the project is December 31, 2019. 2. The Project Development Objective (PDO) is to expand the supply of skilled and employable workers by increasing access to quality and labor market relevant training programs. Progress towards achievement of development objective is currently rated unsatisfactory. As per the table below, only one indicator on improving access is potentially on track to be achieved by the end of the project. The second indicator on the completion rate of trainees, which is a proxy measure for improved quality, is unlikely to be met by the close of the project. The third and the fourth indicators serve to measure the labor market relevance and quality of training. The third PDO indicator dropped below baseline levels and the fourth indicator has barely moved since baseline. There are eight of 14 intermediate indicators that will not be met by project closing, which are critical for the project to be deemed a success. Outcome Indicator Baseline Status End of project Target 1. Number of trainees enrolled T: 148,131 T: 754,806 T: 827,241 in public and private training Male: 81,047 Male: 435,926 Male: 452,609 institutions (number) Female: 67,084 Female: 318,880 Female: 374,632 (cumulative 2017) (cumulative) 2. Completion rate of trainees Total: 77% Total: 65.7% Total: 81% enrolled in public Male: 74% Male: 63.9% Male: 78% institutions (percent) Female: 81% Female: 68.1% Female: 84% (based on 2017 data) 3. Average earnings of TVET Total: 1.08 Total: 1.03 Total: 1.12 graduates relative to Male: 1.00 Male: 0.99 Male: 1.04 earnings of GCE O-level Female: 1.14 Female: 1.08 Female: 1.16 graduates (ratio) 4. Employer Satisfaction Index 43% 43.2% 55% (percent) The World Bank Skills Development Project (P132698) 3. The weak performance on PDO and intermediate indicators was noted in the Mid-Term Review (MTR) of the project in November 2017, and at the time, there was an agreement between the Government of Sri Lanka (GoSL) and the World Bank to restructure the project to be able to meet its development objectives. At MTR, the project rating on progress towards development objective was downgraded from moderately satisfactory to moderately unsatisfactory. The first restructuring mission was fielded in February 2018, followed by four follow-up missions in May 2018, June 2018, August 2018, and February/March 2019. The Aide Memoires from these missions document an agreed set of actions and timeframes within which they were to be achieved by the implementing entity, but most of these actions were subsequently not met. The main bottlenecks in achieving these actions are threefold. 4. First, progress was affected by multiple changes to the institutional structure of the implementing entity. Since the restructuring process began, the Skills Sector Development Program (SSDP) has been moved under the umbrella of three different Ministries: (i) the Ministry of Skills Development & Vocational Training; (ii) the Ministry of Science, Technology, Research, Skills Development & Vocational Training and Kandyan Heritage; and (iii) the Ministry of Industry & Commerce, Resettlement of Protracted Displaced Persons, Co-operative Development and Vocational Training & Skills Development. While the umbrella Ministry and leadership has changed several times under the project, the project implementing unit, the SSDD, has remained the same. Second, and related to the first point, there have been multiple changes in the leadership responsible for the SSDP, which has resulted in a lack of clarity in the direction of the restructuring. As a result, three different restructuring requests were received from the GoSL in June 2018, September 2018 and July 2019. Lastly, the capacity of the SSDP to meet the actions agreed on time was limited and despite having access to the technical assistance component of the project, additional capacity was not hired to deliver on the restructuring. II. DESCRIPTION OF PROPOSED CHANGES 5. Given the delays in the restructuring of over one year, the project ratings on progress towards development objectives and implementation progress were gradually downgraded to unsatisfactory. The Ministry of Finance recognizing these shortcomings and delays in the project restructuring have requested the Bank to cancel most of the remaining funds- US$42.99 million (SDR 31.38 million)- under the project and recommit these funds to other projects in Sri Lanka. This amount is slightly lower than the amount requested in the Borrower’s restructuring request letter due to the SDR/USD exchange rate. The project will close, as planned, on 31 December 2019. III. SUMMARY OF CHANGES Changed Not Changed Implementing Agency ✔ The World Bank Skills Development Project (P132698) Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Institutional Arrangements ✔ Implementation Schedule ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Loan Closing Date(s) ✔ Disbursements Arrangements ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_IA_TABLE IMPLEMENTING AGENCY Implementing Agency Name Type Action Ministry of Skills Development and Implementing Marked for Deletion Vocational Training Agency Ministry of Industry & Commerce, No Change Implementing Resettlement of Protracted Displaced Agency Persons, Co-operative DVTSD The World Bank Skills Development Project (P132698) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Innovation, Results Monitoring and Capacity Building Program Support to the Skills 93.60 Sector Development Program Innovation, Results Monitoring 7.90 and Capacity Building TOTAL 0.00 101.50 OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE CANCELLATIONS Value Reason Current Cancellation New Ln/Cr/Tf Status Currency Date of for Amount Amount Amount Cancellation Cancellation BORROWER' S REQUEST IDA-55160- Effectiv XDR 14,100,000.00 14,100,000.00 05-Sep-2019 0.00 FOR 001 e COUNTRY REASONS BORROWER' Disburs S REQUEST IDA-55170- ing&Re XDR 51,600,000.00 17,280,000.01 05-Sep-2019 34,319,999.99 FOR 001 paying COUNTRY REASONS OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-55160-001 | Currency: XDR iLap Category Sequence No: 1(C)V Current Expenditure Category: EEP-Prt 1of the Project-DLR 3 YR 5 1,560,000.00 0.00 0.00 100.00 100.00 The World Bank Skills Development Project (P132698) iLap Category Sequence No: 1(D)V Current Expenditure Category: EEP-Prt 1 of the Project-DLR 4 YR 5 1,560,000.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(E)V Current Expenditure Category: EEP-Prt 1of the Project-DLR 5 YR 5 1,560,000.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(F)V Current Expenditure Category: EEP-Prt 1of the Project-DLR 6 YR 5 1,560,000.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(G)V Current Expenditure Category: EEP-Prt 1of the Project-DLR 7 YR 5 1,560,000.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(H)V Current Expenditure Category: EEP-Prt 1of the Project-DLR 4 YR 1 1,560,000.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: GDS,NCS,CS,TRG,WKSHPS,IOC 4,740,000.00 0.00 0.00 100.00 100.00 Total 14,100,000.00 0.00 0.00 IDA-55170-001 | Currency: XDR iLap Category Sequence No: 1(A) I Current Expenditure Category: EEP-Prt 1 of the Project-DLR 1 YR 1 0.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(A) II Current Expenditure Category: EEP-Prt 1of the Project-DLR 1 YR 2 1,560,000.00 1,560,000.00 1,560,000.00 100.00 100.00 iLap Category Sequence No: 1(A) III Current Expenditure Category: EEP-Prt 1of the Project-DLR 1 YR 3 The World Bank Skills Development Project (P132698) 1,560,000.00 1,560,000.01 1,560,000.01 100.00 100.00 iLap Category Sequence No: 1(A) IV Current Expenditure Category: EEP-Prt 1of the Project-DLR 1 YR 4 1,560,000.00 1,560,000.01 1,560,000.01 100.00 100.00 iLap Category Sequence No: 1(A) V Current Expenditure Category: EEP-Prt 1of the Project-DLR 1 YR 5 1,560,000.00 1,560,000.00 1,560,000.00 100.00 100.00 iLap Category Sequence No: 1(B) I Current Expenditure Category: EEP-Prt 1of the Project-DLR 2 YR 1 1,560,000.00 1,560,000.00 1,560,000.00 100.00 100.00 iLap Category Sequence No: 1(B) II Current Expenditure Category: EEP-Prt 1of the Project-DLR 2 YR 2 1,560,000.00 1,560,000.00 1,560,000.00 100.00 100.00 iLap Category Sequence No: 1(B)III Current Expenditure Category: EEP-Prt 1of the Project-DLR 2 YR 3 1,560,000.00 1,560,000.01 1,560,000.01 100.00 100.00 iLap Category Sequence No: 1(B)IV Current Expenditure Category: EEP-Prt 1of the Project-DLR 2 YR 4 1,560,000.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(B)V Current Expenditure Category: EEP-Prt 1of the Project-DLR 2 YR 5 1,560,000.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(C) II Current Expenditure Category: EEP-Prt 1of the Project-DLR 3 YR 2 1,560,000.00 1,560,000.00 1,560,000.00 100.00 100.00 iLap Category Sequence No: 1(C)I Current Expenditure Category: EEP-Prt 1of the Project-DLR 3 YR 1 0.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(C)III Current Expenditure Category: EEP-Prt 1of the Project-DLR 3 YR 3 The World Bank Skills Development Project (P132698) 1,560,000.00 1,559,999.99 1,559,999.99 100.00 100.00 iLap Category Sequence No: 1(C)IV Current Expenditure Category: EEP-Prt 1of the Project-DLR 3 YR 4 1,560,000.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(C)V Current Expenditure Category: EEP-Prt 1of the Project-DLR 3 YR 5 0.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(D) II Current Expenditure Category: EEP-Prt 1of the Project-DLR 4 YR 2 1,560,000.00 1,560,000.00 1,560,000.00 100.00 100.00 iLap Category Sequence No: 1(D) V Current Expenditure Category: EEP-Prt 1of the Project-DLR 4 YR 5 0.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(D)I Current Expenditure Category: EEP-Prt 1of the Project-DLR 4 YR 1 1,560,000.00 1,560,000.00 1,560,000.00 100.00 100.00 iLap Category Sequence No: 1(D)III Current Expenditure Category: EEP-Prt 1of the Project-DLR 4 YR 3 1,560,000.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(D)IV Current Expenditure Category: EEP-Prt 1of the Project-DLR 4 YR 4 1,560,000.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(E) I Current Expenditure Category: EEP-Prt 1of the Project-DLR 5 YR 1 0.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(E) II Current Expenditure Category: EEP-Prt 1of the Project-DLR 5 YR 2 1,560,000.00 1,560,000.00 1,560,000.00 100.00 100.00 iLap Category Sequence No: 1(E)III Current Expenditure Category: EEP-Prt 1of the Project-DLR 5 YR 3 The World Bank Skills Development Project (P132698) 1,560,000.00 1,560,000.00 1,560,000.00 100.00 100.00 iLap Category Sequence No: 1(E)IV Current Expenditure Category: EEP-Prt 1of the Project-DLR 5 YR 4 1,560,000.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(E)V Current Expenditure Category: EEP-Prt 1of the Project-DLR 5 YR 5 0.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(F) I Current Expenditure Category: EEP-Prt 1of the Project-DLR 6 YR 1 1,560,000.00 1,560,000.00 1,560,000.00 100.00 100.00 iLap Category Sequence No: 1(F) II Current Expenditure Category: EEP-Prt 1of the Project-DLR 6 YR 2 1,560,000.00 1,560,000.00 1,560,000.00 100.00 100.00 iLap Category Sequence No: 1(F)III Current Expenditure Category: EEP-Prt 1of the Project-DLR 6 YR 3 1,560,000.00 1,560,000.00 1,560,000.00 100.00 100.00 iLap Category Sequence No: 1(F)IV Current Expenditure Category: EEP-Prt 1of the Project-DLR 6 YR 4 1,560,000.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(F)V Current Expenditure Category: EEP-Prt 1of the Project-DLR 6 YR 5 0.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(G) I Current Expenditure Category: EEP-Prt 1of the Project-DLR 7 YR 1 0.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(G) II Current Expenditure Category: EEP-Prt 1of the Project-DLR 7 YR 2 1,560,000.00 1,560,000.00 1,560,000.00 100.00 100.00 iLap Category Sequence No: 1(G)III Current Expenditure Category: EEP-Prt 1of the Project-DLR 7 YR 3 The World Bank Skills Development Project (P132698) 1,560,000.00 1,560,000.01 1,560,000.01 100.00 100.00 iLap Category Sequence No: 1(G)IV Current Expenditure Category: EEP-Prt 1of the Project-DLR 7 YR 4 1,560,000.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(G)V Current Expenditure Category: EEP-Prt 1of the Project-DLR 7 YR 5 0.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(H) II Current Expenditure Category: EEP-Prt 1of the Project-DLR 8 YR 2 1,560,000.00 1,559,999.97 1,559,999.97 100.00 100.00 iLap Category Sequence No: 1(H)1 Current Expenditure Category: EEP-Prt 1of the Project-DLR 8 YR 1 1,560,000.00 1,560,000.00 1,560,000.00 100.00 100.00 iLap Category Sequence No: 1(H)III Current Expenditure Category: EEP-Prt 1of the Project-DLR 8 YR 3 1,560,000.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(H)IV Current Expenditure Category: EEP-Prt 1of the Project-DLR 8 YR 4 1,560,000.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(H)V Current Expenditure Category: EEP-Prt 1of the Project-DLR 8 YR 5 0.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(I)I Current Expenditure Category: EEP-Prt 1of the Project-DLR 9 YR 1 0.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(I)II Current Expenditure Category: EEP-Prt 1of the Project-DLR 9 YR 2 1,560,000.00 1,560,000.00 1,560,000.00 100.00 100.00 iLap Category Sequence No: 1(I)III Current Expenditure Category: EEP-Prt 1of the Project-DLR 9 YR 3 The World Bank Skills Development Project (P132698) 1,560,000.00 1,559,999.99 1,559,999.99 100.00 100.00 iLap Category Sequence No: 1(I)IV Current Expenditure Category: EEP-Prt 1of the Project-DLR 9 YR 4 1,560,000.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 1(I)V Current Expenditure Category: EEP-Prt 1of the Project-DLR 9 YR 5 0.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: GDS,NCS,CS,TRG,WKSHP,IOC 120,000.00 0.00 0.00 100.00 100.00 Total 51,600,000.00 34,319,999.99 34,319,999.99 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2014 0.00 0.00 2015 6,579,658.80 6,579,659.00 2016 10,976,160.00 15,289,498.00 2017 9,944,182.00 19,402,282.00 2018 40,000,000.00 4,383,350.00 2019 34,000,000.00 2,157,230.00 2020 0.00 0.00 OPS_DETAILEDCHANGES_SORT_TABLE SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating at Approval Current Rating Political and Governance  Substantial Macroeconomic  Moderate The World Bank Skills Development Project (P132698) Sector Strategies and Policies  Moderate Technical Design of Project or Program  Substantial Institutional Capacity for Implementation and  High Sustainability Fiduciary  Substantial Environment and Social  Moderate Stakeholders  Substantial Other Overall  High .