Document of The World Bank 70468 v1 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF PENSION AND SOCIAL PROTECTION ADMINISTRATION PROJECT IN THE AMOUNT OF SDR 7.55 MILLION (US$12.0 MILLION EQUIVALENT) GRANT H694-MV AND CREDIT 4611-MV TO THE REPUBLIC OF MALDIVES May 31, 2012 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 AF Additional Financing CMDA Capital Market Development Authority CSC Civil Service Commission DLI Disbursement Linked Indicators ERMD External Resources Management Division of MOFT GoM Government of Maldives HI Health Insurance IUFR Interim Unaudited Financial Reports MMA Maldives Monetary Authority MOHF Ministry of Health and Family MOFT Ministry of Finance and Treasury MPAO Maldives Pensions Administration Office MRPS Maldives Retirement Pension Scheme NSPA National Social Protection Agency PAS Public Accounting System PAD Public Accounting Division of MOFT RB Recognition Bond Vice President: Isabel M. Guerrero Country Director: Diarietou Gaye Acting Sector Director: Amit Dar Sector Manager: Pablo Gottret 2 MALDIVES PENSION AND SOCIAL PROTECTION ADMINISTRATION PROJECT CONTENTS A. DATA SHEET ........................................................................................................... 4 B. BACKGROUND AND RATIONALE FOR THIS RESTRUCTURING ............ 6 C. PROJECT IMPLEMENTATION STATUS .......................................................... 6 D. PROPOSED CHANGES .......................................................................................... 7 E. APPRAISAL SUMMARY ....................................................................................... 7 3 MALDIVES PENSION AND SOCIAL PROTECTION ADMINISTRATION PROJECT RESTRUCTURING A. Data Sheet Basic Information Country Director: Diarietou Gaye Sectors: Pension, Gen Pub Admn, Other Social Services Sector Manager/Director: Pablo Gottret Themes: Other Social Protection and Risk Management, Team Leader: Oleksiy Sluchynsky Social Safety Nets, Health System Performance, and Project ID: P104743 Admn and Civil Service Reforms Effectiveness Date: November 3, 2011 Environmental category: C Lending Instrument: Specific Investment Loan Expected Closing Date: 06/30/2015 Restructuring Type: Level Two Client Information Recipient: Republic of Maldives Responsible Agency: Maldives Pension Administration Office (MPAO) Contact Person: Mohammed Maniku, CEO Telephone No.: +960 3309908 Fax No.: +960 3307759 Email: ceo@pension.gov.mv AF Estimated Disbursements (Bank FY/US$m) FY 2012 2013 2014 2015 Annual 3.6 3.6 3.6 1.2 Cumulative 3.6 7.2 10.8 12.0 Project Development Objective and Description Project development objective: The development objective of the Project will not be changed and will be to support the implementation of the National Pension Act, to strengthen institutional capacity of key involved agencies (MPAO, MOHF, CMDA and MOFT), and to develop the processes and platforms required for the delivery of social protection programs. Project description: The project consists of the following components: Component A. Technical Assistance and Capacity building for implementation of the new pension program (legal and regulatory framework, institutions and systems of the new pension program) Component B. Public Awareness Campaign (increased awareness about the new pension program and public information campaign) Component C. Implementation of the Public Accounting System (developed links between the contributory pension scheme and the Public Accounting System) Component D. Systems of Administration of Health Insurance, Disability, and Targeted Assistance (defined and implemented systems of health insurance, disability benefit, and targeting) Component E. Pay-out of Pension Liabilities (reduced liabilities of the old public sector pension system) Safeguard and Exception to Policies Safeguard policies triggered: Environmental Assessment (OP/BP 4.01) [ ]Yes [x] No Natural Habitats (OP/BP 4.04) [ ]Yes [x] No Forests (OP/BP 4.36) [ ]Yes [x] No Pest Management (OP 4.09) [ ]Yes [x] No Physical Cultural Resources (OP/BP 4.11) [ ]Yes [x] No Indigenous Peoples (OP/BP 4.10) [ ]Yes [x] No Involuntary Resettlement (OP/BP 4.12) [ ]Yes [x] No Safety of Dams (OP/BP 4.37) [ ]Yes [x] No Projects on International Waterways (OP/BP 7.50) [ ]Yes [x] No Projects in Disputed Areas (OP/BP 7.60) [ ]Yes [x] No Does the project require any waivers of Bank policies? [ ]Yes [x] No Have these been endorsed or approved by Bank management? N/A 5 B. Background and Rationale for this Restructuring This Project Paper seeks approval to amend the Financial Agreement of the Maldives’s, Pension and Social Protection Administration Project (Grant H694-MV and Credit 4611-MV). There is no request for additional funds under this restructuring, no change in the disbursement categories, and no extension of the revised project closing date, which is scheduled as June 30, 2015. Changes focus on clarification of roles, responsibilities, and tasks in the implementation program as well as the revised definition of operating costs. This request has been prepared in response to a letter from the Government of Maldives (GoM) to IDA dated December 13, 2011 and findings and agreements reached during the Social Protection mission that visited Male on April 28-May 3, 2012. C. Project Implementation Status The status of legal covenants is as follows: 1. The Recipient shall no later than June 30, 2011 submit to the Association Achieved final terms of reference for the technical assessment required under Section IV. B. 1 (c) and Section V.3 of Schedule 2 to Financing Agreement. 2. The Recipient shall no later than August 15, 2011 appoint an independent consultant to carry out the technical assessment required under Section Achieved IV. B. 1 (c) and Section V.3 of Schedule 2 to Financing Agreement. 3. The Recipient shall no later than March 31, 2012 submit to the Ongoing Association a technical assessment report on the progress made by the Recipient in fulfilling the agreed actions referred to in Section IV.B.1(c)(v) of Schedule 2 to Financing Agreement. 4. The Recipient shall no later than September 30, 2011 submit to the Association final terms of reference for the audit to be prepared under Achieved Section II.B. 3 of Schedule 2 to Financing Agreement, and shall no later than December 31, 2011 appoint an independent auditor to carry out such audit The project has been progressing successfully. The latest ratings are as follows (as of February 24, 2012): Category Rating Progress towards achievement of PDO Satisfactory Overall Implementation Progress (IP) Moderately Satisfactory Financial Management Satisfactory Project Management Satisfactory Counterpart Funding Highly Satisfactory Procurement Satisfactory Monitoring and Evaluation Satisfactory D. Proposed Changes No changes in the PDO or results framework are envisioned 3. A revision of the definition of Incremental Operating Costs to support activities of implementation of the Public Accounting System (PAS) by allowing incentive allowances to a small group of the Civil Servants working on core activities of PAS implementation as part of eligible expenditures, subject to the prior approval by the World Bank. E. Appraisal Summary The proposed changes are in line with the economic analysis of the original project. Specifically, the goal is to avoid duplication and encourage integration of functions of identification across all social programs. This latest restructuring supports this objective. Institutional arrangements, other than the proposed change, and results monitoring will remain the same. It was determined that the salary top-ups of the civil servants could be paid under the CFP for the Maldives (dated June 19, 2006) by a letter issued from CMU on April 25, 2011, although it also stated that such matter is to be considered on case-by-case basis. The cost of the proposed salary top-ups is not expected to produce additional significant fiscal burden and is estimated at around $100,000 annually to be funded from the current allocation. Financial Management arrangements The latest Financial Management review of the project was conducted in February 2012, and the overall performance of financial management of the PMU was rated as - Satisfactory. In line 7 with the revision in the implementation arrangements, the FM arrangements of the project are handled by MPAO, and the MPAO is considered to have sufficient capacity to carry-out the financial management aspects of the project. The PMU located at the MPAO would continue to be responsible for all FM activities under all components of the project, including payments of the incentive allowances to the civil servants. MPAO is authorized by the Government for this purpose to operate advances from the Designated Account. MPAO would be required to submit to the Bank for approval a proposal for incentive allowances indicating terms of such payments within two months of signing the amendment letter. No payments would be made prior to signing the amendment letter and no corresponding payment can be reimbursed without a NOL from the Bank to such proposal. NOL shall be provided for a limited period not to exceed 6 months. Procurement arrangements The latest procurement review was conducted in February 2012 and its performance was rated as Satisfactory. The Procurement Officer in the Project Management Unit (PMU) has gained substantial experience during the last two years. The PMU would remain the procurement focal point for implementation of all procurement activities under the project on behalf of all the implementing agencies. The PMU will update the Procurement Plan and will seek Bank’s concurrence prior to its implementation. Policy Exceptions and Readiness There are no exceptions to Bank policies. Readiness: The GOM has shown a high level of commitment to the program of the reform so far as evidenced by meeting key covenants and achievement of the key targets of the project indicators. 8