Public Disclosure Copy The World Bank Implementation Status & Results Report BOOSTING HUMAN CAPITAL AND PRODUCTIVITY DEVELOPMENT POLICY FINANCING WITH A DEFERRED DRAWDOWN OPTION (P156858) BOOSTING HUMAN CAPITAL AND PRODUCTIVITY DEVELOPMENT POLICY FINANCING WITH A DEFERRED DRAWDOWN OPTION (P156858) LATIN AMERICA AND CARIBBEAN | Peru | Macroeconomics, Trade and Investment Global Practice | IBRD/IDA | Development Policy Lending | FY 2016 | Seq No: 2 | ARCHIVED on 17-Jun-2019 | ISR36833 | Implementing Agencies: Ministerio de Economia y Finanzas, Ministerio de Economia y Finanzas Key Dates Key Project Dates Bank Approval Date:11-Feb-2016 Effectiveness Date:28-Apr-2016 Planned Mid Term Review Date:28-Feb-2020 Actual Mid-Term Review Date:-- Original Closing Date:18-Feb-2019 Revised Closing Date:18-Feb-2022 Program Development Objectives Program Development Objective (from Program Document) Project Development Objective (Note: will be disclosed in the MOS) The proposed Boosting Productivity for Growth Development PolicyFinancing with a Deferred Drawdown Option (DPF-DDO) aims to support Peru’s efforts to foster productivity growth under a more challenging external environment. Lower export demand, including from China, worsening terms of trade, and the prospects of higher borrowing costs is affecting a large number of emerging economies. In this context, a larger portion of economic growth in Peru will have to come from further increasing productivity. The proposed DPF-DDO supports measures targeting key productivity constraints by enhancing the quality of human capital and fostering competition pressures and trade to boost firms’ productivity. Board Schedule Comments PHRPDODEL Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO  Satisfactory  Satisfactory Overall Implementation Progress (IP)  Moderately Satisfactory  Moderately Satisfactory Overall Risk Rating  Moderate  Moderate Implementation Status and Key Decisions The implementation of the Program remains broadly on track and the results have been largely achieved. The macroeconomic policy framework continues to be adequate. The extension of the DDO for additional three years (until February 2022) has prompted revisions to the Result Matrix to ensure continued monitoring of the progress achieved through the DDO-supported reforms. First, the timeframe of the DPF Results Matrix was extended by three years, i.e. until the end of 2020 (compared to the end of 2017 as in the original Results Matrix). Second, the new target values were discussed and agreed with the Government to measure the progress of reform implementation. Finally, to strengthen the monitoring framework and reflect better data availability for several policy actions, the replacement indicators were identified. 6/17/2019 Page 1 of 9 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report BOOSTING HUMAN CAPITAL AND PRODUCTIVITY DEVELOPMENT POLICY FINANCING WITH A DEFERRED DRAWDOWN OPTION (P156858) Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance  --  Moderate  Moderate Macroeconomic  --  Moderate  Moderate Sector Strategies and Policies  --  Moderate  Moderate Technical Design of Project or Program  --  Low  Low Institutional Capacity for Implementation and Sustainability  --  Moderate  Moderate Fiduciary  --  Low  Low Environment and Social  --  Low  Low Stakeholders  --  Moderate  Moderate Other  --  --  -- Overall  --  Moderate  Moderate Results Results Indicators PHINDIRITBL  UPDATED TARGET: Increase the share of programmed merit-based promotions and appointments for teachers and school principals within the Teaching Career outside Lima and Callao (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 60.00 84.00 81.00 80.00 Date 31-Dec-2014 30-Nov-2017 31-Dec-2017 31-Dec-2020 Comments The original result indicator was met. The share of programmed merit-based promotions and appointments for teachers and school principals within the Teaching Career outside Lima and Callao increased from 60 percent in 2014 to 81 percent in 2017. The share of appointed teachers and school principals within the Teaching Career outside Lima and Callao amounted to 78 percent in 2017 and the share of promoted teachers and school principals to 82 percent. The new result indicator for merit-based teaching career should continue emphasizing the merit-based promotion appointment of teachers in disadvantaged areas in order to ensure the sustainability of the reform. As this indicator relates to a geographical dimension and approximately two thirds of the population reside outside Lima, just maintaining the current proportion of appointments and promotions outside Lima will be challenging and will continue increasing the relative quality of teachers in other zones of Peru. The result indicator will be: Increase the share of programmed merit-based promotions and appointments for teachers and school principals within the Teaching Career outside Lima and Callao from 60% in 2014 to 80% in 2020. 6/17/2019 Page 2 of 9 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report BOOSTING HUMAN CAPITAL AND PRODUCTIVITY DEVELOPMENT POLICY FINANCING WITH A DEFERRED DRAWDOWN OPTION (P156858) PHINDIRITBL  REMOVED: Increase the number of secondary schools that implement the new school-day model (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 2,001.00 2,001.00 1,500.00 Date 31-Dec-2014 30-Nov-2017 31-Dec-2017 31-Dec-2017 Comments The original result indicator was exceeded. At the end of 2017, there were 2,001 schools taking part of the extended school-day program, largely exceeding the original target indicator. This number remained unchanged in 2018. Following the extension of the DPF DDO series this indicator will not be maintained. Instead, this area of reforms could directly target an improvement in the student’s learning outcomes, which is the ultimate objective of DDO-supported prior action. Therefore, the new result indicator will be: Increase in 3 pp in the proportion of students that attain the level 2 or superior for Sciences, Math and Reading between 2015 and 2018, according to the results of the PISA evaluation. Baseline 2015: 41.5% in Science, 33.9% for Math and 46.1% for Reading. Target 2018: 44.5% in Science, 36.9% in Math and 49.1% in Reading. PHINDIRITBL and include learning outcomes in the stated targets of the performance-based financial incentive mechanism for subnational entities (Percentage, Custom Supplement) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 100.00 100.00 100.00 6/17/2019 Page 3 of 9 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report BOOSTING HUMAN CAPITAL AND PRODUCTIVITY DEVELOPMENT POLICY FINANCING WITH A DEFERRED DRAWDOWN OPTION (P156858) PHINDIRITBL REMOVED: Increase private sector investment in the construction and/or maintenance of public schools (Amount(USD), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 125,000,000.00 78,000,000.00 150,000,000.00 Date 31-Dec-2014 30-Nov-2017 31-Dec-2017 31-Dec-2017 Comments The result indicator was not met but an acceleration of the participation of the private sector is expected. The total investment committed through the OxI mechanism by the end of 2017 represented only US$ 78 million, below the US$ 150 million targeted. Delays in the initial preparation of projects is the main factor that explains the gap. However, since late 2016, the signing of agreements with private companies accelerated and continued in 2017. Even there were not agreements signed in 2018, 15 agreements are expected to be closed by 2019. Following the DPF DDO extension, the result indicator was clarified and recorded as a new indicator. The result indicator for this policy area was improved to specify ambiguities related to concepts like budgeted/ committed/ executed as well as stock vs. flow concepts. This reworded result indicator will be: Increase private sector investment (commitments through signed contracts through works for taxes and PPPs) in the construction and/or maintenance of public schools; 0 in 2014; US$300 million between 2015 and 2020. Given the amended wording, the current indicator will be removed from the Results Matrix and will no longer be monitored. PHINDIRITBL UPDATED TARGET: Increase in the number of universities and university programs under revision to be licensed (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 100 percent Value 0 universities -- 28 universities universities Date 31-Dec-2014 30-Nov-2017 31-Dec-2017 31-Dec-2020 Comments The original result indicator was exceeded. By the end of 2017, SUNEDU accredited 28 universities (7 public and 21 private) and other 117 were under revision to be licensed, for a total 145 universities either licensed or under revision. This exceeds the original target indicator of 20 universities and university programs. During 2018, additional 31 universities were accredited, bringing the number of accredited entities to 59 (25 public and 24 private). By the end of 2019 the process of accreditation should finish. The new result indicator will reflect the completion of the accreditation cycle. The result indicator will be reformulated to the following: The share of licensed universities increases from 0% in 2014 to 100% in 2020. 6/17/2019 Page 4 of 9 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report BOOSTING HUMAN CAPITAL AND PRODUCTIVITY DEVELOPMENT POLICY FINANCING WITH A DEFERRED DRAWDOWN OPTION (P156858) PHINDIRITBL UPDATED TARGET: Increase in the number of new firms incorporated online in the System of Online Registration (Sistema de Intermediación Digital-SID) (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 10,894.00 18,044.00 40,000.00 Date 31-Dec-2014 30-Sep-2017 31-Dec-2017 31-Dec-2020 Comments The original result indicator was met. The number of new firms incorporated online in the System of Online Registration (Sistema de Intermediación Digital-SID) amounted to 18,044 by December 2017, far exceeding the target number of online registrations in the result indicator (5,000). The new result indicator agreed with the authorities is the following: Number of new firms incorporated online in the System of Online Registration (Sistema de Intermediación Digital-SID); 0 before October 2014; 40,000 between October 2014 and 2020. PHINDIRITBL  UPDATED TARGET: Increase in the number of bureaucratic barriers voluntarily removed from the legal framework by entities of the Public Administration due to an action of INDECOPI (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 91.00 1,460.00 4,348.00 6,000.00 Date 31-Dec-2013 31-May-2017 31-Dec-2017 31-Dec-2020 Comments The original result indicator was exceeded. The number of bureaucratic barriers voluntarily removed from the legal framework by entities of the Public Administration due to an action of INDECOPI amounted to 4,348 by December 2017, far exceeding the envisioned target for the result indicator of 1,000. The new result indicator agreed with the authorities is the following: Number of bureaucratic barriers voluntarily removed from the legal framework by entities of the Public Administration due to an action of INDECOPI; 91 in 2013; 6,000 between 2014 and 2020. PHINDIRITBL  UPDATED TARGET: Reduction in the average amount of monthly withholdings (which would increase liquidity for firms) due to the system (Amount(USD), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 373,566,667.00 154,000,000.00 160,000,000.00 Date 31-Dec-2014 30-Sep-2017 31-Dec-2017 31-Dec-2020 Comments 6/17/2019 Page 5 of 9 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report BOOSTING HUMAN CAPITAL AND PRODUCTIVITY DEVELOPMENT POLICY FINANCING WITH A DEFERRED DRAWDOWN OPTION (P156858) Result indicator was met: Even with the recalibration of the program, monthly withholdings (which would increase liquidity for firms) reduced by US$ 154 million, far exceeding the US$ 75 million original target set by the Program. New result indicator: The new result indicator should still reflect that even with the modifications to the regime, the tax authority maintains the goal of improving liquidity for firms. This will be: Reduction in the average amount of monthly withholdings (which would increase liquidity for firms) due to the system by US$ 180 million from 2014 to 2020. PHINDIRITBL  REMOVED: Increase in the average recovery rate of creditors on insolvencies (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 28.50 30.00 29.80 36.00 Date 31-Dec-2014 31-Dec-2017 31-Dec-2017 31-Dec-2018 Comments The original result indicator was not met. Despite the institutional reforms, the average recovery rate of creditors on insolvencies amounted to 29.8 percent according to Doing Business 2019, below the envisioned target rate of 36 percent in the result indicator. According to the authorities, the DB indicator related to recovery rate is too broad to measure the progress of reforms supported by the DDO. The indicator is subject to many factors exogenous to the reforms, for example companies are not required to use certified liquidators and administrators, they also are not obliged to use online auction mechanisms. Therefore, the Government has suggested to use alternative measures, for example related to the increasing use of electronic auctions. Following the DPF DDO extension, the new result indicator agreed with the authorities is the following: Increase the number of electronic auctions for asset foreclosures from 0 before 2015 to 3,500 between 2015 and 2020. PHINDIRITBL  REMOVED: Decline in the time to import (by 10% in 2017 compared to 2014) (Hours, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 72.00 72.00 72.00 65.00 Date 31-Dec-2014 31-Dec-2017 31-Dec-2017 31-Dec-2017 Comments The result indicator was not met. In spite the progress in implementing customs reforms, the time to import as measured by the Doing Business data has not changed since 2014. The Peruvian Customs Authorities apply an alternative indicator, called TTLM (tiempo total de liberación de mercancías), which measures the effective time from the arrival of the product to its release from customs. This alternative indicator has declined from 155 hours in 2014 to approximately 99 hours by 2017. Following the DPF DDO extension, a new result indicator agreed with the authorities is the following: The time to import (measured as TTLM - total time to release good imports) declines by 40% in 2020 compared to 2014. Baseline: 155 hours in 2014, monthly average. 6/17/2019 Page 6 of 9 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report BOOSTING HUMAN CAPITAL AND PRODUCTIVITY DEVELOPMENT POLICY FINANCING WITH A DEFERRED DRAWDOWN OPTION (P156858) Target: 93 hours in 2020, monthly average. PHINDIRITBL  UPDATED TARGET: Increase in the number of Conformity Assessment Bodies for products, processes, and management systems (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 115.00 169.00 172.00 190.00 Date 31-Dec-2014 30-Nov-2017 31-Dec-2017 31-Dec-2020 Comments The result indicator was exceeded. The number of accredited Conformity Assessment Bodies for products, processes, and management systems amounted to 172 by December 2017, exceeding the envisioned target of the result indicator of 140. Following the DPF DDO mission, the result indicator was updated and agreed with the authorities: Increase in the number of Conformity Assessment Bodies for products, processes, and management systems by 65% from 2014 to 2020 (baseline: 115 in 2014, target: 190 in 2020). PHINDIRITBL NEW INDICATOR: Increase (by 3 pp) in the proportion of students that attain the level 2 or superior for Sciences, Math and Reading (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 44.5% in 41.5% in Science, 33.9% Science, 36.9% Value for Math and 46.1% for -- Not available in Math and Reading 49.1% in Reading Date 31-Dec-2015 -- -- 31-Dec-2020 Comments This is a new indicator which was added following the extension of the DPF DDO series. It has replaced the indicator (Increase the number of secondary schools that implement the new school-day model from 0 in 2014 to 1500 in 2017; and include learning outcomes in the stated targets of the performance-based financial incentive mechanism for subnational entities: baseline: 0% in 2014, target: 100% in 2017.), which will no longer be monitored. The new indicator will measure Peru's progress in improving educational outcomes by comparing results of PISA 2015 and PISA 2018. 6/17/2019 Page 7 of 9 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report BOOSTING HUMAN CAPITAL AND PRODUCTIVITY DEVELOPMENT POLICY FINANCING WITH A DEFERRED DRAWDOWN OPTION (P156858) PHINDIRITBL NEW INDICATOR: Increase private sector investment (commitments through signed contracts through works for taxes and PPPs) in the construction and/or maintenance of public schools (Amount(USD), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- -- 300,000,000.00 Date 31-Dec-2014 -- -- 31-Dec-2020 Comments This is a newly worded indicator which was amended following the extension of the DPF DDO series. It has replaced the indicator (Increase private sector investment in the construction and/or maintenance of public schools from 0 in 2014 to US$150 million in 2017), which will no longer be monitored and was removed from the Results Matrix. PHINDIRITBL  NEW INDICATOR: Increase the number of electronic auctions for asset foreclosures (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- -- 3,500.00 Date 31-Dec-2015 -- -- 31-Dec-2020 Comments This is a new indicator which was added following the extension of the DPF DDO series. It has replaced the indicator (Increase in the average recovery rate of creditors on insolvencies from 28.5% in 2014 to 36% in 2018), which will no longer be monitored. 6/17/2019 Page 8 of 9 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report BOOSTING HUMAN CAPITAL AND PRODUCTIVITY DEVELOPMENT POLICY FINANCING WITH A DEFERRED DRAWDOWN OPTION (P156858) PHINDIRITBL NEW INDICATOR: Reduce the time to import (measured as TTLM - total time to release good imports) (decline of 40% by 2020 compared to 2014) (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 93 hours in 155 hours in 2014, monthly Value -- -- 2020, monthly average average Date 31-Dec-2014 -- -- 31-Dec-2020 Overall Comments Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed Disbursed P156858 IBRD-85830 Effective USD 1,250.00 1,250.00 0.00 345.68 904.32 28% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P156858 IBRD-85830 Effective 11-Feb-2016 04-Apr-2016 28-Apr-2016 18-Feb-2019 18-Feb-2022 Tranches Restructuring History There has been no restructuring to date. Related Operations There are no related projects. 6/17/2019 Page 9 of 9 Public Disclosure Copy