The World Bank DRC Urban Development Project FY13 (P129713) REPORT NO.: RES35961 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING9 OF THE DRC URBAN DEVELOPMENT PROJECT APPROVED ON MAY 9, 2013 TO THE DEMOCRATIC REPUBLIC OF CONGO URBAN, RESILIENCE AND LAND GLOBAL PRACTICE AFRICA REGION Regional Vice President: Hafez M. H. Ghanem Country Director: Jean-Christophe Carret Regional Director: Ede Jorge Ijjasz-Vasquez Practice Manager/Manager: Sylvie Debomy Task Team Leader: Christian Vang Eghoff, Patrice Joachim Nirina Rakotoniaina The World Bank DRC Urban Development Project FY13 (P129713) ABBREVIATIONS AND ACRONYMS CER Contingency Emergency Response CERC Contingency Emergency Response Component DRC Democratic Republic of Congo PDO Project Development Objective PDSS Health System Strengthening for Better Maternal and Child Health Results Project UDP Urban Development Project The World Bank DRC Urban Development Project FY13 (P129713) BASIC DATA Product Information Project ID Financing Instrument P129713 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 09-May-2013 30-Nov-2022 Organizations Borrower Responsible Agency Ministry of Finance Ministry of Urban Planning and Housing Project Development Objective (PDO) Original PDO To improve access to basic services and strengthen urban and municipal management of the targeted cities. Current PDO To improve access to basic services and infrastructure and strengthen urban and municipal management of the targeted cities. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-60340 04-May-2017 13-Jun-2017 07-May-2018 30-Nov-2022 90.00 6.34 85.48 IDA-H8420 09-May-2013 08-Jun-2013 06-Sep-2013 30-Nov-2022 100.00 66.12 27.34 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank DRC Urban Development Project FY13 (P129713) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Implementation status 1. The Project was approved by the Board of Directors on May 9, 2013, in the amount of $100 million. It was the first urban sector intervention in the Democratic Republic of Congo (DRC) and followed a series of emergency projects which had focused on reconstruction of physical infrastructure assets after the 2002 peace agreement. The project became effective on September 6, 2013, and investments under Component 1 (Primary Infrastructure) were launched shortly after effectiveness. Activities under Component 2 (Urban Governance) advanced more slowly, but with project cities making progress to achieve several performance indicators evaluated through an annual performance evaluation. 2. A project restructuring was approved on June 9, 2016 to (i) revise the Results Framework in recognition of difficulties in establishing an urban sector database through government structures and slower than expected advancement on the Government’s decentralization agenda, (ii) make minor changes to the performance evaluation instrument for cities and to component activities, and (iii) reallocate funds between disbursement categories. Additional Financing in the amount of $90 million was approved on May 4, 2017 to scale up the Project and include three additional cities to the Project, for a total of nine cities, and extend the Project closing date from July 31, 2019 to November 30, 2022. 3. To date, over 202,000 people have benefited from infrastructure services and training due to the project, against a target of 1,358,000. Also, project cities are making progress on achievement of several performance indicators. Investments under Component 1 of the initial project have been completed and investments under Component 1 of the additional financing have been launched. Results under the Urban Governance Component have been delayed, but successes to date include improved accounting practices of several cities, which has allowed the Supreme Audit Institution to audit municipal accounts for the first time ever. The 2019 performance evaluation of project cities has been finalized with strong inputs from civil servants of the Ministry of Decentralization and Institutional Reform, laying the groundwork for mainstreaming the project’s performance evaluation mechanism into the Government’s overall decentralization strategy. The Government has budgeted in the 2020 budget law and for the first time ever an amount for the Equalization Fund ($624 million). The Fund is per the constitution to receive part of the 10 percent of government revenue reserved in the constitution to provinces and local government entities. The operational modalities of the Equalization Fund remain to be established and the project will support this in the form of technical assistance to evaluate options for the development of a standard allocation system, based on the Project’s performance-based approach, thus supporting efficiency and effectiveness of the allocated funds. However, despite notable achievements under the Project, the first investments under the Urban Governance Component were only launched in June 2019, more than 4 years later than expected. Other activities, such as elaboration of urban reference plans and revision of urban sector legislation, have made little progress. B. Rationale for restructuring 4. The project is currently rated unsatisfactory on progress towards achievement of the Project Development Objective (PDO) and overall implementation progress. The combined disbursement rate for the initial and additional financing is 38 percent as of December 18, 2019 (68 percent for the initial financing and 6 percent for the additional financing). It is not likely that the project can achieve the PDO on the current trajectory. In parallel, there is a gap in the Bank’s funding of the Government’s emergency response to the Ebola Virus Disease outbreak in the North Kivu province. The World Bank DRC Urban Development Project FY13 (P129713) The outbreak was declared by the Government on August 1, 2018, and on July 16, 2019 was classified as a public health emergency of international concern -the most serious- by WHO. 5. The restructuring therefore has a double objective to redress the underperformance of the Project and reallocate funds to the Bank’s support to the Ebola emergency response. The latter will be done through addition of a Contingency Emergency Response Component (CERC) to the project as a new Component 3, to be provisioned with US$50 million in a new disbursement category. The funds reallocated to the CERC are not expected to be reconstituted to the Project from IDA resources, and hence all related restructuring (change to PDO, reallocations, revision of results framework, etc.) will be processed through the present proposed restructuring to reduce the scope of the remaining Urban Development Project (UDP) activities. The funds allocated to the CERC component will be available for withdrawal once the required withdrawal conditions have been fulfilled as per the new Section IV.B.1 (c) of Schedule 2 to the Financing Agreement. The emergency response will be coordinated through the DRC Health System Strengthening for Better Maternal and Child Health Results Project (PDSS - P147555), which is already managing the Bank’s support to the Ebola outbreak. 6. The underperformance of the project is in large part explained by the historic low quality of project management, an overly ambitious project design compared to implementation and absorptive capacity, and geographic overreach of the project. Following approval of the Additional Financing, it gradually became obvious that project management was overstretched, and the Bank’s advice to recruit additional consultant resources to support implementation was not followed. A new project coordinator was nominated by the Recipient on February 27, 2018 and project implementation virtually ground to a halt. The Bank requested a change of coordinator following the project mission in July 2018, which ultimately led to technical discussions between the client and Bank in February 2019. It was agreed to proceed to competitively recruit a new project coordinator (the project had hitherto been coordinated by civil servants) and further decide on the specifics of a reduction of geographic and thematic scope of the project. 7. The recruitment of a new coordinator was made effective on August 20, 2019, and the Bank received a letter requesting restructuring of the project on September 9, 2019. An updated request to include the reallocation to the Ebola emergency response was received on November 27, 2019. This request presents a detailed analysis of the project’s situation and requests the following modifications to the project: (a) Add a CERC to the projet and reallocate US$50 million to the Ebola emergency response, to be disbursed upon meeting the withdrawal conditions. (b) Maintain $25 million for Component 2 and reallocate remaining Component 2 funds to Component 1, which has historically been able to absorb investment resources and produce results. (c) Refocus activities on a limited number of priority cities going forward: Matadi, Goma, Bukavu and Kikwit. This change will facilitate field supervision and assure an unchanged investment amount per capita, at $29 in the four focus cities, despite reduced overall investment envelope. These four cities are, according to the DRC Territorial Development analysis completed in FY19, in provinces with some of the highest concentration of poverty and hence has the highest potential for poverty reduction. The other cities in the project all benefited from investments in the past and hence the definition of target cities in the project will not change. (d) Drop several planned activities from the Project to reduce implementation bottlenecks and refocus the project on activities that are critical to achieving the PDO. (e) Simplify the performance-evaluation matrix and the approach to performance evaluation to facilitate mainstreaming of the approach into Government decentralization strategies. For this reason, the performance- evaluation matrix will be reduced from five base conditions and 11 performance criteria to about five base The World Bank DRC Urban Development Project FY13 (P129713) conditions and performance criteria combined to focus the evaluation and accompanying measures on the basics of transparent and accountable financial management. (f) Adjust the PDO to incorporate the emergency response, revise the indicator values in the Results Framework to align with the expected results of the revised program of activities and add relevant indicators to measure the results of the CERC. 8. The requested modifications to the project are likely to substantially boost the Bank’s support to the Ebola emergency response, reduce the workload to prepare and implement investments by the UDP Project Unit, and allow the project to achieve the revised results by the current closing date. This is substantiated by the accelerated pace of implementation under the new project coordinator, as demonstrated by submission for the Bank’s review of several activities pending for over a year and accelerated recruitment of additional consultant resources to the project unit. In addition, the disbursement to the CERC will contribute to putting the uncommitted project funds to effective an immediate use. 9. In addition, the Project will retain limited support for establishing the operational modalities of the Equalization Fund. This takes the form of technical assistance to evaluate options for the development of a standard allocation system for local governments, drawing on the experience of the performance-based grants implemented under the Project. The activity remains highly relevant in the current context, as the Government has budgeted substantial amounts of funds under the 2020 budget law ($624 million), to be transferred to provinces and local governments. Although local government elections have not been held since the inception of the project, and this has resulted in limited engagements with administratively appointed mayors, the new Government has announced its intention to hold the country’s first ever local government elections. II. DESCRIPTION OF PROPOSED CHANGES A. Change to PDO 10. The standard CERC text will be added to the PDO, which will remain otherwise unchanged. The PDO will read as follows: The objectives of the Project are to improve access to basic services and infrastructure, strengthen urban and municipal management of the Target Cities, and provide immediate and effective response to an eligible crisis or emergency. B. Change to components and cost 11. The restructuring will entail the following changes to components and cost: (a) Introduction of a CERC. The projet will reallocate US$50 million to a new disbursement category. (b) Reduction of geographic scope. All city-specific activities under the two components will in the future benefit only four cities: Matadi, Goma, Bukavu and Kikwit. Ongoing investments in other cities will be completed. (c) Simplification of activities. To simplify the project activities the following changes will be made: (i) The number of conditions and performance criteria governing the annual performance-evaluation will be substantially reduced to facilitate evaluation by government structures. The performance matrix will be focused on external audits and implementation of audit recommendations, transparent budgeting practices, and mobilization of funds for investments. The change will be reflected in an updated project implementation manual. The financing agreement will be modified to specify that the client does not need to recruit the Independent Performance Evaluation Team but can retain such a Team from the client’s institutions provided the Team has qualifications, experience and terms of reference acceptable The World Bank DRC Urban Development Project FY13 (P129713) to the Association. This will facilitate mainstreaming of the approach into existing government structures. (ii) The following activities will be dropped from the project going forward: (i) street addressing (which will depend on improved municipal financial management, which activity is delayed), (ii) local development plans (part of the planning objective will be met through elaboration of urban reference plans), (iii) the specific study on the urban development needs of Goma given the multiform risks faced by the city, (iv) the urban database, an activity which has not seen any progress, and (v) a study on land management, foreseen to be piloted under the pipeline Kinshasa Multisector Development and Urban Resilience Project. (d) Component reallocation. The amount allocated to Subcomponent 2A will be reduced by $45 million, from $70 million to $25 million. The amount allocated for other activities of Component 2 will be reduced by $12.5 million, from $38 million to $25.5 million. The reallocated investment amounts will be allocated to the four focus cities pro rata population and poverty rate. A new Component 3 will be added. (i) Component 1: Reallocation of $7.4 million from Component 2 to Component 1. The current Component cost is $82 million, the revised component cost will be $89.4 million. (ii) Component 2: Reallocation of $7.4 million from Component 2 to Component 1 and $50 million from Component 2 to the new Component 3. The current Component cost is $108 million, the revised component cost will be $50.6 million. (iii) Allocation of US$50 million to a new Component 3 ‘Contingent Emergency Response’. C. Reallocation between disbursement categories 12. The proposed restructuring will result in the following category reallocations, with additional categories added as described: (a) IDA-H8240 reallocation as follows: (i) From Category 2 to Category 1 SDR 1,733,000. (ii) From Category 3 (PPF) to Category 1 SDR 30,000. This is the undisbursed balance of the Project Preparation Fund. (b) IDA-60340 reallocation as follows: (i) From category 1: SDR 18,167,500 to a new category 4 (CERC) and SDR 11,489,500 to a new category 3, which will fund all project activities (including Part 1(a), previously financed only under IDA-H8240), except part 2(a) (ii) From category 2: SDR 18 167 500 to the new category 4 and 11 332 500 to the new category 3. Table 1: Reallocations H8420-ZR Before restructuring After restructuring Category 1 (Goods, works, non-consulting services, consultants’ services, 45,419,000 47,182,000 Training and Operating Costs for Part 1.a and 2.(b)(c)(d)(e) of the Project.) Category 2 (Goods, works and consultants’ services for Subprojects 19,900,000 18,167,000 under Part 2(a) of the Project) PPF (Category 3) 781,000 751,000 Total 66,100,000 66,100,000 The World Bank DRC Urban Development Project FY13 (P129713) 6034-ZR Before restructuring After restructuring Category 1 (Goods, works, non-consulting services, consultants’ services, 37,000,000 7,343,000 Training and Operating Costs for Part 1.b and 2.(b)(c)(d)(e) of the Project) Category 2 (Goods, works and consultants’ services for Subprojects 29,500,000 0 under Part 2(a) of the Project) Category 3 (Goods, works, non-consulting services, consultants’ N/A 22,822,000 services, Training and Operating Costs for Part 1 and 2.(b)(c)(d)(e) of the Project) Category 4 (CERC) N/A 36,335,000 Total 66,500,000 66,500,000 D. Revision of results framework 13. The following proposed changes to the Results Framework will be implemented in line with the changed program of activities and to assure realism of targets based on the initial implementation experience. The modified values also consider the reduced program of works due to exchange rate losses, which at the time of restructuring reduces the total project funds from $190 million to $183 million. (a) The end target for the PDO indicator ‘Cities qualifying for performance-based investment funds’ will be revised from seven to three. This will consider that one of the four remaining cities may not be performing. (b) The end target for the PDO indicator ‘People provided with improved urban living conditions’ will be revised from 1,036,000 to 457,000. (c) The end target for the PDO indicator ‘Cities with improved livability, sustainability and/or management’ will be revised from nine to four. (d) The end target for the PDO indicator ‘Direct project beneficiaries’ will be revised from 1,358,000 to 742,000. (e) The following PDO indicator will be added to measure the outcome of the funds allocated to the Ebola response: ‘Number of new Ebola cases confirmed’, with baseline 24 for the week of December 9 to 15, 2019 and target value zero. This aligns with the 4th Strategic Response Plan and is also the indicator that other interventions supporting the Ebola response are using. (f) The target for the intermediate results indicators ‘Roads rehabilitated’ will be revised upwards from 34.5 to 51.5 (the increase is explained by incorporating all investments that are presently known while the previous target value was based on estimates at time of approval of the additional financing), ‘Cities meeting targets for infrastructure maintenance’ will be revised from six to three, ‘Person-days of employment generated’ will be revised from 2,185,000 to 1,210,000 and ‘Markets managed according to clearly defined management system’ will be revised downwards from seven to three (to consider that one of the four remaining cities may not implement a management system). The World Bank DRC Urban Development Project FY13 (P129713) E. Overall risk rating 14. This project was approved before the Systematic Operations Risk-Rating Tool (SORT) was launched and therefore has no risk ratings at approval. There is no change compared to latest approved ISR. There’s no pending audit as of November 2019. F. Implementation arrangements 15. There are no changes to implementation arrangements. The UDP Project Unit will remain responsible for the implementation of the Ebola-related activities, which will be implemented through a delegated contract management arrangement with the Project Unit of the PDSS, to be included as part of the CER Manual. This has been discussed with and confirmed by FMS colleagues. III. SUMMARY OF CHANGES Changed Not Changed Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Implementing Agency ✔ DDO Status ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Disbursements Arrangements ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ The World Bank DRC Urban Development Project FY13 (P129713) Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_PDO_TABLE PROJECT DEVELOPMENT OBJECTIVE Current PDO To improve access to basic services and infrastructure and strengthen urban and municipal management of the targeted cities. Proposed New PDO To improve access to basic services and infrastructure, strengthen urban and municipal management of the Target Cities, and to provide immediate and effective response to an eligible crisis or emergency. OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Primary Infrastructure 82.00 Revised Primary Infrastructure 89.45 Contingent Emergency 0.00 New 50.00 Response Urban Governance (including Urban Governance (including 108.00 Revised 50.55 PPA) PPA) TOTAL 190.00 190.00 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-60340-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: GD/WK/ NCS/CS/TR/OC 1b, 2b,c,d,e The World Bank DRC Urban Development Project FY13 (P129713) 37,000,000.00 3,507,783.47 7,343,000.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: GD, WRK, CONS SUBPROJECT PART 2(a) 29,500,000.00 0.00 0.00 100 iLap Category Sequence No: 3 Current Expenditure Category: GD/WK/ NCS/CS/TR/OC 1a,b, 2b,c,d,e 0.00 0.00 22,822,000.00 100 iLap Category Sequence No: 4 Current Expenditure Category: Contingent emergency response 0.00 0.00 36,335,000.00 100 Total 66,500,000.00 3,507,783.47 66,500,000.00 IDA-H8420-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: GD/WK/ NON CONS/CONSULT SCE/OP COST 45,419,000.00 42,345,755.74 47,182,000.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: GOOD, WORK CONSULT SCE PART 2(A) 19,900,000.00 1,831,170.20 18,167,000.00 100 iLap Category Sequence No: 3 Current Expenditure Category: PPF REFINANCING 781,000.00 750,800.54 751,000.00 100 Total 66,100,000.00 44,927,726.48 66,100,000.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed The World Bank DRC Urban Development Project FY13 (P129713) 0000 0.00 0.00 2013 0.00 0.00 2014 12,000,000.00 8,232,388.00 2015 23,000,000.00 16,711,076.00 2016 23,000,000.00 10,286,440.00 2017 22,000,000.00 7,306,522.00 2018 12,000,000.00 13,561,848.00 2019 6,000,000.00 10,671,854.00 2020 2,000,000.00 62,000,000.00 2021 0.00 22,000,000.00 2022 0.00 23,434,500.00 2023 0.00 15,795,372.00 OPS_DETAILEDCHANGES_SORT_TABLE SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating at Approval Current Rating Political and Governance  High Macroeconomic  Substantial Sector Strategies and Policies  Substantial Technical Design of Project or Program  Substantial Institutional Capacity for Implementation and  High Sustainability Fiduciary  High Environment and Social  Substantial Stakeholders  Substantial Other  High Overall  High . The World Bank DRC Urban Development Project FY13 (P129713) . Results framework COUNTRY: Congo, Democratic Republic of DRC Urban Development Project FY13 Project Development Objectives(s) To improve access to basic services and infrastructure and strengthen urban and municipal management of the targeted cities. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target Improve access to basic services and infrastructure. People provided with improved urban living conditions (Number) 76,000.00 457,000.00 Action: This indicator has been Revised Direct project beneficiaries (Number) 0.00 742,000.00 Action: This indicator has been Revised Female beneficiaries (Percentage) 0.00 51.00 Strengthen urban and municipal management of the targeted cities. Cities qualifying for performance-based investment fund 0.00 3.00 (Number) Action: This indicator has been Revised Performance-based fund allocation system piloted and 0.00 1.00 recommendations available (Number) Cities with improved livability, sustainability and/or management 6.00 4.00 (Number) Action: This indicator has been Revised Provide immediate and effective response to an eligible crisis or emergency. (Action: This Objective is New) The World Bank DRC Urban Development Project FY13 (P129713) RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target Number of new Ebola cases confirmed. (Number) 24.00 0.00 Action: This indicator is New PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Primary Infrastructure Roads rehabilitated, Non-rural (Kilometers) 0.00 51.50 Rationale: Action: This indicator has been Revised End target revised upwards as the remainder of programmed works are known. Person-days of employment created (number) of which female 0.00 1,210,000.00 (percentage) (Number) Action: This indicator has been Revised Of which Female (Percentage) 0.00 3.00 Urban Governance (including PPA) Beneficiaries that feel project investments reflected their needs 0.00 80.00 (percentage) (Percentage) Beneficiaries that feel project inv. reflected their needs - 0.00 308,672.00 female (number) (Number) Action: This indicator has been Revised Total beneficiaries - female (number) (Number) 0.00 385,840.00 The World Bank DRC Urban Development Project FY13 (P129713) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Action: This indicator has been Revised Total beneficiaries - male (number) (Number) 0.00 356,160.00 Action: This indicator has been Revised Beneficiaries that feel project inv. reflected their needs - male 0.00 284,928.00 (number) (Number) Action: This indicator has been Revised City budget and narrative reports generated, disclosed, and 0.00 70.00 debated timely each semester. (Percentage) Annual project training plan implemented (Number) 0.00 80.00 Cities meeting targets for infrastructure maintenance (Number) 0.00 3.00 Action: This indicator has been Revised Markets managed according to clearly defined management 0.00 3.00 system. (Number) Action: This indicator has been Revised New urban sector legislation and regulation prepared. (Number) 0.00 1.00 IO Table SPACE The World Bank DRC Urban Development Project FY13 (P129713)