RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF Report No: RES18419 HIGH-PRIORITY ROAD REOPENING AND MAINTENANCE PROJECT IDA GRANT H359-DRC & TF92300 AND IDA GRANT H705-ZR & TF99492 BOARD APPROVAL DATE: MARCH 18, 2008 AND APRIL 05, 2011 Transport Sector Country Department AFCC2 Africa Region TO THE THE DEMOCRATIC REPUBLIC OF CONGO DATE OF RESTRUCTURING: MARCH

2 ABBREVIATION AND ACRONYMS AF DFID DRC Additional Financing Department for International Development Democratic Republic of Congo GBP GDRC ICCN IDA MITP OdR PDO SDR TF Great Britain Pounds Sterling Government of DRC Congolese Institute for Nature Conservation, Institut Congolais pour la Conservation de la Nature International Development Agency Ministry of Infrastructure and Public Works, Ministère des Infrastructures et Travaux Publics Roads Agency, Office des Routes Project Development Objective Special Drawing Rights Trust Fund Regional Vice President: Country Director: Senior Global Practice Director: Sector Manager: Task Team Leader: Makhtar Diop Ahmadou Moustapha Ndiaye Pierre Guislain Supee Teravaninthorn Alexandre Kpedetin Dossou 2

3 DEMOCRATIC REPUBLIC OF CONGO High Priority Reopening and Maintenance Project (P101745) TABLE OF CONTENTS A. SUMMARY... 6 B. PROJECT STATUS... 6 C. PROPOSED CHANGES... 8 ANNEX 1: REALLOCATION OF PROCEEDS

4 DATA SHEET Congo, Democratic Republic of DEMOCRATIC REPUBLIC OF CONGO - High Priority Reopening and Maintenance Project (P101745) AFRICA Report No: RES18419 Basic Information Project ID: P Lending Instrument: Sector Investment and Maintenance Loan Regional Vice President: Makhtar Diop Original EA Category: Full Assessment (A) Country Director: Senior Global Practice Director: Practice Manager/Manager: Team Leader(s): Ahmadou Moustapha Ndiaye Current EA Category: Full Assessment (A) Pierre Guislain Original Approval Date: 18-Mar-2008 Supee Teravaninthorn Current Closing Date: 30-Jun-2016 Alexandre K. Dossou Borrower: Responsible Agency: Cellule Infrastructures, Ministry of Infrastructure, Public Works and Reconstruction, Cellules des Infrastructures, Ministry of Infrastructure, Public Works and Reconstruction, Ministry of Infrastructure, Public Works and Reconstruction, Ministry of Environment Office des Routes Restructuring Type Form Type: Restructuring Level: Short Form Level 2 Decision Authority: Country Director Approval Financing ( as of 18-Mar-2015 ) Key Dates Project Ln/Cr/TF Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P IDA-H3590 Effective 18-Mar Jul Oct Sep Jun-2016 P IDA-H7050 Effective 28-Jun Aug Nov Jun Jun-2016 P TF Effective 08-Jul Jul Oct Sep Jun

5 P TF Effective 12-Aug Aug Nov Jun Jun-2016 Disbursements (in Millions) Project Ln/Cr/TF Status Currency Original Revised Cancelled Disbursed Undisbur sed % Disbursed P IDA-H3590 Effective USD P IDA-H7050 Effective USD P TF Effective USD P TF Effective USD Policy Waivers Does the project depart from the CAS/CPF in content or in other significant respects? Yes [ ] No [ X ] Does the project require any policy waiver(s)? Yes [ ] No [ X ] A. Summary of Proposed Changes The main purpose of the restructuring is to: (a) revise the amount of DFID s contribution to the DRC Pro Routes project (Project) funding as a consequence of its decision to exit the project, as indicated in its August 4, 2014 letter to the World Bank Group. This decision will lead to a partial cancellation of the proceeds provided by the project s TF Grants funded by DFID; (b) reallocate the Financing and TF Grants Agreements proceeds to adapt to the partial cancellation above-mentioned; and (c) revise the disbursement percentages for the different Agreements in order to accelerate the closing of the TFs after the DFID s exit. B. Project Status The initial project with a total amount of US$123 million equivalent was approved on March 18, 2008, primarily funded by two Grants; one from the IDA and the second from a Trust Fund (TF) funded by DFID. The legal agreements for the initial financing were signed on July 8, 2008 and the project was declared effective on October 7, An AF, totaling US$112.2 million equivalent, was approved in June 2011, with contributions from IDA, DFID through the TF and about US$15.9 million from the Government of the Democratic Republic of Congo (GDRC) through the Road Maintenance Fund (Fonds National d Entretien Routier, FONER). As of March 15, 2015, the project has disbursed approximately US$164.4 million equivalent (about 70 percent) of its total funds allocation and about US$231.8 million (about 99 percent) are already contractually committed. Progress towards achievement of the PDO and Implementation Progress have both been rated Satisfactory due to substantial improvement in the project implementation after about two years of a Moderately satisfactory rating. The following major results have been achieved: (a) 1,520 kilometers of roads have been reopened by the project against a planned target for the end of December 2014 of 1,850 kilometers, serving villages and remote areas where more than a million people live, who for years had limited or no all-weather road access; and (b) about 1,922 km are under routine maintenance contracts to ensure their sustainability, against a target of 1681 km; and (c) the civil works continue to be executed in broad compliance with World Bank safeguards policies. No audit reports or Interim Financial Reports are due to date. C. Proposed Changes 5

6 DEMOCRATIC REPUBLIC OF CONGO HIGH-PRIORITY ROAD REOPENING AND MAINTENANCE PROJECT RESTRUCTURING PAPER A SUMMARY 1. This Restructuring Paper was necessitated by a letter from the Department for International Development (DFID) dated August 04, 2014 informing the Bank of its decision to exit the Pro Routes project and a request from the Government of DRC (GDRC) dated March 20, 2015 to: (a) revise the global amount from the Trust Fund (TF) Grants Agreements due to the partial cancellation of DFID s contribution to the project s financing. This partial cancellation will lead to a reduction of the project proceeds as a consequence of DFID s exit; (b) reallocate the proceeds of the Financing and TF Grant Agreements among various expenditure categories in order to modify allocations per category based on the total amount already paid by DFID against its initial contribution to the project and the remaining and ongoing activities; and (c) revise the disbursement percentages for the different Agreements in order to accelerate the closing of the TFs after DFID s exit. The requested restructuring does not entail any change in: (a) the Project Development Objective (PDO); (b) the PDO indicators of the results framework; (c) the description of the project or components of the project as described in the Financing Agreements and the Grant Agreements; and (d) the Environmental Assessment category. It is being processed as a Level 2 restructuring. PROJECT STATUS 2. The project was approved on March 18, 2008 and is primarily funded by two Grants; one from the International Development Agency (IDA) and the second from a Multi-Donor Trust Fund funded from the DFID. The legal agreements for the initial financing were signed on July 8, 2008 and the project was declared effective on October 7, In June 2011, an Additional Financing (AF) was approved by the World Bank Board which included: (a) amendment to the PDO of the original Financing Agreements to extend the initial targeted area from three provinces (Orientale, Sud Kivu and Katanga) to four to include the province of Equateur; (b) extension of the project closing date from September 30, 2013 to June 30, 2016; and (c) increase of the project proceeds equivalent to US$125.2 million, with contributions from IDA, DFID through the TF and the GDRC through the Road Maintenance Fund (Fonds National d Entretien Routier, FONER). This last amount was reduced to US$ million after the project restructuring approved on September 28, 2013, following a cancellation of an amount of US$13.0 million from the additional financing TF Grant (TF99492) and an increase of the original financing TF Grant (TF92300) by an equivalent US$13.0 million to restore consistency between the initial financing and the AF s TF resources to cover against exchange rate fluctuation on DFID s initial contribution to the project. 3. The current PDO is to re-establish lasting access between provincial capitals and districts and territories in four provinces (Province Orientale, Katanga, Sud Kivu, and Equateur) in a sustainable manner for people and the natural environment in the area of influence of the project. The project comprises of the following components: (a) Road Reopening and Maintenance; (b) 6

7 Institutional Strengthening; (c) Environmental and Social Program; and (d) Monitoring and Evaluation. 4. The project was originally designed to be implemented over a five-year period with a closing date on September 30, However, due to delays in the purchase of the road work equipment for the Roads Office (Office des Routes, OdR) brigades at the start of the project, and delays caused by the outsourcing of the road reopening works to private sector, delayed the road reopening works and led to extend the closing date to June 30, 2016, in order to allow a full completion of activities both from the Initial and the additional financing. 5. Despite these delays, the road rehabilitation works implementation has now picked up and the project has globally disbursed, as of March 15, 2015, approximately US$164.4 million equivalent (about 70 percent) of its total funds allocation and about US$231.8 million (about 99 percent) are already contractually committed. More than 75 percent of reopening works were already completed and are under maintenance contracts. The Infrastructure Unit of the MIPWR (Cellule Infrastructure), as the Project Management Unit, has put in place an action plan for close monitoring and proactivity in the management of the two remaining roads reopening contracts related to the following road sections Kalemie Kambu (140 km) and Akula Gemena Libenge Zongo (376 km). This is to avoid any delay which could jeopardize the completion of the road rehabilitation works before the project closing date. The Road Agency Force Account s brigades have withdrawn from the project on December , as agreed upon with the Minister of Infrastructure after completing reopening works on 900 km of roads against their objective of 1,170 km. The selection of the consultant services who will help the GDRC to draft options for the institutional reform of the road sector will be completed by end-april Furthermore, the project management unit has shown noticeable improvements especially in Financial and procurement management and the project results are now better appreciated by the different stakeholders, including government officials thanks to better external communication and quality of results on the ground. 6. The following main results have been so far achieved: (a) 1,520 kilometers of roads were reopened by the project against a planned target by end December 2014 of 1,850 serving villages and remote areas where more than one million people live and who have had limited or no access to all weather roads for many years; (b) about 1,922 km are under mechanized routine maintenance contracts to ensure their sustainability, against a target of 1681 km; and (c) civil works continue to be executed in broad compliance with World Bank social and environmental safeguards policies. 7. The Progress towards achievement of the PDO and Implementation Progress have both been rated Satisfactory since the December 2014 implementation support mission, due to substantial improvement in the project implementation after about two years of a Moderately satisfactory rating. This result will be consolidated with the ongoing implementation of the action plan from the last supervision mission and the move on the institutional capacity building issues. 8. The overall project financial management system has been rated satisfactory. The quarterly Interim Financial Reports have been submitted on time and quality of the reports has been found to be satisfactory. The external audit has been conducted in line with International Audit Standards, the reports have been submitted before June 30th of every fiscal year as indicated in the Financing Agreement, and the reports were unqualified with no major reserves. Most of audit and Bank recommendations have been successfully implemented. 7

8 PROPOSED CHANGES 9. Partial cancellation of DFID s contribution to the project: This partial cancellation will result in a reduction of about US$12,311,033 in DFID s contribution to the two TF Grants (TF and TF 99492) amounts, as shown in the Table below. The purpose of this revision is to reconcile the grant amounts under the initial contribution of DFID (GBP76 million) with its current contribution after its exit from the project funding, according to its letter dated August 04, This exit was in accordance with paragraph 9.3 in the Annex 2 of the Memorandum of Understanding signed between the Bank and DFID for the financing of the Pro Routes project. However, due to the exceptional situation facing this Multi-Donor Trust Fund, were 92% of overall resources have already been either disbursed or contractually committed (about GBP70 million), against the funds already received from the DFID (GBP58.5 million), the World Bank will not request from DFID the disbursement of the additional funds needed to cover the shortage of funds already committed as of the date of the notification letter dated August 4, The World Bank has committed itself to cover this financing gap between the amounts already committed and the amounts received from DFID in order to continue support this strategic Project. This will be done through the processing of a second Additional Financing to the Pro Routes Project, which is under preparation in the proposed amount of US$125 million, and planned for World Bank Board approval by end-september DFID'S CONTRIBUTION TO PRO ROUTES AFTER ITS EXIT FROM THE PROJECT Particulars TF (in US$) TF (in US$) Existing grant 73,000,000 33,000,000 Proposed Grant 70,741,052 22,947,915 Reduction 2,258,948 10,052,085 Total Reduction 12,311, Reallocation of funds: This restructuring also include a request for reallocation of funds within the amended financing disbursement categories, as approved on September 28, 2013 (see Annex 1 for details). The proposed reallocation of the financing proceeds between the different categories of expenditure for the IDA and TF Grants will help to cover amount already disbursed and make consistent the new amount available per categories with the global resources available after DFID exit. In addition and due to the cost overrun noted mainly on the large road reopening contracts, this reallocation will help to optimize the use of the unallocated resources after the September 28, 2013 level 2 restructuring. 11. Changes in the disbursement percentages of the IDA and TF Grants: With the exit of DFID, the Multi-Donor Trust Fund (MTDF) will not have any other Donor as DFID was its only Donor. It is then proposed to increase disbursement percentage against the TFs (TF and TF 99492) to 100 percent in order to accelerate the use of the remaining resources after the partial cancellation of DFID s resources and allow a prompt closing of the TFs. Accordingly and once the TFs resources will be exhausted, the IDA Grants (H359-DRC and H705-ZR) will continue disbursement at a ratio of 100 percent. Furthermore and due to the risk to get the H359-DRC resources also exhausted before the approval in September 2015 of the upcoming second AF of the 8

9 project, funds from H705-ZR will be allowed to finance the activities from the initial financing with respect to its categories of expenses. INT 12. INT investigated a case of corruption in the sector. The proposed project has taken measures to strengthen the procurement oversight of the proposed project to minimize similar events in the future. 9

10 ANNEX 1 Reallocation of Proceeds DEMOCRATIC REPUBLIC OF CONGO HIGH-PRIORITY ROADS REOPENING AND MAINTENANCE PROJECT P H359-DRC, TF92300, H705-ZR AND TF99492 Restructuring Paper Proceeds for DEMOCRATIC REPUBLIC OF CONGO, HIGH-PRIORITY ROADS REOPENING AND MAINTENANCE PROJECT, 1. H359-DRC, TF92300, H705-ZR and TF99492, P101745, will be reallocated as follows: Table 1: REALLOCATION OF IDA GRANT H359-DRC Category of expenditure Allocation (expressed in SDR) Current Revised Current Revised (1) Goods, Works and Consultants services for the project (a) Performance contract 5,894,000 6,620,000 (b) Environmental and Social Assistance Contract 3,900,000 4,417,000 (c) Others 17,252,000 17,241,000 (2) Performance Bonuses (a) OdR 500, ,000 (b) MECNT and ICCN 130, ,000 (3) Operating Costs (a) CI 875,000 1,067,000 (b) MITP 32,000 27,000 (c) OdR 880, ,000 (4) Refund of Project Preparation Advance 827, ,000 (5) Unallocated 1,710,000 0 TOTAL AMOUNT 32,000,000 32,000,000 10

11 Table 2: REALLOCATION OF TF92300 Category of expenditure Allocation (expressed in US Dollars) Current Revised Current Revised (1) Goods, Works and Consultants services for the project (a) Performance contract 13,815,000 13,780,000 (b) Environmental and Social Assistance Contract 9,072,000 7,081,000 (c) Others 42,946,,000 45,476,052 (2) Performance Bonuses (a) OdR 1,141, ,000 (b) MECNT and ICCN 300,000 0 (3) Operating Costs (a) CI 2,051,000 1,642,000 (b) MITP 75,000 61,500 (c) OdR 2.062, ,500 (4) Refund of Project Preparation Advance 0 0 (5) Unallocated 1,538,000 0 TOTAL AMOUNT 73,000,000 70,741,052 Table 3: REALLOCATION OF IDA GRANT H705-ZR Category of expenditure Allocation (expressed in SDR) Current Revised Current Revised (1) Goods, Works and Consultants services for the project (a) Performance contract 1,400,000 1,444,000 (b) Environmental and Social Assistance Contract 3,000,000 3,000,000 (c) Others 30,918,000 33,451,000 (2) Performance Bonuses (a) OdR 0 0 (b) MECNT and ICCN 100, ,000 (3) Operating Costs (a) CI 1,258,000 1,412,000 (b) MITP 250, ,000 (c) OdR 354, ,000 (4) Refund of Project Preparation Advance 0 0 (5) Unallocated 2,720,000 0 TOTAL AMOUNT 40,000,000 40,000,000 11

12 Table 4: REALLOCATION OF TF99492 Category of expenditure Allocation (expressed in US Dollars) Current Revised Current Revised (1) Goods, Works and Consultants services for the project (a) Performance contract 1,650, ,000 (b) Environmental and Social Assistance Contract 3,400,000 2,364,000 (c) Others 24,070,000 19,224,000 (2) Performance Bonuses (a) OdR 0 0 (b) MECNT and ICCN 125,000 0 (3) Operating Costs (a) CI 1,453, ,000 (b) MITP 250, ,000 (c) OdR 492,000 1,915 (4) Refund of Project Preparation Advance 0 0 (5) Unallocated 1,560,000 0 TOTAL AMOUNT 33,000,000 22,947,915 12