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Document ofThe World Bank

Report No: 69820 v1

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING

OF

EMERGENCY PEACE SUPPORT PROJECT

(P110762, GRANT NO. H367-NP)

IN THE AMOUNT OF SDR 31.30 MILLION (US$50 MILLION EQUIVALENT)

MAY 06, 2008

TO

NEPAL

May 28, 2012

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ABBREVIATIONS AND ACRONYMS

CAP Conflict affected peopleEPSP Emergency Peace Support ProjectESESGONMOPRNRs

Employment and self employment servicesGovernment of NepalMinistry of Peace and ReconstructionNepali Rupees

Regional Vice President: Isabel M. GuerreroCountry Director: Ellen A. Goldstein

Sector Manager / Director: Pablo GottretTask Team Leader: Afrah Alawi Al-Ahmadi

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NEPAL EMERGENCY PEACE SUPPORT PROJECT

P110762CONTENTS

Page

A. SUMMARYB. PROJECT STATUSC. PROPOSED CHANGESANNEX 1: RESULTS FRAMEWORK AND MONITORING ……………………………………. 7ANNEX 2: IMPLEMENTATION PLAN JULY 2012 – JUNE 2014 …………………………. 8ANNEX 3: REQUEST FROM MINISTRY OF FINANCE FOR EXTENSION ..…………... 11

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NEPAL: EMERGENCY PEACE SUPPORT PROJECT

RESTRUCTURING PAPER

A. SUMMARY

1. This Project Paper seeks the approval of the Regional Vice President to restructure the Nepal Emergency Peace Project (EPSP, P110762 and IDA Grant no. H367-NP). The proposed restructuring entails: 1) extending the Closing Date of the project by two years from June 30, 2012 to June 30, 2014; 2) reallocating funds between disbursement categories; and 3) revising the Results Framework to more appropriately reflect the end-of-project targets and intended project outcomes (as detailed in Annex 1). The Financing Agreement will be accordingly amended to reflect these changes.

2. The Ministry of Peace and Reconstruction (MOPR) has prepared an implementation plan for the extended period, i.e., July 2012 to June 2014 (attached as Annex 2). The Ministry of Finance of the Government of Nepal (GON) sent a request to the World Bank dated March 30, 2012 requesting the extension of Closing Date (attached as Annex 3).

B. PROJECT STATUS

3. Progress relating to project implementation has been mixed since the project was approved by the Board in May 2008. Due to start-up delays and the need to adjust project design, the project was restructured in April 2010 (approved by the World Bank Board). Since then, project performance has gradually improved, and over the last six months, major progress has been noted and recorded in the Aide-Memoire from the Joint Review Mission that took place in March 2012. Significant progress has been made in all aspects of implementation since the Mid-Term Review in June 2011 against agreed benchmarks. As a result, project performance ratings have been upgraded for all aspects of project implementation.

4. Specifically, achievement of the Project Development Objectives (PDO) is now rated as Moderately Satisfactory on the basis of substantial progress in key project indicators, as follows:

Interim cash benefits have been provided to 13,877 families of the deceased and 4,279 widows;

MOPR has made rapid progress in delivery of employment and self employment services (ESES) to conflict affected people (CAP) through training and job placement services, job counseling and business startup services are being provided to 3,030 CAP through 76 contracts with private sector and non-governmental organizations;

Key findings from a recently completed third party monitoring show:a. 87 percent beneficiary satisfaction with the cash benefits delivery

procedures;

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b. 82 percent expressed that the government officials were friendly while processing their applications after the submission of proper documents;

c. about 74 percent of the recipient of the cash benefits are spouses and children of the deceased;

d. 75 percent reported they had information about the benefit amount prior to receiving their benefits; and,

e. most reported they used the funds for meeting daily consumption/expenses, repair home and buy capital (land/cattle), repay loans, and self and children education.

5. Project management, procurement and financial management have also improved, as follows:

Project Management (rated as Satisfactory): The Project Management Team has been expanded as agreed and inter-agency coordination has improved. A new eleven member Project Management Team was established in the last five months led by the Project Coordinator. Implementation support consultants are hired and in full operation.

Procurement (rated as Satisfactory): Procurement plan is updated regularly. Procurement management capacity has improved. Timeliness and quality of procurement activities is satisfactory.

Financial Management (rated as Moderately Satisfactory): The timeliness and quality of financial management reports have improved markedly. There are no outstanding Implementation Progress Reports. There are no pending audit reports.

6. Most of the governance and accountability actions are either completed or being implemented, including the completion of a third party monitoring of the cash benefits and initiation of social auditing. There are no outstanding audit reports.

7. Project monitoring and evaluation has made dramatic improvements since June 2011. All of the monitoring mechanisms identified during project restructuring in June 2010 are in place and operational. Third party monitoring and beneficiary assessment was completed and the social audit is underway. Monitoring arrangements for the implementation of ESES services are in place. The MOPR has developed and put in place a ministry wide management information system (MIS) which maintains a comprehensive database of conflict victims as well as helping to streamline the overall operational aspects of the MOPR. In addition, MOPR has been active in conducting its own internal monitoring.

8. The above mentioned improvements in project implementation are expected to have a positive impact on disbursements in the next couple of months, which currently stands at 50 percent of the Grant proceeds. Disbursements are expected to reach 53% by June 30, 2012 and, based on the MOPR implementation plan for the next two years (attached as Annex 2), 68% by December 2012.

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C. PROPOSED CHANGES

9. Extension of project Closing Date: The proposal is to amend Section IV. B.2 of Schedule 2 of the Financing Agreement to extend the project Closing Date by two years in order to fully implement project activities as agreed on during the 2010 restructuring. The proposed two-year extension of the Closing Date is from the current June 30, 2012 to June 30, 2014. This would be the second extension of the project Closing Date. The project was extended for 1 year from June 30, 2011 to June 30, 2012 during the 2010 project restructuring approved by the World Bank Board. The reasons for this additional extension are detailed below.

10. The peace process in Nepal is at a critical juncture and it is important that the GON has sufficient funds to meet existing commitments made to CAP under the Comprehensive Peace Accord. EPSP is the main source of financing currently available to MOPR for rehabilitation of CAP and delivering ESES – an important element of the currently ongoing peace process. Notably, there is strong demand from CAP and other stakeholders, including local peace committees for employment services and capacity building which goes beyond one-time cash relief. Continuing the project will allow GON to close an otherwise significant financial gap in meeting the commitments and demand for ESES services.

11. The ESES services and the capacity to administer them did not exist within MOPR at the time of the first project restructuring; hence, progress was slow in the initial stages of developing and delivering these services1. As a result, only 16 percent of the estimated eligible beneficiaries have access to the rehabilitation services and the ESES program is only available in 12 out of the country’s 73 districts affected by the conflict. Additionally, there is still a group of hard-to-reach eligible CAP (estimated as 1,000 families of the deceased and 500–1,000 widows) yet to receive their cash benefits. There is need of special outreach to deliver the benefits to them. Thus, the availability of project financing is critically important at this juncture.

12. Despite initial delays in the delivery of ESES services, all necessary groundwork to deliver these services as well as other rehabilitation services has now been completed and significant capacity developed2 within MOPR to expand, administer and monitor services. Based on the current experience of implementing the first round of ESES services and implementation capacity now in place, it is estimated that two years would be needed to expand ESES delivery to all 73 conflict affected districts and reach 22,000 potential beneficiaries. It is planned to implement 6–8 rounds of service delivery with a take-up rate of 3,000–4,000 beneficiaries in each round. The MOPR has developed an 1 Up to October June 2011, the project suffered from limited capacity and frequent change in project directorship and Ministry senior management leading to significant delays in developing and endorsing ESES guidelines and field implementation manual, as well as initiating the procurement process for service providers. Additionally, the innovative skills training delivery and payment modality using the private sector represented a new way of working for MOPR that was challenging in a limited capacity and staff instability context.

2 As of November 2011, the project management and administrative capacity was strengthened significantly. MOPR has hired four technical staff to support the implementation of employment and self employment services (ESES), mobilized LPCs to support implementation at the local level, developed detailed field implementation manual, developed a comprehensive communication and outreach strategy, assigned teams for the monitoring of implementation and developed a grievance mechanism targeted at beneficiaries as well as service providers.

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implementation Action Plan for the next two years (Annex 2) focusing on actively reaching out to all eligible beneficiaries and enhancing the quality and transparency of service delivery. The Bank team has worked closely with MORP in ensuring that the plan reflects a realistic assessment of the time needed to scale up these services.

13. The GON finds partnership with the World Bank and international community beneficial to helping ensure accountable and transparent mechanisms for peace and reconstruction.

14. Reallocation of Grant proceeds: The proposal is to amend Schedule 2 Section IV of the Financing Agreement to reallocate funds between disbursement categories. Updated information on eligible numbers of CAP as per the lists updated by the GON Task Force, the preliminary findings from ongoing tracer studies and outreach activities suggest the need to revise the eligible (target) numbers of CAP downward. The new estimates of eligible CAP are 14,800 families of the deceased (previous estimate 18,000) and 4,700 widows (previously 9,000). Additionally, in September 2011, the GON amended its relief policy, among others, with regard to the interim relief amount to families of the deceased. This revised policy was approved by the Cabinet on September 27, 2011 increasing the cash relief amount to the families of the deceased from NRs. 100,000 to NRs. 300,000 per family. GON’s financial resources were used to fund the additional NRs. 200,000 to those families who already received the NRs. 100,000 through EPSP resources. However, this left a financial gap to cover about 2900 families with the increased relief amount of NRs. 300,000.

15. The proposed reallocation of Grant resources takes into account: 1) expansion of the delivery of ESES services from originally planned 20,000 to 25,000 beneficiary (under category 1); 2) reduce the number of eligible beneficiaries for the benefit payment under the families of the deceased category from 18,000 to 14,800 families (under category 2-a); and eligible beneficiaries for the benefit payment under the widows category from 9,000 to 4,700 widows (under category 2-b); as well as to increase the amount of the benefit to 2900 families, per the revised policy (under category 2-a).

16. The Grant Proceeds are proposed to be reallocated as follows:

Category of Expenditure Allocation (expressed in SDR)

% of Financing

Current Current Revised Current Revised1. Rehabilitation Support under Part 1

of the project8,800,000 10,767,200 100% 100%

2. Benefit Payments under Part 2 of the Projecta) Benefit Payments to survivor

families of those killed in the conflict

b) Benefit payments to widows of those killed in the conflict

17,200,000

2,250,000

16,770,540

726,160

100%

100%

100%

100%

3. Goods, consultant services, 2,720,000 2,720,000 100% 100%

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Category of Expenditure Allocation (expressed in SDR)

% of Financing

Current Current Revised Current Revisedtraining, workshops under Part 3 of the Project and Operating Costs under Parts 1, 2 and 3 of the Project

4. Unallocated 330,000 316,100 100% 100%TOTAL AMOUNT 31,300,000

17. Revision of the Results Framework (RF): The RF would be amended to better reflect end-of-project targets which were initially identified in percentages of eligible beneficiaries without identifying the numbers. At the current stage of the peace process, MOPR has more accurate data on the identified numbers of eligible CAP and hence end-of-project targets can be defined in a more precise way. Additionally, the revisions improve the phrasing of the indicators and include a target for female participation in the skills and employability services. These revisions are outlined in Annex 1 below.

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ANNEX 1 Results Framework and Monitoring

Nepal Emergency Peace Support Project

Project Development Objective (PDO): The overall objective of the project is to contribute to the peace process by providing interim cash transfers and services to eligible conflict affected groups and by increasing transparency and accountability in the delivery of these benefitsRevised Project Development Objective: n/a

PDO Level Results Indicators*

Cor

e

D=DroppedC=ContinueN= NewR=Revised

Unit of Measure Baseline

Cumulative Target ValuesFrequency Data Source/

MethodologyResponsibility for Data Collection2012 2014

At least 95% of identified eligible families of the deceased and widows receive cash payments following the project operational guidelines

R Text Zero (no receipt of benefits)

At least 95% of identified eligible families of the deceased and widows receive cash payments following the project operational guidelines

At least 95 % (of estimated eligible 14,800 families of the deceased and 4700 widows) receive cash payments, following the operations guidelines.

Quarterly MOPR MIS MOPR

At least 90% of eligible conflict-affected widows, orphans, those disabled in the conflict, families of those killed in the conflict, families of the disappeared, Internally Displaced Persons (IDPs), and those abducted during the conflict who seek skills and employability rehabilitation services in the targeted districts receive them according to the project operational guidelines

R Text Zero (no services provided)

At least 90% of eligible conflict-affected widows, orphans, those disabled in the conflict, families of those killed in the conflict, families of the disappeared, Internally Displaced Persons (IDPs), and those abducted during the conflict who seek skills and employability rehabilitation services in the targeted districts receive them according to the project operational guidelines

At least 90% of eligible (estimated 25,000) conflict-affected widows, orphans, those disabled in the conflict, families of those killed in the conflict, families of the disappeared, Internally Displaced Persons (IDPs), and those abducted during the conflict, who seek skills and employability rehabilitation services receive them and according to the project operational guidelines; among which at least 30% are female CAP.

Quarterly MOPR and ESES database

MOPR

At least 90% of surveyed recipients are satisfied with

R % 0.00 90.00 At least 90% for cash benefits recipient and

Annual Beneficiary assessments

MOPR

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PDO Level Results Indicators* C

ore D=Dropped

C=ContinueN= New




MOPR benefit delivery process (cash payments and rehabilitation services)

80% for rehabilitation services recipient are satisfied with the delivery process

Summary payment information to families of the deceased and widows is available on the MOPR website and district disclosure boards and updated quarterly

C Text No website payment information



Quarterly Website MOPR

Grievance mechanism operational

C Text No grievance mechanism



Quarterly Grievance reports, and social audits

MOPR

INTERMEDIATE RESULTS

Consultations for development of guidelines for rehabilitation services held with stakeholders (beneficiaries, civil society and donors and other line ministries)

C Text No guidelines, no consultations

Consultations held with stakeholders

Consultations held with stakeholders

Annual Minutes of consultations

MOPR

Operational guidelines for services to conflict affected groups endorsed by NPTF Secretariat

C Text No guidelines



Annual Written endorsement from NPTF Secretariat

MOPR

Guidelines/directives for families of the deceased and widows payments endorsed by NPTF Secretariat

C Text No guidelines

Guidelines/directives for families of the deceased and widows payments endorsed by NPTF Secretariat

Annual Written endorsement form NPTF Secretariat

MOPR

MOPR communication strategy developed and deployed

C Text No strategy MOPR communication strategy developed and deployed

MOPR communication strategy developed and deployed

Annual Beneficiary Assessment, third party monitoring

MOPR

Beneficiary Assessments conducted

R Text None conducted

Two beneficiary assessments conducted

At least two beneficiary assessments conducted

Annual Beneficiary Assessment

MOPR

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PDO Level Results Indicators* C

ore D=Dropped

C=ContinueN= New




Report

Social Audits conducted R Text None conducted

Two social audit exercises completed

At least two social audit exercises completed

annual Social Audit report

MOPR

MIS system operational C Text No central MIS

MIS system core elements operational

MIS system core elements operational

Annual MOPR report MOPR

Grievance/complaints mechanism introduced and staffed

R Text No grievance/ complaints mechanism

Basic grievance/complaint mechanism introduced with staff assigned

Grievance/complaints mechanism fully functional for interim cash transfers and employment services

Quarterly MOPR MIS MOPR

Number of disclosure boards established

R Text No disclosure boards

At least 70% of planned disclosure boards in place

At least 70% of ESES locations establish disclosure boards

Quarterly Field Visits/ MOPR MIS

MOPR

Third party monitoring conducted annually

R Text No independent monitoring

Annual third party monitoring of cash payment processes conducted

At least 3 third party monitoring conducted

Annual Third party monitoring reports

MOPR

Monitoring and evaluation (M&E) plan developed

R Text No monitoring and evaluation plan

Monitoring and evaluation plan developed for the Project with possible application to wider MOPR activities

Project Monitoring and Evaluation Plan extends to MOPR Monitoring and Evaluation

Annual MOPR’s M and E Plan

MOPR

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ANNEX 2: Implementation Plan (July 2012 – June 2014)

# Program/Activity

Project Costs & ExpenditurePhysical Targets for

next 2 yrs

Total Budget after Reallocation

(SDR million)

Estimated Disbursement

by July 15, 2012(SDR

million)

Budget available for next 2

yrs.(SDR

million)

Unit Target

1

Rehabilitation Support Program to Conflict Affected Families and Individuals

10.77 1.25 9.52

a)Employment/Self-Employment Services(ESES)

9.52 1.25 8.26 person 22,000

b)Psychosocial Counseling Services

1.25 1.25 person 5,000

2

Benefit Payment to Families and Widows of those killed as a result of conflict

17.50 14.33 3.17

a) Benefit Payment to Families of those killed as a result of conflict(One Hundred Thousand Rupees)

12.23 11.45 0.78 family 1,000

b) Benefit Payment to Widows of those killed as a result of conflict(Twenty Five Thousand Rupees)

0.73 0.53 0.19 person 1,000

c) Benefit Payment to Families of those killed as a result of conflict(Additional Two Hundred Thousand Rupees)

4.54 2.35 2.19 family 2,900

3

Capacity Building of Key Institutional Structures in Support of Peace Process and Project Management

2.69 0.94 1.75

a) Technical Assistance and Consultants cost

0.38 % 100

b) Trainings & Seminars 0.25 % 100c) Evaluation of projects number 1i)Third Party Monitoring & Beneficiary Satisfaction Survey

0.05 number 2

ii) Social Audit 0.03 Number 2iii) Tracer Studies 0.05 number 2

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# Program/Activity

Project Costs & ExpenditurePhysical Targets for

next 2 yrs

Total Budget after Reallocation

(SDR million)

Estimated Disbursement

by July 15, 2012(SDR

million)

Budget available for next 2

yrs.(SDR

million)

Unit Target

c) Operating Costs, Monitoring and Support to DAO, DDC and LPC

0.69 % 100

d) Goods 0.31 % 100

Total 30.96 16.52 14.44 -4 Unallocated 0.34 0.00 0.34 -

Grand Total 31.30 16.52 14.78 -

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ANNEX 3: Letter from the Ministry of Finance

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