The World Bank Supporting Education Reform in Targeted Circuits (P152096) REPORT NO.: RES40830 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SUPPORTING EDUCATION REFORM IN TARGETED CIRCUITS APPROVED ON OCTOBER 14, 2015 TO REPUBLIC OF ECUADOR EDUCATION LATIN AMERICA AND CARIBBEAN Regional Vice President: J. Humberto Lopez Country Director: Marianne Fay Regional Director: Luis Benveniste Practice Manager/Manager: Emanuela Di Gropello Task Team Leader(s): Diego Angel-Urdinola, Nelson Gutierrez The World Bank Supporting Education Reform in Targeted Circuits (P152096) ABBREVIATIONS AND ACRONYMS INEVAL National Institute of Evaluation (Instituto Nacional de Evaluación) MEF Ministry of Economy and Finance (Ministerio de Economía y Finanzas) MINEDUC Ministry of Education (Ministerio de Educación) PIU Project Implementation Unit SECOB Works Contracting Service (Servicio de Contratación de Obras) SENESCYT Secretariat of Higher Education, Science and Technology (Secretaría de Educación Superior, Ciencia y Tecnología) SENPLADES National Secretariat for Planning and Development (Secretaría Nacional de Planificación y Desarrollo) VAT Value Added Tax The World Bank Supporting Education Reform in Targeted Circuits (P152096) BASIC DATA Product Information Project ID Financing Instrument P152096 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 14-Oct-2015 31-Dec-2020 Organizations Borrower Responsible Agency Republic of Ecuador Ministry of Education,INEVAL Project Development Objective (PDO) Original PDO The Project Development Objective (PDO) is to increase enrollment in early education and improve the persistence rate in lower secondary education and upper secondary education in the targeted circuits. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-85420 14-Oct-2015 28-Jan-2016 09-Feb-2016 31-Dec-2020 138.00 48.30 89.70 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Supporting Education Reform in Targeted Circuits (P152096) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. Overall Project Implementation is Moderately Satisfactory. The Project was approved by the Board on October 14, 2015 and became effective on February 9, 2016. The Project disbursement rate as of March 2020 stood at 35 percent (US$48.3 million) of the total amount of US$138 million. A Project restructure was completed in January 2020. The restructure included a partial cancellation of US$40 million, affecting mainly investments in infrastructure under Component 1. Other changes entailed: (i) the revision of the Project's institutional arrangements; (ii) reallocation of Loan proceeds between disbursement categories; (iii) inclusion of an additional budget category; and (iv) changes in the results framework. 2. Progress towards achievement of the Project Development Objectives (PDO) and the Overall Implementation Progress were upgraded to Moderately Satisfactory in February 2020. The Project has achieved important progress in the past 6 months. Thanks to the new institutional arrangements introduced in the Project restructuring (i.e. giving the responsibility of all new construction works to MINEDUC, instead of SECOB), the length of the processes for hiring the architectural and engineering studies has decreased significantly. MINEDUC has also developed a clear and credible implementation plan specifying the procedures for mitigating the identified risks associated with the construction of civil works at all phases (contractual, design and construction); there is a more fluid interaction between sectorial ministries including Planifica Ecuador (former SENPLADES, Planification Secretariat) and the Ministry of Economy and Finance (MEF); ministerial and senior-level staff rotation has decreased (rotation leads to important shifts in policy/technical views); and all core positions in the Project implementation unit have been filled. B. Rationale for Restructuring 1. The Government of Ecuador (GoE) is facing a difficult economic situation due to several factors, most importantly the dramatic fall in oil prices. In an effort to optimize the use of financial resources and avoid further implementation delays due to the lack of liquidity and fiscal resources to finance VAT fees, the Government of Ecuador requested the amendment of their full portfolio of Loan Agreements, in order to allow for the financing of VAT with loan proceeds (Oficio Nro.MEF-SFP-2020-0171-O, dated February 18, 2020). Loan No. Project Name 8591 Risk Mitigation and Emergency Recovery Project 8542 Supporting Education Reform in Targeted Circuits Project 8515 Sustainable Family Farming Modernization Project 8946 Social Safety Net Project 8667 Transformation of the Tertiary Technical and Technological Institutes Project The World Bank Supporting Education Reform in Targeted Circuits (P152096) 2. The involved World Bank Project Managers have worked with the respective implementation units and the Ministry of Economy and Finance to define the changes in each project’s scope associated with the said request. Consequently, project documents and implementation plans have been updated accordingly. 3. An umbrella amendment to the Loan Agreements has been prepared and is attached to this Restructuring Paper. The proposed effectiveness date for this restructuring will be January 2nd, 2020, which is the date when the Government of Ecuador issued the Executive Decree 001 enabling the VAT to be financed with resources from loans signed with multilateral development banks. II. DESCRIPTION OF PROPOSED CHANGES A. Inclusion of VAT within the Expenditure to be financed Originally, the loan agreement stated that VAT should be paid with resources from the Government of Ecuador. However, as per requested, VAT will be financed with resources from the loan and the Loan Agreement will be amended to reflect this change. This restructuring is requesting approval to include VAT as an eligible expenditure in the Loan Agreement. Current amounts allocated per category Amount of the Loan Allocated Percentage of Expenditure Category (expressed in USD) to be financed (1) Goods, works, consultant’s services, and 100% Training for Part 1(a)(i) of the Project 99,489,717 (exclusive of taxes) (MINEDUC with the assistance of SECOB) (2) Goods, consultants’ services, non- consulting services, Operating Costs and 100% Training for Part 1 (except Part 1(a)(i) of the 29,300,000 (exclusive of taxes) Project) and Part 2 (except Part (b)(v) of the Project) (in respect of MINEDUC) (3) Goods, consultants’ services, non- consulting services, Operating Costs and SAC 100% under Part 2 (b)(v) of the Project (MINEDUC 9,210,283 (including taxes) and INEVAL) Subtotal 138,000,000 Cancellation amount effective September 27, 40,000,000 2018 TOTAL AMOUNT 178,000,000 Proposed amounts allocated per category The World Bank Supporting Education Reform in Targeted Circuits (P152096) Percentage of Expenditure Amount of the Loan Allocated Category to be financed (expressed in USD) (including VAT) (1) Goods, works, consultant’s services, and Training for Part 1(a)(i) of the Project 99,489,717 100% (MINEDUC with the assistance of SECOB) (2) Goods, consultants’ services, non- consulting services, Operating Costs and Training for Part 1 (except Part 1(a)(i) of the 29,300,000 100% Project) and Part 2 (except Part (b)(v) of the Project) (in respect of MINEDUC) (3) Goods, consultants’ services, non- consulting services, Operating Costs and SAC under Part 2 (b)(v) of the Project (MINEDUC 9,210,283 100% and INEVAL) TOTAL 138,000,000 100% III. SUMMARY OF CHANGES Changed Not Changed Other Change(s) ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ The World Bank Supporting Education Reform in Targeted Circuits (P152096) EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) . Click here to enter text. The proposed change is that, in all categories, the VAT will be covered with resources from the Loan.