The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) REPORT NO.: RES35678 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF FOSTERING INNOVATION THROUGH RESEARCH, SCIENCE AND TECHNOLOGY (FIRST) APPROVED ON MAY 31, 2013 TO SOCIALIST REPUBLIC OF VIETNAM EDUCATION EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Ousmane Dione Senior Global Practice Director: Jaime Saavedra Chanduvi Practice Manager/Manager: Tobias Linden Task Team Leader: Dilip Parajuli The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) ABBREVIATIONS AND ACRONYMS CPMU Central Project Management Unit NASATI National Agency for Scientific and Technological Information FM Financial Management PDO Project Development Objective(s) GOV Government of Vietnam PIM Project Implementation Manual GRI Government Research Institute R&D Research and Development HHTP Hoa Lac High-Tech Park S&T Science and Technology M&E Monitoring and Evaluation SPMU Subsidiary Project Management Unit MOF Ministry of Finance STI Science, Technology and Innovation MOST Ministry of Science and Technology VINALAB- National Core Technology Laboratory for MAMET Mechanical Manufacturing Automation and Embedded Technology MPI Ministry of Planning and Investment The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) BASIC DATA Product Information Project ID Financing Instrument P117394 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 31-May-2013 30-Jun-2019 Organizations Borrower Responsible Agency Socialist Republic of Vietnam Ministry of Science and Technology Project Development Objective (PDO) Original PDO The project development objective is to support science, technology and innovation (STI) in Vietnam by designing and piloting of STI policies, enhancing the effectiveness of project-aided research and development (R&D) institutions, and encouraging the development of innovative technology enterprises. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-52570 31-May-2013 25-Jul-2013 22-Oct-2013 30-Jun-2019 78.00 23.55 46.99 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. Context and previous restructuring: The Government of Vietnam (GoV), with support from the World Bank, has been implementing the Fostering Innovation through Research, Science and Technology (FIRST) Project since October 2013. In line with the 2012 National Strategy for Science &Technology and High Technology Law of 2008, FIRST Project was designed and implemented on a pilot basis to increase innovation activity in key technology sectors through an enhanced role of the state to provide Science Technology and Innovation (STI) as a public good and at the same time foster innovation in Vietnamese enterprises. The FIRST Project was approved on May 31, 2013, signed on July 25, 2013 and became effective in October 2013. The FIRST Project encountered significant implementation delays during the first three years, in large part because of the nature of the project focusing on innovation as well as the lack of experience in implementing such an operation. The lack of experienced staff, the centralization of every approval steps in the process have also blocked the project implementation. However, after the April 2017 project restructuring that simplified project activities and the fiduciary arrangements, the project started to demonstrate significant progress in achievements towards project objective and implementation activities. Key changes from the 2017 restructuring included: (a) removing two project activities - namely Part 2(B)(i) New Enterprise Grants and Part 2C Government Owned Company Operated (GOCO) model laboratory at the Hoa Lac High Tech Park (HHTP) - and cancelling the corresponding loan amount of US$22 million equivalent; and (ii) the simplification of fiduciary activities whereby the procurement and financial management authorities including the implementing and reporting procurement and FM activities would be decentralized to the grant beneficiaries to improve the ownership and the capacity of grant implementers. With the positive turnover, the project has been rated MS in both DO and IP since December 2017 and these ratings consistently remain up to now. 2. Project Development Objective (PDO): The PDO is to support science, technology and innovation (STI) in Vietnam by designing and piloting of STI policies, enhancing the effectiveness of project-aided research and development (R&D) institutions, and encouraging the development of innovative technology enterprises1. The PDO remains relevant given the Government’s priority and the fact that the Ministry of Science and Technology is now officially have the mandate for Innovation program of the country. The PDO key performance indicators (KPIs) – increase in the number of international scientific publications by beneficiary organizations and increase in innovative activities by beneficiary organizations - have already been over achieved. The newly added third PDO indicator “number of consortia and start-up sub-projects completed successfully” while lagging behind annual targets, is expected to meet the end-of-project target when the associated sub-project grants are completed by the end of 2019. Available data indicates that the intermediate results indicators (IOs) are also on track to be met by project-end (The attached Annex includes an updated results framework with explanation of revisions). 1 The PDO can also be read as ‘Designing and piloting STI policies, enhancing the effectiveness of project-aided research and development (R&D) institutions, and encouraging the development of innovative technology enterprises to support science, technology and innovation in Vietnam’ - This highlights the three distinct aspects of the PDO, and these aspects are used to frame the discussion in this restructuring paper. The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) 3. Overall project implementation has improved considerably during the past twelve months as reflected by: (i) signed agreements and implementation initiation on the thirty (30) third-round STI sub-projects as of August 2018, resulting in the total sub-project grants signed with beneficiaries of US$59 million (97% of the sub-project grants category allocation); (ii) successful completion of nine (9) first round sub-project grants (includes 5 foreign talents grants, 2 Government Research Institutes (GRI) grants, and 2 start-up grants); (iii) reasonable progress in the second round of sub-project grants with some delays in procurement and expenditure reimbursements; and (iv) the Project, to a large extent, meeting all the key milestones agreed during the supervision mission in October 2018. Achievements under Component 1 (Knowledge and Policy Development) include (a) all four (4) rounds of Call for Proposals are completed with a total of 217 proposals submitted and 38 proposals funded; (b) all five (5) sub-project activities under the first-round grants are completed, resulting in thirteen (13) technology processes/ solutions transferred through different innovation and R&D activities, two (2) patents registered, eight (8) foreign talents attracted and thirteen (13) publications recorded; (c) 30 sub-projects under subsequent grant rounds are under implementation and expected to be completed on time. Achievements under Sub-component 1B (Strengthening Results Measurement in Science, Technology and Innovation), implemented by National Agency for Science and Technology Information (NASATI) and these include the following: (a) preparation of a draft STI survey report following the stakeholder workshop held in August 2018 to disseminate analytical results of the STI survey; (b) good progress in the procurement process for National STI Database hardware (bidding documents are now with the Bank for prior review) and completed S&T portal; (c) the monitoring and evaluation (M&E) framework for Government Research Institute (GRI) is completed followed by distribution of two M&E manuals to GRIs. Achievements under Component 2 (Supporting Government Research Institute Reform and Enterprise Innovation) include (a) completion of the two (2) GRI sub-projects (Cuu Long Rice Research Institute and Vietnam Research Institute of Electronics, Informatics and Automation) under the first-round grants; and (b) good implementation progress made by sub-project beneficiaries under the second-round grants with all the advance are made and initial research activities are undergoing. Component 2A on GRIs is the largest project component by volume - $36.5 m (62% of total signed sub-project grants). The provision of advance disbursement to GRIs allows the beneficiaries to expedite their implementation activities. Under component 3 (Project Management), the report to summarize the policy research carried out with project financing has been commissioned. 4. Project disbursement has improved and now stands at 33%, an increase from 20% since June 2018. However, overall disbursement is significantly behind project implementation progress at sub-project levels. The main challenge is that Central PMU’s (CPMU) internal disbursement verification procedure remains highly inefficient, resulting in delayed approval of reimbursement to grant beneficiaries. However, it is expected that the sub-project disbursements will make significant progress going forward as a result of the following recent actions: (a) CPMU has issued a guidance note to all project beneficiaries on the business standards, verification procedures and decision-making authority to expedite reimbursements to grant beneficiaries; (b) a number of sub-projects from the first and second round of STI grants are closing and are expected to result in further disbursement; and (c) procurement activities for both the second and third round of STI grants have accelerated and should lead to increased disbursement. 97% (equivalent to US$ 59 mil.) of project allocation for grants has been committed and will be disbursed by end of the project closing date. The CPMU and the Bank team is also working intensively with MOF to lift the disbursement The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) ceiling and speeding up the withdrawal process at both beneficiaries and CPMU levels. There is no outstanding audit report in this project. 5. Rationale for Restructuring: The proposed project restructuring is requested to extend the closing date by six months from June 30, 2019 to December 31, 2019 to ensure that the project beneficiaries have sufficient time to implement their sub-project grant activities and achieve the results (linked to PDO and indicators). The proposed restructuring also includes revisions to the Project Results Framework (RF) to better reflect the attribution of project interventions, in light of the previous project restructuring that took place after the 2016 Mid-Term Review which included partial funds cancellation (April 2017). Revisions to the key performance indicators is expected to provide greater alignment of the project’s achievements with project implementation. The revision includes (i) the removal of one intermediate indicator and reduction in target of other indicator to reflect the cancellation; and (ii) the addition of two new indicators to better measure the project development objective and reflect the project achievements. The detailed proposed changes are described in the next section. The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) II. DESCRIPTION OF PROPOSED CHANGES 6. The proposed restructuring requests the Extension of Closing Date and revisions to the Project’s Results Framework. Extension of Project Closing Date from June 30, 2019 to December 31, 2019. 7. Despite the initial delays, project implementation is progressing well, and the project has seen promising preliminary results from the first-round (and in some cases second-round) of innovation grants. The third- round grants with 8 Foreign Talents, 8 GRIs and 9 Consortia have been signed, with a commitment of US$30 million and are underway. To maximize the impact of the second and third round of activities, it is important to extend the implementation period to allow for sufficient time to complete the activities and generate results. Based on experience to date, the innovation sub-projects take between 18 to 30 months (depending on the nature of the project) of implementation to produce any meaningful results. With many of the third-round STI grant activities initiated only in June-July of 2018, the current closing date of June 30, 2019 would not guarantee sub-projects are completed satisfactorily. Therefore, the government has requested a no-cost extension until December 31, 2019 in MOF’s letter to the Bank on January 8, 2019 (subsequently verified by SBV on January 15, 2019). Given the importance of this pilot project for public- policy discourse on innovation in the country and the promising results seen from initial rounds of sub- project grants, the extension request is well justified. Revisions of the Project Results Framework 8. The revised Results Framework is attached (in Annex 1) to this paper and proposes the following revisions: 9. Project Development Indicators: (i) Revised the end target of the two Indicators “Number of international scientific publications made by beneficiary organizations” and “Number of innovative activities by beneficiary organizations” to realistically reflect the project expected results. (ii) Add one new indicator - Indicator “Consortia and start-up projects (grants) completed successfully with new products and processes developed” – to capture two key project activities (consortia and start-up areas) and to measure the “Support science, technology and Innovation (STI) in Vietnam by designing and piloting of STI policies and Encouraging the development of innovative technology enterprises” part of the PDO. One of the key highlight of this project is the piloting of the Government support to private sector through the forming of “consortium” whereby the research institutes, universities and private enterprises work together on practical technology solutions that can immediately be commercialized and served the end-users. The success of this pilot will pave the way for a strong support from the Government to the development of Science, Technology and Innovation not only in the public but in the private sector. The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) 10. Intermediate Indicators: (i) Add a new indicator – Indicator “Number know-how, new knowledge and new methodologies transferred” - to capture the output aspect of activities under Component 1A “Foreign Talents” where not only promoting and attracting the foreign talents is measured, but more importantly the transfer of technologies and knowledge as the results of the foreign talents attraction activities. (ii) Add a new indicator – Indicator “S&T Management Information system in place and operational” – to capture an important aspect of activities under component 1B on M&E system that contributes to the “designing and piloting of STI policies” aspect of the PDO. (iii)Reduce the target of indicator “Number of competitive grants awarded and successfully completed to innovative technology enterprises” from 32 to 3 to reflect the removal of Part 2(B)(i) New Enterprise Grants during the April 2017 restructuring. Various government program were developed to address the startup community after 3 start-ups were funded under the project within the first round of proposals. (iv) Remove the indicator “National Core Technology Laboratory for Mechanical Manufacturing Automation and Embedded Technology (VINALAB-MAMET) begins its business operations” to reflect the removal of the entire Part 2(C) -the Government Owned Company Operated (GOCO) model laboratory at the Hoa Lac High Tech Park (HHTP) during the restructuring in April 2017. The revised Results Framework (RF) has been discussed and agreed with the Client and reflected in the last ISR as well as be updated in the Project Operations Manual (POM) accordingly. The RF below is generated by the system based on the latest ISR. The revised RF is attached in a separate document. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Loan Closing Date(s) ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IDA-52570 Effective 30-Jun-2019 31-Dec-2019 30-Apr-2020 . The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) . Results framework COUNTRY: Vietnam Fostering Innovation through Research, Science and Technology (FIRST) Project Development Objectives(s) The project development objective is to support science, technology and innovation (STI) in Vietnam by designing and piloting of STI policies, enhancing the effectiveness of project-aided research and development (R&D) institutions, and encouraging the development of innovative technology enterprises. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target Enhancing the effectiveness of project-aided research and development (R&D) institutions Number of international scientific publications made by 0.00 10.00 beneficiary organizations (disaggregated by gender) (Number) Encouraging the development of innovative technology enterprises Number of innovative activity by beneficiary organizations 0.00 10.00 (disaggregated by gender) (Number) Support science, technology and innovation in Vietnam by designing and piloting of STI policies Consortia and start-up projects (grants) completed successfully 0.00 15.00 with new products and processes developed (Number) PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 Component One: Knowledge and Policy Development The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 Number of international researchers participated in 0.00 0.00 0.00 20.00 30.00 50.00 50.00 project (disaggregated by gender) (Number) Number of know-how, new knowledge and new 0.00 15.00 methodologies transferred (Number) Conduct STI Survey No No Yes Yes Yes Yes Yes (Yes/No) S&T Management Information system No Yes (Yes/No) Component Two: Supporting Government Research Institute (GRI) Reform and Enterprises Innovation Number of GRIs with satisfactory implementation 0.00 0.00 3.00 3.00 5.00 6.00 6.00 of GRI grant (Number) Number of competitive grants awarded and successfully completed to 0.00 0.00 0.00 3.00 3.00 3.00 3.00 innovative technology enterprises (Number) Action: This indicator has been Revised Number of matching grants successfully implemented 0.00 0.00 1.00 3.00 3.00 4.00 15.00 by research-innovation consortia (Number) The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 Component Three: Project Management Research report produced No Yes (Yes/No) IO Table SPACE The World Bank Fostering Innovation through Research, Science and Technology (FIRST) (P117394)