The World Bank Strengthening Rights and Economies of Adat and Local Communities (P156473) REPORT NO.: RES44155 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF STRENGTHENING RIGHTS AND ECONOMIES OF ADAT AND LOCAL COMMUNITIES APPROVED ON MARCH 16, 2017 TO SAMDHANA INSTITUTE INDONESIA ENVIRONMENT, NATURAL RESOURCES & THE BLUE ECONOMY EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Satu Kristiina Jyrintytar Kahkonen Regional Director: Benoit Bosquet Practice Manager/Manager: Ann Jeannette Glauber Task Team Leader(s): Iwan Gunawan Official Use The World Bank Strengthening Rights and Economies of Adat and Local Communities (P156473) ABBREVIATIONS AND ACRONYMS DGM-I Dedicated Grant Mechanism Indonesia FIP Forest Investment Program GoI Government of Indonesia IPLCs Indigenous Peoples and Local Communities MoEF Ministry of Environment and Forestry NEA National Executing Agency NSC National Steering Committee REDD Reducing Emission from Deforestation and Forest Degradation BASIC DATA Product Information Project ID Financing Instrument P156473 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 16-Mar-2017 30-Jun-2021 Organizations Borrower Responsible Agency Samdhana Institute Indonesia Samdhana Institute Indonesia Official Use The World Bank Strengthening Rights and Economies of Adat and Local Communities (P156473) Project Development Objective (PDO) Original PDO To improve the capacity of participating indigenous peoples and local communities  (IPLCs) to engage in tenure security processes and livelihood opportunities from sustainable management of forests and land OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A4242 16-Mar-2017 27-Mar-2017 22-Jun-2017 30-Jun-2021 6.33 4.37 1.95 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. This restructuring paper seeks Level 2 restructuring for the Strengthening Rights and Economies of Adat and Local Communities Project introducing the following changes: (a) an extension of the project period by 17 months from June 30, 2021 to November 30, 2022; and (b) reallocation of remaining funds among the two components. The proposed changes will not alter the existing PDO nor safeguard considerations. This restructuring is expected to accelerate disbursement, implementation progress, and improve likelihood of fully achieving the PDO. A. Background 2. The Dedicated Grant Mechanism Indonesia: Strengthening Rights and Economies of Adat and Local Communities Project (DGM-I or “the Project”, P156473; Grant No. TF0A4242) was approved by the Board of Directors on March 16, 2017 and became effective on June 22, 2017. The Project is funded through a grant from the Climate Investment Funds (CIF) in an amount of US$ 6.33 million. It aims to enhance the capacity of participating Indigenous Peoples and Local Communities (IPLCs) to strengthen forest tenure security and improve their economic wellbeing, while supporting Indonesia’s efforts to reduce greenhouse gases (GHG) emissions. The Project is intended to complement the ongoing Forest Investment Program (FIP) in Indonesia (P144269) – also funded through the CIF – to ensure the full and effective participation of IPLCs as important stakeholders and participants in the Reducing Emission from Deforestation and Forest Degradation (REDD+) and broader forestry agenda. In doing so, the Project is recognizing the roles that IPLCs play, as owners and users of customary territories and stewards of the forests. Official Use The World Bank Strengthening Rights and Economies of Adat and Local Communities (P156473) 3. The Project has a National Steering Committee (NSC) advisory body, established through an extensive consultation process in 2013-14, that operates at a national and regional level (covering seven regions including Sumatra, Java, Kalimantan, Bali-Nusa Tenggara, Maluku, Sulawesi and Papua). The NSC is composed of nine members representing the seven regions and two women representing the Indigenous Peoples and Local Communities; and two observers (non- voting members) representing the National Forestry Council and Ministry of Environment and Forestry (under the Directorate General of Social Forestry and Environmental Partnership). The NSC selected the Samdhana Institute Indonesia, a non-governmental organization, as the National Executing Agency (NEA) through a competitive selection process. The NEA is responsible for managing the project grant and serving as the Secretariat that provides capacity building, technical support, and administrative oversight to help communities design and implement initiatives that reflect community priorities. B. Project Status 4. The overall implementation progress (IP) and progress towards achievement of the PDO have been rated Moderately Satisfactory. Despite some challenges that have resulted in significant implementation delays and low disbursement, the Project has made significant progress towards achieving its objectives. Steady progress has been made in the selection and implementation of sub-projects and in the achievement of tenurial security for participating communities, which has taken place in a number of districts with varying levels of recognition. Notable achievements to date include: (i) three of the four PDO indicator targets have been achieved, with a notable achievement derived from livelihood related activities; (ii) three of six intermediate result indicator targets have been exceeded, with substantial progress achieved from the participation of IPLCs (including women); (iii) other indicators are on track to achieve their end-project targets. 5. The Project has concluded the selection process of subprojects with a total of 63 subgrantees selected (see Table 1), working with 172 IPLC groups in seven regions throughout the country (Sumatra, Kalimantan, Sulawesi, Java, Bali-Nusa Tenggara, Maluku and Papua). All subprojects are primarily working on tenurial rights, covering nearly 0.5 million hectares indigenous territories claims, with 14 out of 30 participating IPLCs having submitted evidence for recognition of tenure to the government. 11 subprojects have completed (mainly from the first batch of selection process). Table 1: Number of Approved Subprojects by Theme and Activity Type Official Use The World Bank Strengthening Rights and Economies of Adat and Local Communities (P156473) 6. In addition, the Project has made modest progress on capacity strengthening, engaging IPLCs representatives in policy processes and dialogue, particularly on climate change, livelihoods issues and agrarian reform, including land tenure and social forestry. 7. At the same time, the COVID-19 pandemic has significantly affected the Project’s performance and slowed down the achievement of some indicator targets due to mobility restrictions imposed by the government, in particular those related to on-the-ground activities such as monitoring and technical assistance to the subgrantees. As a result, the Project continues to experience low disbursement (69% of total budget) and fund utilization (with actual expenditure rate at 44%). This is attributed mainly to slow subproject implementation, reflecting the limited capacity of subgrantees. Given that the block grants under Component 1 represent the largest funding allocation, low subproject disbursement disproportionately affects overall project performance. Despite the delays, there has been important progress with some functions being undertaken virtually to accelerate implementation progress, such as the recent decision to finalize the last selection of subprojects virtually, and to undertake remote reporting and monitoring (through online meetings and phone calls) as an interim and complementary measure until such time that travel restrictions are lifted. C. Rationale for Restructuring 8. This restructuring responds to the request from the Samdhana Institute Indonesia dated March 9, 2021 to: (i) extend the project closing date by 17 months from June 30, 2021 to November 30, 2022; and (ii) reallocate remaining funds among the two components and between two disbursement categories. Budget reallocation is essential to cover project management cost throughout the extension period and enhance capacity building and technical assistance for IPLCs groups (including emerging IPLCs leaders). There will be no changes to the PDO or the safeguards category. There are no pending audits for the Project. 9. The Project remains highly relevant. IPLC’s tenurial security and clarity over rights remain important issues and are still high on the national agenda, given the strong link between such elements and access to natural assets, reduction of conflicts due to overlapping claims and enhanced livelihoods for forest-dependent communities. The Project is an important catalyst for helping bolster both the government’s and IPLCs’ interests to tenure clarity over forests and land and for improving livelihoods that will contribute to addressing poverty and drivers of deforestation. The proposed restructuring will allow the Project to contribute to the national priority agenda and to achieve the intended objectives, particularly regarding subprojects which represent the largest share of funding (63% of total project budget). Specifically, the restructuring will afford the NEA additional time and budget to provide needed technical assistance to subgrantees to expedite subproject implementation, and to facilitate policy processes and dialogue to accelerate agrarian reform and social forestry efforts as part of the national priority agenda, thereby strengthening the leadership skills and capacities of NSC and emerging IPLC leaders to enhance sustainability of project outcomes. The Project also provides a unique opportunity for a direct interaction of the IPLCs groups and local NGOs/CSOs to demonstrate the critical roles they can play in sustainable forest management, including in ongoing negotiation and decision making process, particularly on issues related to tenurial rights, at regional, national and international levels. 10. With sustained subproject implementation progress and the closing-date extension, the ratings for progress toward achievement of the PDO and IP are expected to improve, and the PDO is expected to be fully achieved. Official Use The World Bank Strengthening Rights and Economies of Adat and Local Communities (P156473) II. DESCRIPTION OF PROPOSED CHANGES 11. The proposed revisions are outlined in the following and include: (a) Extension of closing date. The closing date is extended from June 30, 2021 to November 30, 2022, for a total of 17 months This is the first such extension. The additional time will enable implementation of additional capacity building for subgrantees on technical and administrative aspects such as fiduciary management, safeguards management, and project monitoring and reporting. Such elements are critical to the success of both the subprojects and the overall project. (b) Budget reallocation. The component budgets are being adjusted in line with Table 2 below. This reallocation is being done to allow for enhanced capacity building and technical assistance to IPLCs (Component 2), and to cover additional project management costs associated with monitoring compliance with safeguards, fiduciary, monitoring and evaluation, coordination and communication, including project staffing (Component 3). The increased budget for Components 2 and 3 is offset by a reduction in Component 1 (15% reduction of total budget allocation) given that all subgrants are in the implementation phase. The proposed changes are presented in the Table 2 below and are expected to increase the project management capacity of subgrantees and facilitate the provision of additional technical assistance and coaching by the NEA throughout the extension period. The proposed budget reallocation has also changed the allocation under two disbursement categories, as it reflected in Table 3 below. Table 2: Changes to Project Costing Total Project Cost Allocation (US$) Budget Change Original Changes % of US$ / % to Project Component allocation introduced by Rationale for Changes Total Original current Project allocation restructuring Cost 1.Subgrants to 3,985,000 3,404,332 Budget is reduced as all 580,668 / 54% Strengthen IPLCs subgrants have been 85% Capacity to selected and are under Enhance Tenure implementation. There Security and is no expectation of Improve additional funding to Livelihoods subgrants. 2.Inform Policy 550,000 811,658 Additional funding (262,094) / 13% Processes and enables further 148% Dialogue enhancement of IPLCs capacity, to participate in policy processes and dialogues Official Use The World Bank Strengthening Rights and Economies of Adat and Local Communities (P156473) 3.Project 1,790,000 2,109,010 This component is (318,574) / 33% Management, increased to provide 118% Monitoring and additional project Evaluation, and management costs Institutional consistent with the Development extension of closing date Total Costs 6,325,000 6,325,000 Table 3: Budget reallocation between two disbursement categories Category Original Amount of Revised Amount of Percentage of the Grant Allocated the Grant Allocated Expenditures to (expressed in USD) (expressed in USD) be Financed (inclusive of Taxes) (1) Subgrants under Part I of the Project 3,985,000 3,404,332 100% (2) Goods, Non-consulting Services, 2,340,000 2,920,668 100% Consulting Services, Training and Operating Costs under Parts 2 and 3 of the Project TOTAL AMOUNT 6,325,000 6,325,000 (c) Revisions to the disbursement estimates and implementation schedule. Both the disbursement and implementation schedules have been updated to reflect the 17-month extension period. A. Appraisal Summary 12. Technical: No change. 13. Financial management: No change. 14. Disbursement arrangement: No change. 15. Procurement: No change. 16. Environmental and social safeguards: No change 17. Economic and financial analysis: No change. 18. Risks: No change Official Use The World Bank Strengthening Rights and Economies of Adat and Local Communities (P156473) III. SUMMARY OF CHANGES Changed Not Changed Components and Cost ✔ Loan Closing Date(s) ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Implementation Schedule ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Cancellations Proposed ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) Official Use The World Bank Strengthening Rights and Economies of Adat and Local Communities (P156473) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Subgrants to Strengthen IPLC Subgrants to Strengthen IPLC Capacity to Enhance Tenure Capacity to Enhance Tenure 3.99 Revised 3.40 Security and Improve Security and Improve Livelihoods Livelihoods Inform Policy Processes and Inform Policy Processes and 0.55 Revised 0.82 Dialogue Dialogue Project Management, Project Management, Monitoring and Evaluation, and 1.79 Revised Monitoring and Evaluation, and 2.11 Institutional Development Institutional Development TOTAL 6.33 6.33 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications TF-A4242 Effective 30-Jun-2021 30-Nov-2022 30-Mar-2023 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed TF-A4242-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: SUBGRANTS PT. 1 OF PRJ 3,985,000.00 1,924,371.60 3,404,332.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: GDS,CS,NON-CS,TRG&OC PTS.2&3 2,340,000.00 1,269,304.74 2,920,668.00 100.00 100.00 Official Use The World Bank Strengthening Rights and Economies of Adat and Local Communities (P156473) Total 6,325,000.00 3,193,676.34 6,325,000.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2017 100,000.00 100,000.00 2018 1,000,000.00 1,000,000.00 2019 1,900,000.00 1,900,000.00 2020 2,250,000.00 1,000,000.00 2021 1,080,000.00 1,200,000.00 2022 0.00 1,130,000.00 2023 0.00 0.00 . 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