The World Bank Montenegro Institutional Development and Agriculture Strengthening (MIDAS) (P107473) REPORT NO.: RES34883 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF MONTENEGRO INSTITUTIONAL DEVELOPMENT AND AGRICULTURE STRENGTHENING (MIDAS) APPROVED ON APRIL 21, 2009 TO MINISTRY OF FINANCE AGRICULTURE EUROPE AND CENTRAL ASIA Regional Vice President: Cyril E Muller Country Director: Linda Van Gelder Senior Global Practice Director: Juergen Voegele Practice Manager/Manager: Julian A. Lampietti Task Team Leader: Jeren Kabayeva, Silvia Mauri The World Bank Montenegro Institutional Development and Agriculture Strengthening (MIDAS) (P107473) I. BASIC DATA Product Information Project ID Financing Instrument P107473 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 21-Apr-2009 31-Mar-2019 Organizations Borrower Responsible Agency Ministry of Finance Ministry of Agriculture and Rural Development Project Development Objective (PDO) Original PDO The Project Development Objective is to improve delivery of government assistance for sustainable agriculture and rural development in a manner consistent with the EU's pre-accession requirements. Current PDO The new objectives of the Project are: (i) to improve delivery of government assistance for sustainable agriculture and rural development in a manner consistent with the EU's pre-accession requirements; (ii) to increase the experience of Montenegrin authorities in administering rural development grants in accordance with EU-IPARD core rules, and (iii) to support a selected number of agricultural holdings and food establishments in upgrading towards EU standards. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-86430 09-Sep-2016 05-Oct-2016 14-Dec-2016 30-Mar-2019 3.34 2.42 .98 IBRD-77160 21-Apr-2009 27-May-2009 23-Jul-2009 30-Sep-2016 15.44 13.88 0 TF-A1293 24-Dec-2015 30-Dec-2015 23-Feb-2016 31-Mar-2019 5.35 3.90 1.55 The World Bank Montenegro Institutional Development and Agriculture Strengthening (MIDAS) (P107473) TF-93405 27-May-2009 27-May-2009 23-Jul-2009 30-Jun-2017 3.95 3.95 0 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES The proposed restructuring is requested for the EU-funded Grant No. TF0A1293, associated with the Montenegro Institutional Development and Agriculture Strengthening Project (MIDAS, P107473) – Loan 86430. The Project is also funded by Loan 86430 (EUR 3 million) that is currently under implementation, and two other sources, i.e. Loan 77160 (EUR11 million) and GEF Grant TF93405 (US$4 million) that were fully disbursed. The proposed restructuring would include: (a) an extension of the Closing Date of the Grant, and thus of the whole Project, from March 31, 2019 to September 30, 2019 (6 months); and (b) a reallocation of Grant proceeds from Category 1 (Sub-grants under Component 1 of the project) to Category 2 (Goods, Works, Non-Consulting Services, Consultants’ Services, Training and Operating Costs under Component 2 of the project), in the amount of EUR704,997 (US$0.9m equivalent). This would be the second extension of the Grant, which was previously extended for 9 months from June 30, 2018 to March 30, 2019 to provide additional time for successful applicants under the IPARD-like grants program to complete their investments. This extension would thus result in cumulative extension period of 15 months for this Grant, and a total extension of 36 months for the MIDAS Project as a whole. Progress towards achievement of the Project Development Objective (PDO) is Satisfactory and Implementation Progress (IP) is Moderately Satisfactory. The IBRD Loan 86430 will be closing as scheduled, on March 30, 2019. Implementation progress of the activities financed under the Loan is satisfactory and the targets related to this part of the project have already been met. Under the Grant, implementation of Component 1 (80 percent of total Grant funds), four calls for IPARD-like grants supporting the agro-processing sector have been launched, resulting in 98 signed contracts amounting up the EUR 5.2 million in support (corresponding to 100 percent of the total grant allocation). However, due to challenges encountered by the grant recipients in obtaining building permits and financing to cover their own contributions to investments under the Grant program, about EUR 1.2 million (US$1.36 million equivalent) remains unspent to date. Under Component 2, activities have been implemented as planned, including strengthening the grant monitoring support system and capacity for IPARD implementing in the Ministry’s Directorates for Rural Development and for IPARD Payments, as well as of Technical Bodies, Advisory Services and members of the Sector Monitoring Committee. Therefore, the Government requested a 12-month extension of the Grant, and re-allocation of EUR900,000 from Component 1 to Component 2 in the letters dated September 7 and November 2, 2018. However, following lengthy and extensive discussions with the EU Delegation in Montenegro that lasted since September 2018 till March 2019, it was agreed to: (i) extend Grant Agreement between the World Bank and Montenegro until September 30, 2019 (only for six month) due to closure of the EU Funding Agreement to Montenegro; and (ii) re-allocate only EUR704,997 (out of requested EUR900,000) from Component 1 to Component 2 to finance additional activities under the project that were agreed with EU. The World Bank Montenegro Institutional Development and Agriculture Strengthening (MIDAS) (P107473) To date, 63 percent of the total Grant proceeds have been disbursed. Fiduciary arrangements continue to be satisfactory and there are no outstanding audits. Environmental and social safeguards are also satisfactory. The proposed six-month extension and reallocation would be necessary to add more time to implement additional activities and disburse the TF at a greater extent. It will also help consolidate the project’s impact by further strengthening the capacity of Montenegro’s institutions in administering IPARD grants and to prepare them for full IPARD implementation, as Montenegro has received EU entrustment to implement two IPARD measures. Specifically, with the extension and reallocation, the Directorate for Payments will be strengthened through establishing a regional Directorate for Payments (DFP) office in Bijelo Polje to serve as a Disaster Recovery Center for the entire IT systems and data of the DFP, which is in line with EU requirements for a fully functional Paying Agency. In addition, the Grant would support the expansion of the hardware and software systems, the development of the Document Management System (for the electronic archiving and filing of documents), the improvement of workflow management according to IPARD procedures; strengthening of capacity for advisory services, and training for the DFP, Advisory Services and Food Safety Agency. The PMU has prepared an extension action plan that has been reviewed by the Bank team. All of the proposed activities will be completed within the proposed extension timeline. The signed Amendment to the Administration Agreement of Trust Fund (No. TF072443) is attached. II. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications 30-Jun-2015, 31-Mar- IBRD-77160 Closed 30-Jun-2014 2016, 30-Sep-2016, 26-May-2017 IBRD-86430 Effective 30-Mar-2019 30-Jun-2015, 31-Mar- TF-93405 Closed 30-Jun-2014 2016, 30-Jun-2017, 11-Jan-2018 TF-A1293 Effective 30-Jun-2018 31-Mar-2019 30-Sep-2019 30-Jan-2020 The World Bank Montenegro Institutional Development and Agriculture Strengthening (MIDAS) (P107473) REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Current Current Actuals + Proposed Disbursement % Ln/Cr/TF Expenditure Allocation Committed Allocation (Type Total) Category Current Proposed TF-A1293- Sub-grants 001 under 3,900,000.00 1,965,953.16 3,195,003.00 75.00 75.00 Currency: Component 1 EUR G,W,non- CS,CS,TR,OC 823,806.00 426,940.00 1,528,803.00 72.44 72.44 Component 2 Total 4,723,806.00 2,392,893.16 4,723,806.00