The World Bank EU/IPA AGRICULTURE AND RURAL DEVELOPMENT INSTITUTION BUILDING PROJECT (P144994) REPORT NO.: RES29110 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF EU/IPA AGRICULTURE AND RURAL DEVELOPMENT INSTITUTION BUILDING PROJECT APPROVED ON OCTOBER 28, 2014 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: Daniel P. Gerber The World Bank EU/IPA AGRICULTURE AND RURAL DEVELOPMENT INSTITUTION BUILDING PROJECT (P144994) ABBREVIATIONS AND ACRONYMS CAP Common Agricultural Policy (EU) CPS Country Partnership Strategy EC European Commission EMP Environmental Management Plan EU European Union FDI Foreign Direct Investments FM Financial Management GAP Good Agricultural Practices GDP Gross Domestic Product GEF Global Environment Facility GOM Grants Operational Manual IBRD International Bank for Reconstruction and Development IPA Instrument for Pre-Accession IPARD Instrument for Pre-Accession for Rural Development MARD Ministry of Agriculture, Rural Development MIDAS Montenegro Institutional Development and Agriculture Strengthening MONSTAT Statistical Office of Montenegro R&D Research and Development SfP Sector for Payment department Scrod Sector for Rural Development department TF Trust Fund TSU Technical Service Unit The World Bank EU/IPA AGRICULTURE AND RURAL DEVELOPMENT INSTITUTION BUILDING PROJECT (P144994) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P144994 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 28-Oct-2014 31-Dec-2017 Organizations Borrower Responsible Agency Ministry of Finance Ministry of Agriculture and Rural Development Project Development Objective (PDO) Original PDO The objective of the Project is to increase the experience of Montenegrin authorities in administering rural development grants in accordance with the core rules of the European Union Instrument of Pre-accession Assistance for Rural Development and to improve the productivity of a targeted number of agriculture holdings. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net TF Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-18039 28-Oct-2014 31-Oct-2014 04-Dec-2014 31-Dec-2017 4.00 2.88 .94 The World Bank EU/IPA AGRICULTURE AND RURAL DEVELOPMENT INSTITUTION BUILDING PROJECT (P144994) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. The implementation of the Montenegro Institutional Development and Institutional Strengthening (MIDAS) (P107473) and the associated EU/IPA Grants (IPARD Like-I (P144994, TF018039) and IPARD Like-II (P154111, TF0A1293) is progressing in a satisfactory manner and the projects are well on track to meet their development objectives. Altogether, as of end of fiscal year 2017, for the three projects, seven calls for grant applications had been launched, resulting in 734 applications. Upon review of the applications, 465 were approved representing a total investment amount of EUR 15.6 million of which half will be reimbursed as grants in line with the principles of the Instrument for Pre-Accession for Agriculture and Rural Development (IPARD). Of these figures IPARD Like -1 contributed a total of 204 paid out grants amounting to a total investment of EUR 5.285 million, of which 3.072 million were grants paid out to farmers from TF018039. As of the end of May 2017, all available resources under this grant portion of the project have been contracted and the project is expected to close with 100% disbursement and with the full achievement of the PDO and its related indicators. 2. The restructuring of the EU/IPA Grant (P144994) is requested to allow for full absorption of the grant funds. The rational for restructuring and reallocation is that while the resources under Component 1 – Implementation of a Grant Scheme based on Core IPARD rules and the related disbursement category 1 will be fully disbursed, the resources allocated for goods, non-consulting services and consultant’s services, training and operating costs under Component 2 – Technical Assistance to Support Implementation and Monitoring remain substantially underused. This is due to the fact that the technical assistance to support implementation and monitoring has been provided as part of overall MIDAS project management. The demand for grant support remains consistently high and rather than loosing these funds at the closure of the grant the client has asked that a portion of the resources be reallocated so that they can be used as part of the grant scheme. II. DESCRIPTION OF PROPOSED CHANGES 3. The reallocation would ensure that the funds under Category 2, dedicated to services, operational costs, goods and works would also be fully absorbed as grants since they remain substantially unused. They were not used mainly because the IBRD financed MIDAS project was substantially covering these expenditures since it supported the development of the systems to build capacity to approximate IPARD structures. However, rather than just reallocating resources from category 2 to category 1, a third category needs to be created since the disbursement percentage of 69% under category 2 reflects a commitment by government for counterpart financing to IPA funds. When the EU agreed to have the Bank as custodian of IPA resources to ensure effective use of IPA, the obligations for counterpart financing remained attached to this funding. As such, the Administrative Agreement the Bank has with the EU reflects this commitment by the government and is The World Bank EU/IPA AGRICULTURE AND RURAL DEVELOPMENT INSTITUTION BUILDING PROJECT (P144994) therefore also part of the grant agreement the Bank has with the government. Detail of the reallocation including the amounts is reflected in the section of detailed changes. Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. I. SUMMARY OF CHANGES Changed Not Changed Reallocation between Disbursement Categories ✔ Change in Implementing Agency ✔ Change in Project's Development Objectives ✔ Change in Results Framework ✔ Change in Components and Cost ✔ Change in Loan Closing Date(s) ✔ Cancellations Proposed ✔ Additional Financing Proposed ✔ Change in Disbursements Arrangements ✔ Change in Disbursement Estimates ✔ Change in Overall Risk Rating ✔ Change in Safeguard Policies Triggered ✔ Change of EA category ✔ Change in Legal Covenants ✔ Change in Institutional Arrangements ✔ Change in Financial Management ✔ Change in Procurement ✔ Change in Implementation Schedule ✔ Other Change(s) ✔ IV. DETAILED CHANGE(S) The World Bank EU/IPA AGRICULTURE AND RURAL DEVELOPMENT INSTITUTION BUILDING PROJECT (P144994) OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed TF-18039-001 | Currency: EUR iLap Category Sequence No: 1 Current Expenditure Category: Sub-grants under Part 1 3,085,308.00 2,268,866.80 3,085,308.00 75.00 75.00 iLap Category Sequence No: 2 Current Expenditure Category: G,non-CS,CS,TR,IOC Part 2 300,000.00 20,475.50 60,000.00 69.00 69.00 iLap Category Sequence No: 3 Current Expenditure Category: Additional sub-grants under Part 1 0.00 0.00 240,000.00 69.00 Total 3,385,308.00 2,289,342.30 3,385,308.00 Note to Task Teams: End of system generated content, document is editable from here.