The World Bank Haiti Business Development and Investment Project (P123974) REPORT NO.: RES26543 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF HAITI BUSINESS DEVELOPMENT AND INVESTMENT PROJECT APPROVED ON MAY 21, 2013 TO MINISTRY OF ECONOMY AND FINANCE TRADE & COMPETITIVENESS LATIN AMERICA AND CARIBBEAN Regional Vice President: Jorge Familiar Calderon Country Director: Anabela Abreu Senior Global Practice Director: Anabel Gonzalez Practice Manager/Manager: Marialisa Motta Task Team Leader: Maria Deborah Kim, Emiliano Duch Navarro The World Bank Haiti Business Development and Investment Project (P123974) ABBREVIATIONS AND ACRONYMS BDS Business Development Services CFI Centre de Facilitation d’Investissements CRI Competitive Reinforcement Initiative DALA Damage and Loss Assessment DB Doing Business ESMF Environmental and Social Management Framework FM Financial Managment FY Fiscal Year GoH Government of Haiti IDA International Development Association IRM Immediate Response Mechanism MCI Ministry of Trade and Industry (Ministère du Commerce et de l’Industrie) M&E Monitoring and Evaluation MEF Ministry of Economy and Finance (Ministère de l’Economie et des Finances) MSME Micro, Small and Medium Enterprises PAD Project Appraisal Document PDO Project Development Objective PIU Project Implementation Unit SAE Enterprise Support Service UCP Project Coordination Unit (Unité de Coordination de Projet) USD United States Dollar WB World Bank The World Bank Haiti Business Development and Investment Project (P123974) BASIC DATA Product Information Project ID Financing Instrument P123974 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 21-May-2013 30-Nov-2019 Organizations Borrower Responsible Agency Ministry of Economy and Finance Ministry of Trade and Industry Project Development Objective (PDO) Original PDO The objective of the Project is to assist the Recipient in: (a) improving the conditions for private sector investment and inclusive growth; and (b) improving its capacity to respond promptly and effectively to an Eligible Emergency. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-H8650 21-May-2013 14-Jun-2013 11-Nov-2013 30-Nov-2019 20.00 8.08 11.04 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING The World Bank Haiti Business Development and Investment Project (P123974) 1. This proposed level two restructuring has been prepared in response to a request from the Ministry of Trade and Industry (MCI) of the Republic of Haiti (GoH), dated November 15, 2016 and December 30, 2016, requesting the World Bank to trigger the Immediate Response Mechanism (IRM) of the Business Development and Investment (BDI) Project and reallocate funds to the IRM to respond to the victims of Hurricane Matthew. The proposed restructuring also proposes changes to the Project Results Framework to more accurately capture project results, better measure impact on women, and capture the results expected from the IRM Component. The reallocation would allow for the financing of a program designed to support eligible micro, small and medium enterprises (MSMEs) affected by the passage of Hurricane Matthew in the Sud, Sud-est, Nippes and Grand’Anse departments. This is the fourth restructuring (and third amendment to the Financing Agreement) of the BDI project. 2. Original Grant (H865-0-HT): The original BDI Project in the amount of SDR 13.4 million (US$20 million equivalent at the time) was approved on May 21, 2013, with the Project Development Objectives to assist the Recipient in: (a) improving the conditions for private sector investment and inclusive growth; and (b) improving its capacity to respond promptly and effectively to an Eligible Emergency. The project became effective on November 11, 2013 and the original closing date was May 31, 2018. 3. First Restructuring (September 2013): This simple restructuring extended the effectiveness date of the project from September 12, 2013 to November 12, 2013 to accommodate a delay in meeting effectiveness conditions. 4. Second Restructuring (December 2015): The second level 2 restructuring was approved on December 24, 2015 and became effective on September 2, 2016. Under this restructuring, the BDI Project continued to pursue its development objective of improving the conditions for private sector investment and inclusive growth, but moved away from a focus on integrated economic zones to the development of value chains. The restructuring reallocated funds from the integrated economic zones activities towards: (i) the expansion of support from the MCI’s regional offices, from 1 to 10 offices; and (ii) aggregating the Matching Grants to benefit a group of MSMEs and increasing the total envelope for Matching Grants from US$4 million to US$8 million. This restructuring also extended the closing date by 18 months from May 21, 2018 to November 30, 2019.. 5. Third Restructuring (October 2016): This simple restructuring added “non-consulting services” as an Eligible Expenditure under Category (3) in the table in Section IV.A.2. of Schedule 2 to the Financing Agreement. Non-consulting services was omitted from the table in the December 2015 restructuring and was a necessary type of expenditure for the Matching Grants under Component 2 of the Project. The restructuring was approved on August 30, 2016 and became effective on October 28, 2016. 6. The passage of Hurricane Matthew over Haiti on October 4, 2016 affected BDI Project activities by negatively impacting the 364 MSME’s previously registered by the BDI project, operating in the coffee (Grand’Anse and Southeast); vetiver (South) and honey (Nippes) value chains, through the loss of coffee trees, inability to cultivate and sell damaged vetiver and damaging or destroying bee hives. These are the MSMEs located in the four value chains supported by the BDI project through its Component 2: “Business Development Services for MSMEs”. 7. Despite these challenges, the implementation of other activities of the BDI Project have continued. The last ISR rated both Implementation Progress (IP) and Progress towards Development Objective (DO) as Moderately Satisfactory. The Project has been rated Moderately Satisfactory consistently over the last twelve months. On business environment reform, 4 laws supporting the business environment (including reform of the Companies Law and Secured Transactions Law) were passed by the Lower House of Parliament in September 2017 and are now in the Senate. Two other laws (leasing and insolvency) are on the legislative agenda and may be voted upon in the Lower House in the next 6 months. Many of The World Bank Haiti Business Development and Investment Project (P123974) these laws will have a positive impact on Haiti’s Doing Business score once passed by the Senate and implemented by the GOH. The project has also helped to increase transparency and consistency in the granting of investment incentives by the Inter-Ministerial Commission for Investment through its work with the Investment Promotion Agency (CFI). In Component 2, there have been some delays in establishing new value-added services for the MSMEs in the value chains, but the PIU is finalizing the recruitment of a firm to assist them in publicizing the value chain tenders in the United States to ensure they receive high quality bids. Overall, all components are advancing towards the achievement of the PDO, as such the PDO remains relevant. 8. The Project has disbursed a total of US$7.96 million (or 42%) as of December 6, 2017. The lag in disbursement is attributable to the delays in the procurement of the services for the value chains (Matching Grants sub-component of Component 2). There have been no disbursements of Matching Grants yet given that the service providers need to be in place first. In contrast, component 1 (business environment) is projected to disburse over 90% of its allocation by end of FY18. An implementation plan with a clear disbursement plan until full disbursement of the grant (i.e. to November 2019) will be finalized and agreed upon with the Government of Haiti during the Mid-Term Review of the project, scheduled for February 2018. II. DESCRIPTION OF PROPOSED CHANGES Reallocation of Grant Proceeds 9. The proposed restructuring would reallocate funds from Components 1 and 2 to Component 4 (IRM). The proposed reallocation is needed to top up funds under Component 4 in order for the client to adequately provide support to the 300+ MSMEs in the 4 value chains directly affected by Hurricane Matthew and who were previously registered by the MCI before the hurricane. Specifically, this level two restructuring would reallocate US$1.5M from components 1,2 and 3 to component 4. Specifically, the reallocation of US$300,000 from Category 1 (Component 1), US$600,000 from Category 2 (Component 2) and US$600,000 from Category 3 (Component 2) to increase the IRM Category 6 (Component 4) from US$500,000 to US$2.0 million to finance the provision of cash transfer and in-kind support to MSMEs registered by the project in the areas affected by Hurricane Matthew. 10. Hurricane Matthew struck Haiti on October 4, 2016 as a category 4 hurricane. The combined effects of wind, coastal flooding and rain caused heavy flooding, landslides, and the destruction of a great deal of infrastructure, agricultural crops and natural ecosystems. The rapid Damage and Loss Assessment (DALA) carried out by the Ministry of Commerce and Industry estimated total damages and losses for the commerce and industry sector to be US$162,152,716. The departments the most affected by Hurricane Matthew were Grand’Anse, South, Nippes and the Southeast and the principal economic sectors in these departments before the hurricane were agriculture, fishing, tourism, animal husbandry and commerce. These departments were not very industrialized and the few industrial activities included: distillation of vetiver, transformation of cocoa and coffee, honey production, artisanal trades and small-scale agri-food production. The post-hurricane recovery priorities in the industry and commerce sector, as stated in the DALA, is the recapitalization of micro-entrepreneurs, principally to renew stocks, replace equipment and repair locales, plus subsidies to help business owners pay employees. The World Bank Haiti Business Development and Investment Project (P123974) 11. At the time of the hurricane, the BDI Project had 650 MSMEs registered in the project database, including 364 entrepreneurs in the coffee (Grand’Anse and Southeast); vetiver (South) and honey (Nippes) value chains. Of these MSMEs, 75% (272) were surveyed in-person by the MCI after the hurricane as part of a damage and loss assessment undertaken by the ministry. Finalized damage and loss assessments for MSMEs indicate heavy damage and loss for coffee production in Grand’Anse at 93% losses; partial damage and loss to coffee production in the Southeast and vetiver plants in the South at 58% and 52% losses respectively; and more minimal damage and loss to honey production in Nippes at 35% losses. Despite the lesser degree of damage to the vetiver plants, the farmers sustained revenue losses related to problems accessing markets due to damaged and inaccessible roads and some damage to material and equipment. 12. Based on the nature of damage and loss sustained by the registered MSMEs, the IRM will consist of cash transfers and in-kind support, which will allow the beneficiaries to restart or continue their productive activities in their value chain. The cash transfers will be calculated based on damage and loss estimates and previous revenue and production data for each MSME, as per the data in the project database. The first IRM manual was granted non-objection on December 22, 2016 and provided details on eligibility, disbursement procedures, and disbursement conditions. In April 2017, a joint MCI- World Bank field mission (including agricultural specialists) visited some affected MSMEs and confirmed the continued relevance of supporting affected MSMEs as initial recovery efforts need further shoring up. As a result of the field mission and further development of the methodology for calculating the cash transfers, the MCI submitted an updated IRM manual for non-objection. The World Bank granted non-objection to the updated IRM manual on October 10, 2017. 13. Although the original request for restructuring and triggering the IRM was made by the previous administration, the current Minister of Commerce and Industry has no objection to the proposed restructuring and use of the IRM. On August 17, 2017, the World Bank sent a correspondence to the MCI updating the Minister on the restructuring process and providing an opportunity for the MCI to object to the proposed restructuring. The MCI had no objection. Furthermore, the acting Country Director and co-TTL met with the Minister on August 22, 2017 and discussed the IRM. The Minister had no objection to the original request to restructure the project and confirmed that this support aligns with the current government’s efforts to support the victims of Hurricane Matthew in the South of Haiti. 14. The restructuring is also needed to allow for better measurement of gender efforts made under the project. Since January 2017, the project team has made a concerted effort to increase women’s representation in the Competitive Reinforcement Initiatives (CRIs), which are the initiatives to strengthen the competitiveness of the primary producers in the selected value chains. A gender specialist prepared a series of proposals to the BDI Project Coordinator to help the MCI’s Enterprise Support Service (SAE) teams identify more women in the value chains. A half-day gender technical training session took place in May 2017 and focused on training SAE teams to better integrate gender into the value chains work and increase the identification and participation of women in the selected value chains. As a result, SAE teams are more aware of the different means by which they can better identify and reach out to women beneficiaries. They also better understand the constraints Haitian women face which could prevent them from participating in public meetings. The Project Unit will follow-up with SAE teams to ensure that the new gender integration measures are used and applied, partly through the project’s Citizen Engagement Mechanism (CEM) – currently being designed and soon to be implemented. A greater emphasis on measuring the project’s impact on women is reflected on the addition of more gender disaggregation in the Results Framework to measure impact on men and women. 15. There would be no change in the Project Development Objective (PDO), nor any impact on the safeguard category or policies triggered under the Project. The implementation arrangements would also remain unchanged. The World Bank Haiti Business Development and Investment Project (P123974) Results Framework 16. Selected PDO and intermediate level indicators will be revised to better capture project results and impacts on women and beneficiaries and to reduce redundancy. The proposed changes and rationale are as follows: Marked for deletion/Revise:  Convert one PDO indicator into a sub-indicator of another PDO indicator to reduce redundancy;  Drop 6 intermediate indicators: three for redundancy with a PDO indicator or another sub-indicator; one, which would be replaced with a new indicator that would more precisely measure the expected outcome; and, two, which are no longer relevant and/or covered by other new indicators;  Revise the PDO indicator for the IRM to more meaningfully capture the expected impact of the IRM; New indicators/sub-indicators:  Add gender disaggregation as a sub-indicator for one PDO indicator and five intermediate indicators;  Add four new intermediate indicators to better measure intermediate progress (output indicators). Implementation Arrangements, Fiduciary and Safeguards 17. Implementation arrangements for the project will remain unchanged. Apart from the updating of the ESMF to reflect the provision of financing under the IRM, the Project has complied with all social, environmental and fiduciary safeguard requirements. Both financial management and procurement have been carried out in accordance with the Bank’s Financial Management and Procurement Guidelines, and there will be no changes to either Financial Management or Procurement arrangements of the Project. 18. As per the Financing Agreement, the preparation and disclosure of all Safeguards instruments is one of the disbursement conditions for the IRM. The PIU updated the Environmental and Social Management Framework (ESMF), which was publicly disclosed on November 9, 2017. No additional Safeguard policies will be triggered as a result of the IRM activities. III. SUMMARY OF CHANGES Changed Not Changed Change in Results Framework ✔ Change in Components and Cost ✔ Reallocation between Disbursement Categories ✔ Change in Implementing Agency ✔ Change in DDO Status ✔ Change in Project's Development Objectives ✔ The World Bank Haiti Business Development and Investment Project (P123974) Change in Loan Closing Date(s) ✔ Cancellations Proposed ✔ Change in Disbursements Arrangements ✔ Change in Disbursement Estimates ✔ Change in Systematic Operations Risk-Rating Tool ✔ (SORT) 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) ✔ Change in Economic and Financial Analysis ✔ Change in Technical Analysis ✔ Change in Social Analysis ✔ Change in Environmental Analysis ✔ IV. DETAILED CHANGE(S) RESULTS FRAMEWORK Project Development Objective Indicators PDO_IND_TABLE Private sector investment in supported value chains Unit of Measure: Amount(USD) Indicator Type: Custom Baseline Actual (Current) End Target Action The World Bank Haiti Business Development and Investment Project (P123974) Valu 0.00 0.00 5000000.00 No Change e Date 29-Nov-2013 01-Nov-2019 Increased value added of supported MSMEs in the selected value chains Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Valu 0.00 0.00 15.00 Revised e Date 31-May-2016 29-Nov-2019 Increased value added of supported MSMEs in the poorest Departments (poverty rate above 60%) Unit of Measure: Percentage Indicator Type: Custom Breakdown Baseline Actual (Current) End Target Action Value 0.00 0.00 15.00 New Date 08-May-2017 29-Nov-2019 Increase in value added of poorer MSMEs in supported Value Chains in the poorest Departments (poverty rate above 60%) Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Valu 0.00 0.00 20.00 Marked for Deletion e Date 31-May-2016 01-Nov-2019 Number of MSMEs that receive cash or in-kind assistance to continue or restart productive activity in their value chain Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Valu 0.00 0.00 260.00 Revised e Date 29-Nov-2013 24-Oct-2017 01-Aug-2018 The World Bank Haiti Business Development and Investment Project (P123974) Of which, are women Unit of Measure: Number Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 0.00 40.00 New Intermediate Indicators IO_IND_TABLE Total private sector investment as a result of financed business improvement plans Unit of Measure: Amount(USD) Indicator Type: Custom Baseline Actual (Current) End Target Action Valu 0.00 0.00 1200000.00 Marked for Deletion e Date 29-Nov-2013 30-Jun-2017 01-Nov-2019 Number of pre-bidding conferences on the value chain tenders Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Valu 0.00 3.00 7.00 New e Date 02-Jan-2017 21-Nov-2017 29-Nov-2019 Number of firms providing new services in selected value chains Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Valu 0.00 0.00 5.00 Revised e Date 01-Sep-2017 21-Nov-2017 01-Nov-2019 The World Bank Haiti Business Development and Investment Project (P123974) Number of participants in public consultations Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Valu 0.00 800.00 1000.00 Revised e Date 01-Jan-2015 29-Jun-2016 01-Nov-2019 Of which, are women Unit of Measure: Percentage Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 19.00 30.00 New Percentage of MSMEs participating in public consultations Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Valu 0.00 75.00 75.00 Marked for Deletion e Date 01-Jan-2015 29-Jun-2016 30-Sep-2019 Number of MSMEs registered in the MCI project database Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Valu 0.00 650.00 1200.00 New e Date 30-Jun-2014 09-May-2017 29-Nov-2019 Of which, are women owned or operated Unit of Measure: Number Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action The World Bank Haiti Business Development and Investment Project (P123974) Value 0.00 120.00 360.00 New Number of MSMEs given technical and managerial assistance by MCI SAE teams Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Valu 0.00 0.00 900.00 Marked for Deletion e Date 01-Jul-2014 29-Jun-2016 01-Nov-2019 Average number of hours of technical and managerial assistance received by MSMEs Unit of Measure: Hours Indicator Type: Custom Baseline Actual (Current) End Target Action Valu 0.00 1.00 6.00 Marked for Deletion e Date 01-Oct-2014 29-Jun-2016 01-Nov-2019 Firms benefiting from private sector initiatives Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Valu 0.00 0.00 700.00 New e Date 09-May-2017 09-May-2017 29-Nov-2019 Of which, are women Unit of Measure: Number Indicator Type: Custom Breakdown Baseline Actual (Current) End Target Action Value 0.00 0.00 210.00 New Date 09-May-2017 09-May-2017 29-Nov-2019 Of which, are located in the Southern region affected most by Hurricane Matthew The World Bank Haiti Business Development and Investment Project (P123974) Unit of Measure: Number Indicator Type: Custom Breakdown Baseline Actual (Current) End Target Action Value 0.00 0.00 360.00 New Date 04-Oct-2016 24-Oct-2017 31-Dec-2018 Of which, are women Unit of Measure: Number Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 0.00 50.00 New Satisfaction of entrepreneurs/producers with assistance supported by SAE teams Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Valu 0.00 70.00 Marked for Deletion e Date 01-Jul-2014 01-Nov-2019 Number of Haitian public servants that have satisfactorily completed the Value Chain Strategic Analysis Program Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Valu 0.00 30.00 30.00 Revised e Date 01-Aug-2014 09-May-2017 29-Nov-2019 Number of completed value chain diagnostics Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Valu 0.00 10.00 20.00 New e The World Bank Haiti Business Development and Investment Project (P123974) Date 30-Jun-2014 09-May-2017 29-Nov-2019 Number of recommended laws, regulations, amendments, codes enacted or Government policies adopted Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Valu 0.00 0.00 3.00 No Change e Date 02-Dec-2013 29-Jun-2017 29-Nov-2019 Secured transactions law revised and submitted to the Prime Minister's office Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Valu Not existent Law submitted Marked for Deletion e Date 25-Apr-2013 11-Dec-2015 31-May-2018 Electronic moveable collateral registry (to secure loans) system available for use by MSMEs Unit of Measure: Yes/No Indicator Type: Custom Baseline Actual (Current) End Target Action Valu No No Yes No Change e Date 29-Nov-2013 01-Nov-2019 Number of MSMEs registered in the electronic moveable registry who are able to secure loans Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Valu 0.00 0.00 50.00 New e Date 30-Jun-2014 09-May-2017 29-Nov-2019 Of which, are women Unit of Measure: Number Indicator Type: Custom Supplement The World Bank Haiti Business Development and Investment Project (P123974) Baseline Actual (Current) End Target Action Value 0.00 0.00 15.00 New COMPONENTS Current Proposed Current Proposed Cost Action Cost Component Name Component Name (US$M) (US$M) Component 1 - Business Component 1 - Business Environment and Investment 2.00 Revised Environment and Investment 1.70 Generation Generation Component 2 - Business Component 2 - Business Development Services for 15.00 Revised Development Services for 13.80 MSMEs MSMEs Component 3 – Project Component 3 – Project Management, Evaluation and 2.50 Management, Evaluation and 2.50 Monitoring Monitoring Component 4 – Immediate Component 4 – Immediate 0.50 Revised 2.00 Response Mechanism Response Mechanism TOTAL 20.00 20.00 REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-H8650-001 | Currency: XDR iLap Category Sequence No: 1A Current Expenditure Category: GO, NCS, CS, TR Pt A.1 936,645.00 442,490.11 721,000.00 100.00 100 iLap Category Sequence No: 1B Current Expenditure Category: GO, NCS, CS, TR Pt A.2 9,798.00 0.00 10,000.00 100.00 100 iLap Category Sequence No: 1C Current Expenditure Category: GO, NCS, CS, TR Pt. A.2(d) The World Bank Haiti Business Development and Investment Project (P123974) 0.00 0.00 0.00 100.00 100 iLap Category Sequence No: 2 Current Expenditure Category: GO, NCS, CS, TR Pt B.1, B2(a,b),B.3 1,444,597.00 319,815.60 1,013,000.00 100.00 100 iLap Category Sequence No: 3 Current Expenditure Category: M GRANT GO,CW,NCS,CS,TR Pt B.2(c) 5,760,377.00 4,812.12 5,328,000.00 100.00 100 iLap Category Sequence No: 4 Current Expenditure Category: GO, NCS, CS, TR Pt C 720,497.00 0.00 720,000.00 100.00 100 iLap Category Sequence No: 5 Current Expenditure Category: OP Pt A.1(a,c), A.2, B.3, C.1 4,014,263.00 3,421,829.03 4,014,000.00 100.00 100 iLap Category Sequence No: 6 Current Expenditure Category: Emergency Expenditures Pt D 360,249.00 0.00 1,440,000.00 100.00 100 iLap Category Sequence No: 7 Current Expenditure Category: Preparation Advance 153,574.00 138,913.13 154,000.00 Total 13,400,000.00 4,327,859.99 13,400,000.00