NEPAL Proposed Project for Accelerating Inclusive Jobs Growth for Youth in Nepal Preparation Consultations August 8-14, 2018 Aide Memoire 1. During August 8-14, 2018, a World Bank Team led by Jasmine Rajbhandary1 carried out Preparation Consultations of the proposed Project for Accelerating Inclusive Jobs Growth for Youth in Nepal. This Aide Memoire (AM) summarizes the strategic ideas and design of the Project as well as other critical issues discussed during the consultations. The AM was discussed at the wrap-up meeting chaired by the Secretary, Ministry of Labor, Employment and Social Security (MOLESS), Mr. Mahesh Prasad Dahal, and a wrap up meeting with Mr. Harischandra Dhakal, Under Secretary, International Economic Cooperation Coordination Division (IECCD), Ministry of Finance (MOF) on August 14, 2018. It was agreed during the wrap-up meeting that the final AM will be a public document as per the World Bank’s Access to Information Policy. Proposed Project Scope 2. The Bank team carried out consultations with Government officials, to revise the project design and implementation arrangements, given the new priorities of GON and MOLESS. The concept of the project was approved in the Bank at the end of 2017. A list of persons consulted is included in Annex 1. 3. It was agreed that the proposed Project would be implemented by MOLESS and would align with the government’s new flagship jobs program, the Prime Minister’s Employment Program (PMEP). MOLESS organized a project concept consultation workshop for relevant Joint Secretaries and Under Secretaries from more than 10 relevant ministries during the consultation period. There was broad consensus on the overall project design. It was also agreed that there should be strong synergies between the project components, and that implementation arrangements will be aligned with the new federal structure of government. Proposed Project Development Objective 4. “To create quality jobs and enhance labor market outcomes, especially for youth”. Proposed Project Components 5. The MOLESS and WB team agreed to revise the project components as follows: Component 1 focused on employment services and systems, Component 2 focused on job creation and Component 3 focused on Project Management, Monitoring and Evaluation, and Capacity building. Component 1: Employment Services and Systems 6. The objective of this is component is to bring a systematic approach to the provision and management of employment services. This component consists of two sub-components: the first one focused on provision of employment services and the second focused on establishing an employment information system. Component 1a: Employment Services 7. The component will support the Government to build an effective and streamlined system of employment service provision. The minimal set of services include registration of jobseekers and 1 Preparation Team includes: Alina Thapa (ACS), Anastasiya Denisova (Economist), Anupa Aryal Pant (Private Sector Specialist), Anupama Shakya (Consultant), Ashim Nepal (Financial Sector Specialist), Jyoti Maya Pandey (Social Protection Specialist), Karishma Wasti (Agriculture Specialist), Maya Sherpa (Economist), Phillippe Leite (Senior Social Protection Economist) and Shubha Chakravarty (Senior Economist). 1 unemployed into a national database, assessment and profiling of their skills and aspirations, and information and counseling to match them to appropriate skilling or employment opportunities, including those offered under the PMEP. Specialized services to support women and disadvantaged groups will also be needed. The system will include both online and in-person services in targeted locations for youth jobseekers and employers. The mission emphasized the need to coordinate closely with the PMEP to align with the employment service system, for example by using Employment Service Centers (ESCs) operated by Local Governments (LGs) to conduct intake to PMEP and by using the EIS to track outcomes of PMEP participants. Component 1b: Employment Information Systems 8. Online services will be provided through an e-Employment Service Platform, which will include registration and job listings. It could also offer additional functionalities such as online training and support for jobseekers. For online services, it was agreed that the e-Employment Service Platform would build upon the Ministry’s existing Jobs Portal. In terms of results monitoring, there was agreement on the need to track not just placements of jobseekers but also their labor market outcomes including retention and earnings. 9. The component will support the development of a robust Employment Information System (EIS) which aggregates information on employment across sectors and regions. The EIS will include the national database of unemployed, jobseekers and will record outcomes of registered jobseekers after receiving employment services. The EIS will be designed to flexibly allow inter-operability and/or data sharing with additional programs and services over time. 10. Next steps were agreed by the Bank team and MOLESS as follows: • The services to be offered directly by MOLESS will be further elaborated and costed, including plans for monitoring and evaluation. • Consult with entities leading other employment services, and other jobs listings to discuss the scope for integration/collaboration of services. • A review of the existing job portal to identify areas to be strengthened. Component 2: Job Creation 11. This component will support job creation opportunities in the public and private sector. Component 2a: Public sector jobs 12. This component will support the creation of temporary job opportunities in the public sector under the Prime Minister’s Employment Program (PMEP). The objective of the component is to provide short-term employment opportunities to create domestic opportunities for the poor and unemployed to smooth household consumption, improve productivity and future employability, and build sustainable community assets. It will provide unemployed individuals registered at the Employment Service Center with 100 days of work which could consist of i) days of work on small infrastructure or maintenance of community assets, and ii) days of work in providing public services [schools, health posts, etc.]. The component will also include on the job training and coaching or training for provision of public services like child care. The training aspect will help build individual’s capacity to work on the works and increase employability. 13. The selected infrastructure projects under this component will consist of labor-intensive small-scale infrastructure and works aimed to: i) to reduce constraints to job creation at the local level, and ii) to promote household and community resilience to shocks. Specific project will be identified at the local level and should be part of the annual municipal plan of activities across sectors. A menu of acceptable projects/activities will be defined which is expected to include the following: agriculture and natural resources management projects, construction and/or maintenance of community assets, waste and sanitation management projects, social infrastructure and provision of social services. The training aspect will help build individual’s capacity to work on the works and increase employability, and activities will take gender specificities into consideration. 14. This component will be implemented by the local governments within the policy and framework defined by MOLESS, and the Local Government Operation Act. 15. The next steps to elaborate on the design include the following: • Defining activities to be financed by the project and estimating the costs: this would include wages, input costs for infrastructure, cash transfer for those when jobs cannot be provided, 2 and other costs to ensure quality assurance of the works. • Discussing social and environmental safeguards related to infrastructure works • Drafting the project (and PMEP) operations manual on the basis of PMEP regulations and identifying areas that require further TA for those purposes. • Sharing of experiences in the implementation of Karnali Employment Program (KEP) and Rural Community Infrastructure and Works (RCIW) including DPs Component 2b: Private Sector jobs 16. The objective of this sub-component is to generate better jobs by accelerating investment in growth- oriented businesses. It was agreed that the government should incentivize private sector [firms of all sizes] to create more jobs, as they are the likely source for longer term sustainable job creation in Nepal. 17. The World Bank team shared the design for the sub-component to implement a business plan competition, which will be designed to correct the market failures and other limitations that constrain jobs growth. An initial pipeline of proposals will be developed through outreach, including beneficiaries of programs such as Micro Enterprise Development Program for Poverty Alleviation (MEDPA), Project for Agriculture Commercialization & Trade (PACT), Poverty Alleviation Fund (PAF) etc. Prescreened firms will be given technical assistance to prepare business expansion plans, incorporating sufficient information to be eligible to participate in the competition, including evidence of the sustainability of their expansion plans. Winners will then be selected using metrics related to the projected jobs impacts (either direct jobs or indirect jobs) and (inversely) to the amount of financial support needed to make their plan viable. To ensure transparency, the selection committee will include private sector representatives and civil society bodies. It will offer an integrated package of technical and financial assistance to firms with credible expansion plans to create sustainable jobs and enhance earnings for low-income workers. There will be a ceiling on the amount of grant per firm, and on the proportion of total financing needs covered by the program. Grants will disburse in tranches, based on certified implementation progress reports. 18. The World Bank and MOLESS team agreed that further discussion was needed on the sub- component design, and that this would be agreed to before the next consultations in October 2018. As part of these discussions, sharing workshops with similar initiatives in Nepal such as PACT could also be organized, and other modalities of incentivizing private sector could be discussed. To inform this decision, the World Bank team will also conduct a diagnostic to gather additional evidence on the i) opportunities and challenges faced by various segments of enterprises (which are relatively labor intensive), and ii) assess the strength and weakness of existing financial and non-financial-service provider for firm competitiveness and growth. In addition, there will be further consultations with representatives from the private sector representing all firm sizes to discuss the design of support and potential options to the private sector. Component 3: Capacity Building, Monitoring and Evaluation and Project Management 19. This component will finance administration of project implementation, project M&E system and the capacity building for MOLESS and other implementing partners. Proposed Cost and Financing 20. Tentatively, the proposed IDA financing for the Project will be in the range of USD 150 million for the period of five years. It is intended that the start of the project will be the beginning of FY 2019. The Project will be supported through Investment Project Financing (IPF). There is a possibility of combining Disbursement Linked Indicators (DLIs) in some of the components. The financing scope and modality will be the main agenda of the next consultations. Proposed Institutional and Implementation Arrangements 21. As the implementing agency, it was agreed that the MOLESS Secretary would chair an Inter- 3 ministerial project steering committee (PSC). The PSC will be established to provide policy guidance and cross-sectoral coordination. The PSC would consist of senior officials from the Ministries of Finance, Industry, Agriculture, Education, Youth, Tourism and other relevant agencies as noted in the steering committee of the PMEP; and representatives of private sector. Representatives of other non-government agencies, and youth groups would be invited to meetings as required. There will also be technical committee(s) with membership from officials of relevant ministries as required for the project. 22. A Project Implementation Unit (PIU), to be established in MOLESS, will oversee the implementation of the project activities. The PIU will be led by a Project Director, who will be the Joint Secretary within MOLESS heading the PMEP. The PIU will manage the day-to-day operation including monitoring and coordination to ensure smooth project implementation. It was agreed that in addition to the necessary procurement, financial management, safeguards, and technical consultants, the PIU will include MOLESS staff to head the components/sub components. 23. It was agreed that MOLESS would further discuss with other concerned ministries and various levels of government to determine coordination mechanisms at the federal level and collaboration arrangements with state and local governments, which are appropriate to the cross-cutting nature and integrated approach of the proposed project interventions. The detailed governance structure and implementation arrangement for the components and project will be developed during project preparation. Preparation Work 24. MOLESS has agreed to establish a project preparation core team, to be led by a Joint Secretary, with at least one Under Secretary. The team will work closely with the World Bank team and MOF. 25. The Bank team will continue to work with MOLESS to work out the details of project components and activities, scope of project, results framework and M&E, project cost and financing, as well as the institutional and implementation arrangements. Specific areas that need further discussion include the alignment with the PMEP scope, structure and implementation arrangements 26. The Bank team will also carry out the institutional capacity assessments on fiduciary management and safeguards. The Bank team has agreed with MOLESS to carry out a series of background studies, and support the development of the required documents for project preparation, i.e. operations manual, safeguards instruments, Project Procurement Strategy for Development (PPSD). Partnerships 27. While the World Bank team worked only with the government during this consultation period, as in the past the World Bank team intends to consult other key Development Partners who work with MOLESS, to explore collaboration. This includes International Labor Organization (ILO), UK AID (DFID), Swiss Development Cooperation (SDC) and Helvetas. Proposed Timeline 28. The Bank’s team discussed the following timeline with MOLESS for enhancing project processing: Preparation Continuation October 2018 Appraisal December 2018 Negotiations January 2019 Board March 2019 4 Table 1: Summary of Agreed Actions SL Actions Responsibility Agreed timeline 1 MOLESS to identify project preparation team MOLESS August 30, 2018 2 Coordination meeting with DPs, particularly as WB August 30, 2018 linked to employment services or information systems Component activities 3 Determine MOLESS/WB September 14, 2018 4 Discussion on modality for incentivizing private sector MOLESS/WB September 14, 2018 including sharing with other experiences 5 Sharing of experiences in the implementation of KEP MOLESS/WB September 21, 2018 and RCIW 6 Identify component implementation arrangements MOLESS/WB September 21, 2018 7 Estimate component costing MOLESS/WB September 28, 2018 8 Identify financing and fund flow options MOLESS/WB September 28,2018 /MOF 9 Enterprises/private sector diagnostics WB October 31, 2018 10 Drafting of project operations manual MOLESS/WB October 31, 2018 11 Draft Environmental and Social Management MOLESS/WB November 2018 Framework 12 Draft Project Procurement Strategy for MOLESS/WB November 2018 Development (PPSD) and procurement plan 5 Annex 1: List of People Met National Planning Commission Honorable Member, Dr. Ram Kumar Phuyal Ministry of Finance Mr. Harischandra Dhakal, Under Secretary Ministry of Labor, Employment and Social Security (MoLESS) Mr. Mahesh Prasad Dahal, Secretary Mr. Ram Prasad Ghimire, Joint Secretary Mr. Prakash Dahal, Joint Secretary Dr. Lok Nath Bhusal, Under Secretary Ms. Rama Bhattarai, Under Secretary Mr. Bipin Acharya, Under Secretary Mr. Resham Raj Sigdel, Under Secretary Mr. Deepak Dhakal, Under Secretary Mr. Shashi Kumar Lamsal, Under Secretary Mr. Kabindra Nepal, Under Secretary Ms. Bipana Gyawali, Section Officer Mr. Govinda Acharya, Section Officer Mr. Rajan Prasad Shrestha, Program Officer Mr. Sujan Jojiju, Senior Factory Inspector Project Design Workshop Participant List from other ministries besides MoLESS Mr. Binod Prasad Singh, Joint Secretary Ministry of Industry, Commerce and Supplies Mr. Purushottam Nepal, Joint Secretary, Ministry of Federal Affairs and General Administration Mr. Ram Prasad Bhattarai, Director General, Department of Labor and Occupational Safety Mr. Bhuwan Prasad Acharya, Executive Director, Vocational and Skill Development Training Center Mr. Tirtha Raj Rai, Under Secretary, National Planning Commission Mr. Maheshwor Sharma, Under Secretary, Ministry of Youth and Sports Mr. Shankar Sapkota, Under Secretary, Ministry of Agriculture and Livestock Development Mr. Mahendra Kumar Sapkota, Under Secretary, Ministry of Federal Affairs and General Administration Mr. Ajaya Vikram Manandhar, Under Secretary, Ministry of Forest and Environment Mr. Surendra Man Shakya, Senior Divisional Hydro Geologist, Ministry of Energy, Water Resources and Irrigation Mr. Chakravarti Kanta, Senior Divisional Engineer, Ministry of Urban Development Mr. Laxman Kuikel, Section Officer, Ministry of Culture, Tourism and Civil Aviation 6