Document of The World Bank FOR OFFICIAL USE ONLY Report No: 74380 v1 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF DEMAND FOR GOOD GOVERNANCE PROJECT GRANT H4410-KH BOARD APPROVAL DATE: DECEMBER 2, 2008 TO THE KINGDOM OF CAMBODIA JANUARY 15, 2013 EASTS EAP This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ABBREVIATIONS AND ACRONYMS AC Arbitration Council ACF Arbitration Council Foundation DFGG Demand for Good Governance (Project) DO District Ombudsman IA Implementing Agency IDA International Development Association IOC Incremental Operating Cost IOI Intermediate Outcome Indicator M&E Monitoring and Evaluation MBPI Merit Based Pay Initiative MOI Ministry of Interior MONASRI Ministry of National Assembly, Senate Relations and Inspection MTR Mid-Term Review NCDD National Committee for Sub National Democratic Development NCDDS NCDD Secretariat NGO Non-Governmental Organization NSA Non-State Actors NSAC Non-State Actor Component OWSO One Window Service Office PCO Project Coordination Office PDO Project Development Objective PMG Priority Mission Group POC Priority Operating Cost QPR Quarterly Project Report RGC Royal Government of Cambodia RNK Radio National Kampuchea SDR Special Drawing Right SI State Institution SNDD Sub-National Democratic Development TA Technical Assistance TAF The Asia Foundation Acting Regional Vice President: Mr. Ulrich Zachau Country Director: Ms. Annette Dixon Sector Manager: Ms. Julia Fraser Task Team Leader: Ms. Janelle Plummer 2 CAMBODIA DEMAND FOR GOOD GOVERNANCE PROJECT CONTENTS Page A. SUMMARY ........................................................................................................................... 4 B. PROJECT STATUS .............................................................................................................. 4 C. PROPOSED CHANGES ...................................................................................................... 5 3 CAMBODIA — DEMAND FOR GOOD GOVERNANCE PROJECT P101156 GRANT H4410-KH Restructuring Paper A. SUMMARY 1. Following a request from the Royal Government of Cambodia (RGC), the proposed restructuring will extend the Demand for Good Governance (DFGG) project by one year, until March 31, 2014. It will also reallocate proceeds across components and categories in order to enhance efforts to reach the Project Development Objective during the extension period. B. PROJECT STATUS 2. Progress toward the development objective – to enhance the demand for good governance in priority reform areas by strengthening institutions, supporting partnerships and sharing lessons – is now rated satisfactory. Following the mid-term review and subsequent project restructuring the project gained momentum and progress toward the PDO and targeting has improved considerably.  In component 1, the Arbitration Council (AC) continues to be seen as a reliable alternative dispute resolution mechanism for labor disputes, already exceeding the original target of 720. Of those cases, 74.5% have been resolved, up slightly from the 68% baseline. Confidence levels in the independence, credibility and effectiveness of the AC have now reached 93%, increasing significantly; all awards were rated satisfactory or above. Citizen awareness is still lower than anticipated and the financing strategy post-project is still being negotiated. The One Window Service Office (OWSO) has established 17 district offices where it operates with 9 line ministries delegating services. This has resulted in 63,150 transactions (exceeding 2011 target by 12%) and good levels of satisfaction among users (93%) and elected officials (97%). Citizen awareness varies but is still low in new OWSO districts (13- 35%) and efforts are being made to step up and rethink awareness raising campaigns as new OWSOs open. The phased approach to introducing OWSOs has enabled a sensible roll-out across the provinces of Cambodia, though there are delays in procurement and construction with knock on effects. Due to a number of design and risk considerations, the number of OWSOs being constructed in Phnom Penh has been reduced from nine to five with funding retargeted on other indicators.  In component 2, the Non-state Actors Component, all grants are committed and efforts to compile learning from the 48 grant activities have yielded a set of important lessons for future social accountability activity in Cambodia. Citizen and third party monitoring efforts have introduced social accountability concepts in 204 communes, 28 districts, 138 health centers and 215 schools. Partnerships between state and non- state actors are still emerging at the national level but are seeing significant progr3ss at the local level.  In component 3, the Project Coordinating Agency continues to implement its learning program in a co-production arrangement with other Implementing Agencies (IAs) and 4 non-state actors. Progress has slowed of late, but the Coordinating agency has successfully co-delivered capacity building workshops for state and non-state stakeholders on key social accountability themes; the establishment of a Governance Resource and Learning Center has also progressed and will be launched in early 2013. A key milestone for the Ministry of Interior (MOI) in 2011 was the cross- ministerial capacity building workshop to promote project disclosure. Lesson learning and capacity indicators are still in need of strengthening and an action plan is being established to enhance these results. 3. Overall, implementation progress remains, on average, satisfactory (ranging from highly satisfactory (AC) to moderately satisfactory (PCO). Ongoing challenges to implementation (limited capacity and staffing in the area of social accountability, procedural blockages) are being managed through continued close implementation support. Sixty-six percent of project funds are currently disbursed and 80% committed. C. PROPOSED CHANGES 4. Extension of closing date. The closing date for the project will be extended from March 31, 2013 until March 31, 2014. This is the first extension, and is justified as follows: i. Unforeseen events have caused delays in some critical activities. Since effectiveness, delays have been caused by a significant restructuring of the project and the widespread flooding in 2011. This has produced a significant time lag on many activities based in the field. ii. The lesson learning objective of the project will only be partially achieved by the current closing date. Enhancing knowledge for future social accountability activity in the future is a vital dimension of the objective. Delays in implementation mean that many local activities will finish immediately before the current closing date, making the anticipated analysis, reflection and dissemination of these lessons will be impossible. iii. The development of partnerships would benefit from more time. One of the risks identified at appraisal was the short four year implementation period for a DFGG project. The development of state/non-state partnerships, and the trust building associated with those partnerships is also an objective of the project. These partnerships take time and many are only just emerging. MOI efforts regarding the Governance Resource and Learning Center (GRLC) need to now operationalize learning partnerships, and the GRLC needs to become established in the MOI institutional structure. Moreover, the useful efforts by the MOI, in coordination with the Ministry of Economy and Finance (MEF), to support inter- ministerial workshops on the demand-side governance elements of the Good Governance Framework need more time and support. iv. Post-project sustainability will be enhanced by supporting institutional transitions. The Arbitration Council Foundation (ACF) has negotiated a strategy 5 with key stakeholders has not yet moved on to the envisaged sustainable financing arrangements. The sustainability arrangements and plans to establish the OWSO as a National Office/Unit of the OWSO in the MOI are in hand but will only be budgeted in 2014. v. Consolidation of monitoring and evaluation. Delays in monitoring and evaluation, caused by difficult procurement processes, have been made up in part, but completion of the M&E and measurement of results needs additional time. 5. All project implementing agencies have prepared action plans to complete the project by end of March 2014. No audit reports are currently outstanding and there are no unsatisfactory audit reports. 6. Reallocation. A reallocation of proceeds to Component 2 will provide the Non- state Actors component with an increase in allocation of $US450,000 (SDR 288,000) for enhanced lesson learning of state and non-state actors. The corresponding amount has been made available by: (i) a reduction in the One Window Service Office sub- component of $US235,000 – it has been agreed to pilot the one window model in five Khans in Phnom Penh (rather than all nine); (ii) a reduction in Component 1a of $150,000 by the Arbitration Council which will move onto streamlined operating costs for a transitional period; and (iii) a reduction in Component 3 of $US65,000 by refocusing budgets on lagging PDO indicators. 7. Proceeds for the project will be reallocated as follows: Category of Expenditure Allocation % of Financing Current/Revised Current Revised Current Revised (SDR) (SDR) (1) Goods, Works, Consultant's Services, Training Workshops, 100% ACF Operating Costs, and Incremental Operating Costs (a) under Part A.1 of the Project; 1,733,588 1,637,588 For IOC of For IOC of OWSO/DO (b) under Part A.2 of the Project; 245,139 245,140 OWSO and under Category (1)(c), DO offices 100% in Year 1-2, and (c) under Part A.3 of the Project; 3,126,555 2,976,155 100% in Year 50% in Year 3, and 0% 1-2, thereafter, except as may (d) under Part A.4 of the Project; 414,056 No change and 50% in be agreed with the Year 3 Association in the annual (e) under Part B of the Project; 167,120 455,120 work plans described in Section I.A of Schedule 2 to this Agreement (f) under Part C of the Project 2,343,000 2,301,399 For IOC of PCO under Category (1)(f), 100% in Year 1-3, and 0% thereafter, except as may be agreed with the Association in the annual work plans described in Section I.A of Schedule 2 to this Agreement. 6 Category of Expenditure Allocation % of Financing Current/Revised Current Revised Current Revised (SDR) (SDR) (2) Sub-grants under Part B of the 2,212,624 No change 100% No change Project (3) MBPI up to December 31, 2009 (a) under Part A.2 of the Project; 8,455 (b) under Part A.3 of the Project; 8,074 No change 90% in No change (c) under Part A.4 of the Project; and 17,494 Year 1 (d) under Part C of the Project 14,202 (4) PMG up to December 3 1,2009 (a) under Part A.2 of the Project; 2,886 (b) under Part A.3 of the Project; 4,573 No change 90% in No change and 9,168 Year 1 (c) under Part A.4 of the Project (5) Management Cost under Part B No change 100% No change of the Project 541,695 Amount payable (6) Refund of Project Preparation 1,375,984 No change pursuant No change Advances to Section 2.07 (including LEAP Project of the General Preparation Advance Conditions No Q7100-KH) (7) Unallocated 0 No change (8) POC under (a) under Part A.2 of the Project; 34,700 No change 100% 100% up to (b) under Part A.3 of the Project; 424,169 March 31, 2013, and (c) under Part A.4 of the Project; 42,058 0% thereafter. and 74,460 (d) under Part C of the Project Total 12,800,000 12,800,000 7