Document of The World Bank Report No: 72366-TJ RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF FERGHANA VALLEY WATER RESOURCES MANAGEMENT PROJECT GRANT H1790-TJ July 26, 2005 AND GRANT H5760-TJ May 25, 2010 TO THE REPUBLIC OF TAJIKISTAN February 7, 2013 ABBREVIATIONS AND ACRONYMS AF Additional Financing PDO Project Development Objective WUA Water User Association Raivodkhos Local water management authority Regional Vice President: Philippe H. Le Houerou Country Director: Saroj Kumar Jha Sector Manager: Dina Umali-Deininger Task Team Leader: IJsbrand Harko de Jong 2 TAJIKISTAN FERGHANA VALLEY WATER RESOURCES MANAGEMENT PROJECT CONTENTS Page A. SUMMARY ........................................................................................................................... 4 B. PROJECT STATUS .............................................................................................................. 4 C. PROPOSED CHANGES ...................................................................................................... 5 3 FERGHANA VALLEY WATER RESOURCES MANAGEMENT PROJECT RESTRUCTURING PAPER A. SUMMARY This Restructuring Paper for the Ferghana Valley Water Resources Management Project seeks approval for the extension of the Closing Date from May 31, 2013 to May 31, 2014 and the addition of a new activity under Part D (Project Management). The project costs will be updated to reflect these changes, but no reallocations between disbursement categories are required. In addition, the procurement plan and implementation schedule will be updated. B. PROJECT STATUS While the original project was approved in 2005 in the amount of SDR 8.7 million (US$13 million equivalent; IDA Grant H1790-TJ), the project received Additional Financing (AF) in 2010 in the amount of SDR 6.6 million (US$10 million equivalent; IDA Grant H5760-TJ). AF was provided to finance a cost overrun due to the increased cost of works and goods, the completion of additional works identified in detailed designs during project implementation, and expanded activities to increase the capacity of raivodkhoses and Water User Associations (WUAs). The Project Development Objective (PDO) continues to be achievable and to date, a number of PDO and intermediate outcome indicator targets have been achieved. Thus, over 8,000 ha (against the original target of 6,450 ha) of project area has returned to effective irrigation, the dam safety management and emergency action plan is in place, early warning systems have been established and tested, and all 95 observation wells have been rehabilitated and renovated. However, in view of the delays in implementing construction works and the weaknesses in the capacity of WUAs, Implementation Progress and Progress towards achieving the Project’s Development Objective are rated moderately unsatisfactory. Both Part A: Irrigation and Drainage System rehabilitation and Improvements, and Part C: Institutional Development and TA, are suffering from slow implementation progress, reflected in the modest increase in the disbursement rate in the last year. Under Part A, delays are related to the very tight window for implementing works that is affected by (i) water levels in the Kayrakkum reservoir; (ii) the agricultural growing season; and (iii) the often harsh winter season. Effectively, for many of the works, this leaves only a few months per year during which construction works can be implemented. In addition, some of the vertical drainage wells have failed prematurely and clear recommendations have been made to repair these and to avoid problems in future. An action plan to address this urgently has been prepared. The delay in implementing Part C (Institutional Development and Technical Assistance (TA)) was caused by slow farm restructuring in the project area. The local authorities in some areas were reluctant to implement land reforms, and consequently no foundation was established for setting up the WUAs. Although these issues have now been resolved, 4 these delays exacerbate already weak WUA capacity in recovering costs and conducting maintenance. Additional time beyond the current closing date is required to strengthen the WUAs. The Government has agreed to an action plan to accelerate the implementation of delayed activities. The extension of the Closing Date in combination with implementation of the agreed action plan should produce significant progress so that the project ratings can be upgraded as project objectives continue to be achievable. The project has also suffered from an overdue audit report, but the Bank received the audit report on September 27, 2012, and the report’s findings were satisfactory. Currently, there are no overdue audits. C. PROPOSED CHANGES  Components The change to Part D includes the addition of consultant services to carry out preparatory studies for a successor project that would consolidate the gains achieved thus far and would scale up the project to additional raions.  Financing The change to project costs reflects (i) the additional activity above, (ii) additional project management costs due to the Closing Date extension, and (iii) fluctuation in the cost of construction work and consulting services in Parts A-C. Project Costs will be revised as follows: Project Costs (US$m.)* Components/Activities Current Proposed A. Irrigation and Drainage Systems Rehabilitation and 15.1 15.6 Improvement B. Strengthening of Kayrakkum Reservoir 6.0 5.3 Embankments and Related Drainage Control Works C. Institutional Development and Technical Assistance 2.2 2.1 D. Project Management 0.9 1.2 Total 24.2 24.2 * Project costs include the original IDA Grant of $13 million, AF IDA Grant of $10 million and Government contribution of $1.2 million The SDR-USD exchange rate of March 31, 2005 of 1.50803000 was used to convert the USD to SDRs under the original financing; The SDR-USD exchange rate of March 31, 2010 of 1.518240 was used to convert the USD to SDR under AF.  Procurement 5 In accordance with the newly added activities, the procurement plan will be updated.  Closing Date The original Closing Date was May 31, 2011, which was extended to May 31, 2013 when the Additional Financing was approved. It is proposed to extend the Closing Date by an additional year to May 31, 2014. The proposed extension is necessary to complete all works and strengthen the WUAs. Construction works can only be implemented during a few months per year. As a result of this, some of the works have been delayed. It would be challenging to recover these delays as only a few months of effective construction time remain before the Closing Date, by which time it is unlikely that all works will be completed. This would be the second Closing Date extension for the project for a cumulative extension of three years.  Implementation Schedule The delay in implementing construction works in Part A will be recovered during the extended term. The considerable weakness of WUAs in recovering costs and conducting maintenance activities will be covered during the extended term, as global experience indicates that persistent and long-term capacity strengthening is required. Specifically, with respect to WUAs, the action plan includes recruitment of an international consultant with the global knowledge and expertise to resolve the existing gaps under this component. 6