The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) REPORT NO.: RES45244 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF BHUTAN COMMUNITY-BASED RURAL ENTREPRENEURSHIP PROJECT APPROVED ON MAY 11, 2017 TO MINISTRY OF AGRICULTURE AND FORESTS AGRICULTURE AND FOOD SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Mercy Miyang Tembon Global Director: Martien Van Nieuwkoop Practice Manager/Manager: Loraine Ronchi Task Team Leader(s): Felipe Jr Fadullon Dizon, Tenzin Lhaden The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) ABBREVIATIONS AND ACRONYMS IP Implementation Progress IRI Intermediate Results Indicator M&E Monitoring and Evaluation MoAF Ministry of Agriculture and Forests MoH Ministry of Health MTMT Mobile Training and Mentoring Team MU Moderately Unsatisfactory PAN Project Advisory Network PD Project Document PD Project Director PDO Project Development Objective PMU Project Management Unit PSC Project Steering Committee RGoB Royal Government of Bhutan TAG Technical Advisory Group TOR Terms of Reference ToT Training of Trainers YLE Youth-Led Enterprise The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) 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 P143795 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 11-May-2017 25-Feb-2021 Organizations Borrower Responsible Agency Ministry of Agriculture and Forests Ministry of Agriculture and Forests Financing (in USD Million) FIN_SUMM_PUB_TBL SUMMARY Total Project Cost 0 Total Financing 0 Financing Gap 0 DETAILS -NewFin3 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) Project Development Objective (PDO) Original PDO The project development objective is to generate new and more productive employment for the poor and vulnerable youth in selected dzongkhags in southwestern Bhutan OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net TF Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A6795 11-May-2017 23-Jan-2019 29-Sep-2019 25-Feb-2021 1.25 .39 .86 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. The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Overall Progress 1. The progress towards achievement of the PDO is rated as Moderately Unsatisfactory (MU) assuming the current closing date of February 2021 holds. There was first a delay in achieving the conditions for effectiveness, followed by implementation challenges related to the COVID-19 pandemic, and some changes to project management. There is, however, continued commitment of the Ministry of Agriculture and Forests (MoAF) to deliver on expected project results. Overall Implementation Progress (IP) is also rated as MU given considerable delay in initiating key project activities. The cumulative disbursement to dates is USD 387,548 or 31 percent of the total grant of USD 1,250,000 and there are no outstanding audits till date. 2. There was a delay in declaration of effectiveness. The project was signed on January 23, 2019 and declared effective only on September 29, 2019. The delay was due to the requirement of recruitment of three officials for the PMU (Project Manager, Sub-grant Manager, and M&E officer). The MoAF expressed reservation with the high salary package agreed on and indicated in the approved Project Document. Therefore, the package was renegotiated several times. The current budget for the above officials is lower than the initial proposed package but remained competitive to attract the needed officials. 3. The COVID-19 pandemic and recent changes to project management have further led to delays in implementation of activities. While the spread of the COVID-19 pandemic has been fairly contained in Bhutan owing to the mitigation measures instituted by the Royal Government of Bhutan (RGoB), this meant that the country did have to undergo two national lockdowns and several travel and health-related restrictions instituted since March 2020. Concurrently, in July 2020, the then Project Director (PD) was selected for a position in the Bhutan Embassy in Bangladesh and a new Project Director needed to be appointed. The current PD also serves as the new Chief of the Policy and Planning Division (PPD) of the MoAF. This change in project management is resulting in new dynamics between the PMU and the new PD, requiring initial learning and adjusting. The baseline survey, which was planned for March 2020, was completed in August 2020 only after receiving a special permit from the Ministry of Health (MoH). The Project Advisory Network (PAN) was established in October 2020. However, the formation of the Mobile Training and Mentoring Teams (MTMTs) and the implementation of crucial training-related activities under Component 1 (Support Structures to Facilitate Youth-Led Enterprise Development) and Component 2 (Youth Development and Empowerment) have yet to move forward. B. Component-wise progress 4. The recently conducted first implementation support mission reviewed component-wise progress and achievement of outputs. The mission was held between November 2-16, 2020 and findings and recommendations were finalized on December 23, 2020. The mission indicated that no progress has been made towards the targets for the PDO indicators, and only four of the 15 Intermediate Results Indicators (IRIs) have been achieved. Most of these are related to process, such as the establishment of Project Steering Committee (PSC), staffing of the Project Management Unit (PMU), and the establishment of the M&E system. 5. Component 1: Support Structures to Facilitate Youth-Led Enterprise (YLE) Development. The cumulative expenditures under Component 1 was USD 35,834 or 26 percent of the project allocation of USD 138,500. The PAN has been established and has been convened twice (one virtual meeting in September 2020 and another face-to-face meeting in November 2020). It provides independent technical guidance to establish YLEs. However, various activities are stalled due to COVID-19 restrictions on mass gathering and trainings. The main activity under this component is the establishment of specialized MTMTs to train 500 youths. For the selection of the new enterprises, the project will follow the community-based business development strategy of “One Village-One Product” (OVOP) which is in line with the ongoing Royal Initiative “One Gewog One Product” (OGOP). This will enhance the rural grassroots economy through the production of unique value-added goods which considers community wisdom, tradition, and resources. 6. Component 2: Youth Development and Empowerment. There have been no expenditures under Component 2. The allocated budget for this Component is USD 240,000. This Component did not see any progress as it is linked to the establishment of the MTMTs. The MTMTs are to provide training in organizational aspects, business aspects, and ICT aspects to the youths. The MTMT was to be established by March 2020, six months after effectiveness date. However, the MTMTs are still not in place owing to the constraints brought about by COVID-19, and the need to revisit the modality by which these can operate The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) given the current restrictions. After the MTMT and trainers are onboarded, virtual training options will be considered to move forward with implementation. 7. Component 3: Operationalization of YLEs. There have been no expenditures under Component 3. The allocated budget for this Component is USD 634,000. Implementation of Component 3 is preceded by the implementation of Component 2. This component supports YLE capacity building, provision of sub-grants to individuals or YLEs, and promotion of market linkages. No implementation progress is expected until October-November 2021. The PMU is already working closely with relevant agencies (who form part of the PSC and the PAN) to ensure that provision of grants is implemented efficiently even in the context of COVID-19 constraints. For example, the PMU is exploring e-banking with the Royal Monetary Authority (RMA) and the online trade platform of the Ministry of Economic Affairs (MoEA). 8. Component 4: Project Management & Administration, M&E, and Knowledge Dissemination. The cumulative expenditures under Component 4 was USD 57,374 or 24 percent of its allocated budget of USD 237,500. Various PMU officers have been hired. The PSC, chaired by the Secretary of the MoAF, was established and the Annual Work Plan and Budget (AWPB) was approved. An M&E system has been established. The project successfully conducted the baseline after securing special permission from the COVID-19 Technical Advisory Group (TAG) team of the Ministry of Health (MoH). C. Rationale for restructuring 9. The project has become even more relevant now as it is crucial to the RGoB and MoAF response to address the negative impacts of the COVID-19 pandemic. The number of unemployed youths has increased, and more youth are returning back to their villages in search of livelihood opportunities. The need to provide entrepreneurship support and create employment opportunities is even more crucial. By July 2020, close to 30,000 Bhutanese were reportedly seeking jobs, including more than 13,000 who lost jobs domestically, and over 3,000 returning citizens who lost their jobs abroad. The RGoB has reiterated its focus on generating employment for youth. The project can, therefore, impart timely technical guidance and support to establish and strengthen enterprises. 10. The project would be an effective recovery mechanism to cushion the negative impacts of COVID-19. The need for its continued implementation is even more important now. The delayed start-up of project activities, and the imminent closing date, however, require an extension of the project closing date. II. DESCRIPTION OF PROPOSED CHANGES A. Extension of project closing date 11. The MoAF has requested for extension of the project closing date by two years from February 25, 2021 to February 28, 2023, in a request letter dated November 3, 2020. However, the JSDF is allowing for a maximum 18-month project extension to August 31, 2022. The MoAF has acknowledged this allowable project extension period. B. Increase in the total fund for sub-grants and change in training implementation 12. The MoAF proposes to increase the coverage of the sub-grants from 100 to 200 youth. This would be achieved by: (a) limiting the maximum amount of sub-grant per youth from the originally envisaged USD 10,000 to USD 5,000; and (b) increasing the total allocation of funds for sub-grants from USD 500,000 to USD 652,200 (under Category ‘Sub-Grants’ expenses in the Grant Agreement). This will require a reallocation of grant funds across expenditure categories. 13. The MoAF proposes to increase the coverage of the sub-grants from 100 to 200 youth, increasing project coverage. This increased coverage would be achieved by: (a) limiting the maximum amount of sub-grant per youth from the originally envisaged USD 10,000 to USD 5,000; and (b) increasing the total allocation of funds for sub-grants from USD 500,000 to USD 652,200 (under Category ‘Sub-Grants’ expenses in the Grant Agreement). A grant of USD 5,000 is a viable investment for a start-up, and as such it does not comprise the prospects for business sustainability. The increase in the total allocation for sub-grants to USD 652,00 stems from cost savings described below. The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) 14. The modality of implementing MTMTs and training (under Components 1, 2 and 3) will be revised in order to scale up training activities effectively in the context of COVID-19 constraints. The revised modality also leads to cost savings (reallocated to sub-grants), without sacrificing the quality of capacity building. The initial implementation plan was to hire four firm consultancies as MTMTs which would undertake training and mentoring of 500 youth throughout the duration of the project (at a total budget of USD 544,000). Recognizing the COVID-19 protocols on travel and gatherings and the difficulty in mobilizing 500 youth at once for training, there is a proposal to change the modality for the MTMT. Instead of hiring four consultancies, only a single firm will be hired to develop a training curriculum and to conduct a training of 18 (youth) trainers (ToT). These 18 trainers will serve as frontline trainers in the six project districts, with three trainers per district. This organizational arrangement of trainers will effectively serve the purpose of the MTMTs in imparting training. Under this revised modality, there is no reduction in the quality of capacity building given that the 18 trainers will be thoroughly trained and later stationed in the respective districts to provide training and mentoring throughout the project. Unlike the initial plan, this revised modality stations trainers in the districts, thereby enhancing beneficiary access to the trainers. All 18 trainers would be hired as separate individual consultancies. This would result in a potentially efficient decentralized training effort, while generating a saving of USD 96,200 on consultancies. Further, the related goods and operating costs is also expected to reduce, with an additional savings of USD 37,200 and USD 18,800. The total saving of USD 152,200 emanating from this redesigned training approach would be reallocated to the sub-grants sub-component under Component 3. 15. The modality of implementing market linkage strengthening (under Component 3) will also be revised. Trade fairs and craft bazaar constitutes a key platform to brand and market community products and is therefore expected to strengthen market linkages. At project design, such platforms were absent in local communities, hence the plan was to bring in consultancies to support project implementation in this area (at a budget of USD 30,000). However, more recently, these initiatives are being undertaken by the RGoB (Department of Cottage and Small Industries, Department of Trade), Bhutan Chamber of Commerce and Industry (BCCI), and local NGOs (Handicraft Association of Bhutan, Tarayana Foundation, Bhutan Association of Women Entrepreneurs). Further, the use of internet and mobile technologies is expected to be a more efficient means to reach communities in remote areas, and to improve product development and marketing. The project proposes to leverage the existing work of some of these institutions under a cost-sharing arrangement and proposes to reallocate this amount to training activities instead of consultancy services. 16. The delays in finalizing these proposed revisions are due to COVID-19 constraints in implementation. The country underwent two national lockdowns and several restrictions during which all government offices were closed. The work-from-home modality has proved to be a challenge, including for government officials. The request for the extension was received from the RGoB on November 3, 2020, and the necessary details on revised modalities and budget reallocations had been finalized only in mid-February 2021. C. Change in Results Framework 17. PDO Indicators a. Indicator 3: Number of new youth-led enterprises supported by JSDF still in business, at least six months after receiving grants/supports. Although the total number of the new YLEs will be 200, owing to the uncertainties posed by the ongoing pandemic on business sustainability, the End Target for this indicator will be kept at 100. The IRI 8, however, well reflects the increase number of the total beneficiaries of sub-grants. b. All the End Target Dates have been revised to August 31, 2022. 18. Intermediate Result Indicators a. IRI 1: Number of specialized technical support teams established. With the proposed change in the modality of the MTMT, the number of initial 4 consultancy firms are revised to 18 Trainers who will be contracted as part of the MTMT. Initial End Target was 4, and the Revised End Target is 18. b. IRI 8: Number of YLEs established with support from project’s grants. With the increase in the allocation for the sub- grants and the reduction in the maximum per sub-grant, the total number of sub-grant beneficiaries (YLEs) is increased to 200 with subsequent increase of female beneficiaries as well. The Initial End Target was 100 (of which Female 30), and the Revised End Target is 200 (of which Female 60). The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) c. All the End Target Dates have been revised to August 31, 2022. Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Implementation Schedule ✔ Implementing Agency ✔ Project's Development Objectives ✔ Cancellations Proposed ✔ Additional Financing Proposed ✔ Change in Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators PDO_IND_TABLE Number of youth who are employed or are self-employed after at least six months of receiving grants and/or trainings Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 400.00 Revised Date 01-Jul-2017 17-Feb-2021 31-Aug-2022 of which female Unit of Measure: Number Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 120.00 No Change Percentage of pre-existing YLEs supported by JSDF grants that are operating with a 20% increase in net profit. Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 60.00 Revised Date 01-Jul-2017 17-Feb-2021 31-Aug-2022 disaggregrated by gender Unit of Measure: Percentage Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 0.00 50.00 No Change The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) Number of new youth-led enterprises supported by JSDF still in business, at least six months after receiving grants/supports Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 100.00 Revised Date 01-Jul-2017 17-Feb-2021 31-Aug-2022 of which female Unit of Measure: Percentage Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 0.00 30.00 No Change Intermediate Indicators IO_IND_TABLE Number of specialized technical support teams established Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 18.00 Revised Date 01-Jul-2017 16-Feb-2021 31-Aug-2022 Number of enterprises established with the strategy of ‘One Village One Product” Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 20.00 Revised Date 01-Jul-2017 16-Feb-2021 31-Aug-2022 PAN established Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) Value 0.00 1.00 1.00 Revised Date 01-Jul-2017 16-Feb-2021 31-Aug-2022 Number of youths trained in youth development and empowerment training package Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 500.00 Revised Date 01-Jul-2017 16-Feb-2021 31-Aug-2022 of which female Unit of Measure: Number Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 0.00 150.00 Revised Number of trained youths who developed business plans Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 300.00 Revised Date 01-Jul-2017 16-Feb-2021 31-Aug-2022 of which female Unit of Measure: Number Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 0.00 90.00 No Change Number of trained youths using ICT skills in businesses/employment. Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) Value 0.00 0.00 300.00 Revised Date 01-Jul-2017 16-Feb-2021 31-Aug-2022 of which female Unit of Measure: Number Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 0.00 90.00 No Change Number of existing YLEs supported by the MTMT for capacity building Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 100.00 Revised Date 01-Jul-2017 16-Feb-2021 31-Aug-2022 of which female Unit of Measure: Number Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 0.00 30.00 No Change Number of YLEs established with support from project’s grants Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 200.00 Revised Date 01-Jul-2017 16-Feb-2021 31-Aug-2022 of which female Unit of Measure: Number Indicator Type: Custom Supplement The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) Baseline Actual (Current) End Target Action Value 0.00 60.00 Revised Percentage of YLEs submit 6-monthly progress reports to the PMU Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 80.00 Revised Date 01-Jul-2017 16-Feb-2021 31-Aug-2022 Disaggregrated by gender Unit of Measure: Percentage Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 0.00 50.00 No Change Number of enterprises that sells products outside their Gewogs Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 30.00 Revised Date 01-Jul-2017 16-Feb-2021 31-Aug-2022 Independent Project Management Unit (PMU) established with MoAF Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 1.00 1.00 Revised Date 01-Jul-2017 16-Feb-2021 31-Aug-2022 Project Steering Committee established under Secretary, MoAF Unit of Measure: Number Indicator Type: Custom The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) Baseline Actual (Current) End Target Action Value 0.00 1.00 1.00 Revised Date 01-Jul-2017 16-Feb-2021 31-Aug-2022 An independent dynamic M&E system is established and operational by JSDF Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 1.00 1.00 Revised Date 01-Jul-2017 16-Feb-2021 31-Aug-2022 Percent of YLEs maintain progress reports Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 100.00 Revised Date 01-Jul-2017 16-Feb-2021 31-Aug-2022 Percent of YLEs satisfied with the services receive from MTMT/PMU Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 70.00 Revised Date 01-Jul-2017 16-Feb-2021 31-Aug-2022 OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Component 1: Support Component 1: Support Structures to Facilitate Youth- Structures to Facilitate Youth-Led 150000.00 Revised 43100.00 Led Enterprise (YLE) Enterprise (YLE) Development Development Component 2: Youth Capacity Component 2: Youth Capacity 210000.00 Revised 291000.00 Building and Empowerment Building and Empowerment The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) Component 3: Operationalization Component 3: 640000.00 Revised 688200.00 of YLEs Operationalization of YLEs Component 4: Project Component 4: Project Management, Monitoring and Management, Monitoring and 250000.00 Revised 227700.00 Evaluation, and Knowledge Evaluation, and Knowledge Dissemination Dissemination 1,250,000.0 TOTAL 1,250,000.00 0 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline TF Status Closing Closing(s) Closing for Withdrawal Applications TF-A6795 Effective 25-Feb-2021 31-Aug-2022 31-Dec-2022 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed TF-A6795-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: Goods under the Proj 81,200.00 0.00 44,000.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: Consulting, NCS 250,000.00 0.00 249,200.00 100.00 100.00 iLap Category Sequence No: 3 Current Expenditure Category: DISB - TRAINING 294,000.00 0.00 198,600.00 100.00 100.00 iLap Category Sequence No: 4 Current Expenditure Category: DISB - OPERATING COSTS 124,800.00 0.00 106,000.00 100.00 100.00 The World Bank Bhutan Community-Based Rural Entrepreneurship Project (P143795) iLap Category Sequence No: 5 Current Expenditure Category: Matching Grants Part 3(b) 500,000.00 0.00 652,200.00 100.00 100.00 Total 1,250,000.00 53,266.12 1,250,000.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Expected Disbursements (In US$) Fiscal Year Annual Cumulative 2017 0.00 0.00 2018 0.00 0.00 2019 0.00 0.00 2020 387,548.01 387,548.01 2021 259,999.00 647,547.01 2022 413,000.00 1,060,547.01 2023 189,452.99 1,250,000.00 Note to Task Teams: End of system generated content, document is editable from here.