The World Bank China Economic Transformation and Institutional Capacity Building (P144270) REPORT NO.: RES34896 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF CHINA ECONOMIC TRANSFORMATION AND INSTITUTIONAL CAPACITY BUILDING APPROVED ON MAY 22, 2014 TO PEOPLE'S REPUBLIC OF CHINA MACROECONOMICS, TRADE AND INVESTMENT EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Bert Hofman Senior Global Practice Director: John Panzer Practice Manager/Manager: Deepak K. Mishra Task Team Leader: Elitza Alexandrova Mileva, Jianqing Chen The World Bank China Economic Transformation and Institutional Capacity Building (P144270) ABBREVIATIONS AND ACRONYMS The World Bank China Economic Transformation and Institutional Capacity Building (P144270) BASIC DATA Product Information Project ID Financing Instrument P144270 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 22-May-2014 31-Dec-2019 Organizations Borrower Responsible Agency People's Republic of China International Department, Ministry of Finance Project Development Objective (PDO) Original PDO Project Development Objectives are to (i) inform China’s policy making and (ii) strengthen capacity to implement priority reform areas articulated in China’s Five-Year Plans and other development programs. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-83750 22-May-2014 13-Jun-2014 30-Jul-2014 31-Dec-2019 35.00 2.73 32.27 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank China Economic Transformation and Institutional Capacity Building (P144270) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. 22 subprojects (18 implemented by central agencies and 4 by provincial ones) have been approved and USD 9.18 million of the loan committed. Four subprojects have been completed with significant results contributing to the achievement of the development objectives. The implementation of 18 subprojects is ongoing and two subprojects prepared by local governments have been dropped. An additional 22 short- listed subprojects for an estimated USD 8 million from the latest call for proposals are being reviewed and revised currently. 2. The project consists of two components: a. Component A: Analytical outputs (USD 6.02 million, 28% allocated to approved projects) This component supports knowledge generation and dissemination. It has achieved notable results in terms of its development objectives. The four completed subprojects have resulted in eight study recommendations adopted in government regulations or guidelines and three studies published. The ongoing subprojects are also making good progress and are expected to achieve good outcomes. b. Component B: Implementation support, project management, and capacity building activities (USD 3.15 million, 21% allocated to approved projects) Nearly all subprojects encompass capacity building activities and the intermediate target of the number of beneficiaries has already been significantly exceeded: 39 staff have participated in overseas study tours or training in technical areas, 749 staff in institution building workshops and seminars, and over 150 staff from all subproject implementation agencies in training in project implementation. 3. The project PDO and implementation progress ratings are both moderately satisfactory, and the project’s overall risk rating was changed to substantial in the mid-term review. The project is in full compliance with fiduciary requirements and legal covenants. There are no outstanding audit or interim financial reports and no outstanding procurement-related issues. We have received an estimate for the disbursement requirements for the first quarter of 2019 and the PMO will submit the DA withdrawal application as soon as possible. The project safeguard rating is satisfactory. B. Rationale for restructuring 4. Relevance to reform agenda: With its built-in flexibility to quickly adapt to evolving needs and opportunities, the project continues to be highly relevant to GOC’s reform program. The implementation spans China’s 12th and 13th Five-year Plans. The Government has also begun work on preparing the 14th Five-year plan. A broad range of the issues tackled in the project (e.g., green development, public service provision, etc.) are also closely aligned with the priorities of the WB country program. The World Bank China Economic Transformation and Institutional Capacity Building (P144270) 5. Demand for subprojects: The project has two groups of beneficiaries: central agencies with no repayment required (Group 1) and local governments with repayment obligations (Group 2). The request for restructuring includes a partial loan cancelation from the funds allocated to beneficiaries with repayment obligations. There has been limited demand for projects from local governments, due to a significant extent to the repayment requirements but also to limited implementation capacity in some cases. Only four provincial subprojects have been approved for USD 1.28 million, compared with 18 subprojects from central agencies. Two of the four provincial subprojects have been dropped. On the other hand, demand for subprojects from central agencies is solid as indicated by the strong response (65 proposals) to the 4th call for proposals in April 2018 (see Table 1). The PMO estimates that about 20 subprojects will be approved in Batch 4 and, after informal consultations, they expect similarly large demand for Batch 5, which is planned for February 2019. 6. Time-bound action plan: The project implementation delay was mainly caused by a force majeure (a MOF internal review in 2016-17). Since then the PMO has been able to accelerate project selection, approval, and procurement. They have also improved monitoring and evaluation by closely involving an M&E expert throughout the implementation process. In addition, The PMO has developed an action plan to process in a timely manner the 22 short-listed subprojects in Batch 4. Given that average subproject implementation takes 24 months, the successful implementation of Batch 4 proposals depends on the extension of the project closing date. Another call for proposals is planned for February 2019. The PMO expects that the final batch of subprojects will be completed by August 2021, leaving a two-month buffer period. Table 1: Implementation timetable Proposal No. of proposals No. of subprojects Loan committed Call for review and received* approved* (USD million) Subproject Batch proposals approval completion Group 1 Group 2 Group 1 Group 2 Group 1 Group 2 1 Apr-14 completed 13 5 5 3** 2.97 0.68 Jun-18 2 Apr-16 completed 30 4 4 0 1.45 Nov-19 3 Nov-17 completed 25 2 9 1 3.48 0.60 Aug-20 4 Apr-18 Mar. 2019 60 5 [18] [2] [7.20] [0.80] Mar-21 5 Feb-19 Aug. 2019 [20] [3] [7.34] [1.39] Aug-21 Notes: * Group 1 includes central agencies with no repayment required and Group 2 local governments with repayment obligations. **2 of the 3 subprojects have been dropped. The values in parentheses are estimates. II. DESCRIPTION OF PROPOSED CHANGES 7. The formal request for project restructuring, received on December 17, 2018, consists of the following changes: a. Partial loan cancellation of USD 9 million from the funds allocated for local government agencies with repayment obligations due to weaker demand from local governments (see Paragraph 5 above). b. Extension of the closing date by 22 months to October 31, 2021. This is the first extension of the closing date. The World Bank China Economic Transformation and Institutional Capacity Building (P144270) c. Updated results framework, with adjusted target values for the PDO and intermediate indicators (with the indicator definitions unchanged). Upon the approval of the restructuring, the Project Operations Manual will be updated to include the revised Results Framework. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Implementation Schedule ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ 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 China Economic Transformation and Institutional Capacity Building (P144270) IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Component A: Analytical outputs Component A: Analytical (for example sectoral research, outputs (for example sectoral 22.02 Revised 16.62 technical studies, and topical research, technical studies, and reports). topical reports). Component B: Implementation Component B: Implementation support, project management support, project management and capacity building activities and capacity building activities (such as training and (such as training and knowledge 14.68 Revised 11.08 knowledge sharing, se sharing, se condments program, condments program, scholarships, overseas study in scholarships, overseas study in technical areas technical areas TOTAL 36.70 27.70 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IBRD-83750 Effective 31-Dec-2019 29-Oct-2021 28-Feb-2022 OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE CANCELLATIONS Value Reason Current Cancellation New Ln/Cr/Tf Status Currency Date of for Amount Amount Amount Cancellation Cancellation BORROWER' S REQUEST IBRD- Disburs USD 35,000,000.00 9,000,000.00 17-Dec-2018 26,000,000.00 FOR 83750-001 ing COUNTRY REASONS OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES The World Bank China Economic Transformation and Institutional Capacity Building (P144270) Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IBRD-83750-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: GDs, CS & Training under A 22,443,125.00 1,298,128.90 22,443,125.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: GDs, CS & Training under B 12,469,375.00 345,272.97 3,469,375.00 100.00 100.00 Total 34,912,500.00 1,643,401.87 25,912,500.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2014 0.00 0.00 2015 1,000,000.00 500,000.00 2016 3,000,000.00 500,000.00 2017 6,000,000.00 1,000,000.00 2018 8,000,000.00 730,000.00 2019 9,000,000.00 5,000,000.00 2020 8,000,000.00 9,000,000.00 2021 0.00 9,270,000.00 OPS_DETAILEDCHANGES_SORT_TABLE SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating at Approval Current Rating Political and Governance  Low The World Bank China Economic Transformation and Institutional Capacity Building (P144270) Macroeconomic  Low Sector Strategies and Policies  Low Technical Design of Project or Program  Low Institutional Capacity for Implementation and  Substantial Sustainability Fiduciary  Moderate Environment and Social  Low Stakeholders  Low Other  Low Overall  Substantial . The World Bank China Economic Transformation and Institutional Capacity Building (P144270) . Results framework COUNTRY: China China Economic Transformation and Institutional Capacity Building Project Development Objectives(s) Project Development Objectives are to (i) inform China’s policy making and (ii) strengthen capacity to implement priority reform areas articulated in China’s Five-Year Plans and other development programs. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 Inform China's policy making & strengthen capcity to implement priority reform areas in China's 5YP Study recommendations 0.00 0.00 0.00 3.00 8.00 12.00 16.00 19.00 adopted (Number) Action: This indicator has been Revised Studies published 0.00 0.00 0.00 2.00 8.00 14.00 24.00 30.00 (Number) Action: This indicator has been Revised PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 Component A: Analytical outputs (for example sectoral research, technical studies, and topical reports). The World Bank China Economic Transformation and Institutional Capacity Building (P144270) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 High level policy seminars 0.00 0.00 0.00 1.00 5.00 8.00 14.00 20.00 (Number) Action: This indicator has been Revised Number of beneficiaries participating in capacity 0.00 0.00 3.00 5.00 10.00 15.00 25.00 30.00 building activities (Number) Action: This indicator has been Revised Findings disseminated 0.00 0.00 0.00 6.00 10.00 15.00 20.00 26.00 (Number) Action: This indicator has been Revised Component B: Implementation support, project management and capacity building activities (such as training and knowledge sharing, se condments program, scholarships, overseas study in technical areas Findings disseminated 0.00 0.00 0.00 0.00 0.00 1.00 2.00 4.00 (Number) Action: This indicator has been Revised High level policy seminars 0.00 0.00 0.00 2.00 3.00 5.00 8.00 10.00 (Number) Action: This indicator has been Revised Number of beneficiaries participating in capacity 0.00 0.00 15.00 30.00 50.00 70.00 80.00 90.00 building activities (Number) The World Bank China Economic Transformation and Institutional Capacity Building (P144270) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 Action: This indicator has been Revised IO Table SPACE The World Bank China Economic Transformation and Institutional Capacity Building (P144270)