Document of TheWorld Bank FOR OFFICIALUSE ONLY ReportNo. 35240-MV PROJECT PAPER ONA PROPOSED ADDITIONAL FINANCING CREDIT INTHEAMOUNT OF SDR 4.0 MILLION(US$5.7 MILLIONEQUIVALENT) TO THE REPUBLIC OF MALDIVES FORAN INTEGRATED HUMANDEVELOPMENT PROJECT February 8,2006 HumanDevelopment Sector Unit SouthAsia Region document has a restricteddistributionand may be usedby recipientsonly in of their officialduties. Its contents may not otherwise be disclosed CURRENCY EQUIVALENTS (Exchange Rate Effective November 30,2005) Currency Unit= Rufiyaa (RF.) Rf. 1=US$.OSO US$1 =Rf. 12.82 FISCAL YEAR January 1-December31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy EU EuropeanUnion IDA International Development Association IHDP Integrated HumanDevelopment Project Country Director: Alastair J. McKechnie Sector Director: Julian Schweitzer Sector Manager: Mansoora Rashid MALDIVES INTEGRATEDHUMANDEVELOPMENTPROJECT CONTENTS Page A. Introductory Statement..................,..,,.,.......,....., .. ................, ..,....................,..2 ...,.., . . B. Background andRationale for Additional Financing inthe amount of US$5.7 million.,..........,.........,......,....,... ...,,..,...,..,........ . . .. .., ...............................,,,..............2 ,, C. ProposedChanges..................................................................................................... D. Consistency with CAS ...............................,.....,.....................,......,..........................3 E. Economic Analysis of Financing Gap .................................................................. 3 F. Appraisal of Restructured Activities.. ..............,, ................... .., . ..,,. . . .........,,,,,..........3 G. Expected Outcomes ...........,.,.......................,,,,. ................... . .,,.,,.............................3 H. Benefits and Risks.................................................................................................... 4 I. FinancialTermsandConditionsfortheAdditionalFinancing............... ...........4 . .,, . MAP(S) IBRDMap 33442 M A L D I V E S Integrated H u m a n Development Project Additional Financing PROJECT PAPERDATASHEET Date: February 8,2006 Team Leader: Qaiser Khan Country: Republic o f Maldives Sector DirectorManager: Julian Project Name: IntegratedHuman Schweitzer /Mansoora Rashid Development Project Country Director: Alastair J. McKechnie Project ID: PO98583 Environmental Category: B (Partial - Assessment) Borrower: Republic o f Maldives Responsible agency: Ministryof Education Revised estimated disbursements (Bank FY/US$m) FY 12006 I2007 12008 12009 I2010 Current closing date: June 30,2010 Revised closing date [ifapplicable]: Bank policies? Revised project development objectives/outcomes [Ifapplicable] N.A. Does the scaled-up or restructuredproject trigger any new safeguardpolicies? N o Ifso, click hereto indicate whichone(s) N.A. For Additional Financing [ ] Loan [XI Credit [3 Grant F o r Loans/Credits/Grants: Total Bank financing (uS%m.) US$5.7 million Proposed terms: 40 year repayment, 10 year grace period Financing Plan (US$m.) Source Foreign Total Borrower 1.oLocal 0 1.o IBRD/IDA 2.2 3.5 5.7 Others MALDIVES INTEGRATEDHUMANDEVELOPMENT PROJECT A. IntroductoryStatement This Project Paper seeks the approval o f the Executive Directors to provide an additional credit in an amount o f US$5.7 million to the Maldives Integrated Human Development Project (IHDP) (P098583) (Cr. 3948-MAL). The proposed additional credit will help fill the financing gap created by a partial cancellation o f the original IHDP credit to meet the emergency needs o f the post-tsunami reconstruction in the Maldives. It will finance activities on four focus islands including: (i) education services, (ii) services, (iii) health employment services, (iv) community services, and (v) a monitoring and evaluation component, with the objective o f developing the islands as alternative economic and social centers inregions remote from Male that could act as hubsfor the deliveryo fpublic social services andlocal government. B. BackgroundandRationalefor AdditionalFinancinginthe amount of$5.7 million The original IHDP Credit o f SDR 10.9 million (US$15.60 million approximately) was approved on June 6, 2004, and became effective on September 9, 2004. The objectives of the project were to improve social indicators and promote economic growth on four focus islands identified in outlying atolls with a view to developing them as viable alternatives to Male, and thereby reducing regional inequities insocial services and economic growth. A related objective was to promote ecologically sustainable development on these fragile atolls by selecting the most ecologically viable islands within the remote atolls as the focus islands for development. There i s no change in the objectives, design or scope o f the project to be financed under the additional financing. On February 10, 2005, SDR 6.598 million (US$lO million) was cancelled from the IHDP to make available IDA funds for financing urgent post-tsunami rehabilitation works under the first Post Tsunami Emergency Relief and Reconstruction Project (PO94193/Cr. 40420). During the December 2004 Tsunami disaster, tidal waves ranging from 4-14 feet engulfed the Maldives. More than 100 persons were reported dead, 1,300 persons injured, 12,000 persons displaced from their islands and 8,500 relocated to other places on their own islands. There was widespread destruction o f infrastructure including electricity and water supply. Damages to physical assets were estimated to be about US$300 million. The impact on the economy was severe and widespread. To respond to the emergency and crisis situation, the Government o f the Maldives requested the World Bank to cancel US$lO million from the IHDP to make IDA funds available for tsunami relief. Even at the time o f the request for cancellation, the Government indicatedthat the request was solely to meet urgent funding needs for the Post Tsunami program, and that the Government would seek the restoration o f cancelled funds to meet the original project objectives, once additional funds were available for the Maldives under the IDA-14 cycle in July 2005. However, the IDA-14 allocation for the Maldives o f US$27 million will not be sufficient to restore US$10 million in funding inview o f the other commitments/requirements o f the Government. It was therefore decided that the Republic of Maldives would seek from IDA a maximum o f US$5.7 million for refinancing IHDP, and that the European Union (EU) would finance IHDP activities in two islands to the tune o f $3.6 million, reducing the estimated shortfall inthe funds needed to meet the original IHDP objectives to about US$0.7 million. It i s expected that the shortfall will be met by savings resulting from the bidding process and from fluctuations inthe exchange rate. The situation will be reassessed during the project's mid-term 2 review. Meanwhile, the proposed additional financing will suffice for the project to meet its original objectives. In terms of implementation performance, the assessment of the last IDA supervision mission (December 2005) was that the project was currently on track to meet its development objectives. Project launch had initially beendelayed from January to June 2005 as a result o f the Government's focus on Tsunami rehabilitation works and the Project Implementation Plan was revised to reflect a new timeline resulting from the delayed start of the project. In the second half o f 2005, project implementation improved significantly and both the development objective and implementation progress ratings are satisfactory. A number o f start-up activities having been completed under each component, including the selection and appointment o f key consultants. Under the civil works consultancy, for example, the preparation of detailed drawings for 11 packages o f works i s currently on-going. Training programs have been identified and staff to be deputed for training will be selected in the first half o f 2006 as most o f the courses are scheduled to begininSeptember 2006. About 36% o fthe reduced credit amount has disbursed to date. Without the additional financing implementation could begin to stall as the Government is unwilling to sign contracts for which bidding is on-going beyond the funds available under the credit. This includes contracting for the construction o f schools, residential learning centers, teacher training centers, and multi-purpose buildings; contracting for the provision o f broadband services on focus islands and the procurement o f furniture and equipment for education, healthand community services. C. ProposedChanges None. The additional financing will allow the completion o f components as originally designed. D. Consistency with CAS N.A. The component continues to be consistent with the CAS objective of reducing regional inequities and developing alternatives to Male inremote atolls. E. EconomicAnalysis of financinggap N o change. The original economic analysis of the project still holds as there are no changes inthe components. F. Appraisal of restructuredactivities N.A. G. ExpectedOutcomes N o change in the expected outcomes of improved social indicators and better economic growth in the focus islands, as well as a reduction in regional inequities and promotion o f ecologically sustainable development. 3 H. BenefitsandRisks No change in the expected benefit o f developing viable alternative growth centers to Male for more equitable and ecologically sustainable development. The risk that people continue to prefer using services inthe capital area i s sought to be mitigated by ensuring that the quality o f services to be provided with project support on the focus islands is high, and that the transaction costs o f using services inthe islands i s lower than inthe capital city. I. Financialtermsandconditionsfortheadditionalfinancing Standard IDA Credit terms apply. 4 MAP SECTION IBRD 33442 71° 72° 73° 74° 75° 76° HAA ALIFU Dhidhdhoo 7° 7° THILADHUNMATHI UTHURUBURI HAA DHAALU THILADHUNMATHI Kulhudhuffushi DHEKUNUBURI SHAVIYANI MILADHUNMADULU MALDIVES UTHURUBURI Funadhoo 6° NOONU 6° MILADHUNMADULU DHEKUNUBURI Ugoofaaru Manadhoo RAA MAALHOSMADULU UTHURUBURI LHAVIYANI FAADHIPPOLHU Naifaru Eydhafushi 5° BAA 5° MAALHOSMADULU DHEKUNUBURI KardivaChannel KAAFU MALÉ ATOLL ALIFU Rasdhoo Thulusdhoo ALIFU ARI ATHOLHU UTHURUGOFI MALÉ 4° 4° Mahibadhoo I N D I A N ALIFU DHAALU ARI ATHOLHU Fulidhoo DHEKUNUGOFI VAAVU O C E A N FELIDHE ATOLL FAAFU Magoodhoo NORTH NILANDHE ATOLL 3° Muli 3° MEEMU Kudahuvadhoo MULAKU ATOLL DHAALU SOUTH NILANDHE ATOLL THAA KOLHUMADULU Veymandoo 2° 2° Fonadhoo LAAMU HADHDHUNMATHI One and Half Degree Channel GAAFU ALIFU HUVADHU ATHOLHU UTHURUBURI 1° 1° 75° 76° Viligili Thinadhoo MALDIVES 0 25 50 75 Kilometers GAAFU DHAALU 0 25 50 75 Miles HUVADHU ATOLL DHEKUNUBURI ATOLL ADMINISTRATIVE CAPITALS 0° EquatorialChannel 0° NATIONAL CAPITAL Foamulaku ATOLL ADMINISTRATIVE SEENU GNAVIYANI BOUNDARIES* ADDU ATOLL FOAMULAKU This map was produced by the Map Design Unit of The World Bank. ATOLL The boundaries, colors, denominations and any other information Hithadhoo shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any *Local Atoll Names shown in green; endorsement or acceptance of such boundaries. Official Atoll Names shown in white. 72° 73° 74° JANUARY 2005