The World Bank Report No: ISR11621 Implementation Status & Results Papua New Guinea PG Second Mining Sector Inst Strengthening TA (P102396) Public Disclosure Copy Operation Name: PG Second Mining Sector Inst Strengthening TA (P102396) Project Stage: Implementation Seq.No: 8 Status: ARCHIVED Archive Date: 04-Sep-2013 Country: Papua New Guinea Approval FY: 2008 Product Line: IBRD/IDA Region: EAST ASIA AND PACIFIC Lending Instrument: Technical Assistance Loan Implementing Agency(ies): Mineral Regulatory Authority Key Dates Board Approval Date 26-Jun-2008 Original Closing Date 31-Dec-2013 Planned Mid Term Review Date 19-Mar-2012 Last Archived ISR Date 22-Dec-2012 Effectiveness Date 03-Aug-2009 Revised Closing Date 31-Dec-2013 Actual Mid Term Review Date 19-Mar-2012 Project Development Objectives Project Development Objective (from Project Appraisal Document) The project development objective is to improve the benefits from Extractive Industries (EI) to the national budget and to mining affected communities and to mitigate mining's health and safety risks for ASM miners. This will be achieved through improving effectiveness of key EI sector institutions, supporting EI communities to be better able to monitor the delivery of community programs and services, empowering disadvantaged groups including women and youth in extractive industries affected areas, and improving accountability of the sector and for management and use of mining-related revenues. The primary target groups are the institutions involved in the mining sector, the communities in the vicinity of both large-scale and artisanal/small scale mining operations and the recipients and managers of mining benefits streams. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Component(s) Component Name Component Cost Strengthening Policy and Regulatory frameworks 1.90 Strengthening Mining Sector Governance 8.19 Improving Revenue Collection 4.20 Public Disclosure Copy Strengthening Mining Sector Management in Bougainville 2.00 Project Management 0.67 Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Satisfactory Overall Implementation Progress (IP) Moderately Unsatisfactory Moderately Satisfactory Overall Risk Rating Substantial Substantial Page 1 of 5 The World Bank Report No: ISR11621 Implementation Status Overview The project had been facing a number of implementation challenges. Following declaration of effectiveness in August 2009, project implementation began in September 2009 but delays resulted from a number of factors, ranging from political change, institutional instability within the implementing agency, and limited capacity combined with complex implementation arrangements. Public Disclosure Copy In 2012, the Government agreed to undertake a number of remedial measures to address the specific implementation challenges of the project. These include (i) staffing changes to strengthen the PMU (separation of the function of Acting Managing Director with that of Project Manager; appointment of a full-time staff to oversee day-to-day activities of the project; on-boarding of a Procurement Officer and an international Procurement Advisor); (ii) improvement of implementation oversight (empowerment of the Project Steering Committee); and (iii) realignment of activities within project components to better match them with current needs and priorities. The last ISR dated December 4, 2012 recommended as key action a review of the result framework to assess the extent to which the indicators remain valid, and agreement on a detailed plan to put the project back on track and consider alternatives, including the restructuring of the project if the procurement performance improves. The present ISR should be read in this context. It reports on progress of remedial measures taken by the government and how they have impacted implementation progress. The ISR covers the period since December 2012 during which two supervision missions visited the project. The first one during January 21-31, 2013, and the second one during May 22- June 1, 2013. Aide Memoires for both missions are attached to this ISR as supporting documentation. The two missions have observed that project implementation progress improved significantly over the period. Major procurement items have moved and commitments have increased. Based on the current procurement and expenditure projections, about 75% of the project funds will be fully committed by the initial closing date of December 31, 2013. The balance of funds will consist of the following: (i) activities no longer needed to be funded by the project; (ii) PMU operating costs; and (iii) contingencies. Estimated annual disbursement will reach the highest level during calendar year 2013 (about US$3.5 million). As part of the planning exercise to put the project back on track, the government has taken a critical look at the different components and has recommended that activities or contracts which have not advanced be canceled because of one or more of the following reasons: (i) they have not started and after reassessing them four years later, they are no longer a priority; (ii) they have been undertaken by the government, outside the funding of the project; and (iii) dropping them would have a marginal impact on the initial development objectives. After the pruning exercise, the project was left with a number of critical activities which are either under implementation progress or in advanced stage of procurement. Furthermore, the government committed to a detailed action plan to move all remaining activities to contract stage by end September 2013. These activities are long-lead high impact policy-related initiatives which are critical to achieving the project’s overall development objectives. Of all the components, it is the IRC component which has not achieved significant progress due to delays in launching the activities. IRC was expected to achieve by now the following results: (i) the initiation of at least four field audits on specific taxation issues and four large-scale full audits and preparation of the related reports; and (ii) the preparation of a report on observed loopholes in the mining and hydrocarbon tax laws to be considered for future changes in tax legislation. These are not yet achieved, however there are signs of progress. Audit notices have been issued to two major extractive multinationals in PNG, and one voluntary disclosure has been received to date. It was estimated that the consolidated revenue for these two audits is worth 71 million Kina. Audits have commenced in August 2013; IRC hopes that the Bank will extend the component by one year, which provides time to explore other funding alternatives for a TA program which will scale up the component and provide long term support for the audit initiative. RC is currently preparing a proposal for Bank support through a new IDA credit to continue the implementation of its audit and capacity building programs. Public Disclosure Copy Locations Country First Administrative Division Location Planned Actual Pap. New Guinea Not Entered Independent State of Papua New Guinea Pap. New Guinea Bougainville Bougainville Results Project Development Objective Indicators Page 2 of 5 The World Bank Report No: ISR11621 Indicator Name Core Unit of Measure Baseline Current End Target Increased Tax Assessments from IRC audits Text Value 0 The team comprising sixteen US24 million dollars officers has started the audit Public Disclosure Copy of two large resource corporations, netting PNGK 57 million (about US $28million) in payments for tax shortfalls Date 26-Jun-2009 12-Aug-2013 31-Dec-2013 Comments In addition to Tax audit The number of audits started adviser, IRC has set up two was expected to increase audit teams to undertake from 2 at the beginning of the technical training and audit project to 8 by the closing capacity building in profiling date. and risk assessment for mining and petroleum companies in preparation of two field audits. Mining community representatives participate Text Value 0 6 6 in preparation of Local Level Mining Date 26-Jun-2009 12-Aug-2012 31-Dec-2013 Community Development Plans Comments Data to be re-confirmed MRA provides mining ahead of next mission in communities with Benefit October 2013. Streams Reports and discusses them with both community members and companies at miningsites Number of community groups participating in Text Value 0 Data to be reconfirmed ahead 3 at each mine site community planning of next mission in october 2013 Date 26-Jun-2009 12-Aug-2012 31-Dec-2013 Comments Data to be collected and The priorities of women and provided ahead of next youth are reflected in more Public Disclosure Copy mission in October 2013 Local Level Mining Community Development Plans Number of ASM miners using mercury Text Value 0 1600 180 management or zero mercury technologies Date 26-Jun-2009 12-Aug-2013 31-Dec-2013 Comments Data to re-confirmed ahead of next mission in October 2013 Intermediate Results Indicators Page 3 of 5 The World Bank Report No: ISR11621 Indicator Name Core Unit of Measure Baseline Current End Target Exploration and Mining license processing time Text Value 300 days Data to re-confirmed ahead 120 days is reduced of next mission in October Public Disclosure Copy 2013 Date 26-Jun-2009 12-Aug-2013 31-Dec-2013 Comments Data to be reviewed ahead of next mission in October 2013 Number of IRC tax audits conducted Text Value 2 4 6 Date 26-Jun-2009 12-Aug-2013 31-Dec-2013 Comments two audit teams already established and operational. New mining sector policies developed, Text Value 0 2 3 including mine closure, offshore mining and Date 26-Jun-2009 12-Aug-2013 31-Dec-2013 mining safety Comments Consultants selected and policies under development New mining legislation developed and adopted Text Value 0 1 3 Date 26-Jun-2009 12-Aug-2013 31-Dec-2013 Comments Revision of mining act and mines safety act still pending. New mining M&E framework developed and Text Value Developed 0 Adopted by 0 Developed 1 Adopted by adopted mines 0 mines 6 Date 26-Jun-2009 12-Aug-2013 31-Dec-2013 Comments M&E framework for Fully functioning audit teams measuring social outcomes is under preparation Number of community plans reflecting priotities Text Value 0 6 6 opf women and youth Date 26-Jun-2009 12-Aug-2013 31-Dec-2013 Comments Data to be re-confirmed ahead of next mission in Public Disclosure Copy October 2013 Number of communities where MRA provides Text Value 0 0 6 reports on benefits streams and discusses Date 26-Jun-2009 12-Aug-2013 31-Dec-2013 these with communities Comments This is part of MRA's plan for the remainder of the project. To be verified during next mission in October 2013. Data on Financial Performance (as of 18-Jul-2013) Page 4 of 5 The World Bank Report No: ISR11621 Financial Agreement(s) Key Dates Project Ln/Cr/Tf Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P102396 IDA-44910 Effective 26-Jun-2008 19-Feb-2009 03-Aug-2009 31-Dec-2013 31-Dec-2013 Public Disclosure Copy Disbursements (in Millions) Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P102396 IDA-44910 Effective XDR 10.40 10.40 0.00 4.20 6.20 40.00 Disbursement Graph Key Decisions Regarding Implementation Bank Management to make a decision on project restructuring and partial extension of credit closing date for one year. Public Disclosure Copy Restructuring History There has been no restructuring to date. Related Projects There are no related projects. Page 5 of 5