The World Bank NATIONAL WATER RESOURCES MANAGEMENT PROJECT - PHASE 1 (P144336) REPORT NO.: RES37514 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF NATIONAL WATER RESOURCES MANAGEMENT PROJECT - PHASE 1 APPROVED ON APRIL 4, 2014 TO KYRGYZ REPUBLIC WATER EUROPE AND CENTRAL ASIA Regional Vice President: Cyril E Muller Country Director: Lilia Burunciuc Senior Global Practice Director: Jennifer J. Sara Practice Manager/Manager: David Michaud Task Team Leader: Pieter David Meerbach, Abdulhamid Azad The World Bank NATIONAL WATER RESOURCES MANAGEMENT PROJECT - PHASE 1 (P144336) I. BASIC DATA Product Information Project ID Financing Instrument P144336 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 04-Apr-2014 30-Jun-2019 Organizations Borrower Responsible Agency KYRGYZ REPUBLIC Department of Water Resources Project Development Objective (PDO) Original PDO The project development objective of the NWRMP-1 is to improve water resources management capability and irrigation service delivery for the benefit of water users. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-16315 17-Apr-2014 17-Apr-2014 29-Apr-2015 30-Jun-2019 7.75 7.75 0 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES The World Bank NATIONAL WATER RESOURCES MANAGEMENT PROJECT - PHASE 1 (P144336) This Restructuring Paper outlines a proposed Level-2 restructuring of the Kyrgyz Republic – National Water Resources Management Project – Phase 1 (a Recipient-Executed Trust Fund, RETF) for the extension of the project closing date from June 30, 2019 to August 31, 2019, bringing the cumulative extension period to 26 months. The extension of the project closing date is required to finalize the appraisal and negotiations of a proposed Additional Financing (AF) for the project, financed by the Swiss Agency for Development and Cooperation (SDC) . The proposed extension would reduce the grace period for submission of withdrawal applications, from four months to two months, and therefore would not require an amendment to the Administration Agreement between the World Bank and SDC. A formal request from the Ministry of Finance for the extension of the project closing date was received on June 4, 2019. The NWRMP-1 is financed by SDC and administered by the World Bank, and was originally approved as the first phase of a series of projects, for which financing of a second phase had been earmarked by SDC. SDC has confirmed its intent to finance the second phase through an Additional Financing, which is scheduled to be appraised by end June 2019. The Administration Agreement was signed on November 29, 2013, covering the US$ 7.75 million RETF for the NWRMP-1, and two Bank-executed Trust Funds to cover managing unit costs and implementation support costs. The NWRMP-1 was approved by the Bank’s Regional Vice President (RVP) in April 2014, the Grant Agreement was signed on August 29, 2014 and the project became effective on April 29, 2015, with a project closing date of June 30, 2017. The project underwent three restructurings for extension of the closing date: (i) the first restructuring in June 2017, extended the closing date to June 2018 to account for effectiveness delays; (ii) the second restructuring in June 2018, extended the closing date to December 2018 to allow for full disbursement and completion of project activities; and (iii) the last restructuring in December 2018, extended the closing date to June 30, 2019 and the end disbursement date to December 2019, to allow for preparation of the Additional Financing. The Project Development Objective (PDO) of the NWRMP-1 is to improve water resources management capability and irrigation service delivery for the benefit of water users. The NWRMP-1 is implemented by a Project Implementation Unit (PIU) under the Department for Water Resources and Land Improvement (DWRLI) and has four components, financing mostly technical assistance for: (i) Strengthening national water management capacity, including establishment of a Water Information System (WIS); (ii) Improving irrigation service delivery to Water Users Associations (WUAs); (iii) Improving irrigation management by Water Users Associations; and (iv) Project management. The project is implemented nationwide, covering all river basins, government-run off-farm irrigation systems, and systems managed by Federations of and individual Water User Associations (WUA), with localized initiatives to test and develop specific processes and procedures. With 100% of the funds disbursed to the designated account, and around US$ 150,000 remaining uncommitted in the PIU account, the project implementation is on schedule to substantially meet the PDO by the current closing date of June 30, 2019, whilst funds remain available to cover PIU costs and audits for the 2nd half of 2019. Key indicators are: (i) DWRLI performs functions of State Water Administration (SWA) as measured by a separate division for water resource management (WRM) using the WIS for WRM planning; (ii) Irrigation and Drainage Management (IDM) division adopting revised procedures for management, operation and maintenance (MOM); (iii) WUAs supplied with adequate volumes of water by IDM division (for six pilot schemes); (iv) WUAs providing satisfactory levels of service to water users (for rehabilitated WUAs); and (v) Area with improved irrigation and drainage services. Except for the full preparation of the AF, all activities envisaged under the third extension have been substantially completed, and the project is rated Moderately Satisfactory (MS) for PDO and implementation progress. Under Component 1, Strengthening national water management capacity, the hardware, software and databases of the WIS have been fully installed and populated, the system passports have been included, and river The World Bank NATIONAL WATER RESOURCES MANAGEMENT PROJECT - PHASE 1 (P144336) basin management plans (RBMPs) have been prepared by the newly established River Basin Councils (RBCs) for all five river basins. Under Component 2, Improving Irrigation Service Delivery to WUAs, the IDM division adopted improved procedures for MOM on six pilot irrigation schemes, prepared joint MOM plans with all stakeholders in the schemes, and increased both the budget as well as improved the water delivery, so the WUAs supplied with adequate volumes of water by IDM division has increased. Under Component 3, Improving irrigation management by WUAs, WUAs have improved their service provisions, as measured by the percentage of water users responding in surveys that they are satisfied with services provided by the WUA. The overall state of the WUAs has significantly improved. There are now 486 registered WUAs, of which 448 WUAs are functioning, managing 707,398 ha (69% of total irrigable area). There are 267,430 WUA members, of which 10% are women, and the Irrigation Service Fee (ISF) has increased from KGS 272/ha to KGS 800/ha, with collection rates of 85%. The MS rating is associated with partial achievement of the first indicator, since the DWRLI has not yet fully taken up the role of the State Water Administration and has not create the separate division for WRM. This division is now envisaged for the first year of the proposed AF. Preparation of the AF is at an advanced stage and is done in close consultation with SDC and the European Commission (EC). The AF will finance further sector reforms and will inform a proposed budget support from the EC, which would be tied to progress made in the reform and strengthening of the water sector. Preparing the AF took longer than expected, mostly due to extensive round-table consultations on the water sector which were conducted with all the main institutional stakeholders under the auspices of the office of the Vice Prime Minister. Since as a result of these consultations, government has now made substantial progress in defining the core elements of sector development, the task team was given approval to proceed with appraisal and negotiations of the AF during a Decision Meeting on June 17, 2019. Most notably, on May 14, 2019, the National Water Council, chaired by the Prime Minister, substantially endorsed a revised Roadmap for the development of the sector, and approved a plan to establish one single designated government agency for water resources management. It is expected that the negotiated package for the AF will be submitted for RVP approval in the first half of August 2019. The AF will be covered through a revised Administration Agreement and Supplemental Agreement with SDC, which will cover the AF through a RETF, as well as a BETF to cover World Bank costs associated with implementation support and analytical work. As part of the proposed AF, the NWRMP would be restructured from a series-of-projects with two phases to one project with an additional financing, since: (i) the PDO and implementation arrangements are not materially changed and the core project activities remain largely the same; (ii) overall implementation period is shorter than 10 years; (iii) processing a new stand-alone project would require excessive resources and time both on the side of the Bank, SDC and the government in relation to the available funding; and (iv) AF will allow for a smooth transition between the original project and the next AF phase. The auditors issued unqualified opinions in the latest audit reports for 2018, and the audits and the financial management arrangements for the project continue to be found satisfactory by the World Bank. There are no unresolved safeguards issues under the NWRMP-1. The NWRMP-1 closing date needs to be extended by two months from June 30, 2019 to August 31, 2019 to enable finalization of the appraisal and negotiation of the AF. The original project will be further extended to the AF closing date of December 31, 2022 upon negotiation of the AF, and approval and signing of the Grant Agreement. WFACs has cleared the reduction of the grace period for disbursements by two months to October 31, 2019 to allow extending the project closing without amending the Administration Agreement. There are sufficient funds available under the RETF for project extension, and under the existing BETFs for implementation support and management unit costs until December 31, 2019. The World Bank NATIONAL WATER RESOURCES MANAGEMENT PROJECT - PHASE 1 (P144336) II. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications 30-Jun-2018, 31-Dec- TF-16315 Effective 30-Jun-2017 31-Aug-2019 31-Oct-2019 2018, 30-Jun-2019