The World Bankdocuments.worldbank.org/curated/en/741541579316456847/...HRP Housing Reconstruction Program IPF Investment Project Financing IRR Internal Rate of Return IUFR Interim

Document of

The World Bank

FOR OFFICIAL USE ONLY Report No: PAD3323

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROJECT PAPER

ON A

PROPOSED ADDITIONAL CREDIT

IN THE AMOUNT OF (SDR 145 MILLION) (US$ 200 MILLION EQUIVALENT)

TO

NEPAL

FOR

SECOND ADDITIONAL FINANCING EARTHQUAKE HOUSING RECONSTRUCTION PROJECT

December 19, 2019

Urban, Disaster Risk Management, Resilience and Land Global Practice

South Asia Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective October 31, 2019)

Currency Unit = NPR

NPR 110 = US$1

US$ 1.37939 = SDR 1

FISCAL YEAR July 16 – July 15

ABBREVIATIONS AND ACRONYMS

AF Additional Financing

BCR Benefit‐Cost Ratio

Cat‐DDO Catastrophe Deferred Draw Down Option

CERC Contingent Emergency Response Component

CLPIU Central‐Level Project Implementation Unit

CPF Country Partnership Framework

CPS Country Partnership Strategy

CSEB Compressed Stabilized Earth Brick

DA Designated Account

DLPIU District‐level Project Implementation Unit

DPC Development Policy Credit

DRM Disaster Risk Management

DRRM Disaster Risk Reduction and Management

DTCO District Treasury Controller’s Office

EA Economic Analysis

EHDC Earthquake Housing Damage Characteristics

EHRP Earthquake Housing Reconstruction Project

ESMF Environment and Social Management Framework

ESMP Environment and Social Management Plan

FCGO Financial Comptroller General’s Office

FM Financial Management

FMIS Financial Management Information System

GDP Gross Domestic Product

GESI Gender Equality and Social Inclusion

GLOF Glacial Lake Outburst Flood

GoN Government of Nepal

GRM Grievance Redressal Mechanism

GRS Grievance Redressal System

HRP Housing Reconstruction Program

IPF Investment Project Financing

IRR Internal Rate of Return

IUFR Interim Unaudited Financial Report

LMBIS Line Ministry Budget Information System

MDP Mandatory Direct Payment

MDTF Multi‐Donor Trust Fund

MIS Management Information System

MRT Mandatory Rules of Thumb

NBC Nepal Building Code

NLSS Nepal Living Standards Survey

NPV Net Present Value

NRA National Reconstruction Authority

NRB Nepal Rastra Bank

OAG Office of the Auditor General

OJT On‐the Job Training

OP Operational Policy

PDO Project Development Objective

PIU Project Implementation Unit

PMU Project Management Unit

PPSD Project Procurement Strategy for Development

POM Project Operations Manual

SMS Short Messaging Service

STA Socio‐technical Assistance

TA Technical Assistance

TABUCS Transaction Accounting and Budget Control System

TPMA Third Party Monitoring Agent

USAID United States Agency for International Development

WB World Bank

Regional Vice President: Hartwig Schafer

Country Director: Idah Z. Pswarayi‐Riddihough

Regional Director: John Roome

Global Practice Director: Sameh Wahba

Country Manager: Faris H. Hadad‐Zervos

Practice Manager: Christoph Pusch

Task Team Leader(s): Kamran Akbar, Hemang D. Karelia

Nepal

Second Additional Financing Earthquake Housing Reconstruction Project

TABLE OF CONTENTS I. BACKGROUND .................................................................................................................. 1

II. DESCRIPTION OF ADDITIONAL FINANCING ....................................................................... 9

III. KEY RISKS ....................................................................................................................... 10

IV. APPRAISAL SUMMARY ................................................................................................... 11

V. WORLD BANK GRIEVANCE REDRESS ............................................................................... 12

VI SUMMARY TABLE OF CHANGES ...................................................................................... 14

VII DETAILED CHANGE(S) ..................................................................................................... 14

VIII. RESULTS FRAMEWORK AND MONITORING .................................................................... 17

ANNEX 1: ECONOMIC ANALYSIS ............................................................................................ 26

ANNEX‐2: PROCUREMENT ARRANGEMENTS ......................................................................... 29

ANNEX‐3: FINANCIAL MANAGEMENT .................................................................................... 30

ANNEX 4: TARGETED SUPPORT TOWARDS IMPROVING GENDER OUTCOMES ....................... 35

i

BASIC INFORMATION – PARENT (Earthquake Housing Reconstruction Project ‐ P155969)

Country Product Line Team Leader(s)

Nepal IBRD/IDA Kamran Akbar

Project ID Financing Instrument Resp CC Req CC Practice Area (Lead)

P155969 Investment Project Financing

SSACD (9364) SACNP (7029) Urban, Resilience and Land

Implementing Agency: National Reconstruction Authority ADD FIN TBL1

Is this a regionally tagged project?

No

Bank/IFC Collaboration

No

Approval Date Closing Date Expected Guarantee Expiration Date

Original Environmental Assessment Category

Current EA Category

29‐Jun‐2015 30‐Jun‐2023 Partial Assessment (B) Partial Assessment (B)

Financing & Implementation Modalities Parent

[ ] Multiphase Programmatic Approach [MPA] [✓] Contingent Emergency Response Component (CERC)

[ ] Series of Projects (SOP) [ ] Fragile State(s)

[ ] Disbursement‐Linked Indicators (DLIs) [ ] Small State(s)

[ ] Financial Intermediaries (FI) [ ] Fragile within a Non‐fragile Country

[ ] Project‐Based Guarantee [ ] Conflict

[ ] Deferred Drawdown [✓] Responding to Natural or Man‐made disaster

[ ] Alternate Procurement Arrangements (APA)

Development Objective(s) The Project Development Objective (PDO) is to restore affected houses with multi‐hazard resistant core housing units in target areas and to enhance the government's ability to improve long‐term disaster resilience.

ii

Ratings (from Parent ISR) RATING_DRAFT_YES

Implementation

07‐Dec‐2017 15‐Jun‐2018 19‐Dec‐2018 27‐Jun‐2019 27‐Sep‐2019

Progress towards

achievement of

PDO MS

MS

MS

MS

MS

Overall

Implementation

Progress (IP) MS

MS

MS

MS

MS

Overall Safeguards

Rating MS

MS

MS

MS

MS

Overall Risk S

S

S

S

S

BASIC INFORMATION – ADDITIONAL FINANCING (Second Additional Financing Earthquake Housing Reconstruction Project ‐ P170565) ADDFIN_TABLE

Project ID Project Name Additional Financing Type Urgent Need or Capacity Constraints

P170565 Second Additional Financing Earthquake Housing Reconstruction Project

Scale Up Yes

Financing instrument Product line Approval Date

Investment Project Financing

IBRD/IDA 22‐Jan‐2020

Projected Date of Full Disbursement

Bank/IFC Collaboration

30‐Jun‐2023 No

Is this a regionally tagged project?

No

Financing & Implementation Modalities Child

iii

[ ] Series of Projects (SOP) [ ] Fragile State(s)

[ ] Disbursement‐Linked Indicators (DLIs) [ ] Small State(s)

[ ] Financial Intermediaries (FI) [ ] Fragile within a Non‐fragile Country

[ ] Project‐Based Guarantee [ ] Conflict

[ ] Deferred Drawdown [✓] Responding to Natural or Man‐made disaster

[ ] Alternate Procurement Arrangements (APA)

[ ] Contingent Emergency Response Component (CERC)

Disbursement Summary (from Parent ISR)

Source of Funds Net

Commitments Total Disbursed Remaining Balance Disbursed

IBRD

%

IDA 500.00 385.72 112.71

77 %

Grants

%

PROJECT FINANCING DATA – ADDITIONAL FINANCING (Second Additional Financing Earthquake Housing Reconstruction Project ‐ P170565)

PROJECT FINANCING DATA (US$, Millions)

SUMMARY‐NewFin1

SUMMARY (Total Financing)

Current Financing Proposed Additional

Financing Total Proposed

Financing

Total Project Cost 500.00 239.40 739.40

Total Financing 500.00 239.40 739.40

of which IBRD/IDA 500.00 200.00 700.00

Financing Gap 0.00 0.00 0.00

DETAILSNewFinEnh1‐ Additional Financing

World Bank Group Financing

International Development Association (IDA) 200.00

IDA Credit 200.00

iv

Non‐World Bank Group Financing

Counterpart Funding 39.40

Borrower/Recipient 39.40

IDA Resources (in US$, Millions)

Credit Amount Grant Amount Guarantee Amount Total Amount

Nepal 200.00 0.00 0.00 200.00

National PBA 200.00 0.00 0.00 200.00

Total 200.00 0.00 0.00 200.00

COMPLIANCE

Policy

Does the project depart from the CPF in content or in other significant respects?

[ ] Yes [ ✔ ] No

Does the project require any other Policy waiver(s)?

[ ] Yes [ ✔ ] No INSTITUTIONAL DATA

Practice Area (Lead)

Urban, Resilience and Land

Contributing Practice Areas

Climate Change and Disaster Screening

This operation has been screened for short and long‐term climate change and disaster risks

PROJECT TEAM

Bank Staff

Name Role Specialization Unit

Kamran Akbar Team Leader (ADM Responsible)

SSACD

v

Hemang D. Karelia Team Leader Disaster Risk Management SSACD

Shambhu Prasad Uprety Procurement Specialist (ADM Responsible)

Procurement ESARU

Chandra Kishor Mishra Procurement Specialist ESARU

Franck Bessette Financial Management Specialist (ADM Responsible)

Financial Management ESAG2

Caroline Mary Sage Social Specialist (ADM Responsible)

Social Safegaurds SSASO

Drona Raj Ghimire Environmental Specialist (ADM Responsible)

SSAE1

Avani Dixit Team Member Disaster Risk Management SSACD

Bigyan B. Pradhan Team Member Operations SACNP

Neena Shrestha Team Member ESARU

Ramesh Raj Bista Team Member ESARU

Rekha Shreesh Team Member Social Development SSASO

Rupa Shrestha Team Member SACNP

Sujan Bahadur Thing Team Member SSACD

Sulochana Nepali Team Member Disaster Risk Management Analyst

SSACD

Extended Team

Name Title Organization Location

The World Bank Second Additional Financing Earthquake Housing Reconstruction Project (P170565)

Page 1 of 38

I. BACKGROUND

A. Introduction

1. This Project Paper seeks approval of the Executive Directors to provide an additional credit in the amount of SDR 145 million (US$200 million equivalent) to the Nepal Earthquake Housing Reconstruction Project (EHRP; Project ID: P155969; Credit Number: 5706‐NP and 6164‐NP; US$500 million equivalent). The EHRP and the Second Additional Financing contribute to the Government of Nepal’s (GoN) umbrella Housing Reconstruction Program (HRP) which aims to rebuild earthquake‐resistant core housing units by providing housing grants – divided into three tranches – to eligible beneficiaries who have enrolled in the program. The proposed second additional financing (AF2) will scale up EHRP’s support to the Government’s HRP by financing reconstruction of an additional 86,680 houses in the 32 districts affected by the 2015 earthquakes. The Project Paper does not propose any major changes to the design and activities supported by the project.

2. The original EHRP (US$200 million, approved on June 29, 2015) supports resilient reconstruction of approximately 55,000 houses in the districts most affected by the 2015 earthquakes. An additional IDA credit of US$300 million was approved on December 15, 2017 to scale up the EHRP and help bridge the financing gap in the GoN’s HRP by supporting 96,000 additional households under the project. The EHRP adopts an owner‐driven housing reconstruction approach that promotes earthquake‐resistant building techniques and materials and aims at improving long‐term resilience through a culture of safer and sustainable housing and settlements. The project also finances (a) social, environmental and technical support mechanisms for beneficiary households; (b) training of artisans and beneficiaries; (c) communication and outreach; (d) supervision and certification of compliance with construction guidelines; (e) implementation of environmental and social management framework including identified safeguard mitigation measures; (f) development of grievance redress mechanism; and (g) other enabling activities.


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3. Eligible beneficiaries receive grants of NPR 300,000 (approximately US$2,7301) each for reconstruction of their houses in compliance with approved reconstruction guidelines. Housing grants are provided in three tranches:

a. First tranche of NPR 50,000 is paid upon signing of the Participation Agreement by an eligible beneficiary; b. Second tranche of NPR 150,000 is paid once it is established that the plinth has been constructed in

accordance with the reconstruction guidelines approved by the National Reconstruction Authority (NRA); and.

c. Third tranche of NPR 100,000 is paid after inspection at roof‐band level upon finding it to be compliant with the reconstruction guidelines. There is a provision of ascertaining completion of house reconstruction that serves as output verification.

4. In view of the large scope of the housing reconstruction program, a World Bank‐administered Multi‐Donor Trust Fund (MDTF)2 has been established to facilitate the participation of development partners interested in contributing to the housing reconstruction program. This MDTF, through its $10 million Recipient‐executed grant, finances housing grants to approximately 3,200 eligible beneficiaries. Bank‐executed grants of the MDTF support the implementation of the EHRP, provision of technical assistance to NRA, vulnerable population and economic recovery assistance to women and Persons with Disabilities and will continue supporting EHRP’s expanded scope with the proposed AF2. The MDTF has received commitments from the United States Agency for International Development (USAID), United Kingdom’s Department for International Development, Switzerland, and Canada, totaling to US$34.54 million to date. Japan International Cooperation Agency is providing parallel financing of about US$100 million and the Government of India is providing US$100 million grant and US$50 million concessional credit to support GoN’s housing reconstruction program.

5. Country Context. Nepal is one of the world’s most disaster and climate vulnerable countries. An estimated 80 percent of the geographic area in Nepal is at risk from multiple hazards, with the vast majority of the country’s population, inhabiting high risk areas. Its per capita income is estimated at USD 730 and about 25 percent of its population lives below the poverty line. In last 50 years (from 1971 to 2015), disasters claimed lives of 40,000 people, injured more than 75,000 and affected 3 million people. The resilient development of Nepal is seriously hindered by these disasters and climate risks. The impact of the 2015 Gorkha earthquake and its major aftershocks are estimated at 35 percent of GDP with recovery needs of about USD 7 billion. Every year, intense monsoon rainfall causes floods in many parts of the country. The country was severely affected by monsoon floods in year 2017 that impacted more than 30 districts. So far3, this year’s monsoon floods, landslides and heavy rainfall have affected 67 districts, causing loss of 113 lives, disappearance of 34 persons and damage to 67,413 households4. In some cases, debris from landslides blocks rivers and when released suddenly, causes disastrous inundation downstream. The increased instability and intensity of geological and climate events on top of the fragile landscape is worsening landslide risks. Nepal is also highly vulnerable to Glacial Lake outburst floods (GLOFs). Glacier thinning and retreat in the Himalayas has resulted in the inherently unstable process of formation of new glacial lakes and the enlargement of existing ones. Recent surveys indicate that many glacial lakes in the country are expanding at a considerable rate, increasing the risk of sudden outbursts. For Nepal to continue to make progress on its key development indicators, it is critical to invest in resilient recovery and reconstruction post‐earthquakes to avoid creating new risks and strengthen disaster preparedness and response capacity to manage the disaster risks.

1 Exchange rate of US$1=NPR 110 has been used. 2 The MDTF includes $10 million in Recipient‐executed grant providing housing grants to beneficiaries and other Bank‐executed grants for providing technical assistance and advisory support to NRA on implementing housing reconstruction program. 3 As of July 26, 2019 4 National Emergency Operation Centre, Ministry of Home Affairs


Page 3 of 38

6. Strategic Context of Disaster Risk Management Sector: Under the provisions of the new constitution, Disaster Risk Management (DRM) is on the list of concurrent subjects, thus all the tiers of government share authority and responsibility in this regard. In October 2017, the Disaster Risk Reduction and Management Act (DRRM Act) was enacted to streamline the disaster risk management, relief and response related processes across all line Ministries. The Act provides a platform to address climate and disaster risk reduction in a systematic manner and is the foundation of the GoN’s DRM program. It mandates the establishment of a National Disaster Risk Reduction and Management Authority and Disaster Committees at the Federal, Provincial, District and Municipal levels. The Act is consistent with the Sendai Framework 2015‐2030 and its predecessor the Hyogo Framework for Action 2005‐2015 (HFA), and sets in motion the ongoing GoN’s DRM Program that aims to reduce climate and disaster risk and loss of life, livelihoods and health. The activities planned under EHRP Component 2: Disaster Risk Management Systems will directly support some elements of GoN’s DRM program and will also complement the DRM Development Policy Credit (DPC) Catastrophe Deferred Draw‐down Option (Cat‐DDO) that is under preparation.

7. Institutional Context. Following the devasting earthquakes occurred in April 25, 2015 and May 12, 2015, Government of Nepal (GoN) established National Reconstruction Authority (NRA) in December 2015 to lead and manage recovery, rehabilitation and reconstruction of affected infrastructures. The mandates of NRA are to: reconstruct, retrofit and restore damaged infrastructure and houses in disaster resilient manner following the Build Back Better principle and with the overall aim of building resilient communities; develop opportunities for economic growth and livelihood; undertake research and studies on the science of earthquakes and their impact; and manage relocation and resettlement of vulnerable and displaced communities. The NRA’s roles and responsibilities include: identifying priorities for reconstruction based on damage assessments; allocating reconstruction funds based on agreed priorities; approve plan and budget for the allocated funds; relocation and rehabilitation; collaborating with key stakeholders; building implementation capacity; developing and implementing programs related to reconstruction and rehabilitation of infrastructures related to education, health, agriculture, cultural heritage and industry; monitoring and quality control; and ensuring accountability and transparency. The Project and proposed additional financing will complement these efforts and lay the groundwork for a longer‐term program to strengthen disaster and climate resilience in Nepal.

8. The project aligns with the objective of the 2014–2018 Nepal Country Partnership Strategy (CPS) 5 as well as the 2019–2023 Nepal Country Partnership Framework (CPF) 6 to address natural disaster risks in a cross‐cutting manner. The CPS and the CPF recognize Nepal’s high vulnerability to climate change and disaster risks, particularly the high earthquake risks, and commits to continue mainstreaming contingent emergency response components across its portfolio to allow the GoN to request the reallocation of project funds to support response and reconstruction in the case of an adverse natural event. The project with its focus on disaster‐resistant reconstruction, strengthening of the DRM systems, and inclusion of the contingent emergency response component directly contributes to achieving the objectives of the CPS and the CPF objective 3.3 for increasing resilience to natural disasters and climate change. The project is also consistent with the World Bank’s twin goals of ending extreme poverty and promoting shared prosperity and fully aligns with the GoN’s post‐earthquake Housing Reconstruction Policy. The project objectives also align with the Sendai Framework for Disaster Risk Reduction (2015–2030) priority 4 that calls for enhancing disaster preparedness for effective response and to ‘Build Back Better’ in recovery, rehabilitation, and reconstruction.

B. Economic and Political Context

5 The Project is consistent with the World Bank Group Country Partnership Strategy FY14‐18 discussed by the Board on May 1, 2014 (Report 83148‐NP) 6 The Project is consistent with the World Bank Group Country Partnership Framework FY19‐23 discussed by the Board on July 10, 2018 (Report 121029‐NP)


Page 4 of 38

9. Over the past decade, Nepal’s economy has performed reasonably well. Real gross domestic product (GDP) growth averaged 4.9 percent (at market prices) over FY2010‐FY2019. Although declining as a share of GDP, agriculture continues to play a significant role, contributing 1.6 percentage points to growth in FY2019. Over the same period, the service sector contributed 3.9 percentage points and industry 1.3 percentage points. Industry has grown more slowly and over the past decade. Similarly, exports continue to struggle, while imports are fueled by remittances, federalism, and housing construction/reconstruction. Remittances have remained stable, with its share as a percentage of GDP averaging 25 percent, supported by an increased transfer of funds through formal channels in recent years, and a depreciation of the Nepali Rupee against the US dollar. Inflation has been in single digits for most of the past decade, with the peg of the Nepalese rupee to the Indian rupee providing a nominal anchor. Fiscal balances remained sustainable owing to strong revenue growth and modest spending. Also, the federal government is now sharing revenue and transferring grants to provincial and local governments, as part of the recent reforms linked to federalism. The projected poverty headcount ratio (at the US$1.90 per person per day international poverty line) was 9.3 percent in 2018, down from 15 percent in 2010. At a higher line of US$3.20 a day for Nepal, 41 percent of the population was poor in 2018, a 10 percentage‐point decrease from 2010. Despite the declining poverty trend, vulnerability remains high in Nepal. Almost 10 million people or close to 32 percent of the population are estimated to live between US$1.90 and US$3.20 a day (2018). Climate related shocks such as floods and earthquakes, further increase vulnerability.

10. Data released by the Central Bureau of Statistics (consisting of a revision of the FY2018 growth rate coupled with the preliminary estimate for FY2019), show that growth has been strong. Good monsoons together with increased commercialization of agriculture, the availability of fertilizers and seeds, and irrigation facilities helped raise production of paddy, maize, and wheat to historic highs and increased the contribution of the agriculture sector to GDP growth from 0.9 percentage points in FY2018 to 1.6 percentage points in FY2019. As a result, GDP growth increased from 6.7 percent in FY2018 to an estimated 7.1 percent in FY2019. Government revenue growth was robust (17.7 percent) in FY2019 but only 90.5 percent of the revenue target was met mainly due to lower imports, resulting in lower trade taxes. Delays in the enactment of Federal, Provincial, and Local Civil Service Acts and in the establishment of provincial civil service commissions adversely impacted the hiring of new staff at the subnational level. These delays together with the lack of technical capacity of existing staff led to an underspending of the federal budget by 18.8 percent, with recurrent and capital spending standing at 83.2 and 75.9 percent of the budgeted target, respectively. There was also bunching of spending, with 14.4 percent of recurrent and 36.5 percent of capital spending occurring in the last month of the fiscal year. Federalism has also exacerbated the challenges linked to weak budget execution with significant underspending of provincial budgets, resulting in significant opening balances of 17 percent of FY2020 provincial budgets (equivalent to the provincial budget share for conditional transfers).

11. Given good agricultural production and the existing peg to the Indian Rupee, inflation in FY2019 (4.5 percent) remained below target (5.5 percent). Credit growth reached 19.3 percent, exceeding deposits growth, and led to a rise in the banking sector’s credit‐to‐core capital plus deposit ratio (which at 75.2 percent, remained just below the 80 percent regulatory limit). On the external side, the current account deficit remained high at 7.7 percent of GDP in FY2019, driven by a persistent trade deficit. The latter narrowed marginally from 37.5 percent to 37.1 percent of GDP as goods import growth slowed down, reflecting lower import demand for industrial supplies (such as cement clinker) and capital goods. The trade deficit has been financed mainly by remittances, as well as external concessional loans, and foreign reserves.

12. A new government, backed by an unprecedented majority in Parliament, which took office on February 15, 2018 has recently completed one and half years. This follows successful elections for all three tiers (local, state and federal) of the new state architecture defined by the 2015 constitution, marking a protracted‐but‐successful conclusion of a political transition that began with the signing of the Comprehensive Peace Agreement in November 2006. State governments largely mirror the coalition at the center. At the sub‐national level, funds, functions and functionaries hitherto managed by the central, district and village authorities are moving to the


Page 5 of 38

seven new provinces and 753 local governments for which new legislation, institutions and administrative procedures are being formalized as constitutionally prescribed. Meanwhile, the central level authority is being streamlined with a focus on national policies and oversight. This profound level of state restructuring is expected to result in improved outreach and service delivery in the medium term but is likely to take time before becoming fully operational.

C. Current Status of the Project

13. The EHRP is rated Moderately Satisfactory for implementation progress as well as for progress toward achieving the Project Development Objective (PDO). The PDO remains relevant given the extensive housing reconstruction needs and is achievable judging by the progress attained so far and demonstrated commitment shown by the GoN leadership. The EHRP and AF have already disbursed 77 percent of the total credit as of November 30, 2019. The EHRP is compliant with key legal covenants, including auditing and financial management (FM) reporting requirements, though the last year’s audit report was submitted with a delay of three months. There has been satisfactory compliance on establishing a Project Management Unit (PMU) at the NRA and central and district‐level Project Implementation Units (DLPIUs). The Housing Reconstruction Program has adopted a robust system for identifying eligible beneficiaries, enrolling them into the program by signing Participation Agreements and ensuring the grant payments are transferred to the beneficiaries’ registered bank accounts upon satisfactory inspection at each stage of the multi‐hazard resistant house reconstruction.

14. Below is a summary of progress in the project components:

a. Component 1: Housing Reconstruction. Significant progress has been achieved under this component with accelerated disbursement of the second and third tranches of the housing grants based on satisfactory rate of compliance to safer reconstruction requirements. As of September 10, 2019, out of 680,587 beneficiaries enrolled under the GoN’s Housing Reconstruction Program in 14 most affected districts, 99 percent have received the first tranche, 81 percent have received the second tranche, and 68 percent have received the third tranche of the housing grant. While the inspection regime is fully established, the process of successful quality inspections and tranche disbursement gets delayed because of shortage of funds. The funding gap is also reflected in the lag between 1st and 2nd and 3rd tranches. The NRA has reported about 402,297 houses fully reconstructed under their program. Similar progress is observed in other 18 affected districts. Overall, about 481,056 houses in 32 affected districts are reported to be fully reconstructed under the Housing Reconstruction program. Under EHRP, approximately 151,000 completed houses will be covered upon meeting the output verification requirements and digital documentation of the Participation Agreements with beneficiaries, first and second inspection data, and proof of payment of housing grant tranches into beneficiaries’ bank accounts. To date, 77,789 houses have been booked under IDA credits with 40,000 additional houses slated to be booked by mid‐December 2019. The NRA has devoted additional resources to expedite output verifications and have them validated by an M&E firm as a Third‐Party Monitoring Agent.

b. Component 2: Disaster Risk Management Systems. The progress on this component remained slow initially with only 29 of 200 targeted government officials receiving training, and no technical studies for the Disaster Risk Management (DRM) were taken up. This was mainly due to the fact that the housing reconstruction remained top priority for the NRA, coupled with the fact that Nepal was in transition from unitary form of government to a federal structure, awaiting clarity on roles and responsibilities related to the DRM activities. The Mid‐term review of the original EHRP held from July 29 to August 10, 2018, agreed to carry out several activities under Component 2. This included a nationwide Structural Integrity Assessment (SIA) of social infrastructure (schools and health facilities), that will assist all three tiers of government in risk‐informed decision making in educational and health sector. The second activity agreed under this component is to build disaster risk management capacity of and transfer housing reconstruction data and systems to local governments. These activities were included in the Project through a Project Restructuring in early‐2019. While the action plan for transferring reconstruction data and systems along


Page 6 of 38

with capacity building measures has been finalized after conducting a district‐level needs assessment, the implementation of SIA has delayed. These activities aim to enhance the Government’s ability to improve long‐term disaster resilience.

15. Overall, the EHRP and the EHRP MDTF have helped set up a sound implementation framework and technical regime for the GoN’s umbrella HRP with the following contributions:

a. A comprehensive census of the earthquake‐affected areas surveying over 800,000 households to collect housing damage and socioeconomic information to determine program eligibility;

b. A robust management information system and a multi‐tier grievance redressal system in place that has registered more than 200,000 grievances (primarily related to ineligibility to receive housing grants), with more than 98 percent cases addressed;

c. Around 2,500 engineers, sub‐engineers, and assistant sub‐engineers deployed in the project districts to facilitate reconstruction, of which 18 percent are women;

d. Mass awareness programs, technical trainings for masons and artisans, and communication campaigns for safer construction practices and Government‐approved design specifications;

e. House quality inspection regime to ensure earthquake‐resistant construction at several construction stages and guidelines for corrective (remedial) actions;

f. A streamlined fund flow with digital recordkeeping and direct payment of housing subsidy into the beneficiaries’ designated bank accounts; and

g. Strong coalition of major development partners toward safer housing reconstruction and pooled resources for providing continuous sociotechnical assistance to homeowners for construction.

16. The lessons learnt during the EHRP implementation, such as the need to sustain and expand socio‐technical assistance to vulnerable beneficiaries and engaging recently formed Local Governments into reconstruction have already been factored into the original Project through a restructuring and remain integral to the proposed AF2.

17. Climate change. A detailed climate and disaster risk screening has been carried out for the project. The effects of climate change and extremes have further aggravated the disaster vulnerability in Nepal. Notre Dame‐Global Adaptation Initiative (ND‐GAIN) matrix estimates that Nepal is on road to responding effectively to climate change, but the adaptation needs and urgency to act are greater. The projected change in flood risk hazard has remained static since 1995, implying that the country continues to face flood risks. Rapidly growing urban concentration coupled with geohazards and climate risks puts Nepal in a high‐risk position. The technical and financial support extended through the project is helping beneficiaries to reconstruct houses in nonhazardous locations, out of harm’s way. Due to its focus on reconstructing multi‐hazard resistant housing units and strengthening the DRM systems, the EHRP was assessed to have 81.5 percent (US$163 million) climate adaptation co‐benefit, and the first AF’s climate adaptation co‐benefits were estimated at 88.5 percent (US$265.6 million). Given the similar project design and higher share of the credit allocated to resilient housing construction, climate adaptation co‐benefit for the second AF is anticipated at 90 percent (US$180 million). The sociotechnical assistance and trainings provided to homeowners and artisans/masons for multi‐hazard resistant construction techniques will also help improve the construction quality in the longer term in targeted and neighboring areas. This will be an important co‐benefit toward building resilience to natural hazards.

18. Gender. As specified in the results framework, the project tracks the housing reconstruction progress of women‐headed households, which is estimated to be 26% of the total beneficiaries. In addition, out of total indirect beneficiaries of the project activities including awareness about resilient reconstruction, 50 percent are expected to be women. Beyond ensuring their participation, the project has been able to significantly contribute to improved outcomes for women in several domains. For example, the project has promoted financial literacy and inclusion for women. The EHRP’s condition of transferring housing grants directly into beneficiary bank accounts has facilitated opening of bank accounts for 100 percent of participating households, with 30 percent


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of the bank accounts belonging to women. The Government’s HRP also provides an additional grant of NPR 200,000 to households requiring relocation due to hazardous location, wherein NRA has enforced a mandatory policy provision of joint land entitlement by both husband and wife in such land purchases. So far, 2,157 beneficiaries have purchased land. This provision ensures joint ownership of not only land but also the reconstructed houses.

19. While not necessarily funded under IDA funds, the HRP program activities contribute significantly towards creating job opportunities for women in reconstruction and allied sectors. The GoN and I/NGOs encourage women’s participation in various trainings related to masonry, carpentry, electrician and plumbing, etc. Out of the recipients of these construction related trainings, 15 percent are women. A 2018 study7 conducted by a coalition of I/NGOs on women’s role in reconstruction indicates that the reconstruction has provided an opportunity for many women in terms of employment, training and increased confidence. Similarly, of the total number of engineers deployed in the field to provide technical assistance and carry‐out inspection of reconstructed houses, 18 percent are women, which is quite significant, as engineering has conventionally remained a male‐dominated discipline with about 12 percent of the licensed engineers being women8. Social mobilization, which is a key area of the reconstruction activities, is female dominated, with 80 percent of social mobilizers in rural areas being women. Still, significant gender gaps in skilled work within the construction sector persist. According to data from Nepal Living Standards Survey (NLSS) Wave 3 (2010/2011), 29 percent of male wage earners work in the construction sector, compared to only 5.6 percent of female wage earners. Female wage earners in the construction sector work fewer days than men (on average 62 versus 112 days, annually) and earn less annual income (Nepalese Rupees 7,800 versus 21,000). Although the number of women in engineering and technical jobs has increased during the implementation of this large‐scale reconstruction program, a downward trend is likely once the program concludes and associated jobs in public sector reduce. However, with increased awareness on the need for earthquake‐resistant design and construction, there remains a scope of increased private sector jobs where the women engineers and artisans, trained and experienced during the earthquake reconstruction, would have opportunities.

20. In view of the above, the proposed AF2 aims at providing targeted support to leverage and improve some of the gender‐specific outcomes in view of the gender gaps in employment in the construction and allied sectors. Under the proposed AF2, targeted support will be provided to leverage and improve gender outcomes through IDA financing. This includes: i) ensuring a share of employment in socio‐technical assistance. For expanding socio‐technical assistance, NRA is in the process of recruiting 250 social mobilizers and 988 mobile masons where the project will ensure that at least 10 percent9 mobile masons being employed are women, at equal pay scale of male masons, to narrow the gender and pay gap in employment in the reconstruction. The NRA has issued recruitment directives that emphasize the prioritization of employing women masons and confirm their equal pay; ii) providing tailored on‐the‐job skills development and vocational training to female staff and masons/artisans after their recruitment to improve their job prospects and earning potential and help close the gender pay gap.; and iii) ensuring a share of women elected officials and local government officials (250 out of 1,000 planned) in Disaster Risk Management and reconstruction orientation. A detailed summary of gender actions and expected outcomes is presented at Annex‐4.

21. Citizen engagement. Citizen engagement is central to the EHRP and the AFs because they follow an owner‐driven housing reconstruction approach. In addition to providing door‐to‐door socio‐technical assistance directly to the beneficiaries in earthquake‐affected areas for effective reconstruction, a robust multitier Grievance Redress Mechanism (GRM) developed for the EHRP will continue to be in use for the AF2. The GRM

7 Women in Reconstruction Research Report by Housing Recovery and Reconstruction Platform, May 2018 8 Source: Nepal Engineers’ Association (NEA) 9 This target is set based on consultations with NRA and Nepali context where participation of women in skilled masonry prior to earthquakes was very low. This target will be reviewed during implementation.


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has so far received more than 200,000 grievances with more than 98 percent grievances redressed as per NRA records, some of which have been addressed at the local level. The NRA also conducted an awareness campaign for program beneficiaries through Short Message Service (SMS) during May–August 2017 that reached more than 450,000 enrolled beneficiaries with regular messages to inform them about the housing reconstruction modalities and updates. This resulted in increased use of NRA’s toll‐free line by the beneficiaries for queries and feedback. Encouraged by the positive response from the dissemination of information through SMS, NRA is again sending critical information to beneficiaries through SMS. For example, an SMS campaign was conducted in July 2019 to inform beneficiaries on the requirement of third inspection. Other mass communication tools such as FM radio, social media, and television programs are also being widely used to disseminate reconstruction related information. The federal system of governance, recently introduced in the country, empowers citizens at the local level aiming at provision of services at doorsteps of the citizens. The planned mobilization of socio‐technical assistance teams at local government level will facilitate close engagement with the beneficiaries, who for various reasons, including vulnerability, have not yet been able to reconstruct their houses or have aborted the process in between.

D. Rationale for Additional Financing 22. The EHRP was originally designed to address the housing reconstruction needs of about 10 percent (total 55,000) of the total beneficiary households estimated after the earthquake in the 14 most impacted districts. During the subsequent beneficiary surveys and resurveys, the number of total enrolled beneficiaries surpassed 779,000 in 32 affected districts, widening the funding gap in the GoN’s umbrella housing reconstruction program to more than US$1.2 billion. In response to the GoN’s request for scale‐up, an additional IDA credit of US$300 million was approved in December 2017 to cover 96,000 additional household beneficiaries under the EHRP. Since the EHRP’s quality assurance, accountability and FM procedures apply to the whole umbrella HRP, this scale‐up has seamlessly expanded the scope of EHRP while narrowing the funding gap in HRP. Despite the resource pooling from Government sources and external assistance, the NRA estimates an outstanding funding gap of US$689 million in their HRP and has sought a second round of additional financing (AF) for EHRP with a share in counterpart financing. Given the advanced stage of reconstruction with more than 400,000 houses completed, 170,000 houses under construction, and another 100,000 houses yet to start reconstruction, there is an urgent need for the NRA to bridge the funding gap through this second additional financing (AF2) and avoid any delays in tranche payments to eligible beneficiaries in the process of reconstruction. The proposed AF2 will support hazard‐resistant reconstruction of an additional 86,680 of participating houses; the first tranche of the housing grant to these households (approximately US$39.40 million) will be financed by GoN as counterpart funding and the AF2 will finance the second and third tranches of the housing grants.

E. Situation of Urgent Need of Assistance or Capacity Constraints 23. The EHRP and the AF were prepared under situations of urgent need of assistance or capacity constraints (formerly OP 10.0 paragraph 12, currently applicable as “General Considerations Applicable to Paragraph 12 of Section III of the IPF Policy” ) in view of the massive impact of the 2015 earthquakes on Nepal, particularly in the rural districts with higher poverty rates and weaker service delivery and substantial support required for post‐earthquake recovery and reconstruction. The demands of the large‐scale multisector earthquake recovery have continued to strain the NRA’s management and implementation capacities and have led to lost opportunities in the recovery process. The large‐scale devastation caused by the 2017 and 2019 monsoon flooding and subsequent recovery process have broadened the capacity constraints among the implementing agencies. With the implementation of the 2015 constitution, Nepal has moved from unitary form of government to a federal structure. Considering Nepal’s high vulnerability and exposure to natural disasters, the Constitution has addressed the subject of DRM in several instances,10 and has devolved all aspects of DRM and climate change

10 Article 51(g)(4), 51(g)(9), and 267(4) as well as Articles 211 and 273 of the Constitution of Nepal.


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adaptation to all the levels of government.11 The GoN has also adopted a ‘Disaster Risk Reduction and Management Act’ in 2017. While the legislative reforms have taken place, the GoN is yet to fully establish provincial and local‐level institutions along with the approval of their respective structure, rules, and regulations. Though the NRA and the task team have initiated a number of activities under the current EHRP operations to build capacities of local governments, it is felt that the capacity constraints necessitate increased hands‐on support to all tiers of government. While Nepal’s transition to federal structure offers opportunities to decentralize recovery and reconstruction and make service delivery more effective and accountable, the risks of jurisdictional overlap among the new tiers of Government, and lack of clarity and coherence between policies and devolved powers is likely to remain high during the coming few years, especially in the DRM sector. The ambiguity regarding the roles and responsibilities between federal, provincial and local governments was evident during floods and ensuing landslides of 2019. Since the proposed project will identify the beneficiaries among the households that have already been enrolled, some of which have already started reconstruction, it will require 40 percent retroactive financing under the situations for urgent need and capacity constraints. Moreover, the US$689 million funding gap estimated by the GoN also suggests that second and third tranche payments to a large number of beneficiaries may get delayed, causing further debt burden on the beneficiaries who have completed the construction. This situation of urgent need warrants the use of condensed procedures available under “General Considerations Applicable to Paragraph 12 of Section III of the IPF Policy”. The financing agreement will address the triggering of paragraph 12 of Section III of the IPF Policy, to cater to the need for 40 percent retroactive financing to reimburse the eligible beneficiary households who have already received housing grant tranche(s).

II. DESCRIPTION OF ADDITIONAL FINANCING

24. The proposed AF2 is to scale up the components of original financing and the AF and does not propose major changes in the design and activities supported by the project. The proposed AF will support reconstruction of an additional 86,680 houses, increasing support from the existing 151,000 houses under EHRP and AF1 to a total of 237,680 houses.

36ble 1. Revised Components Allocations

Current Component Name

Proposed Component Name

Current Cost (US$, millions)

Proposed AF Cost (US$, millions)

Counterpart Financing

(US$, millions)

Total Cost (US$, millions)

Housing Reconstruction Housing Reconstruction 472.50 197.00 39.40

708.90

Disaster Risk Management Systems


15.00 0.00 0.00

15.00

Project Implementation Support


12.50 3.00

0.00 15.50

Contingency Emergency Response


0.00 0.00 0.00

0.00

11 References from the Constitution of Nepal, 2015: (i) “Preparedness, rescue, relief and rehabilitation from natural and man‐made calamities” is a Schedule 7 subject, that is, concurrent between federal and provincial governments; (ii) Disaster Management is also a Schedule 8 subject, that is, concurrent between provincial and local governments and a Schedule 9 subject, that is, concurrent for all the three levels of government; (iii) Article 197 gives legislative powers to provinces with regard to Schedule 6, 7, and 9 and article 226 empowers municipal or local governments to frame laws with respect to schedule 8 and 9; (iv) At the federal level, according to Government of Nepal (Work Division) Regulation, 2074 published as Part‐3 of the Part 67 of the Nepal Gazette published on Falgun 11, 2074, the DRM‐related functions are divided among ‘Office of the Prime Minister and the Council of Ministers’ and nine federal ministries.


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Total: 500.00 200.00 39.40 739.40

III. KEY RISKS

25. The overall risk rating for the proposed second AF is Substantial. The most critical risks and mitigating measures associated with the second AF are summarized as follows:

(a) Political and Governance risks are rated as Substantial. In contrast to the frequent changes in government that characterized Nepal’s decade‐long transition to federalism, the new government enjoys an unprecedented super‐majority in Parliament. Along with new constitutional checks and a far fewer number of political parties, there is a much greater degree of optimism for stability in the coming days. However, state restructuring on this scale is uncharted territory for Nepal and smoothing the transition from the previous unitary system to the new federal one will remain a daunting task. The new system, in principle, provides opportunities to decentralize development benefits and make service delivery more effective and accountable. However, the risks of jurisdictional overlap between the three tiers of government, lack of clarity and coherence between policies and devolved powers, and duplication of efforts will remain high during the coming few years. Key aspects of the new system require further definition and may continue to be contested by different population groups. Despite the lack of clarity at this early stage to define roles, rules and create governance capacity at the provincial and local levels, the overall political and governance risk has decreased.

(b) Technical design of the project and stakeholders’ risks remain Substantial. The owner‐driven housing reconstruction approach adopted under the project is new to Nepal and providing socio‐technical assistance and establishing home inspection regime in remote, mountainous areas have proven to be logistically challenging. This risk is being mitigated through technical assistance (TA) to the PMU and the PIUs with continuous expanded hands‐on implementation support. There is a need to expand Socio‐technical assistance at the municipality level to provide TA to households. The World Bank has engaged three firms as third‐party monitoring agents (TPMA) under the MDTF as World Bank‐executed activities, to independently carry out field level monitoring to technically review the government’s inspection scheme on sample basis, and provide feedback to NRA, District Level Project Implementation Units and engineers involved in the inspection.

(c) Institutional capacity for implementation and sustainability risk remains Substantial. The scope of the umbrella housing reconstruction program is huge, and implementation capacities of the NRA and the PIUs have not been entirely satisfactory. While PMU remains fully staffed with all PIUs under its administrative control, capacity constraints still prevail in program management in general, and the FM and monitoring and evaluation in particular, as evident from persistent delays in conducting output verification of the completed houses and its timely reporting in desired quality. In view of the NRA’s sunset clause of December 2020, a possible handover to relevant ministries or local governments also pose sustainability risk.

(d) Fiduciary risk remains High. The World Bank will continue the expanded implementation support, especially for synchronizing planning and budgeting, streamlined chart of accounts, and timely submission of financial reports. A number of mitigation measures have already been taken. NRA has established an FM working group in April 2017 supported by the World Bank, USAID‐Public Financial Management Strengthening Project, and Nepal European Union Action for Recovery and Reconstruction (NEARR). An FM team is in place at the NRA, supported by consultants seconded by development partners. An FM software has been customized and installed to improve the FM and accounting functions, and training of trainers has been completed. The streamlined use of software for budgeting and accounting will help address the quality and timeliness issues experienced in financial and audit reporting. The World Bank TPMA will be another source of data verification. Moreover, the detailed earthquake household damage and characteristics survey to


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identify beneficiaries, signed PAs while enrolling beneficiaries to the program, multitier grievance redressal mechanism (GRM) home inspection teams at the local level, and housing grant tranches disbursed through bank‐to‐bank transaction after verification have enhanced the transparency and helped manage fiduciary, stakeholder, and governance risks.

(e) Environment and social risk remain Substantial. The risk for the proposed additional finance remains the same as for the parent project. The housing component of the project has been envisaged to respond to the reconstruction needs of the targeted communities for new, improved and resilient housing. There are various indigenous communities and vulnerable people residing in the targeted communities who would receive benefits. The project is designed to ensure timely, adequate, and appropriate dissemination of project information, and their full participation in the program design and implementation. Additional support is to be provided to vulnerable members of the communities. Due to the in‐situ reconstruction focus of the project activities, involuntary resettlement impact is expected to be quite limited.

IV. APPRAISAL SUMMARY

A. Economic and Financial Analysis

26. The direct beneficiaries of the parent project are the members of approximately 55,000 participating households whose homes were destroyed in the earthquake. The AF approved in December 2017 added 96,000 additional households under housing reconstruction component and the proposed AF2 will add approximately 86,680 households as beneficiaries. An economic analysis (EA) performed for the parent project assessed the rate of return of capital investments needed for the reconstruction and recovery from the earthquake. Since it is difficult to make any assessment of benefits from resilient housing in terms of protection from future such earthquakes, the analysis adopted a more straightforward approach of calculating the returns to the households living in a resilient home and staying out of poverty compared to them not receiving any benefits to jumpstart their post‐disaster life. The main benefit component of this project is the shadow annualized rental income from the newly built multi‐hazard resilient housing units. The EA found the parent project to have the internal rate of return (IRR) of 21 percent and net present value (NPV) of US$265 million, with the benefit‐cost ratio (BCR) of 1.8, indicating that the project was economically viable by conservative estimates. The EA for the first AF approved in December 2017 found IRR of 24 percent, NPV of US$541.9 million, and BCR of 2 for the proposed AF’s housing reconstruction component of US$287.5 million. Using similar assumptions for the EA of the proposed AF, IRR of 27 percent, NPV of US$490.5 million, and BCR of 2.2 for the proposed AF’s housing reconstruction component of total US$236.40 million ($197 million from IDA and $39.40 million GoN counterpart financing) were found. The higher IRRs stem from costs savings resulting from the exchange rate depreciation leading to more housing grant beneficiaries and higher share of investment allocated towards housing reconstruction component.

B. Technical

27. There is no change in the technical analysis. The housing reconstruction component scales up the provision of housing grants to the participating household beneficiaries in targeted areas. Core housing units are being reconstructed under owner‐driven housing reconstruction approach in compliance with the GoN/NRA's technical guidelines to ensure multi‐hazard resilience of the reconstructed houses. These technical guidelines cover the popular building construction technologies and locally available construction materials that are used in earthquake‐affected areas to ensure that the beneficiaries are likely to use them and have access to critical inputs.

C. Financial Management

28. The FM arrangements under the original project will also apply to the AF2 since the implementing arrangements remain unchanged. NRA will be responsible for the overall FM arrangements under the project


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and will be supported through the FM arrangements in place at the CLPIUs and DLPIUs. The FM arrangements covering budgeting, accounting, reporting, funds flow, internal controls and audit were re‐assessed as part of the Pre‐Appraisal and found adequate. Financial controls for housing grants are supplemented through the TPM arrangement contracted by NRA. Adequate supporting documentation for tranche releases, of inspections and output verification is maintained and digitized within the MIS system allowing for easy retrieval and review. The AF2 will have a provision for retroactive financing for approx. US$80 million (40 percent of Credit) for Categories 1 and 2. There will also be counterpart funding from Government of Nepal to the tune of US$39.40 million, this will cover all first tranche payments made to identified beneficiaries prior to the retroactive financing period. Despite the recent improvements in internal controls and FM performance, the fiduciary risk is rated High given the large scope of the reconstruction program and capacity constraints in FM. World Bank will provide enhanced hands‐on implementation support, in addition to the bi‐annual reviews. The fiduciary risk will be reviewed during the implementation support and adjusted as necessary. The FM arrangements as currently assessed along with existing mitigating measures are considered adequate for the AF2. More details on the FM arrangements and internal controls are provided in the Annex‐3.

D. Procurement

29. The World Bank Procurement Regulations for IPF Borrowers, July 2016 (revised November 2017 and August 2018), will apply for the procurement using the World Bank funds from the AF2. However, the procurement arrangements for the original financing will remain unchanged. The PPSD and the Procurement Plan for the first 18 months of the project have been prepared for smooth implementation of procurement activities during project implementation. A summary of the PPSD and due diligence measures are in Annex‐2.

E. Social and Environment (including Safeguards)

30. Under the original financing, the project team experienced difficulties due to complicated safeguard arrangements which involved developing environmental and social screening reports of each settlement in three districts, totaling to approximately 1,000 environmental and social screenings and several cluster‐level Environment and Social Management Plans (ESMP). Meanwhile, the safeguard assessments carried out in the three original districts also revealed limited environmental and social impacts arising from project activities. Considering the lesson learned in three districts (Dolakha, Nuwakot, and Dhading) in terms of the feasibility and usefulness of the safeguard arrangements, plus the recent changes in governance structure, the original Environment and Social Management Framework (ESMF) has been revised with mutual agreement between the GoN and the World Bank, to make it proportionate to environment and social risks and impacts and reflect legal, regulatory, and institutional regime changes. The scope of the revised ESMF excludes community relocation, integrated settlement development, urban areas, areas supported by other donors or international/national nongovernmental organizations, and reconstruction of heritage/cultural sites and other physical and social infrastructure and services. Preparation of a project‐level ESMP has been introduced as part of the ESMF which requires review, verification, and validation through the consultation with local government. A separate site‐specific ESMP along with an accompanying technical verification report will be prepared as needed for special cases of environmental and social issues. Priority is given to coordinate and develop links with other similar agencies for sharing mitigation measure costs; low‐cost options will be adopted and final mitigation costs must be approved by the NRA and relevant agencies. “Central Level PIU‐Grant Management and Local Infrastructure Development” of the NRA will then play a coordination and linking role with line agencies working in the sector to implement mitigation measures. The Resettlement Policy Framework has been prepared as part of the ESMF to guide the resettlement planning process. The project‐level ESMP prepared as part of the revised ESMF identifies sociotechnical assistance as the major support to be provided under the project to address the vulnerable groups.

V. WORLD BANK GRIEVANCE REDRESS


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31. Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project‐level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project‐related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non‐compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/en/projects‐operations/products‐and‐services/grievance‐redress‐service. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org.


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VI SUMMARY TABLE OF CHANGES

Changed Not Changed

Results Framework ✔

Components and Cost ✔

Safeguard Policies Triggered ✔

Implementing Agency ✔

Project's Development Objectives ✔

Loan Closing Date(s) ✔

Cancellations Proposed ✔

Reallocation between Disbursement Categories ✔

Disbursements Arrangements ✔

EA category ✔

Legal Covenants ✔

Institutional Arrangements ✔

Procurement ✔

Other Change(s) ✔

VII DETAILED CHANGE(S)

COMPONENTS

Current Component Name Current Cost (US$, millions)

Action Proposed Component Name

Proposed Cost (US$, millions)

Housing Reconstruction 472.50 Revised Housing Reconstruction 669.50


15.00 Disaster Risk Management Systems

15.00


12.50 Revised Project Implementation Support

15.50


0.00 Contingency Emergency Response

0.00


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TOTAL 500.00 700.00

Expected Disbursements (in US$) DISBURSTBL

Fiscal Year Annual Cumulative

2015 0.00 0.00

2016 20,000,000.00 20,000,000.00

2017 35,000,000.00 55,000,000.00

2018 55,000,000.00 110,000,000.00

2019 120,000,000.00 230,000,000.00

2020 130,000,000.00 360,000,000.00

2021 130,000,000.00 490,000,000.00

2022 130,000,000.00 620,000,000.00

2023 80,000,000.00 700,000,000.00

SYSTEMATIC OPERATIONS RISK‐RATING TOOL (SORT)

Risk Category Latest ISR Rating Current Rating

Political and Governance Substantial Substantial

Macroeconomic Moderate Moderate

Sector Strategies and Policies Moderate Moderate

Technical Design of Project or Program Substantial Substantial

Institutional Capacity for Implementation and Sustainability

Substantial Substantial

Fiduciary High High

Environment and Social Substantial Substantial

Stakeholders Substantial Substantial

Other

Overall Substantial Substantial

Safguard_Table COMPLIANCE


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Change in Safeguard Policies Triggered

Yes

Safeguard Policies Triggered Current Proposed

Environmental Assessment OP/BP 4.01

Yes Yes

Performance Standards for Private Sector Activities OP/BP 4.03

No No

Natural Habitats OP/BP 4.04

Yes Yes

Forests OP/BP 4.36

Yes Yes

Pest Management OP 4.09

No No

Physical Cultural Resources OP/BP 4.11

Yes Yes

Indigenous Peoples OP/BP 4.10

Yes Yes

Involuntary Resettlement OP/BP 4.12

Yes Yes

Safety of Dams OP/BP 4.37

No No

Projects on International Waterways OP/BP 7.50

No No

Projects in Disputed Areas OP/BP 7.60

No No

LEGAL COVENANTS2

LEGAL COVENANTS – Second Additional Financing Earthquake Housing Reconstruction Project (P170565)

Sections and Description OPS LEGAL CONVENANT CHILD NODATA No information available Conditions


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VIII. RESULTS FRAMEWORK AND MONITORING

Results Framework COUNTRY: Nepal

Second Additional Financing Earthquake Housing Reconstruction Project RESULT NO PDO Project Development Objective(s)

The Project Development Objective (PDO) is to restore affected houses with multi‐hazard resistant core housing units in target areas and to enhance the government's ability to improve long‐term disaster resilience.

Project Development Objective Indicators by Objectives/ Outcomes

RESULT_FRAME_TBL_PDO

Indicator Name DLI Baseline End Target

Restore affected houses with multi‐hazard resistant core housing units in targeted areas (Action: This Objective has been Revised)

Households with resilient core housing reconstructed under the project (Number) 0.00 237,680.00

Action: This indicator has been Revised

Rationale:

The target is revised in view of revised amount of financing.

Out of which women headed households (Number) 0.00 61,797.00


Rationale:

Target is revised based on revised component allocation.

Out of which women headed households (Number) 0.00 61,797.00


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RESULT_FRAME_TBL_PDO



Rationale:

Target is revised based on revised component allocation.

Citizens made aware of earthquake resilient reconstruction (Number) 0.00 237,680.00


Rationale:

Target is revised.

Enhance the Government's Ability to improve long‐term disaster resilience.

Elected representatives and government officials of 32 earthquake affected districts are trained on disaster risk management and housing reconstruction with transfer of project records. (Number)

0.00 1,000.00


Out of which, women elected representatives and officials of Local Level. (Number)

0.00 250.00

Action: This indicator is New

Rationale:

In ensuring inclusive DRM, enhancing DRM knowledge of women elected representatives and women officials of local government is imperative. This will empower women in seeking the voice and agency in the policies and activities related to DRM so that women's different needs are recognized and addressed.

PDO Table SPACE


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Intermediate Results Indicators by Components

RESULT_FRAME_TBL_IO


Housing Reconstruction (Action: This Component has been Revised)

Direct project beneficiaries (Number) 0.00 1,022,024.00


Female beneficiaries (Percentage) 0.00 50.00

Intended beneficiaries aware of project info. and project investments (%) (Percentage)

0.00 100.00


Intended beneficiaries aware of project info. and project investments ‐ female (Number)

0.00 61,796.00


Grievances registered related to delivery of project benefits addressed (%) (Percentage)

0.00 95.00


Grievances related to delivery of project benefits that are addressed‐(number) (Number)

0.00 100,000.00

Engineers and artisans trained in multi‐hazard resistant construction (Number)

9,319.00 12,000.00



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RESULT_FRAME_TBL_IO


Women masons to be employed by the project in the provision of Socio‐Technical Assistance (Percentage)

0.00 10.00


Rationale:

Masonry profession is where the gender gap is observed to be high. In an effort to bridge the gender gap, the project will ensure that at least 10% of total mobile masons to be hired for Socio‐technical Assistance would be women.

Employed women masons to be trained in Contract, Procurement and Logistics Management and Book‐keeping (Number)

0.00 95.00


Rationale:

Capacity of employed women mobile masons will be further strengthened with a number of training opportunities in contract and procurement management and book keeping to empower and encourage them in continuing the masonry profession beyond reconstruction.


Structural Integrity of social infrastructure carried out across the country. (Number)

0.00 1.00


IO Table SPACE

Monitoring & Evaluation Plan: PDO Indicators Mapped

Indicator Name Definition/Description Frequency Datasource Methodology for Data Collection

Responsibility for Data Collection

Households with resilient core housing reconstructed under the project

Number completed houses of households that

Daily

Project's MIS Tablet‐based Data Digitization of Inspection

CLPIU Building


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received project financial and technical assistance, with seismic resilient features.

carried‐out by Engineers.

Out of which women headed households

Daily

Project's MIS

Tablet‐based Data Digitization of Inspection carried‐out by Engineers.

CLPIU Building

Out of which women headed households Daily

Project's MIS


CLPIU Building

Citizens made aware of earthquake resilient reconstruction

Number of participating household beneficiary.

Daily

Project's MIS


CLPIU Building

Elected representatives and government officials of 32 earthquake affected districts are trained on disaster risk management and housing reconstruction with transfer of project records.

NRA will carry out orientation training program of selected local governments' elected representatives and officials in batches, based on a concept note agreed by the Association. The program will also be used to transfer housing reconstruction record to concerned local

NRA will submit quarterly updates.

1. Monitoring Reports 2. Financial Reports 3. Third Party Monitoring Reports

Data will be collected during regular implementation reviews.

The Project Management Unit


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governments.

Out of which, women elected representatives and officials of Local Level.

Attendance list of participants.

EHRP, PMU

ME PDO Table SPACE

Monitoring & Evaluation Plan: Intermediate Results Indicators Mapped

Indicator Name Definition/Description Frequency Datasource Methodology for Data Collection

Responsibility for Data Collection

Direct project beneficiaries

Direct beneficiaries are people or groups who directly derive benefits from an intervention (i.e., children who benefit from an immunization program; families that have a new piped water connection). Please note that this indicator requires supplemental information. Supplemental Value: Female beneficiaries (percentage). Based on the assessment and definition of direct project beneficiaries, specify what proportion of the direct project beneficiaries are female. This indicator is

Daily

Project's MIS


CLPIU Building


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calculated as a percentage.

Female beneficiaries

Based on the assessment and definition of direct project beneficiaries, specify what percentage of the beneficiaries are female.

Intended beneficiaries aware of project info. and project investments (%)

This indicator intends to measure the effectiveness of consultation and communication mechanisms in terms of ensuring that information about the project and project supported investments have been communicated effectively.

PMU Project's MIS


CLPIU Building

Intended beneficiaries aware of project info. and project investments ‐ female

This indicator intends to measure the effectiveness of consultation and communication mechanisms in terms of ensuring that information about the project and project supported investments have been communicated effectively.

Daily

Project's MIS


CLPIU Building

Grievances registered related to delivery of project benefits addressed (%)

This indicator measures the transparency and accountability mechanisms

PMU Project's progress report, and

GRM

Daily


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established by the project so the target beneficiaries have trust in the process and are willing to participate, and feel that their grievances are attended to promptly. It is understood that local sensitivities and tensions will not allow grievance or redress mechanisms to be established in all projects.

GRM

Grievances related to delivery of project benefits that are addressed‐(number)

This indicator measures the transparency and accountability mechanisms established by the project so the target beneficiaries have trust in the process and are willing to participate, and feel that their grievances are attended to promptly. It is understood that local sensitivities and tensions will not allow grievance or redress mechanisms to be established in all projects.

Daily

Project's MIS and Grievance Redressal Mechanism

GRM

CLPIU Grant Management and Local Infrastructure

Engineers and artisans trained in multi‐hazard resistant construction

Number of engineers and artisans that received training on multi‐hazard resilient housing

Quarterly.

CLPIU Building

1. PMU's Record 2. Implementation Reviews

Project Management Unit


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reconstruction.

Women masons to be employed by the project in the provision of Socio‐Technical Assistance

Socio‐technical Assistance team includes social mobilizers and mobile masons.

CLPIU Building/PMU

Employed women masons to be trained in Contract, Procurement and Logistics Management and Book‐keeping

Capacity of women mason will be further built, in contract , logistics and procurement management and book keeping to encourage in continuing masonry occupation beyond reconstruction.

CLPIU Building

Structural Integrity of social infrastructure carried out across the country.

Number of schools and health posts surveyed for structural integrity assessment.

Monthly

Project's progress report

The concerned CLPIU Education will submit monthly status report.

CLPIU Education

ME IO Table SPACE


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Annex 1: Economic Analysis

1. The AF of the project, through its different components, will provide both direct and indirect benefits to 32 affected districts in Nepal. Direct beneficiaries include members of the approximately 86,680 additional households in the targeted areas, whose houses were destroyed/damaged by the earthquake. Among those receiving social assistance, the most vulnerable population will be specially targeted to receive additional assistance.

2. The EA for the AF follows the methods and assumptions used in the original project’s EA. For the EA of the AF, the major project component of US$236.40 million for Housing Reconstruction (US$197 million IDA credit and US$39.40 million in GoN’s counterpart funding) is examined.

Housing Reconstruction

3. Because of the AF, approximately 86,680 eligible households will have multi‐hazard resilient core housing units. A total of around 372,700 additional direct project beneficiaries will be safe from house collapse and potential death and injuries in case of future earthquakes.12 Many local construction workers will learn valuable construction skills. The local housing materials market will be active and help the local economy with multiplier effects.

Costs Calculations

4. For the EA, the total cost of Component 1 of the project, building multi‐hazard resilient rural residential houses, is considered. Component 1 is US$236.40 million (US$197 million IDA; US$39.40 million GoN financing), which is 98.7 percent of the total Project costs. It is estimated that approximately 86,680 multi‐hazard resilient core housing units will be built using the additional funding.13 The cost is to be disbursed in the amounts described in Table 1.1. over the four‐year period from 2020 to 2023. Following the end of the project, the continued operating and maintenance costs of the project will be 1 percent of the overall costs.

Table 1.1. Distribution of Project Costs

Project Duration (Years)

2020 2021 2022 2023 Overall

Costs (US$, millions) 70 70 70 26.4 236.4

Number of housing units built 25,135 25,135 25,135 11,275 86,680

Counterfactual Benefit Calculations without the Project

5. To understand the counterfactual, it is assumed that in the absence of the project, no new houses will be built. In other words, the potential beneficiaries will continue to live in temporary structures that have no significant shadow rental value. The shadow rental value of housing is the imputed welfare benefit of living in a house. Another way to look at it is to consider the absence of shadow rental value as an implicit cost of living in temporary structures. Thus, there will be no costs and benefits in the absence of the project.

12 According to the 2010 household survey of Nepal, the average rural household size is five members per household. 13 As a result of exchange rate depreciation, the housing subsidy provided under this AF is expected to be US$2,750, instead of US$3,000 as originally assumed.


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Economic Analysis

6. The main benefit component of this project is the shadow annualized rental income from the newly built multi‐hazard resilient housing units, which the approximate 86,680 beneficiary households will live in. It is assumed that with the use of improved construction methods and materials the reconstructed houses will be significantly more valuable than their old homes.

7. The EA focuses on the single benefit of shadow annualized rental income from the multi‐hazard resilient housing to the household receiving the housing grant. Other benefits such as the prevention of death and injuries in case of earthquake, and poverty alleviation through livelihood support are not considered in this EA. Therefore, the resulting quantitative indicators of economic benefits from the project are underestimated.

8. The AF benefits are based on the assumption in the original project’s EA:

The average value of a multi‐hazard resilient new home will be US$15,000.14

The value of home to rent ratio will be 20.15

For the benefit calculations, the new homes will have a useful life of 20 years16 beginning the year after the unit was built.

The discount rate is 10 percent.17

Returns to Investments

9. Based on the assumptions listed above, the benefit of living in multi‐hazard resilient houses for approximately 86,680 eligible households in terms of shadow rental income for the next 20 years is considered. Under this scenario, only the benefit of living in homes is considered and the additional benefits of prevention of potential death and injuries and loss of other assets resulting from future earthquakes are ignored.

10. Using similar assumptions for the EA of the proposed AF, IRR of 26.8 percent, NPV of US$490.5 million, and BCR of 2.2 for the proposed AF’s housing reconstruction component of total US$236.40 million ($197 million from IDA and $39.40 million GoN counterpart financing) were found. The higher IRRs stem from costs savings resulting from the exchange rate depreciation leading to more housing grant beneficiaries and higher share of investment allocated towards housing reconstruction component. Both the IRR and NPV of the benefits to the affected households show that the AF is economically viable by this conservative estimate.

Conclusion

14 The average value of a pre‐earthquake rural housing unit was US$7000 in current prices, based on the 2010 household survey. It is assumed that these old houses used construction methods and materials that were not multi‐hazard resilient. Note that the value of a house includes the value of the land and its location value such as access to market. New houses with improved construction and materials are assumed to be significantly more valuable than the old houses. 15 The house price to rent ratio is the price of the house divided by the annual rent. The estimated house price to rent ratio in Nepal was 35 for rural areas and 81 for urban areas based on the 2010 household survey data. These values are exceptionally high compared to the ratio in the United States. A more conservative ratio of 20 is used. 16 The common useful life of 20 years for infrastructure lending projects is used. 17 The standard discount rate is 12 percent. However, due to the humanitarian nature of the project, use a slightly lower social discount rate is used.


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11. Based on the qualitative analysis of the avoided deaths, injuries, and loss of assets from the resilient housing reconstruction and the livelihood support and the calculated IRRs for the shadow annualized rental income from the multi‐hazard resilient houses, the AF is considered economically viable.

References

Original Project Appraisal Document of EHRP

Nepal LSMS Survey 2010


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Annex‐2: Procurement Arrangements A. Project Procurement: The World Bank Procurement Regulations for IPF Borrowers, July 2016 (revised

November 2017 and August 2018), will apply for the procurement using the World Bank funds from

the AF2. However, the procurement arrangements for the original financing will remain unchanged.

Given that the IDA disbursements under Component 1 are made against the agreed procedure for

‘Housing Grants’, no procurement is involved under this component and the Procurement Regulations

will not apply to this component. However, project implementation support will involve procurement

activities, mainly selection of consulting firms and individual consultants and some procurement of

goods. Procurement under these components will be carried out in accordance with the Procurement

Regulations and the provisions stipulated in the Financing Agreement. The procurement of goods and

consulting services as agreed in the Project Procurement Strategy for Development (PPSD) and

Procurement Plan may be carried out using national competitive bidding as per the GoN’s Public

Procurement Act of 2007 and regulations thereunder, along with the additional IDA‐prescribed

caveats. The NRA is the primary responsible agency for project implementation and for providing

overall coordination and guidance to other implementing agencies. The NRA has gained experience

in managing procurement of the ongoing EHRP. The current Project Operations Manual, with

necessary update, will be followed for detailed guidance on project procurement management. To

enhance and maintain its procurement management capacity, it was agreed that the NRA needs to

engage a procurement consultant throughout the implementation period of the project to expedite

the procurement process and ensure the quality of procurement carried out by the NRA.

B: Project Procurement Strategy for Development

Country Nepal

Full Project Name EARTHQUAKE HOUSING RECONSTRUCTION PROJECT – 2nd Additional Financing

Total Finance (US$) 200 million

Project Number P170565

This AF2 of EHRP will primarily fund for housing grants (US$197 million out of US$200) covering

about 86,680 beneficiaries. US$ 3 million has been allocated for TA and incremental operating costs.

No major procurement has been envisaged under this AF. A very minor procurement activities may

be required for contracting some consulting firms, individual consultants, procurement of goods of

office operating nature and non‐consulting services. These categories and volume of procurement

can be acquired easily from the local market. The main procurement strategy for this AF remains the

same as per the PPSD for EHRP‐AF (P163593).


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Annex‐3: Financial Management 1. The FM arrangements under the ongoing project have been re‐assessed and found satisfactory. As such, the same arrangements will apply to the AF2 as well. The detailed arrangements including enhanced internal controls are detailed below. 2. Implementation Arrangements ‐ The implementing agency will remain the National Reconstruction Authority. A Project Management Unit within NRA, headed by a Project Coordinator, will carry out the day to day project activities along with three central level PIUs – CLPIU‐GMaLI, CLPIU‐Building and CLPIU‐Education, and the District Level PIUs. All the PIUs are under the administrative control of the PMU. 3. FM staffing ‐ FM staffing is adequate at the NRA, CLPIUs and DLPIUs. The government‐deputed finance staff are supported by required level of FM consultants. No additional staffing is envisaged at this stage. Hands on support and training will be provided by the Bank as needed. FM Consultants would also cover the 18 districts to be additionally covered by the AF 2. The staffing structure is as below:

Note: CLPIU‐Education has no activities under this project except for carrying out the Structural Integrity Assessment, hence no FM staff have been assigned to this unit. 4. Budgeting ‐ The project follows the government process for budget preparation and approval. The DLPIUs, CLPIUs and NRA prepare their detailed budgets using the LMBIS (Line Ministry Budget Information system). The NRA‐PMU will thereafter consolidate the annual work program and budget for the project and submit to MoF for approval. Once the budget is approved, the approved budget is reflected in the MoF FMIS, and is also uploaded to TABUCS (project accounting software) by NRA‐PMU. The budget is

NRA-PMU

Accounts Officer } Accountant } Deputed from govt 3 financial consultants 1 banking coordination consultant

CLPIU – GMaLI

2 FM staff (deputed from govt) 1 FM consultant

CLPIU – Building

2 FM staff (deputed from govt) 1 FM consultant

DLPIUs (32 districts)

1 FM consultant in each of 14 focus districts

DLPIUs (20 districts) 1 FM staff in each PIU (deputed)


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detailed, and is broken down by funding source, spending units (cost centers) and activity code. There is a midyear budget review process where budget alignments can be requested. 5. Accounting and Reporting – Cash basis of accounting is used across the government. At the central level, MoF has FMIS (Financial Management Information System) where all disbursements are recorded. All payments processed by DTCOs (District Treasury Control Offices) through the Treasury Single Account are automatically reflected in FMIS. At the project level, the following is maintained by NRA‐PMU:

TABUCS (Transaction Accounting and Budget Control System) Accounting Software – This is a web‐based system with access provided to all cost centers (NRA, CLPIUs and DLPIUs). Transactions are recorded in the system at the point they originate and consolidated at NRA‐PMU.

Excel records – Additional subsidiary books are records at the overall project level are maintained in excel by NRA‐PMU. These include general ledger, grant/credit register, withdrawal register, and bank book by funding source

MIS (Management Information System) – This is a web‐based system maintained for Housing Grants with access down to the district level. The MIS captures detailed information covering beneficiary data, Participation Agreements, tranche payments, supporting documents for each tranche, inspection information and third‐party verification.

6. All original supporting documents for project expenditures will be maintained at the source cost centers. In addition, for Housing Grants, all relevant supporting documents related to tranche releases and inspections will be digitized and uploaded to the MIS system. 7. Trimester (4 monthly) Interim Unaudited Financial Reports will be required under the project, in form and substance currently being followed. The IUFRs will be due within 45 days from the end of the reporting period. NRA‐PMU will prepare consolidated project IUFRs based on information from TABUCS, MIS and MoF FMIS. The IUFRs will continue to provide financial information segregated for each funding source. 8. Funds Flow and Disbursements – The funds flow and disbursement arrangements as designed under the original project is operating well. Under the ongoing project, there are two Designated Accounts, one for each IDA Credit. In addition, a DA is also maintained under the MDTF financing. This will continue. Across all projects in Nepal, the government pre‐finances eligible project expenditures. The reimbursement mechanism is used, whereby the government reimburses itself from the Designated Accounts and documents the expenditures based on IUFRs. Mandatory Direct Payments (MDP) will be used for applicable contracts which will be identified and included in the procurement plan. Arrangements are in place at the PIU level to ensure only MDP will be used for such identified contracts. Expenditures under Category 1 are expected to be booked after the allocations under original financing and AF are booked. 9. Under the proposed AF2, no new DA will be established. Government will continue to pre‐finance project expenditures and eligible expenditures will be claimed from IDA by submitting reimbursement applications. The project coordinator and accounts officer will be authorized signatory for claiming from IDA and managing funds in the existing DAs. The project will continue to follow output based disbursements mechanism, whereby the Housing Grants will be included in IUFRs based on output verification.


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- Documented with the World Bank against the DA advances under the current two IDA Credits and the MDTF.

- Claimed from the World Bank through submission of reimbursement applications under the new IDA Credit for AF2.

10. Payments requests for Housing Grants as well as other expenditures will be processed by the cost centers through their respective DTCOs whose systems maintain disaggregated information for individual IDA sources and MDTF RETF. All payments will be made through bank transfers and cheques. Specifically, for Housing Grants, the following procedure will be followed. 11. DLPIUs will request DTCOs to issue cheques to concerned banks for making payments to the beneficiaries’ bank accounts. The concerned banks, on receipt of cheques from DLPIUs, will make payments to the beneficiaries’ bank accounts in various NRB licensed banks or acceptable financial institutions. The bank accounts should have been authorized by beneficiaries and instructed by DLPIUs. The GoN will engage the services of banks or financial institutions, including a microfinance institution, or another entity having the capacity to provide the payment services in accordance with criteria set forth in the POM. GoN will enter into service agreements with the payment service providers in a manner acceptable to the Bank. Detailed procedures are documented in the Operations Manual. The following will be the categories of eligible expenditure:

Category Amount (in USD) Percentage of Expenditures to be Financed

(inclusive of taxes)

(1) Goods, works, non‐consulting services, consulting services, Incremental Operating Costs, and Training and Workshops

3,000,000 100%

(2) Housing Grants 197,000,000 83% of amounts disbursed

TOTAL AMOUNT 200,000,000

12. The Credit will have a provision for retroactive financing for approx. US$80 million (40 percent of Credit) to cover eligible payments made within one year prior to the signing date. There will also be counterpart funding from Government of Nepal to the tune of US$39.40 million, this will cover all 1st tranche payments made to identified beneficiaries prior to the retroactive financing period. 13. Internal Controls– The internal control mechanism is reasonably robust and continues to be strengthened. There is proper segregation of duties and final approval for expenditures is given by the head of the respective cost enter. The preparation of payment request, check and approval processes are automated in TABUCS beginning FY 2019/2020. Periodic reconciliation is done by the cost centers as well as NRA‐PMU. The cost centers carry out monthly reconciliation of their expenditures with DTCO records, and also carry out annual reconciliation with FMIS. In addition, NRA‐PMU reconciles TABUCS records with FCGO records on a monthly basis. All accounting and reporting is done in a segregated manner for each funding source.


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14. The DTCOs will conduct internal audits on trimester basis of the cost centers. The control processes in place at various stages for Housing Grants are covered in detail in the Operations Manual. Housing Grants are considered eligible expenditures only after output verification, and thereafter can be included in the IUFRs and documented/claimed with/from the World Bank. All payments are made through bank transfers and are fully traceable (from government TSA to beneficiaries’ bank accounts in commercial banks). It is supported by the attribution of a unique beneficiary identification number which is the continuous reference across the expenditure cycle. All supporting documents for tranche releases and the three inspections (the 3rd and final inspection being the output verification) including relevant forms and pictures are scanned and digitized in the MIS. This enables transparency, completeness and facilitates review at the central level. Additional layer of assurance is provided through the TPM arrangements engaged by the PMU as well as the Bank. 15. The bi‐annual FM supervision will focus in detail on Housing Grants to review funds withdrawn from IDA against Housing Grants paid by the government, expenditures documented, availability of supporting documents on a sample basis, time lag in digitizing supporting documents and documenting expenditures, and steps being taken to reduce the time lag. 16. External Audit ‐ The Office of the Auditor General (OAG) will conduct external audit of the project. NRA will prepare consolidated project financial statements for audit based on information generated from TABUCS and expenditure reports from CLPIUs and DLPIUs (and reconciled with FMIS). The audited financial statements are due to be submitted to the World Bank within nine months from the end of each fiscal year. All records (including contracts, orders, invoices, bills, receipts and other relevant documents evidencing all expenditures) will be maintained properly at the respective cost centers to enable proper document trail and facilitate the audit. Bank's representatives will also have access to the records for the purpose of examination. 17. There are no unresolved ineligible expenditures nor overdue audit reports under projects implemented by National Reconstruction Authority. 18. Fiduciary Risk ‐ Despite the recent improvements in internal controls and FM performance, the fiduciary risk is rated High given the large scope of the reconstruction program and capacity constraints in FM. Bank will follow a risk‐based approach to FM supervision to address and mitigate key FM risks. The FM section of the operations manual will be updated periodically as the need arises. The fiduciary risk will be reviewed during the implementation support missions and adjusted as necessary. 19. Supervision Plan ‐ Bank FM team will provide enhanced hands‐on implementation support, in addition to the bi‐annual reviews that will include field visits and transaction review as deemed necessary. Periodic review meetings in between missions will also be held to address any emerging FM issues in a timely manner and to ensure sustained satisfactory FM performance. 20. Disclosure of information: Project would be required to disclose the following: i) Audited Project Financial Statements; ii) list of eligible beneficiaries; and, iii) details of major contracts.


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Housing Grant Tranche Payment Process Flow


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Annex 4: Targeted support towards improving gender outcomes

1. The EHRP and EHRP MDTF have been providing technical assistance and advisory support to NRA in developing various policies, guidelines and standards related to reconstruction with gender‐sensitive approaches considered within the EHRP as well as in the umbrella Housing Reconstruction Program of the Government of Nepal. Over the implementation of the program, several positive trends have been observed, not necessarily with IDA funding, on increased participation of women in technical jobs, social mobilization, financial access and inclusion, skill development/upgradation activities, and joint ownership of houses in the cases where houses are being relocated with additional GoN assistance. Some of these areas are illustrated below:

a. Prioritizing women beneficiaries. By the virtue of the housing reconstruction program design, there are several ways the women beneficiaries have been prioritized. For example, single women are prioritized as beneficiaries under the On‐the Job Trainings (OJT) for masons, a 45‐day course tailored to train new masons for safer construction, wherein a new house is fully constructed as a model during the training period. Recipients of the model house procure the construction materials but receive free labor and technical support through the construction. CLPIU Building has facilitated the construction of 153 houses belonging to single women.

b. Increased participation in reconstruction workforce: Conventionally, the jobs in construction and allied sectors in Nepal have a very limited participation of women as engineers, masons, electricians, carpenters and plumbers, mainly due to sociocultural norms. As per the Nepal Engineering Council, the percentage of women engineers who are licensed to work professionally at national level is only 12.5 percent. However, there has been a marked uptick in the share of women engaged in housing reconstruction program. For example, of the total number of engineers hired to provide technical assistance and conduct quality inspection of reconstructed houses, 18 percent have been women. This is quite significant since majority of these engineers were deployed in field locations. Moreover, 80 percent of social mobilizers hired under the program and 15 percent recipients of construction related trainings are women.

c. Financial access and inclusion. The Earthquake Housing Damage Characteristics Survey (EHDC; co‐financed by MDTF), conducted in 2015 after the earthquake recorded that only 21 percent of 1,036,478 households surveyed had bank accounts, of which only 5 percent bank accounts belonged to women. The project’s mandatory provision of transferring housing grants directly to beneficiary bank accounts facilitated the opening of bank account for each participating household. As per the NRA records, 30 percent of beneficiary bank accounts belong to women, thus recording six times increase in women bank account holders. This provision has introduced a large number of women to formal banking and financing with enhanced financial literacy. The 2018 Gender Equality and Social Inclusion (GESI) audit observed that women feel more empowered due to their involvement in housing reconstruction and interaction with government officials and banks.

d. Joint ownership by women under relocation assistance: For the destroyed houses requiring relocation due to hazard‐prone location, the Government’s Housing Reconstruction Program provides additional grant of NPR 200,000 for alternative land purchase for new safer construction of house under the policy “Land Purchase Standards for the relocation of earthquake affected people, 2017”. This policy has a mandatory provision of joint land ownership of both husband and


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wife. So far, 2,157 households deemed eligible for relocation have purchased land with joint ownership and this provision will also ensure the joint ownership of houses constructed.

e. Supporting Economic Recovery through Women‐led Enterprises: During the EHRP implementation, the World Bank has conducted two studies to examine economic recovery and entrepreneurship development opportunities in Nepal’s post‐earthquake reconstruction context and construction and allied sectors. The recommendations of these studies have potential to inform or scale‐up the NRA and other Government agencies’ efforts to support the earthquake affected people in the economic recovery. After the earthquake, the NRA had facilitated introduction of financing schemes by Nepal Rashtra Bank, Nepal’s central bank, to promote entrepreneurship among youth, women and marginalized communities. One of such concessional loan schemes provides targeted support to women for establishing enterprises. So far, 529 women have availed these concessional loans amounting approximately US$ 3.25 million.

2. While these have been invaluable direct and indirect co‐benefits of the EHRP, AF and MDTF, the proposed second AF aims at providing targeted support to leverage and improve some of the gender‐specific outcomes in view of the gender gaps in employment in the construction and allied sectors. According to data from NLSS Wave 3 (2010/2011), 29 percent of male wage earners work in the construction sector, compared to only 5.6 percent of female wage earners. Female wage earners in the construction sector work fewer days than men (on average 62 versus 112 days, annually) and earn less annual income (7,800 versus 21,000 NRs). Although the number of women in engineering and technical jobs has increased during the implementation of this large‐scale reconstruction program, a downward trend is likely once the program concludes and associated jobs in public sector reduces. However, with increased awareness on the need for earthquake‐resistant design and construction, there remains a scope of increased private sector jobs where the women engineers and artisans, trained and experienced during the earthquake reconstruction, would have opportunities.

3. In view of the above, below are the areas that the proposed AF2 will target to achieve improved gender‐specific outcomes:

a. Improved participation in skill development trainings and access to jobs. The AF2 will support women technical staff (engineers, sub‐engineers and assistant sub‐engineers) in enhancing technical skills and improving job opportunities in the construction and allied sectors by targeted capacity building activities on earthquake‐resistant construction techniques and design, vocational trainings on masonry, entrepreneurship development etc.

b. Ensuring a share of employment in socio‐technical assistance: NRA is in the process of recruiting 200 social mobilizers and 988 mobile masons under EHRP, wherein the project will ensure that at least 10 percent of mobile masons being employed are women. Women’s participation in masonry was almost non‐existent before the 2015 earthquakes. Nepal’s large‐scale reconstruction program has provided unprecedented opportunity for women to upgrade their skills and improve income potential in the work areas usually dominated by men. The provision to employ women mobile masons through the project would ensure share of employment in this male‐dominated area of work. Moreover, government employment is considered a highly respected occupation within the Nepali society, and the planned employment of women by NRA would convey a strong message to the communities in changing deep‐rooted socio‐cultural norms and in breaking gender stereotype. These recruited mobile masons, together with social mobilizers will support the beneficiaries in expediting resilient reconstruction. The tailored


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orientation/induction trainings provided to new employees will also include modules on contract management, project management and book keeping, procurement and logistics, and assessing the differentiated needs of persons with disabilities. These modules will further enhance their capability to manage the construction contracts and projects and will equip them to continue their skilled masonry occupations beyond the reconstruction phase.

c. Ensuring a share of women elected officials and local government officials in Disaster Risk Management and reconstruction orientation: The NRA is planning to carry out an orientation training program of targeted local governments' elected representatives and officials in batches, as per the third PDO indicator of the Project towards ‘Enhancing the Government's Ability to improve long‐term disaster resilience’. This activity will also facilitate the transfer housing reconstruction records and systems to concerned local governments. The proposed AF2 will add a new Intermediate Results Indicator under this PDO indicator to ensure that 25 percent of elected representatives and government officials to be oriented on disaster risk management and housing reconstruction with transfer of Project records will be women.

Proposed activities and indicators for gender‐specific outcomes:

Activity/indicator Baseline Target

10 percent women employed as mobile masons under STA

0* At least 98 women mobile masons employed under the Project.

Tailored vocational and skill/capacity development trainings for women engineers and masons conducted

0 1. At least 250 women masons/artisans trained on resilient construction and related skills such as safer masonry techniques using local materials and following MRT guidelines in construction;

2. At least 250 women engineers/technical staff trained on earthquake‐resistant building design and construction, applying NBC guidelines in construction, contract and project management, procurement and logistics, approaches for universal access for disabled people, and innovative use of local building materials and Nepal’s heritage‐sensitive designs.

New Intermediate Results Indicator:

Existing PDO Indicator

Activity/indicator Baseline Target

Elected representatives and government officials given orientation on disaster risk management and housing reconstruction with transfer of project records. (Number)

0.00 1,000.00

New Intermediate Results Indicator

Out of which, the number of 0.00 250.00


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women elected representatives and government officials (Number)

* While this indicator aims at narrowing the gender gap persisting in skilled labor such as trained masons, in view of the lack of precise data on the gender gap as well as no mobile masons were recruited under the Project by NRA, a baseline has been proposed as 0, a starting point for employing and training women masons under the IDA financing. A detailed baseline and contribution towards bridging gender gap will be worked out during implementation. Once more data is available, this target will also be reviewed during implementation.

Documents

The World Bankdocuments.worldbank.org/curated/en/741541579316456847/...HRP Housing Reconstruction Program IPF Investment Project Financing IRR Internal Rate of Return IUFR Interim