: Urban Governance and Infrastructure Project Implementation Support and Review: January 25-29,2021 AIDE MEMOIRE (draft) I. INTRODUCTION 1. A World Bank team1 led by Mr. Jonas Ingemann Parby, Sr. Urban Specialist (Task Team Leader), carried out the first Implementation Support and Review (ISR) of the Nepal Urban Governance and Infrastructure Project (NUGIP )from January 25-29, 2021.This Aide Memoire summarizes the outcome of consultations and agreements made, including implementation status of project components. The team discussed the findings of the mission at the wrap-up meeting with Dr. Ramesh Prasad Singh, Secretary, Ministry of Urban Development (MoUD), and briefed Mr. Prem Upadhyay, Under Secretary, International Economic Cooperation Coordination Division (IECCD), Ministry of Finance (MOF) on the mission findings on January 29, 2021. A list of key officials met is included in Annex 1 and summary of agreed actions are listed in Annex 2. As agreed during the wrap-up meeting, the AM will be classified as a public document as per the World Bank‟s Access to Information Policy.

II. CONTEXT & MISSION OBJECTIVES

2. The objectives of the ISR were to: (i) review the implementation status that include review of annual work plan and budget and (ii) participate in Project Stakeholder Workshops with the targeted municipalities focusing on the project manuals, timeline, and actions required (including signing of the Participation Agreements), key aspects of financial management, procurement, and social and environmental safeguards. Due to the ongoing COVID-19 pandemic, the mission was organized with virtual meetings, following the GoN‟s and the WB‟s COVID safety protocols. The project was jointly launched by Dr. Ramesh Prasad Singh, Secretary of Ministry of Urban Development (MoUD) and Ms. Lada Strelkova, Operations Manager of the WB, through a virtual launch workshop held on 27thJanuary. The launch workshop was attended by over 60 participants including Mayors of participating municipalities, officials from Ministry of Finance (MOF), Ministry of Urban Development (MoUD), and the World Bank (WB).Orientation workshops on Component 1 and Component 3were organized for the participating municipalities and were attended by key officials from 29 municipalities (refer Annex 4 and 5). In addition, a pre-mission workshop was conducted for the four municipalities eligible for capacity support under Component 2 (see Annex 3).

III. OVERALL STATUS & KEY PROJECT DATA

Project Data Project Performance Indicators2 Board Approval September 28, 2020 Last Rating Current Rating Effectiveness date December 1, 2020 Achievement of PDO N/A S Closing date July 15, 2025 Implementation Progress N/A S Mid Term Review January 2023 N/A S (MTR) Planned Procurement Project Management N/A S Financial Management N/A S Monitoring & Evaluation N/A S Safeguards N/A S Financing Amount Disbursed as of 31st December 2020 – 0$

1 The team comprised of Shambhu Prasad Uprety (Senior Procurement Specialist), Bishwa Raj Basaula (Senior Financial Management Specialist), Caroline Mary Sage (Senior Social Development Specialist), Drona Raj Ghimire (Senior Environmental Specialist), Jaya Sharma (Senior Social Development Specialist), Engila Mishra Maharjan (Environmental Analyst), Anika Fletcher (Social Development Consultant), Ashmita Khanal (Social Development Consultant), Sarah Subba (Social Development Consultant), Pranav Acharya (Environmental Consultant), Manoj Kumar Lal (Senior Operations Consultant), Milan Karki (Consultant), Manish Basnet (Consultant) and Nagendra Nakarmi (Senior Program Assistant). 2 Ratings: HS = Highly Satisfactory; S = Satisfactory; MS = Moderately Satisfactory; MU = Moderately Unsatisfactory; U = Unsatisfactory; HU = Highly Unsatisfactory; NA = Not Applicable; NR = Not Rated. 1

IV. IMPLEMENTATION STATUS &PROGRESS

3. The project‟s implementation started after the formal signing of the project between the Government of Nepal (GoN) and the WB on November 18, 2020, and effectiveness on December 1, 2021. Mr. Parikshit Kadariya has been appointed the new Project Director effective January 18, 2021. The PCO has updated the project‟s annual work plan for 2021. The Bank team reviewed and provided feedback on the updated plan. The first withdrawal request for disbursement is expected no later than March 15, 2021.

Component 1: Urban Development Grants (UDGs) for strategic municipal infrastructure and service delivery (US$115million): 4. An orientation workshop for the participating 17 municipalities was successfully completed during the mission, covering all key aspects of the component. The workshop resulted in fruitful discussions and agreements on follow up sessions with the municipalities, who all showed their readiness to take forward the project implementation at their level (see Annex 4 for a summary of the workshop outcomes).

5. With regards to the preparation of subprojects, there has been good progress in budgeting from the government side on Urban Development Grants for the implementation of NUGIP in this fiscal year. The Government of Nepal has already allocated the budget this fiscal year (FY 2020-21) in the red book for the first- year investments under this component to the PCO/MoUD as well as to the Participating Municipalities.

6. The preparation of Detailed Project Reports (DPR) of the first-year investments under the Urban Development Grants3 has advanced. The DPR of the Talchowk-Begnas Road of Pokhara metropolitan city has been finalized and the Bidding Documents for this investment are almost complete.It was agreed that the bidding documents will be completed and shared to the Bank by February 15. The PCO will organize a consultation meeting with Pokhara metropolitan city regarding this DPR of Talchowk-Begnas Road Pokhara and the Bidding documents by February 20. Following the agreement with Pokhara municipality, the DPR can be submitted the Bank for no objection.

7. Similarly, progress has been noted with regards to the preparation of other four DPRs one in Damak, Birtamod, Urlabari and Tilottama. The mission was informed that the technical guidance notes and checklists prepared for the Pokhara DPR which has been improved with the assistance of the WB project team, are been taken into account by the DPR designers of the remaining 1st-year investment roads with high emphasis requested by the WB team on climate resilience and road safety. These four DPRs will be further harmonized with the requirements of the existing ESIAs to be updated (Damak, Birtamod, Urlabari) and prepared (Tilottama) by a new consultant to be hired, and are expected to be submitted for their final review and approval by April 30 (see also under Safeguards in this Aide memoire). The DUDBC committed to support review of the DPRs with the necessary additional engineers so that the process moves forward.

8. With regards to the Design and Supervision Consultant (DSC), the team highlighted that the recruitment of DSC by the respective municipality is very crucial for the project implementation. The team agreed with PCO that the Design and Supervision Consultant (DSC) ToR will be submitted to the bank for no objection by February 17. Before March 15, the PCO will conduct orientation on the DSC ToR to the participating municipalities and ultimately help the participating municipalities to hiring DSC for design and supervision of their eligible strategic investments under UDG.

9. It was agreed Participating Agreement to be signed by the Participating Municipalities with MOUD has to be expeditiously cleared by the MoUD and to be sent to the participating municipalities. It was agreed that MoUD/PCO will aim to sign the Participatory Agreement with the Participating Municipalities for Urban

3 Per the NUGIP project design, it should be noted that the subprojects will focus on developing infrastructure and designs that are gender and inclusion responsive and will provide skilled employment opportunities to women. Each municipality will closely follow and adapt the SEA/SH risk mitigation measures of the project to prevent and reduce potential SEA/SH risks related to labor and other workers in their subprojects. 2

Development Grants by February 10. It was further agreed that the PCO will organize a session for orientation to the participating municipalities on PIM no later than February 28. It was also agreed that in the next six months the PCO will provide different trainings to the participating municipalities on procurement and financial management. In order to catch up the first-year investments this fiscal year, the team agreed with the MoUD/PCO that all the 17 participating municipalities will be assessed by MoUD against Grant Access Conditions compliance by March 15.

Component 2: Institutional strengthening of the participating municipalities (US$7 million):

10. An orientation workshop was organized as part of the mission for the 4 municipalities that only receive support under this component (Jaleshwor, Dhanusadham, Gaur and Jiri) – see annex 3 for details. It was agreed that PCO will conduct an orientation program on this component 2 to the rest 17 municipalities (also captured under component 1) by no later than February 21.

11. The Urban Development Support Team (UDST) ToR is under preparation, and it was agreed that the UDST ToR will be submitted for no objection by February 15. In order to further accelerate the implementation, it was agreed to undertake a number of mapping activities of the 21 targeted municipalities, in order to have updated baseline information around the critical areas of intervention under the component (i.e. urban management, planning, revenue mobilization, asset management, citizen engagement, gender and social inclusion, etc.). The mapping activities will be supported by the WB technical team and are planned to be completed by April 1.

12. The importance of close coordination of activities under this component with the multi‐ donor‐ funded Provincial and Local Governance Support Program (PLGSP) in MOFAGA) was discussed. It was agreed that the PCO will organize a follow up meeting with MOFAGA by March 1, with the objective to obtain an update on PLGSP implementation status and updates on any relevant capacity building training curriculums that were already developed under PLGSP or other MOFAGA program.

Component 3: Support to municipalities for COVID-19 recovery (US$20 million):

13. Activities undertaken: An orientation session was conducted for 12 participating municipalities (refer annex 5). Six technical presentations were delivered during the workshop which covered various processes and procedures outlined in the POM, participation agreement and proposed accelerated timeline for LIPW operationalization until the end of the ongoing fiscal year.

14. Key Agreement and Outcomes: The PCO has a coordination, monitoring and supervision roles as per the LIPW-POM. The POM envisages PMST for supporting the municipalities in the operationalization of the LIPW and also supporting the PCO in monitoring of progress. Given the ongoing schedule, it is likely that PMST will only come on board by earliest September 2021. Hence, the Mission agreed on taking required actions in expediting the implementation process in line with the commitment of participating municipalities in delivering LIPW sub-project in the ongoing fiscal year (FY20-21). The first action towards that end would be hiring number of individual consultants who would be providing support to municipalities and carrying out monitoring roles together with the PCO. Each of the consultants will be focusing on 3-4 municipalities. The PCO has agreed to have the consultants on board by February 2021.

15. Next Steps and Pending Issues: The mission was also informed continuous communication was essential with the participating 12 municipalities. It has been proposed that either one to one orientation sessions or sessions in clusters will be conducted. Municipalities have agreed on the accelerated timeline to ensure that a number of LIPW sub-projects are implemented before the end of the fiscal year. These changes will be reflected in the revised Annual Work Plan, with specific details on the accelerated implementation. It was agreed that the Participation Agreement will be signed with the participating municipalities by the 15th of February 2021.The Project Operations Manual (POM) for LIPW will be finalized and shared with municipalities by February 8, 2021. 3

16. Component 4: Contingent Emergency Response: The Manual for the Contingent Emergency Response Component (CERC) was completed in November 2020. Component 5: Project management and coordination (US$8 million) 17. The Annual Work Plan was reviewed and discussed, and it was agreed that PCO will share the updated plan by February 5.Further, it was agreed that PCO will review current fiscal year NUGIP budgets allocated in the red book to the PCO as well as to the participating municipalities for the first year investments and will have a dialogue with the Budget Division of MoF for necessary adjustments in the allocations for the remaining periods of this fiscal year, including adjustments for all other components under the project. The revised budget should be shared with the World Bank no later than February 12. In addition, it was agreed that PCO will submit to WB for orientation the draft MDBS figures for FY21-22 no later than March 1.

18. The Project Implementation Manual (PIM), and the Project Operations Manual (POM) for Component 3 were discussed. It was agreed that the POM will be submitted by February 8 and the PIM will be finalized conjointly by February 12, for subsequent immediate dissemination to participating municipalities. The Participation Agreements (PAs) for municipalities under Component 1 and Component 3 were completed and presented to the municipalities. The municipalities are expected to sign their respective Participation Agreements no later than February 15.

19. In terms of project staffing and support staff, the extension of contracts with Procurement Specialist, Financial Management Specialist, Senior Urban Planner, as well as additionally recruitment of short-term consultant with specialization in road safety to help review DPRs under Component 1. In addition, it was agreed that PCO will review the current website of sharing project information and explore the options for a dedicated website for the project. Finally, it was agreed that PCO shall consult with and nominate the members of the steering committee of the respective institutions (FCGO, Ministry of Water and Sanitation, Department of Urban Roads, etc.) and conduct the first inaugural meeting before May 1.

V. FIDUCIARY MANAGEMENT

Financial Management (FM): 20. The Project Implementation Manuals (PIM) are prepared separately for the Urban Development Grants (UDGs) and Labor-Intensive Public Works (LIPW) components which details about the financial management arrangement for the project. Fiduciary system assessments carried out for the project have observed various fiduciary risks while implementing the project. The major risks are: (i) the staff capacity, (ii) establishing adequate internal control particularly in spending to eligible scope, (iii) timely and reliable financial reporting, (iv)timely and quality public, internal and external audits and (v) actions to address issues raised in audits.

21. Startup orientation and regular back-up for the FM staffs are taken as mitigation measure and the Bank team highly appreciates the orientation sessions conducted by the PCO during the Project launch and the review mission. It was agreed that PCO shall to orientation and training sessions on FM regularly and the next one virtually within one-month i.e. February 20214. The PCO shall coordinate and support the municipalities in developing own financial administration regulations of the municipalities, developing own accounting policies, constituting internal control and audit committee including for developing internal control guidelines following the framework issued by MOFAGA. The PCO and the municipalities are requested to maintain separate books of account and prepare bank reconciliation statements regularly in order to track and establish adequate control over the project fund. During the orientation sessions conducted in the mission, the Bank team observed that the Municipalities have agreed to submit financial reports regularly to the PCO. Conducting internal audits regularly

4 To increase the effectiveness of the training sessions PCO is considering in-person training sessions soon taking care of all necessary health protocol amidst COVID-19 pandemic. 4

with emphasis on quality of the report is disseminated to the PCO and the municipalities. Keeping in view of the audit issues raised by the auditors, developing an action plan for resolving the audit issues is suggested. The unaudited project financial report for FY 2019-20 of the Project Preparation Advance has not been received yet and the PCO has assured to make available by February 2021.Based on the risks identified and mitigation measures agreed, the project at this initial phase is taken as „Satisfactory‟. Disbursements 22. As the project is just launched from January 2021, there is no disbursement yet. Federal government‟s red book for FY 2020-21 has stipulated a recurrent budget of NPR 113.8 million. The PCO is coordinating with the MOF for adjustment of the budget required for the FY. PCO is suggested to accomplish the Authorized Signatories as soon as possible. It is expected that the first withdrawal application will be submitted no later than March 15, 2021.

Procurement 23. The PCO has submitted updated procurement plan through STEP during the mission for the Bank‟s review. The activities were discussed in depth with the project team before and during the mission. TOR of critical consulting services, i.e. PMST, UDST and several individual consultants necessary to kick start the project implementation has been discussed in rounds and is expected to be processed through STEP once the Bank clears the received procurement plan. Since the project implementation manual (PIM) and project operation manual for LIPW are in place, it is expected that the project implementation moves fast. As discussed and agreed in the mission, the PCO will prepare a plan for early orientation/ short training on project procurement, especially for municipalities on Bank‟s Procurement Regulations, Public Procurement Act (PPA) and Regulations (PPR), community driven development (CDD) procedure, LPIW procedure, etc. The plan is expected to be submitted to the Bank by Feb 12, 2021. Considering the important prerequisites ready (PIM, POM/LIPW, updated procurement plan, TOR of major consulting assignments), project launch with encouraging participation including with Mayors/Deputy Mayors, the performance rating has been given as “Satisfactory”.

VI. SAFEGUARDS MANAGEMENT, GENDER AND CITIZEN ENGAGEMENT

24. The team focused on: (i) resources at the PCO and at the municipality level; (ii) status of first year sub- project ESIAs; and (iii) orientating municipalities on environmental and social, citizen engagement and gender requirements under Components 1 and 3. Environmental and social performance is found to be “Satisfactory”. The key issues and agreed actions are outlined below.

Environment and Social Safeguards 25. The Environmental and Social Impact Assessment (ESIA) prepared for the Pokhara municipality subproject (Talchowk-Begnas) has been finalized by the PCO and cleared by the World Bank. The Bank team emphasized the need for the integration of the environmental and social clauses in the bid document of Talchwok- Begnas Road Improvement Project.

26. The three ESIAs drafted in 2019 for the first-year subproject investments of Damak, Birtamod, and Urlabari, require revision in line with updated DPRs, new Environmental Protection Act (EPA 2019) and Environmental Protection Rules (EPR 2020) and to meet requirements of WB Safeguard Policies. The PCO advised that an ESIA consultant will be recruited by March 15, 2021 to revise and finalize these three ESIAs and also to carry out the ESIA of the proposed subproject of Tilottama Municipality. The ToR for the ESIA Consultants will be shared with the Bank for review. The PCO agreed to provide a draft timeline for finalizing the ESIAs and DPRs. The PCO advised that ownership of all land within the Right-of-Way for these four subprojects has been legally transferred to the Government and that the PCO has received signed declarations from each municipality. The Bank team reiterated to the PCO the need for details of stakeholder consultations undertaken during subproject preparation to be reflected in the final ESIAs. The Bank team emphasized the need for a screening process for LIPW subprojects to identify potential environmental and social risks and impacts.

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27. The Bank team met with the DPR consultants who have completed the DPRs for the four first year sub- projects of Damak, Birtamod, Urlabari, and Tilottama, and emphasized to the DPR consultants the importance of being available for, and working closely with, the ESIA consultants once they are on board, to ensure that the ESIAs are completed efficiently and the respective DPR integrates relevant environmental and social aspects. The Bank team also clarified that any additional proposed subprojects which are associated or connected to a WB- financed subproject, but which are not financed by the WB, need to be subject to WB Safeguard Policies. The Bank team emphasized the need for municipalities to assign an environmental and social focal point for the subprojects.

28. The PCO is recruiting a short-term Environmental Consultant and a short-term Social Development Consultant at the PCO to provide environmental and social support until environmental and social experts are onboard under the PMST. The PCO will provide draft ToRs for the two short term Consultants for the Bank review and no objection by February 8, 2021 and the Consultants will be hired by March 15, 2021. The Bank team emphasizes the importance of timely on boarding of social and environmental specialists, noting that delay in this may adversely affect the environmental and social performance as well as implementation progress.

Gender 29. The PCO will undertake a gender mapping of the municipalities under Component 2, with Bank support, to understand the existing structure, mechanism and capacity for gender at the municipality level. The mapping will be used to inform gender activities under Component 2. The PCO will undertake orientation workshops on gender with the municipalities over the next six months. The PCO advised that they have recently recruited a Gender and Social Inclusion (GESI) focal point who will also be the focal point for GESI-related matters for NUGIP. Additionally, the PCO was reminded and requested to follow project‟s SEA/SH prevention and response action plan as a guidance to prevent and mitigate SEA/SH risks in their own subprojects.

Citizen engagement 30. The PCO will work with municipalities to establish a basic grievance redress mechanism (GRM) protocol over the next coming months, and the environmental and social focal point assigned at the municipality will be responsible for receiving, recording and managing the grievances received to the GRM. The PCO will undertake a CE baseline questionnaire and survey at each municipality, with Bank support, to understand existing mechanisms for CE and grievance handling to inform CE activities under Component 2. The Social Development Consultant to be recruited at the PCO until the PMST is on board will be the focal point for citizen engagement- related matters.

VII. NEXT MISSION

31. It is agreed that the next mission will take place around June 2021. The exact dates will be agreed in consultation with the PCO and the GoN.

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LIST OF ANNEXES Annex 1: List of key officials met

Annex 2: Detailed table of Agreed Actions

Annex 3: Summary of Orientation Workshop on Institutional Capacity Strengthening for 4 additional Municipalities

Annex 4: Summary of Orientation Workshop for Selected Municipalities on Component 1 (Urban Development Grant) Annex 5:Summary of Orientation Workshop for Selected Municipalities on Component 3 – Labor Intensive Public Works (LIPW)

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Annex 1: List of key officials met Ministry of Urban Development 1. Dr. Ramesh Prasad Singh, Secretary 2. Mr. Padam Kumar Mainali, Joint Secretary 3. Mr. Digambar Thakur, Joint Secretary 4. Mr. Suresh Kumar Wagle, Senior Divisional Engineer Department of Urban Development and Building Construction 5. Mr. Navaraj Pyakurel, Director General 6. Mr. Kumar Prasad Ghimire, Deputy Director General 7. Mr. Parikshit Kadariya, Project Director, NUGIP 8. Mr. Roshan Shrestha, Project Director, New Town Project 9. Ms. Sangeeta Baral, Project Engineer 10. Ms. Renuka Bhandari, Project Engineer 11. Mr. Hemant Kaphle, Project Engineer 12. Mr. G.P. Gorkhali, Senior Urban Planner 13. Mr. Dibya Chandra Shrestha, Financial Management Consultant 14. Mr. Ishwar Bhatta, Procurement Specialist 15. Mr. Dinesh Pandeya, Media Personnel Ministry of Finance 16. Mr. Prem Upadhyay, Under Secretary, IECCD Municipalities 17. Mr. Man Bahadur G.C., Mayor, Pokhara Metropolitan City 18. Mr. Basudev Ghimire, Mayor, Tilottama Municipality 19. Mr. Chintan Tamang, Mayor, 20. Mr. Janakraj Poudel, Mayor, Baglung Municipality 21. Mr. Ganesh Prasad Prasai, Mayor, Hariwon Municipality 22. Mr. Baldev Chaudhari, Mayor, Triyaga Municipality 23. Mr. Bimal Acharya, Mayor, 24. Mr. Dhruva Kumar Siwakoti, Mayor, 25. Mr. Romnath Oli, Mayor, 26. Mr. Nagendra Kumar Gupta, Mayor, Ramgram Municipality 27. Mr. Shambhu Yadav, Mayor, Rajbiraj Municipality 28. Mr. Shiva Prasad Dhakal, Mayor, Sundarharaincha Municipality 29. Ms. Sima , Mayor, Putalibazar Municipality 30. Mr. Bipin Ojha, Mayor, Amargadhi Municipality 31. Mr. Mahadev Bajgai, Mayor, Lamkichuha Municipality 32. Mr. Padampani Sharma, Mayor, Phalewas Municipality 33. Mr. Dwarika Lal Chaudhari, Mayor, Municipality 34. Mr. Kishan Gurung, Mayor, Suklagandaki Municipality 35. Mr. Devnath Sah, Mayor, Golbazar Municipality 36. Mr. Ajay Kumar Gupta, Mayor, Gaur Municipality 37. Mr. Tanka Bahadur Jirel, Mayor, Jiri Municipality 38. Mr. Pashupati Khatiwada, Chief Administrative Officer, Birtamod Municipality 39. Mr. Yagya Puri, Chief Administrative Officer, Kawasoti Municipality 40. Mr. Man Bahadur Khadka, Chief Administrative Officer, Bhimeshwor Municipality 41. Mr. Ram Bahadur Thapa, Chief Administrative Officer, Dhankuta Municipality 8

42. Mr. Narayan Prasad Sapkota, Chief Administrative Officer, Baglung Municipality 43. Mr. Jeeban Gyawali, Chief Administrative Officer, Sandhikharka Municipality 44. Mr. Sridhar K.C., Chief Administrative Officer, Golbazar Municipality 45. Mr. Mukti Ram Rijal, Chief Administrative Officer, Phalewas Municipality 46. Mr. Prem Bahadur Kafle, Engineer, 47. Mr. Santosh Kumar Yadav, Engineer, Golbazar Municipality 48. Mr. Manoj Sharma, Engineer, Baglung Municipality 49. Mr. Tarapati Bhattarai, Engineer, Shuklagandaki Municipality 50. Mr. Jiban Ghimire, Engineer, Itahari Municipality 51. Mr. Roshan Udas, Engineer, 52. Mr. Santosh Kumar Yadav, Engineer, Golbazar Municipality 53. Ms. Manju Sharma, Engineer, Phalewas Municipality 54. Mr. Saugat Oli, Engineer, Lamahi Municipality 55. Mr. Pahal Bahadur Pun, Engineer, Musikot Municipality 56. Mr. Narbir Khadka, Engineer, Musikot Municipality 57. Mr. Nirmal Dangi, Engineer, Bheri Municipality 58. Ms. Mina Karki, Sub Engineer, Amargadhi Municipality 59. Mr. Dipesh Jha, Engineer, Jaleshwor Municipality

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Annex 2: Detailed table of Agreed Actions

S.N Actions Responsibility Agreed Timeline

Component 1 1 Finalization of Bidding document for Talchowk-Begnas Road PCO February 15, 2021 of Pokhara Metropolitan city 2 Submission of DPRs to WB for Birtamod , Damak , Urlabari PCO April 30, 2021 and Tilottama DPRs 3 Consultation Workshop for the DPR of Talchowk-Begnas PCO February 20, 2021 Road Pokhara and the Bidding documents to the Pokhara Metropolitan City 4 Submission of DSC TORs to WB for no objection PCO+WB February 17, 2021 5 Signing of Participation agreement in between MoUD and the PCO+MoUD+ February 15, 2021 Participating Municipalities Participating Municipalities 6 Orientation on PIM to the participating municipalities PCO+WB February 28, 2021 7 Assessment of Participating municipalities against the PCO+MoUD March 15, 2021 compliance with GACs Component 2 8 Orientation on component 2 to the 17 municipalities (under PCO February 21, 2021 UDG) 9 PCO to submit UDST ToR to WB for review PCO+WB February 15, 2021 10 Consultation with MOFAGA on developed Curriculum for PCO Feb 15, 2021 Institutional strengthening of local bodies under PLGSP and other programs 11 PCO to undertake institutional mapping based on the baseline PCO April 1 from the PWC study of 2018 Component 3 12 Signing of LIPW Participation Agreement with all 12 PCO and February 15, 2021 Municipalities Municipalities

Component 4 13 No actions to be taken at this point Component 5 14 Finalization of PMST ToR and Entering into the STEP PCO February 5 15 Hiring of 4 individual consultants, namely senior urban PCO March 1 , 2021 planner, procurement specialist financial management specialist and road safety expert at PCO 16 Hiring of 4 Individual Consultants (Monitoring and Evaluation PCO February 28, 2021 Engineer)for Comp-3 17 PCO to submit the Revised AWP of FY 2020-21 to WB, with PCO February 5, 2021 details on accelerated implementation of Component 3 18 Submit revised budget numbers for MDBS to WB before PCO February 12 sharing with MoF 19 Submit draft budget for FY21-22 to WB before sharing with PCO March 1 MoF 20 Identify project steering committee members from relevant PCO May 1, 2021 institutions (MOFAGE, DoR, MoF, etc.) and conduct first inaugural steering committee meeting

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Fiduciary 21 Conduct a training program to the municipal finance staffs PCO By February 28 virtually on procurement and financial management 2021 22 Develop an internal control guideline Municipality After the model guideline is issued by MOFAGA 23 Formulate Audit Committee and Internal control Committee as Municipality July 1 2021 per LGOA Section. 24 Develop an accounting policy Municipality August 1, 2021 25 Submit the first annual internal audit report of the project Municipality August 1, 2021 26 Develop a template of the action plan and implement PCO July 1, 2021 27 Submit unaudited project financial report for FY 2019-20 of PCO February 22, 2021 the Project Preparation Advance 28 Submit training plan for FM and procurement for March to PCO February 15, 2021 December 2021 (for Component 1 and Component 3) 29 Submit first withdrawal application to WB PCO March 15, 2021 Safeguards 30 Provide ToRs for the short-term Environment and Social PCO February 8 Safeguards focal points for the PCO for WB review and no- objection

31 Hire ESIA consultant to complete revisions of ESIAs for March 15 Damak, Birtamod, Urlabari subprojects and carry out ESIA of Tilottama subproject

32 Submit revised ESIAs for Damak, Birtamod, Urlabari PCO May 1 subprojects for Bank review and no-objection

33 Submit ESIA of Tilottama subproject for Bank review and no- PCO May 31 objection

34 Provide ToR for the ESIA Consultant for WB technical review PCO February 15

35 Undertake baseline questionnaire and survey of existing CE PCO 1 July and GRM mechanisms at the municipalities 36 Undertake a gender mapping of the municipalities under PCO 1 July Component 2 to understand the existing structure, mechanism and capacity for gender at the municipality level 37 Ensure to integrate environment and social clauses to bid PCO March 15 document of Talchwok- Begnas Road Improvement Project and to share Bank Team for review 38 Provide workplan timeline for finalizing ESIAs PCO February 15 Others

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Annex 3 Orientation Workshop on Institutional Capacity Strengthening for 4 additional Municipalities Introduction

The Project Coordination Office (PCO) of Nepal Urban Governance and Infrastructure Project (NUGIP) organized separate virtual orientation workshop on Institutional Capacity Strengthening (Component 2 of the NUGIP) on January 21, 2021 for the four municipalities that are only eligible for this support under the project. The representatives from Gaur, Jaleshwor and Jiri Municipalities participated in the workshop while representative from Dhanushadham could not participate due to technical problem with the internet in the municipality. Mr. Parikshit Kadariya welcomed the participants and briefly explained about the project specifically focusing on Component 2: Institutional Capacity Strengthening of the project.

 The Component will finance operational costs, goods, training and technical assistance support to strengthen the institutional systems and capacities of participating 21 municipalities for improved urban management and service delivery.  The component will adopt a demand-based approach to support the participating municipalities. Urban Development Support Teams (UDST) will be hired by PCO at the federal level. The UDST will provide support to the participating municipalities in identified areas of institutional strengthening support.

Summary of Discussions

The discussion focused on the type of support the project‟s component will extend to the municipalities under the project and the roles and responsibilities of the municipalities during the implementation of the component.  The team clarified that the component specifically focuses on the capacity building and may provide small toolkits/hardware if there is demand/need in the municipalities. Further, the team also said that the technical support provided through UDST could help the municipalities to carry out and/or technically strengthen their priority projects‟ study and report and make them invest-ready and viable.  Regarding the role of municipalities during the implementation, it was clarified that municipalities will be required to work with the UDST and provide information on their capacity gaps and support needs. Based on this, the UDST will provide hands-on support to the municipalities supporting them on critical issues such as urban management and planning, revenue mobilization, asset management, FM and procurement, etc.  Each municipality will have its own priorities and the support will be customized as per the municipalities‟ requirements. The team also said that the component will be implemented continuously for four years starting from next FY starting with the UDST on board. However, the PCO team expressed that some of the component activities will be implemented before the mobilization of UDST which will be discussed with respective municipalities in advance. In addition, the project will seek to link municipal plans and programs with other relevant projects of donor partners and GoN. The team requested the municipalities to forward the focal person‟s contact information to the PCO for easy and effective project coordination.

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Annex 4 Orientation Workshop for Selected Municipalities on Component 1 (Urban Development Grant) Introduction

The Project Coordination Office (PCO) of Nepal Urban Governance and Infrastructure Project (NUGIP) organized virtual orientation workshop on Urban Development Grant (Component 1 of the NUGIP) on January 27, 2021 for 17 municipalities. The workshop was attended by over 45 representatives from all 17 municipalities as well as team members from the PCO and the WB team. The PCO team presented the project background and the details of Component 1 of the project. The presentation included brief overview of safeguards, gender and citizen engagement requirements, financial management, procurement and monitoring and evaluation aspects, among others.  Component 1 focuses exclusively on strategic municipal infrastructure and service delivery improvement. Municipalities will identify, design, and implement identified sub projects in line with the guidelines and procedures outlined in the Project Implementation Manual (PIM).  Municipalities will be required to sign a participation agreement (PA) with the MoUD to agree to the terms and conditions of the proposed Project, as well as their roles and responsibilities. Each participating Municipality will have to qualify to a set of GACs annually to access UDG and utilize them for the identified infrastructure sub projects  Respective municipalities will be responsible for financial management, procurement of infrastructure related works, follow all GoN‟s rules and regulations and the WB‟s safeguards policies, consult and engage stakeholders ensuring Grievance Redressal Mechanism and prepare annual progress reports

Summary of Discussions

The discussion focused on criteria for selection of sub-projects under the component, Participation Agreement and the responsibility of the municipalities for the land acquisition, payment of compensation among others.  The municipal representatives stressed that the Participation Agreement and hiring of DSCs should be completed soon so that the project implementation could move forward. The PCO team said that the DSC ToR is being completed and will be forwarded to the municipalities. After signing of the PA, municipalities can start hiring DSCs. The budget for DSC is NRs. 5 million for current FY. The DSC will assist the municipalities in preparation of DPRs and on-field implementation and will start from next FY. In addition, PCO team will support the municipalities throughout the project‟s implementation and provide guidance when required.  The PCO team clarified that NPR 20 million forwarded to 17 municipalities as part of COVID response has been cancelled. The decision took place during the negotiation for the project‟s loan agreement between the GoN and the WB due to substantial amount allocated to 17 municipalities under the UDG.  The Project can also finance the municipal projects whose DPRs has already been prepared. However, the DPR should be technically sound fulfilling all the criteria set by the project and they should not trigger any safeguards issues. It is the responsibility of each municipality to resolve issues surrounding land acquisition and land compensation before the sub-projects‟ selection. Similarly, the PCO team said that municipality can select any old or new sub-projects or sub-projects whose DPRs were prepared by the DUDBC‟s consultants to be financed under the component 1 but they should provide credible justification for sub-projects‟ selection.  The PCO team reemphasized that Municipalities can select any urban infrastructure sub-projects including drainage, drinking water and sanitation and other infrastructure works as per their priority. The RoW of roads‟ projects should be set as per national standards. The PCO team requested the municipalities to forward focal person‟s contact information for effective project coordination.

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Annex 5 Orientation Workshop for Selected Municipalities on Component 3 - Labor Intensive Public Works Introduction

The Project Coordination Office (PCO) of Nepal Urban Governance and Infrastructure Project (NUGIP) organized virtual orientation workshop on Labor Intensive Public Works (Component 3 of the NUGIP) on January 28, 2021 for 12 municipalities. The workshop was attended by representatives from the participating municipalities including team members from the PCO and the WB team. The PCO team presented the project background and explained in detail about the Component 3 of the project. The presentation included brief overview of timeline of the component‟s implementation, allocated budget and wages, eligible sub-projects, beneficiary selection, institutional arrangement, safeguards, gender and citizen engagement requirements, financial management, procurement and monitoring and evaluation aspects of the component.

 Component 3 aims to provide support and relief to vulnerable groups in 12 municipalities to help mitigate the short and medium-term negative impact of the COVID-19 crisis through rapid labor-intensive public works (LIPW). The component targets to provide LIPW benefits to at least 20,000 HHs.  It is envisaged that LIPW‟s, being a rapid recovery response, effective period would be until Dec 1, 2023. The eligible sub-projects are (i) regular maintenance of municipal infrastructure including maintenance and cleaning of streets, roads and drainages, public spaces, parks, and community facilities; and (ii) construction of some basic infrastructures, including community water facilities such as water distribution schemes, water kiosks, wells, and public washing facilities.  The target beneficiaries of the component are individuals from poor and vulnerable HHs including the elderly, physically challenged, minorities, and disadvantaged groups. The selection process requires minimum percentage representation of female workers – 35%.

Summary of Discussions

The discussion focused on budget allocation for the sub-projects, minimum wages for skilled and unskilled labors to be hired under the component and the timeline.  The PCO will physically hold trainings, workshops and visit the municipalities to further discuss and coordinate in the component‟s implementation when permissible. The municipalities requested the need for physical workshop to better understand the implementation procedures of the sub-project and advised to expedite the implementation works.  The budget limit for the sub-projects under the component is NPR 2million. Procurement is carried out based on the option of implementation modality chosen i.e. through a) PIC, b) Private Party or c) Forced account. - Since the total budget allocated to each municipality under the component and average of NRs. 20million, each municipality can execute a minimum of 8 number of sub-projects.  The sub-projects cannot be implemented through contractors employing bidding process. It is envisaged that the works will be carried out either through Project Implementation Committee or Private Party for wage- sharing sub-projects and Forced Accounts. The workers‟ insurance can be covered through non-wage cost of the sub-projects.  It is the responsibility of the municipalities to appoint focal person from the municipality to coordinate with the PCO in the component implementation. The PCO will also forward its focal person‟s contact to the municipalities for effective project coordination. The PCO will support the municipalities in ensuring the sub- projects comply with E&S checklists or in case sub-projects are required to go through IEE process.  The daily wage rate of unskilled and skilled labor will be set in consultations with GoN and WB management, with the principle to ensure harmonization across WB financed projects and will be communicated to participating municipalities no later than February 15.

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