Nepal: 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