documents.worldbank.orgdocuments.worldbank.org/curated/pt/426371468205168507/... · Web viewDocument of. The World Bank. FOR OFFICIAL USE ONLY. Report No: RES13152. Restructuring

Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No: RES13152

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING

OF THE

E-SOCIETY AND INNOVATION FOR COMPETITIVENESS (EIC) PROJECT (P115647)

LOAN IBRD-79630NOVEMBER 30, 2010

TO THE

REPUBLIC OF ARMENIA

July 3, 2014

GTIDR - TRANSPORT & ICT - GP GPSVP-GP- CCSA, VICE PRESIDENCY - IBRD

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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.

Regional Vice President: Laura TuckCountry Director:

Senior Global Practice Director:Henry G. R. KeraliJose Luis Irigoyen

Practice Manager: Randeep SudanTask Team Leader: Sandra Sargent

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ARMENIAE-SOCIETY AND INNOVATION FOR COMPETITIVENESS (EIC) PROJECT (P115647)

CONTENTS

A. SUMMARY………………………………………………………..5B. PROJECT STATUS………………………………………………..6C. PROPOSED CHANGES…………………………………………...6ANNEX 1: RESULTS FRAMEWORK AND MONITORING …………..15ANNEX 2: OPERATIONAL RISK ASSESSMENT FRAMEWORK…….22

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DATA SHEET

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ArmeniaE-Society and Innovation for Competitiveness (EIC) Project (P115647)

EUROPE AND CENTRAL ASIA0000009080

.

Report No: RES13152.

Basic InformationProject ID: P115647 Lending Instrument: Specific Investment Loan

Regional Vice President: Laura Tuck Original EA Category: Partial Assessment (B)Country Director: Henry G. R. Kerali Current EA Category: Partial Assessment (B)

Senior Global Practice Director: Jose Luis Irigoyen Original Approval Date: 30-Nov-2010

Practice Manager/Manager: Randeep Sudan Current Closing Date: 31-Dec-2014

Team Leader: Sandra Sargent.

Borrower: Ministry of Economy

Responsible Agency:

Enterprise Incubation Foundation, e-Government Infrastructure Implementation Unit OJSC (EKENG)

.

Restructuring TypeForm Type: Full Restructuring Paper Decision Authority: Country Director Approval

Restructuring Level:

Level 2

.

Financing ( as of 18-Dec-2014 )Key Dates

Project Ln/Cr/TF Status Approval Date Signing Date Effectiveness

DateOriginal Closing Date

Revised Closing Date

P115647 IBRD-79630 Effective 30-Nov-2010 26-Jan-2011 18-May-2011 31-Dec-2014 30-Jun-2016

Disbursements (in Millions)

Project Ln/Cr/TF Status Currency Original Revised Cancelled

Disbursed

Undisbursed

% Disbursed

P115647 IBRD-79630 Effective USD 24.00 24.00 0.00 10.25 13.75 43.

Policy WaiversDoes the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ]

Does the project require any policy waiver(s)? Yes [ ] No [ X ].

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A. Summary of Proposed ChangesThe proposed restructuring will comprise:1. Reallocation of loan proceeds in the amount of US$4 million from Category 2(a) to Category 1 of Eligible Expenditures as defined in the Loan Agreement.2. Change of scope in Component 1: National Broadband sub-component (1.1) will be scaled down to a Rural Broadband sub-component.3. Change of scope in Component 2:Removing Idea Generation Mini Grants (Activity 2.1.1)Adding Vanadzor Technology Center to sub-component 2.2 (currently just Gyumri Technology Center)Adding grants program for Vanadzor (sub-component 2.2)Seed and Early Stage Venture Fund (Activity 2.1.2): US$300,000 will be reallocated from Category 1 “Goods, works, consultants’ services, training and incremental operating costs for the Project” to Category 2(d) “Sub-financing for Sub-project under Part B.1(b) of the Project (Seed and Early Stage Venture Fund)” to be financed 100% from loan proceeds.Remove Innovation Brokerage activity 2.1.3 and Managerial Secondments sub-activity 2.3.1.ii.

4. NCFA was removed as implementing agency for Component 1.1 National Broadband

5. Legal Covenant Section 1. A. Institutional Arrangements for Sales Representation Office was removed

6.Corresponding revision of performance indicators undertaken

7. Extension of the project closing date is being proposed along with restructuring from December 31, 2014 to June 30, 2016.

8. Environmental and social risks of works to be undertaken for the rehabilitation of premises for Vanadzor Technology Center are modest. Installation of Wi-Fi devices under Component 1 will have no negative impact. The devices will be placed in central locations of settlements, on public buildings.

Change in Implementing Agency Yes [ X ] No [ ]

Change in Project's Development Objectives Yes [ ] No [ X ]

Change in Results Framework Yes [ X ] No [ ]

Change in Safeguard Policies Triggered Yes [ ] No [ X ]

Change of EA category Yes [ ] No [ X ]

Other Changes to Safeguards Yes [ ] No [ X ]

Change in Legal Covenants Yes [ X ] No [ ]

Change in Loan Closing Date(s) Yes [ X ] No [ ]

Cancellations Proposed Yes [ ] No [ X ]

Change to Financing Plan Yes [ ] No [ X ]

Change in Disbursement Arrangements Yes [ X ] No [ ]

Reallocation between Disbursement Categories Yes [ X ] No [ ]

Change in Disbursement Estimates Yes [ X ] No [ ]

Change to Components and Cost Yes [ X ] No [ ]

Change in Institutional Arrangements Yes [ X ] No [ ]

Change in Financial Management Yes [ ] No [ X ]

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Change in Procurement Yes [ X ] No [ ]

Change in Implementation Schedule Yes [ X ] No [ ]

Other Change(s) Yes [ ] No [ X ]

Appraisal Summary Change in Economic and Financial Analysis Yes [ ] No [ X ]

Appraisal Summary Change in Technical Analysis Yes [ ] No [ X ]

Appraisal Summary Change in Social Analysis Yes [ ] No [ X ]

Appraisal Summary Change in Environmental Analysis Yes [ X ] No [ ]

Appraisal Summary Change in Risk Assessment Yes [ ] No [ X ].

B. Project Status1. The EIC Project became effective on May 18, 2011 and implementation of prioritized activities was launched. The Mid-Term Review was held in December 2013 and it found implementation progress moderately satisfactory. The implementation progress of the project has been overall slow due to a number of challenges faced by the Government under the Computer for All (1.3), Financial Support (2.1), and IT Industry Development (2.3) sub-components, as well as a confirmation that the financing of the physical infrastructure of the National Broadband sub-component 1.1 is no longer a priority.

2. However, there has been noted a significant implementation progress under the project during the last year. In the last nine months project disbursement reached US$9.3 million. The sub-components that are disbursing well include 1.2 Computer for All Program, 1.3 Digital Citizen Program, and 2.2 Establishment of Gyumri Technology Center. The sub-components that have not yet commenced disbursement are 2.1 Financial Support for Innovation in Knowledge and Technology-intensive Firms and 2.3 Support to IT/Knowledge-intensive Industry Development. The Computer for All Program has been fully implemented and all funds disbursed and the Digital Citizen Program is undergoing testing and final acceptance with 90% of all funds disbursed, The Gyumri Technology Center refurbishment is completed and operational as of February 1, 2014. The project met most of the milestones established during the May 2013 mission to trigger a decision on the scope of restructuring and project extension requested by the Government of Armenia (GoA).

3. Progress towards achievement of the PDO remains moderately satisfactory. However, the Government confirmed its commitment to the project objectives, outcomes, and indicators. Implementation activities are ongoing under all components.

4. The FM arrangements of the project have been reviewed periodically as part of project supervision, and were found to be adequate and acceptable to the Bank, with no outstanding or unresolved FM issues. The FM function under the project, including planning and budgeting, accounting, internal controls, flow of funds, staffing, financial reporting, and auditing, would remain under FFPMC’s responsibility. The project FM risk remains moderate. The Borrower is compliant with the FM covenants of the Legal Agreement including maintenance of an acceptable financial management system, submission of acceptable audited financial statements and IFRs to the Bank on time, and public disclosure of the audited financial statements. The project’s audited financial statements, with the auditor’s unmodified opinions, were received by due dates. There are neither overdue audits under the project nor any outstanding issue raised by the auditors in the project’s management letters.

5. 1. All environmental checklists, procurement plan and revised implementation plan for Vanadzor Technology Cente have been received. Project is in compliance and rated satisfactory in regard to environmental management..

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C. Proposed Changes.

Change in Implementing Agency

Implementing Agency Name Type Action

Enterprise Incubation Foundation Implementing Agency New

e-Government Infrastructure Implementation Unit OJSC (EKENG) Implementing Agency New.

Development Objectives/ResultsProject Development Objectives

Original PDOThe Project Development Objective (PDO) is to address constraints to competitive e-Society and enterprise innovation in Armenia by strengthening the underlying infrastructure and enabling environment.

Change in Project's Development Objectives

Change in Results Framework

Explanation:

Minor revisions were made to the Project Outcome Indicators consisting of:Change of bi-annual survey for the second of the indicators to annual.Replacement of responsibility for the first indicator from NCFA to EIF.

Several changes are proposed to the Intermediate Outcomes Indicators:Replacement of responsibility for data collection from NCFA to EIF for four indicatorsClarification of one indicator (residential broadband in villages)Removal of five indicators due to the change in scope of Components 1 and 2Introduction of one indicator due to the new activity in Vanadzor.

Change in Legal Covenants

Explanation:It is proposed to remove Legal Covenant Section 1. A. Institutional Arrangements: "furnish to the Bank an evidence showing a private sector co-financing is available for Part B.3 (a) (i) of the Project on the terms and conditions as set forth in the Sales Force Representation Office Operational Manual". The Sales Force Representation Office was financed by the Government with in-kind private sector contribution.

Ln/Cr/TF

Finance Agreement Reference

Description of Covenant Date Due Status Recurre

ntFrequency Action

IBRD-79630

Section 1. A. Institutional Arrangements

The Borrower shall, within one month after the Project effectiveness, establish a Project Steering Committee, consisting of the representatives from all entities involved in the Project implementation, and maintain it until

31-Jul-2011

Complied with

No Change

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completion of the Project

IBRD-79630

Section 1. A. Institutional Arrangements

The Borrower shall, after one year of set up of the Sales Force Representation Office, furnish to the Bank an evidence showing a private sector co-financing is available for Part B.3 (a) (i) of the Project on the terms and conditions as set forth in the Sales Force Representation Office Operational Manual

31-Dec-2013

Not complied with

Marked for Deletion

IBRD-79630

Section 1. C. Subsidiary Finance Agreements

the Borrower shall make a part of the proceeds of the Loan available to the NCFA or PFIs or EIF or the Seed and Early Stage VentureFund, respectively, under subsidiary agreements to be entered into between the Borrower and the NCFA or each PFI or the EIF or theSeed and Early Stage Venture Fund, respectively

Complied with Yearly No

Change

IBRD-79630

Section 2 B 4.

Financial Management, Financial Reports and Audits

One year after the first deposit into the Seed and Early Stage Venture Fund commercial account mentioned in Section IV.A.2 of this Schedule is made either by the Seed and Early Stage Venture Fund or the private investors, and every year thereafter, cause the Seedand Early Stage Venture Fund to carry out an annual independent external audit

28-Feb-2014

Not yet due

No Change

.

FinancingChange in Loan Closing Date(s)

Explanation:

The project is being proposed for extension from December 31, 2014 to June 30, 2016. The government

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request to introduce a second Technology Center under the project to be located in Vanadzor is in line with the regional economic development strategy. The Government intends to replicate the Gyumri model already implemented under the project. The activities required for implementation of Vanadzor Technology Center are scheduled to go beyond the current project closing project date until December 2015.

The Government has relied on the private sector to finance the Broadband Backbone. Therefore this activity is no longer needed under the project scope and consequently Broadband Backbone sub-component 1.1 has been reduced and restructured to focus on rural connectivity. Activities planned under the restructured component will also go beyond the current project completion date.

Also, delays were noted under Component 2, particularly implementation of Grants and Venture Fund activities that warrant an extension beyond the established timeline for completion.

Ln/Cr/TF Status Original Closing

DateCurrent Closing Date

Proposed Closing Date

Previous Closing Date(s)

IBRD-79630 Effective 31-Dec-2014 31-Dec-2014 30-Jun-2016 31-Dec-2014

Change in Disbursement Arrangements

Explanation:As US$4 million is proposed to be reallocated from Category 2(a) to Category 1 in the Eligible Expenditures of the Loan Agreement towards financing of a new activity related to the construction of the Vanadzor Technology Center, the Loan Agreement should be amended to remove the withdrawal condition (Schedule 2, Section IV.B.1(b)) as the Broadband Networks Subprojects under Category 2(a) (related to sub-component 1.1 Nationwide Broadband Backbone and Government Network) is being eliminated.In addition, the disbursement condition for Ideas Generation Grants and Innovation Matching Grants (Schedule 2, Section IV, B.1 (d)) should be modified. Specifically, the reference to Ideas Generation Grants should be removed as those grants were eliminated from the project. Inclusion of the Vanadzor region for Innovation Matching Grants should be reflected. The modified covenant should also refer to a new manual for Gyumri and Vanadzor.

Reallocations

Explanation:

The following re-allocations are proposed under the project restructuring:1. IBRD79630 Goods, works, consultants' services, training, and incremental operating costs category will increase from US$12,384,947 to US$15,712,947 due to US$3,328,000.00 proposed to be moved from the National Broadband sub-component 1.1 toward activities financing Vanadzor Technology Center under sub-component 2.2. National Broadband has been financed by the private sector, therefore activities under sub-component 1.1 have been refocused on Rural Broadband requiring a much smaller amount of financing.

2. IBRD79630 Sub-financing part B.1(a) increase of US$600,000 to finance additional grants for Vanadzor and Gyumri. This amount will be reallocated from part A.1(b).

3. IBRD79630 Sub-financing part B.1(b) increase of US$300,000 additional to original investment of US$3 million will be provided to finance management fees that will be repaid by the Fund Manager to the government. Recognizing that venture capital investing is still emerging in Armenia, and that a 2% management fee based on the Seed and Early-stage Venture Fund’s capital base would be insufficient for the Fund Manager to function effectively given the small size of the fund, it was agreed that in the interest

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of sound investment operations, a special class of shares amounting to US$300,000 held only by the Government with special rights unavailable to other shares will serve to augment the management fees. This amount will be reallocated from Category 1 "Goods, works, consultants' services, training and incremental operating costs for the Project".

Ln/Cr/TF Currency Current Category of Expenditure Allocation Disbursement % (Type

Total)

Current Proposed Current Proposed

IBRD-79630 USD IBRD79630 GO,CW,CS,TRG,OP

12,384,947.83

15,712,947.83 100.00 100.00

IBRD79630 Sub-financing part A.1(b)

4,000,000.00 0.00 100.00 100.00

IBRD79630 Sub-financing part A.3

3,000,000.00

3,000,000.00 100.00 100.00

IBRD79630 Sub-financing part B.1(a) 900,000.00 1,500,000.0

0 100.00 100.00

IBRD79630 Sub-financing part B.1(b)

3,000,000.00

3,000,000.00 50.00 50.00

IBRD79630 CS,TRG part B.3 (a) (i) 600,000.00 372,000.00 100.00 100.00

Refund of PPA 55,052.17 55,052.17 0.00 0.00

Designated Account 0.00 0.00 0.00 0.00

Designated Account 0.00 0.00 0.00 0.00

FRONT END FEE 60,000.00 60,000.00 0.00 0.00

IBRD79630 Sub-financing part B.1(b) (i) 0.00 300,000.00 0.00 0.00

Total: 24,000,000.00

24,000,000.00

Disbursement Estimates

Change in Disbursement Estimates

Explanation:The disbursement schedule will be revised to reflect disbursements under the contract for Vanadzor Technology Center in the amount of US$3.5 million scheduled for 2016.2015 - $4 million2016 - $9.7 million

Fiscal Year Current (USD) Proposed (USD)

2011 1,000,000.00 120,320.78

2012 4,000,000.00 1,086,678.39

2013 7,000,000.00 1,741,871.59

2014 7,000,000.00 7,328,286.45

2015 5,000,000.00 4,000,000.00

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2016 0.00 9,722,842.79

Total 24,000,000.00 24,000,000.00.

ComponentsChange to Components and Cost

Explanation:

The proposed restructuring will comprise:

Change of scope in Component 1:

Sub-component 1.1 National Broadband Backbone and Government Network is proposed to be changed to a Rural Broadband sub-component (“digital village”) due to the availability of private sector financing for the national backbone. The Rural Broadband sub-component is estimated at around US$400,000 and aims to demonstrate the socioeconomic impact of access to broadband at the local level in 344 rural locations in 10 border marzes (regions): Aragatsotn, Armavir, Shirak, Kotayk, Lori, Gegharkunik, Tavush, Ararat, Vayots Dzor, and Syunik. The sub-component involves the selection on a competitive basis of one or more service providers for the installation and operation of public WiFi access points in a central area (a village square or park) within the identified rural locations, and to deliver wireless internet service free of charge for at least one year within that limited area. The funds under the project will be used to finance the installation of the WiFi access points, including WiFi routers and antennas, on the exterior of already existing public buildings or poles. Given the demonstration effect of the pilot project, it is expected that private household demand for paid broadband services will grow in the identified rural locations beyond the coverage area of the public WiFi access points. This, combined with additional support that local authorities have committed to provide, will enable the service providers to continue to deliver free service at the public WiFi points beyond the first year.Specifically, it is expected that the local authorities will contribute to the continuation of the service in their respective villages. The list of villages was organized into four lots on the basis of their geographic proximity, and hence up to four different providers may be selected. While the rural broadband sub-project will contribute to the last mile element of the original design of this sub-component, the backbone element is being removed from the project design in light of the increased level of private sector investment. GoA confirmed that private sector telecommunications providers are investing heavily in deploying broadband infrastructure through a variety of technologies, such as backbone fiber optic infrastructure and broadband wireless access through 3G and LTE cellular technologies among others, having reached a household broadband penetration in excess of 50% by end-2012.

Change of scope in Component 2:

Given the implementation progress, it is proposed to carry out the following project adjustments through project restructuring and extension: sub-component 2.1: (i) increase Grants Facility from US$900,000 to US$1.5 million to include grants for Gymri and Vanadzor, (ii) move US$300,000 into the Venture Fund category to finance management fees; sub-component 2.2: (i) move US$4 million towards Establishment of the Vanadzor Technology Center; sub-component 2.3: (i) to account for and leverage the private sector financing that has been raised revise training scheme to provide cofinancing towards facilities and equipment needed for training, (ii) eliminate secondment program in the amount of $228,000 under Loan Agreement Part B.3 (a)(ii) of the project corresponding to sub-activity 2.3.1.ii.

Activity 2.1.1: Ideas Generation Mini Grants and Innovation Matching Grants

It is proposed to remove the sub-activity 2.1.1.i Ideas Generation Matching Grants and increase Category

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2(c) Grants Facility from US$900,000 to US$1.5 million to account for new grants in the Gyumri and Vanadzor Technology Centers. The program of providing “Ideas Generation Grants” ranging in size from US$2,000-US$10,000 was proposed as a means of helping students, scientists, and entrepreneurs determine the commercial feasibility of their ideas. After further analysis and review, it became apparent that such a financing program would be duplicative of other similar programs, such as Microsoft Innovation grants and those provided under the Armenian Government’s Scien ce Technology Entrepreneurship program with the U.S. Civil Research and Development Foundation. Moreover, given the small size of the proposed Idea Generation Mini Grants, such a program would likely be administratively unwieldy and inefficient to implement and manage. Thus, it was determined that funds allocated to mini-grants could be better utilized by expanding the Innovation Matching Grants program.

A new matching grants program in the Gyumri and Vanadzor Technology Centers will be added under this sub-activity. Gyumri and Vandadzor represent economically-depressed regions of Armenia, though there is a strong potential for stimulating growth of technology-driven, innovative SMEs and Technology Centers in both cities. In creating an ecosystem conducive for new technology businesses to develop and flourish, there must be present an array of complementary instruments. In particular, from conception to commercialization of innovative technologies, access to capital is crucial for entrepreneurs generating ideas to test and develop them into viable technologies, create prototypes, and ultimately, to market new products and services.

Various instruments developed under the Project have been designed to contribute along this development financing continuum in supporting establishment of viable technology-based businesses in Armenia. In this regard, the Matching Grant programs designed for Gyumri and Vanadzor fill a significant gap. They will provide commercially-driven grant award vehicles for selecting SMEs being incubated in the local Technology Centers and elsewhere to acquire critical financial resources they need – as well as the mentoring that accompanies these Matching Grants. Under these programs, the matching grant financing of US$10,000-US$50,000 is fixed at an 85:15 split, reflecting the specific needs of emergent SMEs in the Gyumri and Vanadzor regions.

Activity 2.1.2: Seed and Early Stage Venture Fund

Critical to the success of the Seed and Early Stage Venture Fund (SESVF) is ensuring that the fee paid to its Fund Manager is sufficient to cover essential expenses. Typically, the standard management fee for a mature venture capital fund in a developed market is approximately 2%, but the capital bases of those funds are much larger than the SESVF’s. Recognizing that venture capital investing is only emerging in Armenia, and that a 2% management fee based on SESVF’s small capital base would be insufficient for the Fund Manager to function effectively, it has been agreed that in the interest of sound investment operations, the aggregate management fee should be augmented by a US$300,000 investment by the Government in a special class of shares. This sum must be repaid by the Fund Manager, as it was structured as a special class of shares held only by the Government with special rights unavailable to other shares. The funding of this investment is provided for by reallocation of Project funds from Category 1 “Goods, works, consultants’ services, training and incremental operating costs for the Project” to Category 2(d) “Sub-financing for Sub-project under Part B.1(b) of the Project (Seed and Early Stage Venture Fund)” to be financed 100% from loan proceeds.

Activity 2.1.3: Innovation Brokerage

The team proposes to eliminate activity 2.1.3 Innovation Brokerage, which was designed to facilitate transformation of technology and innovation ideas into commercial projects acceptable for early stage venture capital or investors. Further to the concept of creating an ecosystem that will seamlessly provide access to finance along a continuum of tech SME development, the Matching Grant programs in Gyumri and Vanadzor will allow successful entrepreneur-innovators to grow their tech ideas and emergent

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companies to the next stage of venture capital financing. They could then be suitable candidates for commercially-based funding by the Seed and Early Stage Venture Fund.

Activity 2.2.4: Establishment of Vanadzor Technology Center

It is proposed to reallocate funds from sub-component 1.1 to sub-component 2.2, since project financing for national backbone is no longer needed (see above on change of scope in Component 1). The proposed reallocation will be used to finance the establishment of a Technology Center in Vanadzor, which will create the conditions for dev elopment of a technology center network in the country. The specific reallocation will be US$3,100,000 from Category 2 (a) and US$228,000 from Category 3 to Category 1 of the Eligible Expenditures as defined in the Loan Agreement.

The Government's request f or this reallocation takes into account the latest developments, in particular, (i) successful implementation of the Gyumri Technology Center (GTC) under sub-component 2.2 and a shift in the Government's regional economic development strategy to include Vanadzor, and (ii) the potential availability of significant private financing for the broadband sub-component, as described below:a. It was noted that establishment of the GTC was of specific priority and has already recorded success in Gyumri, which indicates a need for the creation of a technology center network by replicating the GTC model in Vanadzor. The Government has undertaken a feasibility study and designed a roadmap for the establishment of the new Vanadzor Technology Center, which will require US$4.27 million.b. The Government's assessment of private sector interest in financing broadband infrastructure shows that there is a larger interest than was initially anticipated. The GoA is currently further exploring the possibility of increasing private sector financing for broadband in Armenia.

This activity will finance refurbishment of the Vanadzor Technology Center’s building and technical monitoring (US$3.34 million), purchase of equipment and furniture (US$0.53 million), hiring of management staff and two administrators (US$0.1 million), and training and operating expenses (US$0.3 million).

Activity 2.3.2: Skills development and productivity improvement

The team proposes to eliminate 2.3.2.ii Productivity Improvement sub-activity under activity 2.3.2 Skills Development and Productivity Improvement. It was initially envisaged that this sub-activity would support local training firms to obtain necessary qualifications to provide certification and training in such standards as IT PMP, COBIT, and CMMI. However, an alternative approach was adopted for this purpose. In particular, the project will contribute cofinancing towards existing public-private partnerships with involvement of multinationals, academia, and donor institutions engaged in implementing initiatives targeted at the improvement of education quality at all levels. Such cohesive and institutional support to skills development of IT/high tech sector specialists is considered more efficient in terms of increasing the sector's productivity, as opposed to individual certification on a company level. Successful examples of PPP projects include the establishment of Microsoft Innovation Center (MIC) jointly with Microsoft Corporation, the Regional Mobile Applications Laboratory for Eastern CIS (mLab ECA) jointly with Nokia, and the Armenian-Indian Center for Excellence in ICT (AITC) and Armenian National Engineering Lab (ANEL) implemented jointly with National Instruments, all aiming to address the shortage of qualified ICT specialists in the country by means of curricula modernization, short-term and long-term courses, and expert assistance in organization of R&D activities. The activity will contribute towards financing of refurbishment, equipment, and training costs of the above-mentioned labs.

Public-private partnership (PPP) approach with involvement of multinationals, academia and donor institutions in implementing initiatives targeting at encouraging efficiency-seeking FDI from multinationals to ramp up their levelof engagement in the country and facilitate skills development by

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funding joint projects between multinationals and academia t odevelop enabling infrastructure, such as joint laboratories and Innovation centers. This approach is leveraging a model that has been proven to work in Armenia where the government provides the infrastructure and the multinational provides course work and tech nical know-how. As in previously completed PPPs, the facilities is located in academic institutions and owned by the government. There are several other initiatives in the pipeline and a proposal with a major multinational is currently under negotiations which will include upgrading academic programs within universities, providing state of the art equipment to students and researchers to implement relevant research projects and access to complex software to develop social analytics and mobile application. Memorandums of Understanding (MOUs) have been signed with some other major multinationals and high-level discussions have been initiated in several areas including developing capabilities in Cloud computing and network technologies. The multinationals customarily do not invest in infrastructure and do not provide in cash contributions but rather work with existing infrastructure in the country.

Current Component Name

Proposed Component Name

Current Cost (US$M)

Proposed Cost (US$M) Action

E-Society Infrastructure Development 12.70 4.70 Revised

Fostering Enterprise Innovation 10.20 17.53 Revised

Project Management 1.10 1.77 Revised

Total: 24.00 24.00.

Other Change(s)Change in Institutional Arrangements

Explanation:Remove NCFA as a PIU for the implementation of National Broadband due to elimination of this sub-component from the project scope.

Change in Procurement

Explanation:New items were added in the procurement plan.

Change in Implementation Schedule

Explanation:

The implementation schedule was extended to accommodate additional activities..

Change(s) in Appraisal SummaryAppraisal Summary Change in Environmental Analysis

Explanation:An additional site at Vanadzor is being proposed for refurbishment.

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Annex 1:Results Framework and Monitoring

Armenia: E-Society and Innovation for Competitiveness (EIC) Project (P115647)

Project Name:

E-Society and Innovation for Competitiveness (EIC) Project (P115647)

Project Stage: Restructuring Status: ARCHIVED

Team Leader: Sandra Sargent Requesting

Unit: ECCU3 Created by: Sandra Sargent on 11-Dec-2013

Product Line: IBRD/IDA Responsible

Unit: GTIDR Modified by: Sandra Sargent on 08-Jul-2014

Country: Armenia Approval FY: 2011

Region: EUROPE AND CENTRAL ASIA

Lending Instrument: Specific Investment Loan

.

Project Development ObjectivesOriginal Project Development Objective:The Project Development Objective (PDO) is to address constraints to competitive e-Society and enterprise innovation in Armenia bystrengthening the underlying infrastructure and enabling environment.

ResultsCore sector indicators are considered: Yes Results reporting level: Project Level.

Project Development Objective IndicatorsStatus Indicator Name Core Unit of Measure Baseline Actual(Current) End TargetRevised Access to Internet Services

(number of subscribers per 100 people)

Number Value 15.00 65.00 50.00

Date 30-Nov-2010 13-Dec-2013 30-Jun-2016

Comment Unit of n/a Unit of measure

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measure is %.Baseline is a government estimate, to be confirmed through household survey currently underway.

is %.

Access to Internet Services (number of subscribers per 100 people)

Number Value 15.00 65.00 50.00

Date 30-Nov-2010 13-Dec-2013 31-Dec-2014

Comment Unit of measure is %.Baseline is a government estimate, to be confirmed through household survey currently underway.

n/a Unit of measure is %.

Revised IT/ITES Employment (number of people)

Number Value 5190.00 10740.00 6900.00

Date 30-Nov-2010 13-Dec-2013 30-Jun-2015

Comment n/a

IT/ITES Employment (number of people)

Number Value 5190.00 10740.00 6900.00

Date 30-Nov-2010 13-Dec-2013 31-Dec-2014

Comment n/a

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Revised Access to computers (% of population using a computer)

Percentage Value 15.00 41.00 50.00

Date 30-Nov-2010 31-May-2013 30-Jun-2016

Comment Baseline is a government estimate, to be confirmed through household survey currently underway.

n/a

Access to computers (% of population using a computer)


Date 30-Nov-2010 31-May-2013 31-Dec-2014

Comment Baseline is a government estimate, to be confirmed through household survey currently underway.

n/a

Revised Development of Knowledge and Technology intensive industries (Ratio of IT/ITES Sector revenue in GDP)


Date 30-Nov-2010 13-Dec-2013 30-Jun-2016

Comment Includes IT services, software, ISPs, and engineering

n/a

18

services. Target values assume 15% annual growth.

Development of Knowledge and Technology intensive industries (Ratio of IT/ITES Sector revenue in GDP)


Date 30-Nov-2010 13-Dec-2013 31-Dec-2014

Comment Includes IT services, software, ISPs, and engineering services. Target values assume 15% annual growth.

n/a

New VTC facility is ready for occupancy

Date Value 30-Jun-2016

Date

Comment

Intermediate Results Indicators

Status Indicator Name Core Unit of Measure Baseline Actual(Current) End TargetRevised Residential broadband

household penetration in the villages under the project scope


Date 30-Nov-2010 03-May-2013 30-Jun-2016

Comment Household broadband penetration as of end-2009

No new data available

Residential broadband Percentage Value 8.30 54.40 30.00

19

household penetration Date 30-Nov-2010 03-May-2013 31-Dec-2014

Comment Household broadband penetration as of end-2009


Marked for Deletion

Business broadband penetration

Number Value 0.00 54000.00

Date 30-Nov-2010 03-May-2013 31-Dec-2014

Comment Baseline and targets to be estimated by NCFA prior to project launch


Marked for Deletion

Public sector institutions/ offices connected to broadband

Number Value 0.00

Date 30-Nov-2010 01-Nov-2012 31-Dec-2014

Comment Baseline and targets to be estimated by NCFA prior to project launch

Survey has not been conducted yet. Discussions are underway about restructuring this indicator.

Revised Price of retail broadband access as a % of average monthly salary


Date 30-Nov-2010 13-Dec-2013 31-Dec-2014

Comment Estimated based on a monthly broadband subscription

20

fee of 14,200 AMD and a monthly average salary of 101,800 AMD

Price of retail broadband access as a % of average monthly salary


Date 30-Nov-2010 13-Dec-2013 31-Dec-2014

Comment Estimated based on a monthly broadband subscription fee of 14,200 AMD and a monthly average salary of 101,800 AMD

No Change Number of electronic certificates issued

Number Value 0.00 175000.00 5000.00

Date 30-Nov-2010 13-Dec-2013 31-Dec-2014

CommentRevised Percentage of households

owning a computerPercentage Value 10.00 40.00 40.00

Date 30-Nov-2010 13-Dec-2013 30-Jun-2016

Comment Household survey underway. 10% estimated PC penetration

21

for 2008

Percentage of households owning a computer


Date 30-Nov-2010 13-Dec-2013 31-Dec-2014

Comment Household survey underway. 10% estimated PC penetration for 2008

Revised Number of households owning a computer purchased under the Computer for All program

Number Value 3500.00 0.00 10000.00

Date 30-Nov-2010 01-Nov-2012 30-Jun-2016

Comment Computers sold under Computer for All pilot (6 months prior to project appraisal)

Number of households owning a computer purchased under the Computer for All program

Number Value 3500.00 0.00 15000.00

Date 30-Nov-2010 01-Nov-2012 31-Dec-2014

Comment Computers sold under Computer for All pilot (6 months prior to project appraisal)

Revised Number of Matching grants Number Value 0.00 0.00 8.00

22

approved Date 30-Nov-2010 13-Dec-2013 30-Jun-2016

Comment Project did not commence.

Number of Ideas/Matching grants approved

Number Value 0.00 0.00 0.00

Date 30-Nov-2010 13-Dec-2013 31-Dec-2014

Comment Project did not commence.

Revised Number of projects financed through the Venture Fund


Date 30-Nov-2010 13-Dec-2013 30-Jun-2016

Comment Activity did not commence disbursement.

Number of projects financed through the Venture Fund


Date 30-Nov-2010 13-Dec-2013 31-Dec-2014

Comment Activity did not commence disbursement.

Revised Number of projects prepared and presented to potential investors


Date 30-Nov-2010 01-Nov-2012 30-Jun-2016

Comment Activities have not yet commenced.

Number of projects prepared and presented to potential investors


Date 30-Nov-2010 01-Nov-2012 31-Dec-2014

Comment Activities have

23

not yet commenced.

Revised Number of enterprises benefited from GTC

Number Value 0.00 0.00 50.00

Date 30-Nov-2010 13-Dec-2013 30-Jun-2016

Comment GTC has not yet opened.

Number of enterprises benefited from GTC

Number Value 0.00 0.00 50.00

Date 30-Nov-2010 13-Dec-2013 31-Dec-2014


Revised Occupancy rate of GTC Percentage Value 0.00 0.00 80.00

Date 30-Nov-2010 13-Dec-2013 30-Jun-2016


Occupancy rate of GTC Percentage Value 0.00 0.00 80.00

Date 30-Nov-2010 13-Dec-2013 31-Dec-2014


Marked for Deletion

Export of IT/ITES sector (million USD)

Amount(USD) Value 71.50 133.40 165.00

Date 30-Nov-2010 13-Dec-2013 31-Dec-2014

Comment Includes IT services, software, ISPs, and engineering services (2009

IT industry experienced growth due to factors external to project.

24

data from MinEcon IT Industry Report). Target values assume 15% annual growth.

Revised Number of sales and investments generated by the representative office (million USD)


Date 30-Nov-2010 13-Dec-2013 30-Jun-2016

Comment Office was just opened in May 2013.

Number of sales and investments generated by the representative office (million USD)


Date 30-Nov-2010 13-Dec-2013 31-Dec-2014

Comment Office was just opened in May 2013.

Marked for Deletion

Labor productivity in IT/ITES sector (thousand USD per employee)

Amount(USD) Value 25.00 37.00 43.00

Date 30-Nov-2010 13-Dec-2013 31-Dec-2014

CommentRevised Number of manpower trained

and certified under the project (number of people)

Number Value 0.00 0.00 150.00

Date 30-Nov-2010 13-Dec-2013 30-Jun-2016

Comment Training program was not launched.

Number of manpower trained and certified under the project

Number Value 0.00 0.00 150.00

Date 30-Nov-2010 13-Dec-2013 31-Dec-2014

25

(number of people) Comment Training program was not launched.

Annex 1

Operational Risk Assessment Framework (ORAF)

Armenia: E-Society and Innovation for Competitiveness (EIC) Project (P115647).

.

Project Stakeholder Risks

Stakeholder Risk Rating

Risk Description: Risk Management:

While the project enjoys a high degree of commitment from all stakeholders (both with government and with project beneficiaries), political developments could imply a shift in level of political support for the project.

Project Steering Committee to be led by PM with clear implementation roadmap which will identify upfront potential roadblocks to effective implementation and design of mitigation measures.

Resp: Status: Stage: Recurrent: Due Date: Frequency:

Client In Progress Implementation Yearly

Implementing Agency (IA) Risks (including Fiduciary Risks)

Capacity Rating


FFPMC has key staff with experience and a satisfactory track record in procurement and FM in general and on donor-funded projects specifically. However, FFPMC lacks experience with ICT procurement. Project complexity and expected volume of ICT procurement

FFPMC will assign two procurement specialists to work on the project. FFPMC will attend training in ICT procurement. Additional staff to be recruited to strengthen EIF, NCFA, and EKENG in a number of areas, in particular to manage the broadband, computer for all, and venture fund sub-components.


26

packages, coupled with large number of projects managed by FFPMC, could lead to delays in implementation. The capacity of the other participating agencies, EIF, NCFA, and EKENG, was assessed as adequate, but with certain areas in need of strengthening, particularly with regard to

Client Completed Implementation 28-Dec-2012

Governance Rating


FFPMC has a clear system of accountability with clearly defined responsibilities and delegation of authority on who has control of FM and procurement decisions. However, technical expertise lies in the Ministry of Economy, and FFPMC is only accountable for fiduciary responsibilities. Hence, split implementation responsibilities between the technical agencies (NCFA, EIF, and EKENG) and the fiduciary agency (FFPMC) could introduce delays in implementation and even conflicts between the responsible agencies.

Project Steering Committee will have a small executive team comprised of the heads of the four key responsible agencies and a representative of the Ministry of Economy, which will meet on a regular basis to ensure coordination and smooth implementation.


In Progress Implementation Yearly

Risk Management:

Board composition and structure of FFPMC will provide for independence of the entity. Project team will ensure chamber of control will be involved in providing independent oversight over FFPMC's discharge of its fiduciary obligations.


27

Client In Progress Implementation Yearly

Project Risks

Design Rating


Overall project complexity, relatively modest resources to implement the project, and excessively high expectations of the client could lead to perceptions of underperformance and disappointment.

The project team has made an effort to simplify the design of the project and set targets for outcome indicators at a modest level, managing expectations through adequate PR. The use of PPP approaches, leveraging private sector investment, should mitigate the risk of inadequacy of resources.


Client In Progress Implementation

Social and Environmental Rating


Works envisaged under the project include rollout of broadband communications infrastructure and refurbishing of Gyumri Technology Center building, which could have moderate negative environmental impacts, in most cases transitory.

The client has developed a detailed ESMF for the broadband component and a detailed EMP for the GTC refurbishing, which assess in detail the possible impacts and lay out the mitigation measures and respective obligations of the responsible agencies.


Client Completed Implementation 28-Dec-2012

Program and Donor Rating


There are no other donors directly cofinancing the project and hence there are no program-related risks. The IT Sector Development Concept Paper serves as a master strategy for the broad ICT and innovation sectors, and the

The Government expects to assure coordination between all ICT-related projects through the Project Steering Committee, which will have responsibility over future donor-funded projects in the same field.

28

Government is in discussion with a number of donors for eventual provision of complementary assistance to the GoA in areas not covered by the project. If such assistance materializes, coordination will need to be assured.

The Bank will conduct ongoing dialog with donors.


Both In Progress Implementation Yearly

Delivery Monitoring and Sustainability Rating


Inappropriate sequencing of ICT investments and business reengineering or lack of resources needed for change management could pose a threat to the effectiveness and impact of the project.

The project will focus primarily on cross-cutting e-Society building blocks with minimal business process reengineering requirements.


Client Completed Implementation Yearly

Other (Optional) Rating


A number of activities under the project (broadband networks, e-ID cards, personal computers for households, technology center, andventure fund) rely on demand from citizens or businesses for their success. If demand is weaker than expected, the development impact of the project could be reduced.

Demand for most of the proposed investments has already been tested through pilots or earlier projects. Promotion and demand stimulation activities will be an integral part of the project.


Client Not Yet Due Implementation Yearly

Other (Optional) Rating



Implementation

29

Overall Risk

Overall Implementation Risk: Rating

Risk Description:

n/a

30

Documents

documents.worldbank.orgdocuments.worldbank.org/curated/pt/426371468205168507/... · Web viewDocument of. The World Bank. FOR OFFICIAL USE ONLY. Report No: RES13152. Restructuring