RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE KENYA COASTAL DEVELOPMENT PROJECT APPROVED ON JULY 27, 2010 TO THE REPUBLIC OF KENYA

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Environment and Natural Resources Kenya Country Department Africa Region Document of The World Bank RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE KENYA COASTAL DEVELOPMENT PROJECT APPROVED ON JULY 27, 2010 TO THE REPUBLIC OF KENYA August 9, 2012 Report No: KE This document has as restricted distribution and may be used by recipients only in the performance of their official duties. Its contents my not otherwise be disclosed without World Bank authorization.

2 ABBREVIATIONS AND ACRONYMS ALRMP II BDS BP CAAC CDA CDD CSO CRC CVF EA EEZ EOP EIA ESMF FID FM FY GEO GEF GoK GIS HMP ICR ICZM ISR IDA ISDS IPPF KACC Arid Lands Resource Management Project II Business Development Services Bank Policy Coastal Area Advisory Committee Coast Development Authority Community Driven Development Civil Society Organization Citizen Report Card Coastal Village Fund Environmental Audit Exclusive Economic Zone End of Project Environmental Impact Assessment Environmental and Social Management Framework Fisheries Department Financial Management Fiscal Year Global Environmental Objective Global Environmental Government of Kenya Geographical Information System Hazina ya Maendeleo ya Pwani Implementation Completion Rport Integrated Coastal Zone Management Implementation Status an Results International Development Association Integrated Safeguards Datasheet Indigenous Peoples Planning Framework Kenya Anti Corruption Council 2

3 KCDP KMFRI KEFRI KWS MoF MoFD MCS M&E MLDP MPA MPs MSMEs MoL MS NEMA OP OPCS PAD PC PF PPOA PCU PIM PPP PPR PDO RP SDR SMSEs SoE TTL VMS Kenya Coastal Development Project Kenya Marine Fisheries Research Institute Kenya Forestry Research Institute Kenya Wildlife Service Ministry of Finance Ministry of Fisheries Development Monitoring, Control and Surveillance Monitoring and Evaluation Ministry of Lands (Department of Physical Planning Marine Protected Area Management Plans Micro Small and Medium Enterprises Ministry of Lands Moderately Satisfactory National Environment Management Authority Operation Policy Operations Policy and Country Services Project Appraisal Document Project Coordinator Process Framework Public Procurement Authority Project Coordination Unit Project Implementation Manual Public-Private Partnership Procurement Post Review Project Development Objective Restructuring Paper Special Drawing Rate Small and Medium Sized Enterprises Statement of Expenditure Task Team Leader Vessel Monitoring System 3

4 Regional Vice President: Country Director: Sector Manager / Director: Task Team Leader: Makhtar Diop Johannes Zutt Jonathan Kamkwalala Ann Jeannette Glauber 4

5 KENYA KENYA COASTAL DEVELOPMENT PROJECT P CONTENTS A. SUMMARY... 8 B. PROJECT STATUS... 8 C. PROPOSED CHANGES... 9 D. APPRAISAL SUMMARY ANNEX 1: RESULTS FRAMEWORK AND MONITORING ANNEX 2: UPDATED GOVERNANCE ACTION PLAN

6 Data sheet RestructuringStatus: Restructuring Type: Level I (Board Approval) 1. Basic Information Project ID & Name: P (IDA Cr KE/TF097578) Coastal Development Project Country: Republic of Kenya Task Team Leader: Ann Jeanette Glauber Sector Manager / Director: Jonathan Kamkwalala / Jamal Saghir Country Director: Johannes Zutt Original Board Approval Date: 07/27/2010 Original Closing Date: 10/29/2016 Current Closing Date: 10/29/2016 Proposed Closing Date: 10/29/2016 EA Category: B-Partial Assessment Revised EA Category: B-Partial Assessment EA Completion Date: 06/06/2008 EA Completion Date, Revised: 2. Revised Financing Plan (US$ million) Source Original Revised Borrower GFCO IDA Total Borrower Organization Department Location Ministry of Finance, The Nairobi, Kenya Treasury, Nairobi, Kenya 4. Implementing Agency Organization Department Location Kenya Marine Fisheries Mombasa, Kenya Research Institute (KMFRI) Fisheries Department (FiD) Mombasa, Kenya Kenya Forestry Research Mombasa, Kenya Institute (KEFRI) Kenya Wildlife Service (KWS) Mombasa, Kenya Coast Development Authority Mombasa, Kenya (CDA) National Environment Mombasa, Kenya Management Authority Ministry of Lands (Department of Physical Planning) Nairobi, Kenya 5. Disbursement Estimates (US$m) Actual amount disbursed as of July 25, 2012 Total to date:

7 Fiscal Year Annual Cumulative Total Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank NO policies? Does the restructured project trigger any new safeguard NO policies? 7a. Project Development Objectives and Outcomes Original/Current Project Development Objectives/Outcomes: The original Project Development Objective (PDO) is: To promote environmentally sustainable management of Kenya s coastal and marine resources by strengthening the capacity of existing relevant government agencies and by enhancing the capacity of rural micro, small and medium sized enterprises in selected coastal communities. 7b. Revised Project Development Objectives/Outcomes: The proposed revised PDO is: To improve management effectiveness and enhance revenue generation of Kenya s coastal and marine resources. 7

8 KENYA KENYA COASTAL DEVELOPMENT PROJECT RESTRUCTURING PAPER A. SUMMARY 1. This Restructuring Paper (RP) responds to the request of the Government of Kenya and proposes to introduce the following changes to the Kenya Coastal Development Project (KCDP; P094692, Credit 4801-KE/TF097578) and accompanying amendments to the Project s legal documents: (i) simplification of the Project Development Objective (PDO); (ii) revision of the results framework, including changes to outcome indicators so as to better monitor project impact, and revision of targets to reflect reallocated resources (see below); (iii) revision of institutional arrangements to allow for implementation of the Development Fund of the Coast, or Hazina ya Maendeleo ya Pwani (HMP), formerly Coastal Village Fund (CVF) (Part 4(b) of the Project), by the Kenya Marine Fisheries Research Institute (KMFRI), rather than the Arid Lands Resource Management Project II (ALRMP II), which is now closed; (iv) revision of activities included under Schedule 1 of the Financing and Grant Agreements to reflect agreed simplification and streamlining; (v) reallocation of about 26% of credit proceeds to facilitate project implementation; (vi) definition of project activities to be financed under the GEF grant at 100% and to allow for project financing of 100% of expenditures under Category 1 of the Financing Agreement; and (vii) revision of eligible procurement methods to include Force Account and Community Participation. The reallocation of project funds among existing categories will address unbudgeted costs associated with safeguards requirements and management costs associated with the HMP (now implemented directly by KMFRI). The reallocation also reflects a reduced scope of Public-Private Partnership and HMP activities in line with the revised Results Framework. Overall, the proposed restructuring provides an opportunity to: (i) clarify and simplify the project design so as to ensure achievement of objectives within the duration of the project, which is expected to close on October 29, 2016, and (ii) improve the potential for demonstrating project success. B. PROJECT STATUS 2. The project was approved on July 27, 2010 and became effective on June 30, 2011, almost a year after Board approval, due to delays in achieving the project s six conditions of effectiveness. The project, which has now been under implementation for one year, has experienced initial delays in procurement and financial management, which have resulted in an overall slow implementation progress. These shortcomings, mainly due to weak capacity, have been addressed and implementation is picking up the pace, with key studies, works and technical consultancies being procured. As of July 25, 2012, the project has disbursed US$3.02 million. Overall, project implementation progress is rated Moderately Satisfactory (MS) in the last ISR dated May 7, 2012, to reflect the slow 8

9 start in implementation. This project restructuring includes simplification and streamlining of activities which will help expedite implementation. C. PROPOSED CHANGES Project s Development Objective 3. The original Project Development Objective (PDO) is: To promote environmentally sustainable management of Kenya s coastal and marine resources by strengthening the capacity of existing relevant government agencies and by enhancing the capacity of rural micro, small and medium sized enterprises in selected coastal communities. 4. The proposed revised PDO is: To improve management effectiveness and enhance revenue generation of Kenya s coastal and marine resources. This change simplifies the PDO by eliminating the description of the component activities from the PDO statement, aligning it with the activities supported, and facilitating measurement of results within the project lifetime. Results/indicators 5. In addition to changing the PDO, the proposed restructuring introduces changes to the Results Framework, which has been revised and simplified to include more relevant, measurable and clearly defined results indicators that are better suited to assess and monitor the implementation progress toward achieving the PDO. In addition, the targets related to activities of, or supported by, the HMP have also been revised to better reflect the pilot nature of these activities. (See Annex 1 for details). Components 6. The restructuring does not propose revision of any components or subcomponents; rather it includes changes to the activities to be supported under each component (Schedule 1 of the Financing and Grant Agreements, and Parts 1, 2, 3 and 4 of the Project). The proposed modifications are intended to reflect the agreed simplification and streamlining, and distinguish grant- and credit-financed activities, while retaining the general project design and component structure. Table 1 shows the activities originally supported by the project and those that would be supported under the restructured project: Table 1: Original Versus Proposed Activities Original Activities Proposed Activities Component 1: Sustainable Management of Fisheries Resources Promote sustainable management of Promote long term management fisheries resources and enhancing the effectiveness of fisheries resources and benefits and revenue generation derived enhance the benefits and revenue from coastal fisheries through: (a) developing and implementing a cost generation derived from coastal fisheries through: effective monitoring control and (a) Promoting and developing fisheries surveillance strategy in Kenya s governance including support for and 9

10 Exclusive Economic Zone; (b) developing the Recipient s capacity to negotiate fair and transparent license agreements with distant water fishing nations and vessels through training and technical advisory services; (c) developing and implementing a vessel monitoring system for licensed fishing vessels; (d) carrying out routine monitoring of vessels, licenses, fish landings and developing a fisheries management information system; (e) carrying out research to support stock assessments for ten (10) agreed priority fish species; (f) carrying out demand-driven research for aquaculture; (g) rehabilitating and constructing hatcheries; (h) promoting aquaculture production through technical assistance, training and provision of necessary equipment; (i) undertaking quality assurance and building capacity and awareness of fishing communities through training and dissemination of information; (j) developing the legal and policy framework for sustainable aquaculture development; (k) undertaking spatial mapping of fisheries and related oceanographic and environmental parameters; (l) promoting ecosystem-based management of fish resources; (m) developing fishery specific comanagement plans; (n) carrying out research on by-catch management and control and on tools for reducing mortality of turtles, seabirds and mammals and other protected or endangered species. Component 2: Sound Management of Natural Resources Promote sound management of natural resources and eco-tourism related industries through: (a) setting up of a coastal biodiversity information management system; 10 the development of increased capacity to undertake monitoring, control and surveillance and optimizing the use of deep-sea resources within Kenya s Exclusive Economic Zone; (b) Promoting and developing the Recipients fisheries management and research capacity including assessment of fish stocks, ecosystem approach to fisheries, co-management of fisheries through beach management units and fishery management plans; (c) Promoting and developing value addition of fish catches in the coastal fisheries and the affected communities; (d) Promoting and developing aquaculture through research and technical support; (e) Carrying out minor infrastructure improvements. Promote improved management of natural resources and eco-tourism related industries through: (a) Improving the management and regeneration of natural resources and

11 (b) carrying out specialized surveys on flora and fauna in the Arabuko-Sokoke, Boni-Dodori and Kiunga forests areas and any other areas agreed with the Association; (c) carrying out of biodiversity assessments in the Mombasa Marine National Park and Kisite-Mpunguti, Shimba Hills, Shimoni, Marereni and Assakone community conservation areas and any other areas agreed with the Association; (d) developing and implementing guidelines for management of environmentally and socially critical habitats in the Tana Delta; (e) developing and implementing conservation strategies for endangered species/ecosystems such as sea turtles, coral reefs and dugong and other critical habitats; (f) promoting co-management of conservancies by facilitating partnership between the Recipient and local communities and implementing management plans for conservation and sustainable use of coastal mangrove and other forest ecosystems; (g) creating and securing an elephant corridor linking Arabuko-Sokoke forest to Tsavo East National Park; (h) building the capacity of institutional staff and local community members in conservation management through training and sharing of best practices; (i) carrying out of economic valuation for Shimba Hills and the Malindi - Watamu Marine Protected Area; (j) supporting greater collaboration, harmonization, monitoring and surveillance of shared fisheries and other resources at Kisite-Mpunguti and Shimba Hills, and between South Coast in Kenya and Tanga, Pangani, Zanzibar and Pemba in Tanzania so that individual national budgets in the two countries are more effective; (k) strengthening extension services for biodiversity through co-management and partnerships; (b) Improving research capacity and information systems for natural resource management and biodiversity conservation; (c) Identifying biodiversity products and markets that will assist in promoting eco-tourism and related industries; (d) Conducting institutional and local communities awareness and capacity building for sustainable natural resource management, and providing improved extension services; and (e) Carrying out minor infrastructure improvements. 11

12 village based investment activities through training, information sharing and technical advice; (l) developing and disseminating information on ten (10) appropriate technologies for village based investment activities; (m) compiling information on existing tourism infrastructure, assets and activities along the Kenya coast; (n) developing new tourism circuits in Kiunga, Lamu, Mombasa, Malindi, Watamu, Arabuko-Sokoke and South Coast, by facilitating partnerships amongst the local industry players and local communities; and carrying out activities to develop and promote markets for the new circuits; (o) undertaking a study on tourism income distribution to identify opportunities for local communities to exploit and building their capacity to exploit these opportunities in sustainable manner; and (p) carrying out specific coastal and marine research for promoting sustainable management of natural resources. Component 3: Support for Alternative Livelihoods Promote sustainable livelihoods within a sound governance framework through: (a) preparing land capability plans and land use plans to assess land potential and defining broad land use plans at the provincial, district and ward levels of the Coast Province; (b) Strengthening NEMA s capacity to implement the Integrated Coastal Zone Management (ICZM) framework through: (i) technical assistance for reviewing the relevant policy and legal framework, (ii) rehabilitating and refurbishing offices, (iv) provision of training and equipment, (v) financing of community outreach activities and (v) developing and implementing an ICZM awareness strategy; (c) developing and implementing incentives for environmental 12 Promote sustainable livelihoods within an improved governance framework through: (a) Building the capacity of the implementing agencies decentralized offices in the Coast Region s six counties (MoL, NEMA and CDA); (b) Preparing a land capability plan for the Coast Region and land use plans for selected counties and wards; (c) Enhancing NEMA's capacity to strengthen and implement the Integrated Coastal Zone Management (ICZM) framework; (d) Promoting the development of Micro, Small and Medium Enterprises (MSMEs) through value chain studies, and provision of business development and financial services; (e) Piloting of Public-Private Partnerships (PPP) to promote sustainable

13 governance and conservation; (d) building the capacity of the provincial and district land offices in the Coast Province through rehabilitation and refurbishment of offices and provision of training and relevant equipment; (e) sensitizing local communities on sustainable land use; (f) harmonizing the legislative and regulatory framework for addressing environmental degradation along the coast and strengthening associated institutions through sensitization, training and provision of relevant equipment; (g) developing CDA s capacity to promote partnerships between local communities and Micro, Small and Medium Enterprises (MSMEs) through training, technical advisory services, rehabilitation and refurbishment of offices and provision of relevant equipment; (h) providing Business Development Services (BDS) and establishing BDS resource centers for MSMEs; (i) promoting the availability and accessibility of ready financing for MSMEs through: (i) value addition micro studies in the mango, cashew, fishing and jatropha subsectors and other natural resources subsectors; (ii) provision of training and support in basic financial management, (iii) developing business plans and business licensing; and (iv) provision of relevant equipment and supplies; (j) promoting value addition of village based economic activities in five (5) viable subsectors to maximize economic returns to local communities; and (k) piloting five (5) public private partnerships between local investors and MSMEs. 13 management of coastal and marine resources; and (f) Carrying out minor infrastructure improvements. Component 4: Capacity Building, Monitoring and Evaluation System, Project Management, Communication and Coastal Development Fund Promote investment in village based Promote investment in village based

14 economic activities and enhancing the capacity for Project implementation, and stakeholder dialogue through: (a) establishing and implementing a Coastal Village Fund to provide grants to Beneficiaries to implement preselected activities that promote the sustainable management of fishery resources and the sound management of natural resources; (b) establishing and building capacity of the Project staff through training, technical advisory services and provision of relevant goods; (c) developing an information and communication strategy for the Project; (d) developing and implementing an effective monitoring and evaluation system; and (e) financing of Operating Costs. economic activities, and enhance the capacity for Project implementation and stakeholder dialogue through: (a) Establishing and building capacity of the Project staff through training, technical advisory services and provision of relevant goods; (b) Establishing and implementing a a Development Fund of the Coast (Hazina ya Maendeleo ya Pwani) to provide micro-credit banking fees and grants to Beneficiaries to implement eligible demand driven sub-projects that promote micro and small enterprises (MSME), natural resource management and community services; (c) Developing an information and communication strategy for the Project; (d) Developing and implementing an effective monitoring and evaluation system; (e) Establishing efficient coordination mechanisms and management procedures through financing consultancies, minor infrastructure improvements and financing of Operating Costs for the entire project; and (f) Carrying out minor infrastructure improvements. Of these activities, the GEF grant will support the following activities: Original Activities Proposed Activities Component 1: Sustainable Management of Fisheries Resources Promote sustainable management of Promote long term management fisheries resources and enhancing the effectiveness of fisheries resources and benefits and revenue generation derived enhance the benefits and revenue from coastal fisheries through: (a) developing and implementing a cost generation derived from coastal fisheries through: effective monitoring control and (b) Promoting and developing the surveillance strategy in Kenya's Recipients fisheries management and Exclusive Economic Zone; (b) developing the Recipient's capacity to negotiate fair and transparent license agreements with distant water fishing nations and vessels through training research capacity including assessment of fish stocks, ecosystem approach to fisheries, co-management of fisheries through beach management units and fishery management plans. 14

15 and technical advisory services; (c) developing and implementing a vessel monitoring system for licensed fishing vessels; (d) carrying out routine monitoring of vessels, licenses, fish landings and developing a fisheries management information system; (e) carrying out research to support stock assessments for ten (10) agreed priority fish species; (f) carrying out demand-driven research for aquaculture; (g) rehabilitating and constructing hatcheries; (h) promoting aquaculture through technical assistance, training and provision of necessary equipment; (i) undertaking quality assurance and building capacity and awareness of fishing communities through training and dissemination of information; (j) developing the legal and policy framework for sustainable aquaculture development; (k) undertaking spatial mapping of fisheries and related oceanographic and environmental parameters; (l) promoting ecosystem-based management of fish resources; (m) developing fishery specific comanagement plans; and (n) carrying out research on by-catch management and control and on tools for reducing mortality of turtles, seabirds and mammals and other protected or endangered species. Component 2: Sound Management of Natural Resources Promote sound management of natural resources and eco-tourism related industries through: (a) setting up of a coastal biodiversity information management system; (b) carrying out specialized surveys on flora and fauna in the Arabuko-Sokoke, Boni-Dodori and Kiunga forests areas and any other areas agreed with the Association; 15 Promote improved management of natural resources and eco-tourism related industries through: (b) Improving research capacity and information systems for natural resource management and biodiversity conservation.

16 (c) carrying out of biodiversity assessments in the Mombasa Marine National Park, Kisite-Mpunguti, Shimba Hills, Shimoni, Marereni and Assakone community conservation areas and any other areas agreed with the Association; (d) developing and implementing guidelines for management of environmentally and socially critical habitats in the Tana Delta; (e) developing and implementing conservation strategies for endangered species/ecosystems such as sea turtles, coral reefs and dugong and other critical habitats; (f) promoting co-management of conservancies by facilitating partnership between the Recipient and local communities and implementing management plans for conservation and sustainable use of coastal mangrove and other forest ecosystems; (g) creating and securing an elephant corridor linking Arabuko-Sokoke forest to the Tsavo East National Park; (h) building the capacity of institutional staff and local community members in conservation management through training and sharing of best practices; (i) carrying out of economic valuation for Shimba Hills and the Malindi - Watamu Marine Protected Area; (j) supporting greater collaboration, harmonization, monitoring and surveillance of shared fisheries and other resources at Kisite-Mpunguti and Shimba Hills, and between South Coast in Kenya and Tanga, Pangani, Zanzibar and Pemba in Tanzania so that individual national budgets in the two countries are more effective; (k) strengthening extension services for village based investment activities through training, information sharing and technical advice; (l) developing and disseminating information on ten (10) appropriate 16

17 technologies for village based investment activities; (m) compiling information on existing tourism infrastructure, assets and activities along the Kenya coast; (n) developing new tourism circuits in Kiunga, Lamu, Mombasa, Malindi, Watamu, Arabuko-Sokoke and South Coast, by facilitating partnerships amongst the local industry players and local communities; and carrying out activities to develop and promote markets for the new circuits; (o) undertaking a study on tourism income distribution to identify opportunities for local communities to exploit and building their capacity to exploit these opportunities in a sustainable manner; and (p) carrying out specific coastal and marine research for promoting sustainable management of natural resources. 7. It is further proposed to rename the grant fund mechanism supported under Component 4 (Coastal Village Fund) Development Fund of the Coast (Hazina ya Maendeleo ya Pwani or HMP). The change of name is considered appropriate in order to: (i) use a name with a better reference to the target group; and (ii) distinguish the fund from the Constituency Development Fund, presently being implemented by the Kenyan Government. Safeguards 8. There are no changes in the safeguards policies triggered by the Project. The PAD and Integrated Safeguards Datasheet (ISDS) classified the project as Category B since the investments, focused on participatory policy and planning framework at the local government level, will have moderate environmental impacts. Support to rural economic development, through assistance to MSMEs, and to subprojects, through the HMP fund, may have site specific negative environmental impacts. In view of this risk, the project is supporting the development of spatial plans and land capability maps and of an Integrated Coastal Zone Management framework that will guide these activities. Larger investments, such as coastal infrastructure, which may be supported by the Project, will be carried out after a full EA. Additionally, the project will be financing the development and implementation of Environmental and Social Management Plans, the preparation of which is called for in the project s Environmental and Social Management Framework, dated March 17, OP 4.12 (Involuntary Resettlement) applies to the Project since some of the KCDP activities may restrict or control access to marine and fisheries resources if the comanagement and community rules for access and use of resources are not carefully 17

18 monitored. The Process Framework (PF) prepared under the Project, which was made public on May 7, 2010, defines the guidelines for co-management and use of resources, including a public consultation and disclosure plan and a grievance mechanism. 10. OP/BP 4.10 (Indigenous Peoples) is triggered under the Project as the project area includes Indigenous Peoples. The Government of Kenya has prepared an Indigenous Peoples Planning Framework (IPPF), disclosed on February 5, 2010, that provides information about these communities, their livelihoods and guidance in the event of impacts by project activities. A comprehensive Social and Impact Assessment for the entire project area (the six coastal counties of Kilifi, Kwale, Lamu, Mombasa, Taita- Taveta and Tana River) is being contracted. This study will include a socio-economic analysis for the entire project area, with screening, mapping and social assessment for Indigenous Peoples (OP 4.10), and a comprehensive Process Framework for target groups (OP 4.12). Following the completion of the social assessment, the Project will support the preparation of site-specific Indigenous Peoples Plans will be developed for all eligible communities affected by the Project (including the HMP). Institutional Arrangements 11. According to the original project design, the Kenya Arid Lands Resources Management Project II (ALRMP II) was responsible for implementing the Coastal Village Fund (CVF) (now Development Fund of the Coast HMP) activities (Part 4(a) of the Project). Specifically, the Project was to use established ALRMP II structures at district and community levels to identify and implement projects and disburse funds under the CVF. The ALRMP was also to provide necessary technical training to communities during project implementation. 12. Following the closing of the ALRMP II on December 31, 2010, an alternative project mechanism has been developed which will provide (i) micro-credits and grants for priority conservation-compatible activities identified through the various project components, and (ii) training and capacity building for sub-project implementation. 13. Under the new HMP, responsibility for implementing and overseeing the overall implementation of the HMP fund will fall under the Kenya Marine Fisheries Research Institute (KMFRI) -- the agency responsible for implementation of Component 4 and coordination of overall project implementation -- in collaboration with the coimplementing agencies (the Kenya Forestry Research Institute, the Kenya Wildlife Service, the Fisheries Department and the Coast Development Authority). 14. An assessment of KMFRI s capacity for implementation of the new HMP fund has been undertaken, highlighting needs in terms of additional staff and equipment. Specifically, the Project is in the process of: (i) establishing County Liaison Offices in each of the six coastal counties; (ii) hiring staff for each of these offices; and (iii) developing and installing a management information system that will permit handling, processing, monitoring and reporting of HMP activities. Further, each of the seven partner institutions will appoint one focal point as representative to the HMP fund. 18

19 Financing a. Project Costs 15. Currently, the financial intervention is split among the different components as follows: Sustainable Management of Fisheries Resources Component -- 22% of base costs; Sound Management of Natural Resources Component -- 22% of base costs; Support for Alternative Livelihoods Component -- 26% of base costs; and Capacity Building, M&E, Management and HMP (formerly CVF) Component -- 30% of base costs, of which support for CDD sub-projects (HMP) represents the largest expenditure at 23%. Project Coordination and Management makes up 7% of base costs. The restructuring does not affect component project costs. b. Financing Plan 16. The Financing Plan has been revised to reflect delays in: (i) declaring the project effective; and (ii) the initial phases of implementation as a result of financial management and procurement weaknesses. As mentioned in section B Project Status above, these shortcomings have been addressed and the revised Financing Plan includes larger disbursements during the last 3 years of project implementation (FY 2015, 2016, and 2017). The Estimated Disbursements table in the Data Sheet has been revised accordingly. As of July 25, 2012, the actual amount disbursed is as follows: IDA US$2.50 million and GEF US$0.52 million. IDA Estimated Disbursements (US$ million) Fiscal Year Total Annual Cumulative GEF Estimated Disbursements (US$ million) Fiscal Year Total Annual Cumulative Reallocation of Credit Proceeds. It is proposed to reallocate SDR 6.2M (26% of credit proceeds) from Category 3 and Category 4 of the Financing Agreement, to Category 2 and to a new Unallocated Category. The proposed reallocation is necessary to facilitate project implementation towards achieving the project development objective. Specifically, it will allow for addressing unbudgeted costs associated with safeguards requirements including technical consultancies for a comprehensive social assessment including Vulnerable and Marginalized Groups, updating of the Process Framework, development of co-management actions and social and environmental guidelines on subprojects to be implemented and costs associated with implementing the resulting action 19

20 plans and management costs associated with the HMP fund (now implemented by KMFRI). The reallocation also reflects a reduced scope of PPP and HMP activities (under Categories 3 and 4) in line with the revised Results Framework. 18. In order to facilitate project implementation, it is proposed to increase the percentage of expenditure to 100% (including taxes) for Category 1 of the Financing Agreement. This is possible as GEF funds will now be used to fully finance specific activities as outlined in the following table. 19. The changes are reflected in the revised Disbursement Table of Section IV to the Financing and Grant Agreements and provided below: Financing Agreement Category of Expenditure Allocation (in SDR) 20 % of Financing Increase/ (Decrease) Current Revised Current Revised Current Revised 1. Goods, Works, Services, Training and Operating Costs under Part 1 and 2 of the Project 2.Goods, Works, Services, Training and Operating Costs under Part 3 and 4 (excluding Part 3(k) and Part 4(a)) of the Project 3.Investments under Part 3(k) of the Project 4.Grants under the Coastal Village Fund under Part 4(a) of the Project 5.Goods, Works, Services, Training and Operating Costs under Parts 1 and 2 of the Project (excluding Parts 1(b) and 2(b)) 6.Goods, Works, Services, Training and Operating Costs under Part 3 and 4 (excluding Part 3(e) and Part 4(b)) of the Project 7.Investments under Part 3(e) of the Project 8.Grants and micro-credit banking fees under the Development Fund of the Coast under Part 4(b) of 7,800,000 7,800,000 IDA 70% 5,500,000 9,400,000 IDA 100% 3,850,000 1,000,000 IDA 100% 6,650,000 3,300,000 IDA 100% IDA 100% IDA 100% IDA 100% IDA 100% 0 0 3,900,000 71% (2,850,000) (74%) Increase/ (Decrease) % of original allocation (3,350,000) (50%)

21 TOTAL AMOUNT the Project 9. Unallocated N/A 2,300,000 23,800,000 23,800,000 Grant Agreement Category of Expenditure Allocation % of Financing (in USD) Current Revised Current Revised Current Revised 1. Goods, Works, Training, Services and Operating Costs 2. Goods, Works, Training, Services and Operating Costs under Parts 1 (b) and 2 (b) 5,000,000 5,000,000 30% 100% 20. Procurement. It is proposed to revise the eligible procurement methods in both the Financing and Grant Agreements to include the following methods: (a) Community Participation, which would allow for financing the implementation of community-based activities for improved fisheries and natural resources management under Components 1 and 2, and of community subprojects under Component 4; and (b) Force Account, which would allow the carrying out of small and scattered works in remote locations, such as the construction of fish driers, by the Ministry of Fisheries Development using its own personnel and equipment. 21. Specifically, the rationale for, and appraisal of, such changes is the following: (A) Community Participation in procurement was foreseen during project preparation and appropriate mitigation measures taken into consideration. At the time of preparation, the CDD component was expected to have been undertaken by the Arid Lands Resources Management Project (ALRMP) which had the capacity, experience, implementation tools and local presence that would have minimized procurement risks considerably. While the provision for Community Participation was included in the PAD, it was inadvertently omitted from the Financing Agreement. Given that the ALRMP Project is no longer active, there is a need to revisit the implementation arrangements for this component in order to identify and mitigate against any associated risks and at the same time build in a framework for social accountability. (B) Force Account was not contemplated during project preparation. However during the post-effectiveness implementation support missions, it was realized that some of the activities particularly those related to fisheries micro-projects involved a large number of small, low-value contracts that were geographically spread out in remote locations and which required a high level of craftsman skills. Such characteristics would likely render the resulting contracts unattractive to local contractors, raise the cost of administering such contracts if sourced competitively, and make it difficult to 21

22 guarantee quality due to their uniqueness and required level of specialization. Given that the responsible ministry (Ministry of Fisheries Development) has the in-house capacity to undertake such works, it is considered to be the most prudent approach for constructing these kind of works. Due to the small size and relatively low value of the contracts envisaged, there are minimal risks which would primarily be attributed to the management of SOEs, and travel logistics and general contract administration due to the wide geographical spread. The project has already taken on board specific risk mitigation measures to address these issues, as set forth in Annex Disbursement Condition. The design and development of the funding mechanism for the new HMP fund is well advanced and is expected to be finalized by the end of August 2012, including inter alia the preparation of a detailed Project Implementation Manual (PIM) containing clear eligibility and selection criteria, procedures for the application, screening and vetting process. So as not to delay the processing of the restructuring package, it is proposed to include a disbursement condition in the Financing Agreement which would allow for financing of HMP activities only once the revised PIM, reflecting all restructuring-related changes, has been finalized and approved by the Bank. D. APPRAISAL SUMMARY 23. The restructuring will not modify the overall design of the project, thus, the original assumptions with respect to expected impact remain unchanged. 24. The key proposed changes include the following. First, there will be a reduction in the number of HMP subprojects supported through grants from 840 to 700. However, the inclusion of a window to support access to micro-credits for Small and Medium Sized Enterprises (SMSEs) is expected to significantly increase the number of total people directly benefitting from the HMP. Secondly, the amount allocated to PPP investments is reduced by 30% compared to what was included in the Project Appraisal Document. These funds will be used to better assess the feasibility of possible PPP investments, which can be supported through other project funds as necessary. As such, the basic assumptions regarding the project impacts at appraisal remain intact. Risks 25. Overall, the proposed changes do not entail risks additional to those identified during the original Project appraisal as summarized in the Project Appraisal Document (PAD). With regard in particular to governance risks posed by the use of the Community Driven Development (CDD) approach in the financing of community subprojects, the new HMP mechanism supported under the Project reflects the adoption of enhanced governance and accountability measures (see Annex 2 for an updated Governance Action Plan). Responsibility for implementation and oversight of the HMP fund, together with related procurement and financial management tasks, will be the direct responsibility of the agency in charge of overall project implementation -- KMFRI, rather than outsourced to a separate entity. Further, the new HMP mechanism includes clear measures to ensure transparency and appropriate use of funds, including: 22

23 (a) the definition of clear eligibility criteria and vetting and approval processes; (b) the participation of the beneficiaries and their representatives in the management of the funds allocated to the community sub-projects; (c) detailed information regarding disclosure and dissemination requirements, including rules about disclosure of sub-project level reports in a manner understandable to all interested parties, including subproject expenditures. Emphasis will be given to information dissemination of project activities to community members and potential providers of goods, works, and services so as to enhance transparency and competition in procurement processes; (d) the design of a comprehensive grievance and complaint mechanism; (e) periodic audits of financed sub-projects; and (f) the definition of clear sanctions and remedies. 26. In addition, the PIM will include measures that support social accountability, such as: (i) a description of a system of fund use monitoring at the community level to enable the user groups to keep proper books of accounts and account for funds received and used; (ii) a description of the internal structure, roles and responsibilities within the Community Group responsible for receipt and use of the funds, including a Governance Training; and (iii) a Risk Mitigation Plan to address cases of reported misuse of funds. 27. Finally, measures will be adopted to mitigate risks related to the financing of training, per diems and vehicle and fuel costs (see Annex 2 for details). 23

24 Core ANNEX 1: Results Framework and Monitoring KENYA: KENYA COASTAL DEVELOPMENT PROJECT Project Development Objective (PDO): To promote environmentally sustainable management of Kenya s coastal and marine resources by strengthening the capacity of existing relevant government agencies and by enhancing the capacity of rural micro, small and medium sized enterprises in selected coastal communities Global Environmental Objective (GEO): To strengthen conservation and sustainable use of marine and coastal biodiversity Revised Project Development Objective: To improve management effectiveness and enhance revenue generation of Kenya s coastal and marine resources D=Dropped 2012-EOP Target Values C=Continue Comments PDO Level Results N= New Unit of Baseline /Rationale Indicators* R=Revised Measure June 2011 Proposed Original Revised for Indicator One: 50% increased revenue generated to GoK from vessel licensing in 200 mile EEZ and from nearshore fisheries development Indicator Two: 10% increase in cost recovery of MPAs R Number $0.68m (2009: 28 vessels, $0.56m; 2010: 32 vessels, $.960m; 2011: 34 vessels, $1,02m) Increased revenue generation to GOK from nearshore and EEZ fisheries Change Same indicator, but improved clarity of formulation and annual fluctuation corrected through using US$/yr based on 3- year average for combined nearshore and EEZ. D Percentage 0 Sustainabili ty aspect already Frequency Data Source/ Methodology 50% 1.0m Annually Accounting records from FiD Fisheries MIS 10 Responsibility for Data Collection FiD

25 Indicator Three: 20% increase in micro, small and medium sized enterprise startups and business expansions directly related to project interventions in pilot villages Indicator Four: Direct Project Beneficiaries (number), of which female (%) Indicator Five Quality of data, data coverage and reporting frequency of catch and effort (the frame) (15,000 records by EOP) improved. and associated with by-catch management measures Indicator Six: At least three of the more important existing conservation areas brought under effective management (including comanagement) by EOP) X covered by increased revenues in the above indicator D Percentage 0 Not a direct aspect of the PDO. The Project does not directly support expansion of micro, small and medium C Number/Per centage enterprises. 0 Mandatory core indicator moved from the intermediat e level as required by OPCS R Hectares 0 Target areas with annually updated georeferenced biodiversity data R Hectares 0 Conservation/ target areas with management plan in place, implemented and showing improvement Replaced with a measurable indicator. Same indicator, but improved clarity of formulation 20 15,000 records 1,000, 35% women Bi-Annually Surveys, Progress Reports KWS, NEMA, KEFRI, CDA, KMFRI 10,000 ha Annually MIS FiD, KWS, KMFRI, KEFRI ha Annually Annual Reports; Mid- Term Review and ICR using Management Effectiveness Tracking Tool KWS, KEFRI, NEMA 25

26 in management as shown by effectiveness tracking tool by EoP. INTERMEDIATE RESULTS Intermediate Result (Component One): Sustainable management of fisheries resources Revised Intermediate Result (Component One): Intermediate Result indicator One: Installation of VMS on all licensed fishing vessels in the EEZ by the end of year 6 leading to less illegal and more legally licensed fishing when combined with a strong MCS R Number 0 Number of vessels licensed to fish in the Kenyan waters with VMS installed Same indicator, but improved clarity of formulation Installation completed 20 Annually Reporting VMS units FiD Intermediate Result indicator Two: Number of Fishery Management Plans Intermediate Result indicator Three: Number of stock assessment (five priority species and others) R Number 1 (Prawn fishery) Number of species with Fishery Management plans developed R Number 0 Number of key exploited species with stock status established Same indicator, but improved clarity of formulation. Currently the Prawn Fishery Management plan exists. By EOP will target ring net, lobster and aquarium fisheries Same indicator, but improved clarity of formulation. By EOP will have stock 3 3 (Ring Net, Lobster) 5 3 (Lobsters, Aquarium, Small and Medium pelagic) Bi-Annually Bi-Annually Surveys, Monitoring Reports Surveys, Monitoring Reports FiD, KMFRI FiD, KMFRI 26

27 Intermediate Result (Component Two): Sound management of natural resources assessments for (1) lobster, (2) aquarium, and (3) small and medium pelagics Revised Intermediate Result (Component Two): Intermediate Result indicator One: Number of Direct Beneficiaries, including percentage of female beneficiaries Intermediate Result indicator Two: Integrated Conservation Management Plans developed and implemented Intermediate Result indicator Three: Biodiversity management information system is developed, populated and updated annually Intermediate Result indicator Four: Reduction in destructive activities such as dynamite fishing, cutting mangroves, charcoal manufacturing, etc. Intermediate Result indicator Five: Number of communities engaged in activities to preserve and use sustainably the coastal and marine resources X C Number/Perce ntage R 0 Number of Management Plans (MPs) developed or updated Moved to the PDO level as required by OPCS Same indicator, but improved clarity of formulation to reflect input to PDO N YES/NO NO The new indicator measures key progress towards achieving PDO D Percentage 0 The indicator was removed due to challenges of collecting accurate data R Number 0 Number of successful community based interventions documented and disseminated Participation in conservation in itself does not indicate a behavioural change. Lack 3 3 Bi-Annually Progress Reports KWS, NEMA, KEFRI YES Bi-Annually Surveys, GIS progress reports 5 10 Bi-Annually Policy studies, monitoring reports KWS, NEMA, KEFRI KWS, KEFRI, CDA, KMFRI, FiD 27

28 Intermediate Result indicator Six: Number of community level resource-based businesses established of information on best practices was noted as a hindrance to adoption thus the need for an indicator on acquiring and disseminatin g information. D Number 0 Not a direct aspect of the PDO, which focuses on improved effectiveness of coastal and marine ecosystem management and use Intermediate Result (Component Three): Support for Alternative Livelihoods 3 Revised Intermediate Result (Component Three): Intermediate Result indicator One: Land Capability and Spatial Development Plans prepared in 1 Coast Province; 2 Districts; 8 combined action plans developed R Number 0 Number of regions and wards with coastal land capability plans or maps developed Indicator changed due to consideration of various components, sub components and sectoral spatial planning needs. Resultant output is 1 provincial,2 district, 8 action plans 1 coast region, 2 county, 8 ward level plans Bi-Annually Reconnaissance Surveys, GIS progress reports, GIS data base Physical Planning Department 28

29 Intermediate Result indicator Two: Number of officers from lead agencies trained on EIA/EA review process Intermediate Result indicator Three: Number of environmental audits for KCDP community based projects undertaken Intermediate Result indicator Four: Number of PPPs funded and still in operation at EOP Intermediate Result indicator Five: Entrepreneurs identified, trained, and with business plan developed R Number 0 Number of officers from lead agencies trained on ICZM & EIA (including EIA certification) R Number 0 Annual environmental and social audits for KCDP supported projects undertaken integrated spatial development plan Same indicator, but improved clarity of formulation and better link with PDO Same indicator, but improved clarity of formulation D Number 0 Not a direct aspect of the PDO, which focuses on improved effectiveness of coastal and marine ecosystem management and use N Number 0 The new indicator measures key progress towards effective management of coastal and marine resources use Bi-Annually Training reports, NEMA reports NEMA 3 3 Bi-Annually NEMA reports NEMA 5 By-Annually CDA records and monitoring reports 200 Bi-Annually Project records and progress reports Intermediate Result (Component Four): Capacity Building, Monitoring & Evaluation System, Project Management, Communication and Coastal Village Fund CDA CDA Revised Intermediate Result (Component Four): Capacity Building, Monitoring & Evaluation System, Project Management, Communication and Development Fund of the Coast 29